PACCAR 10-Q 2024-03-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended March 31, 2024

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 — 524,145,446 shares as of April 29, 2024

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, 2023 consolidated balance sheet has been derived from audited financial statements.

See Notes to Consolidated Financial Statements.

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Consolidated Balance Sheets

(Millions)

• The December 31, 2023 consolidated balance sheet has been derived from audited financial statements.

See Notes to Consolidated Financial Statements.

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Condensed Consolidated Stateme****nts of Cash Flows (Unaudited)

(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.

First Quarter Financial Highlights:

Worldwide net sales and revenues were $8.74 billion in 2024 compared to $8.47 billion in 2023, due to higher truck, parts and financial services revenues.

Truck revenues were $6.54 billion in 2024 compared to $6.41 billion in 2023, reflecting higher revenue in the U.S. and Canada.

Parts sales were $1.68 billion in 2024 compared to $1.62 billion in 2023, primarily due to higher sales in Europe and the U.S. and Canada.

Financial Services revenues were $509.3 million in 2024 compared to $423.2 million in 2023, primarily due to portfolio growth and higher portfolio yields.

Net income was $1.20 billion ($2.27 per diluted share) in 2024 compared to $733.9 million ($1.40 per diluted share) in 2023. In 2023, adjusted net income (non-GAAP), excluding a $446.4 million after-tax non-recurring charge related to civil litigation in Europe was $1.18 billion ($2.25 per diluted share). See Reconciliation of GAAP to Non-GAAP Financial Measures on page 42.

Capital investments were $164.3 million in 2024 compared to $132.9 million in 2023.

Research and development (R&D) expenses were $105.5 million in 2024 compared to $97.2 million in 2023.

PACCAR is constructing a new, 240,000 square-foot PACCAR Parts Distribution Center (PDC) in Massbach, Germany, to be opened in 2024. The new PDC in Germany will enhance parts delivery to dealers and customers in Europe.

PACCAR’s advanced battery cell manufacturing joint venture is expected to begin construction of its 21-gigawatt hour (GWh) factory in Marshall County, Mississippi, in the second quarter of 2024, and start production in 2027. PACCAR anticipates investing $600-$900 million in the joint venture over the next several years.

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 $21.15 billion. PFS issued $950.0 million in medium-term notes during the first three months of 2024 to support new business volume and repay maturing debt.

Truck Outlook

Truck industry heavy-duty retail sales in the U.S. and Canada in 2024 are expected to be 250,000 to 290,000 units compared to 297,000 in 2023. In Europe, 2024 truck industry registrations for over 16-tonne vehicles are expected to be 260,000 to 300,000 units compared to 343,300 in 2023. In South America, heavy-duty truck industry registrations in 2024 are projected to be 105,000 to 115,000 as compared to 105,000 in 2023.

Parts Outlook

In 2024, PACCAR Parts sales are expected to increase 4-8% compared to 2023 reflecting stable demand.

Financial Services Outlook

In 2024, average earning assets are expected to increase 3-5% compared to 2023. If freight transportation conditions decline due to a weaker economy, then past due accounts, truck repossessions and credit losses would likely increase from the current levels and new business volume would likely decline.

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Capital Investments and R&D Outlook

Capital investments in 2024 are expected to be $700 to $750 million and R&D is expected to be $460 to $500 million. The Company is increasing its investment in new powertrains, advanced manufacturing capabilities and capacity, and aftermarket distribution capabilities and capacity.

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

RESULTS OF OPERATIONS:

The Company’s results of operations for the three months ended March 31, 2024 and 2023 are presented below.

• In 2023, Other includes a $600.0 million non-recurring charge related to civil litigation in Europe (EC-related claims).

The following provides an analysis of the results of operations for the Company’s three reportable segments - Truck, Parts and Financial Services. Where possible, the Company has quantified the impact of factors identified in the following discussion and analysis. In cases where it is not possible to quantify the impact of factors, the Company lists them in estimated order of importance. Factors for which the Company is unable to specifically quantify the impact include market demand, fuel prices, freight tonnage and economic conditions affecting the Company’s results of operations.

2024 Compared to 2023:

Truck

The Company’s Truck segment accounted for 75% of revenues in the first quarter of 2024 compared to 76% in the first quarter of 2023.

The Company’s new truck deliveries are summarized below:

Worldwide new truck deliveries decreased in the first quarter of 2024 compared to the same period of 2023, primarily due to lower deliveries in Europe, mostly offset by higher deliveries in the U.S. and Canada.

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Market share data discussed below is provided by third-party sources and is measured by either retail sales or registrations for the Company’s dealer network as a percentage of total registrations or retail sales depending on the geographic market. In the U.S. and Canada, market share is based on retail sales. In Europe, market share is based primarily on registrations.

In the first three months of 2024, industry retail sales in the heavy-duty market in the U.S. and Canada were 62,300 units compared to 72,000 units in the same period of 2023. The Company’s heavy-duty truck retail market share was 30.3% in the first three months of 2024 compared to 27.0% in the first three months of 2023. The medium-duty market was 25,200 units in the first three months of 2024 compared to 25,900 units in the same period of 2023. The Company’s medium-duty market share was 17.0% in the first three months of 2024 compared to 11.2% in the first three months of 2023.

The over 16‑tonne truck market in Europe in the first three months of 2024 was 84,600 units compared to 90,100 units in the first three months of 2023. DAF over 16‑tonne market share was 13.4% in the first three months of 2024 compared to 16.1% in the same period of 2023. The 6 to 16‑tonne market in the first three months of 2024 was 12,100 units compared to 11,400 units in the same period of 2023. DAF market share in the 6 to 16-tonne market in the first three months of 2024 was 9.2% compared to 9.1% in the same period of 2023.

The over 16-tonne truck market in Brasil in the first three months of 2024 was 21,000 units compared to 21,500 units in the same period of 2023. DAF Brasil market share for the first three months of 2024 was 10.7% compared to 8.6% in the same period in 2023.

The Company’s worldwide truck net sales and revenues are summarized below:

The Company’s worldwide truck net sales and revenues in the first quarter increased to $6.54 billion in 2024 from $6.41 billion in 2023 from improved price realization, primarily in the U.S. and Canada, partially offset by lower truck unit deliveries, primarily in Europe.

Truck segment income before taxes and pretax return on revenues was comparable to the same period in 2023, as lower truck unit deliveries in Europe were mostly offset by higher truck deliveries in the U.S. and Canada.

The major factors for the Truck segment changes in net sales and revenues, cost of sales and revenues and gross margin between the three months ended March 31, 2024 and 2023 are as follows:

Truck sales volume decreased revenues by $100.5 million and costs by $102.7 million, primarily reflecting lower truck deliveries in Europe, mostly offset by higher truck deliveries in the U.S. and Canada.

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Average truck sales prices increased by $177.8 million from modest price realization, primarily in the U.S. and Canada, and the positive effect of new truck models.

Average cost per truck increased by $175.1 million, primarily reflecting higher raw material and labor costs.

Factory overhead and other indirect costs increased $19.7 million, primarily due to higher labor costs partially offset by lower utilities and premium freight.

Extended warranties, operating leases and other increased revenues by $25.8 million primarily due to higher volume of extended warranty and R&M contracts. The increase in extended warranty, operating leases and other cost of