PACCAR 10-Q 2023-09-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended September 30, 2023

OR

For the transition period from to

Commission File No. 001-14817

PACCAR Inc

(Exact name of registrant as specified in its charter)

(425) 468-7400

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Common Stock, $1 par value — 523,075,842 shares as of October 30, 2023

PACCAR Inc – Form 10-Q

INDEX

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PART I – FINANCI****AL INFORMATION

Consolidated Statements of Com****prehensive Income (Unaudited)

(Millions, Except Per Share Amounts)

See Notes to Consolidated Financial Statements.

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Consolidated Balance Sheets (Millions)

• The December 31, 2022 consolidated balance sheet has been derived from audited financial statements.

See Notes to Consolidated Financial Statements.

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Consolidated Balance Sheets (Millions)

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OVERVIEW:

PACCAR is a global technology company whose Truck segment includes the design and manufacture of high-quality light-, medium- and heavy-duty commercial trucks. In North America, trucks are sold under the Kenworth and Peterbilt nameplates, in Europe, under the DAF nameplate and in Australia and South America, under the Kenworth and DAF nameplates. The Parts segment includes the distribution of aftermarket parts for trucks and related commercial vehicles. The Company’s Financial Services segment derives its earnings primarily from financing or leasing PACCAR products in North America, Europe, Australia and South America. The Company’s Other business includes the manufacturing and marketing of industrial winches.

Third Quarter Financial Highlights:

Worldwide net sales and revenues were $8.70 billion in 2023 compared to $7.06 billion in 2022, primarily due to higher truck and parts revenues.

Truck revenues were $6.64 billion in 2023 compared to $5.20 billion in 2022, reflecting higher truck deliveries and price realization in all markets.

Parts sales were $1.58 billion in 2023 compared to $1.47 billion in 2022, primarily reflecting higher price realization in the U.S. and Europe.

Financial Services revenues were $464.1 million in 2023 compared to $371.9 million in 2022, primarily due to portfolio growth and higher portfolio yields.

Net income was $1.23 billion ($2.34 per diluted share) in 2023 compared to $769.4 million ($1.47 per diluted share) in 2022 due to higher Truck and Parts operating results.

Capital investments were $174.5 million in 2023 compared to $115.0 million in 2022.

Research and development (R&D) expenses were $103.5 million in 2023 compared to $82.9 million in 2022.

First Nine Months Financial Highlights:

Worldwide net sales and revenues were $26.05 billion in 2023 compared to $20.69 billion in 2022, primarily due to higher truck and parts revenues.

Truck revenues were $19.88 billion in 2023 compared to $15.23 billion in 2022, primarily due to higher truck deliveries and price realization in all markets.

Parts sales were $4.80 billion in 2023 compared to $4.30 billion in 2022 reflecting higher price realization in all markets.

Financial Services revenues were $1.33 billion in 2023 compared to $1.11 billion in 2022, primarily due to portfolio growth and higher portfolio yields.

Net income was $3.18 billion ($6.07 per diluted share) in 2023 compared to $2.09 billion ($3.99 per diluted share) in 2022 due to higher Truck and Parts operating results.

Adjusted net income (non-GAAP), excluding a $446.4 million after-tax non-recurring charge related to civil litigation in Europe in the first quarter of this year, was $3.63 billion ($6.92 per diluted share). See Reconciliation of GAAP to Non-GAAP Financial Measures on page 48.

Capital investments were $486.5 million in 2023 compared to $349.5 million in 2022.

Research and development (R&D) expenses were $302.0 million in 2023 compared to $241.3 million in 2022.

PACCAR has begun construction of a new 240,000 square-foot PACCAR Parts Distribution Center (PDC) to be opened in Massbach, Germany, in 2024. This PDC will improve parts delivery to dealers and customers in the region.

PACCAR, Cummins, Daimler Trucks and EVE Energy are partnering to create state of the art commercial vehicle battery cell production in the United States. The joint venture partners expect growing demand for zero emissions vehicles throughout the decade. The planned battery cell factory will provide cost effective scale and industry leading battery cell technology, which will benefit our commercial vehicle customers. The total investment is expected to be in the range of $2-3 billion, subject to regulatory approval, for

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the 21-gigawatt hour (GWh) factory, of which PACCAR's share is 30%. PACCAR, Cummins and Daimler Truck will each own 30% of the joint venture, which will initially focus on the lithium-iron-phosphate (LFP) battery technology for commercial battery-electric trucks. EVE Energy will serve as the technology partner in the joint venture with 10% ownership and will contribute its industry leading battery cell design and manufacturing expertise.

The PACCAR Financial Services (PFS) group of companies has operations covering four continents and 26 countries. The global breadth of PFS and its rigorous credit application process support a portfolio of loans and leases with total assets of $19.56 billion. PFS issued $2.14 billion in medium-term notes during the first nine months of 2023 to support new business volume and repay maturing debt.

Truck Outlook

Truck industry heavy-duty retail sales in the U.S. and Canada in 2023 are expected to be 295,000 to 315,000 units compared to 283,500 in 2022. Estimates for the U.S. and Canada truck industry retail sales in 2024 are in the range of 260,000 to 300,000 units. In Europe, 2023 truck industry registrations for over 16-tonne vehicles are expected to be 310,000 to 330,000 units compared to 297,500 in 2022. The European truck industry registrations in the above 16-tonne truck market for 2024 are projected to be in a range of 260,000 to 300,000. In South America, heavy-duty truck industry registrations in 2023 are projected to be 105,000 to 115,000 as compared to 137,100 in 2022, and in a similar range in 2024.

The Company has been affected by an industry-wide undersupply of component parts and anticipates the shortages may continue to affect deliveries in 2023.

Parts Outlook

In 2023, PACCAR Parts sales are expected to increase 10-13% compared to 2022 levels reflecting good retail demand. In 2024, PACCAR Parts sales could increase 4-8% from 2023 levels, depending on economic conditions.

Financial Services Outlook

In 2023, average earning assets are expected to increase 8-10% compared to 2022 due to strong new business volume and dealer wholesale financing. If current freight transportation conditions decline due to weaker economic conditions, then past due accounts, truck repossessions and credit losses would likely increase from the current low levels and new business volume would likely decline. In 2024, average earning assets are expected to increase 3-5% compared to 2023.

Capital Investments and R&D Outlook

Capital investments in 2023 are expected to be $650 to $675 million and R&D is expected to be $410 to $420 million. In 2024, capital investments are projected to be $675 to $725 million and R&D is expected to be $470 to $520 million. The Company is increasing its investment in fuel efficient diesel and electric powertrain technologies, autonomous systems, connected vehicle services, and next-generation manufacturing and parts and distribution capabilities.

See the Forward-Looking Statements section of Management’s Discussion and Analysis for factors that may affect these outlooks.

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RESULTS OF OPERATIONS:

The Company’s results of operations for the three and nine months ended September 30, 2023 and 2022 are presented below.

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There were no material changes in the Company’s market risk during the three months ended September 30, 2023. For additional information, refer to Item 7A as presented in the 2022 Annual Report on Form 10‑K.

The Company’s management, with the participation of the Principal Executive Officer and Principal Financial Officer, conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the period covered by this report. Based on that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.

There have been no changes in the Company’s internal controls over financial reporting that occurred during the fiscal quarter covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II – OTHE****R INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Refer to Note M – “Commitments and Contingencies” in the Notes to Consolidated Financial Statements (Part I, Item 1) for discussion on litigation matters, which is incorporated by reference herein.

For information regarding risk factors, refer to Part I, Item 1A as presented in the 2022 Annual Report on Form 10-K. There have been no material changes in the Company’s risk factors during the three months ended September 30, 2023.

ITEM 2. UNREGISTERED SALES OF EQUI****TY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES

For Items 2(a) and (b), there was no reportable information for the three months ended September 30, 2023.

(c)

Issuer purchases of equity securities.

On December 4, 2018, PACCAR’s Board of Directors approved the repurchase of up to $500.0 million of the Company’s outstanding common stock. As of September 30, 2023, the Company has repurchased $110.0 million of shares under this plan. There were no repurchases made under this plan during the first nine months of 2023.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

None of the Company's directors or officers adopted, modified or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company's quarter ended September 30, 2023, as such terms are defined under Item 408(a) of Regulation S-K.

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Any exhibits filed herewith are listed in the accompanying index to exhibits.

INDEX TO EXHIBITS

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• filed herewith

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SIGNA****TURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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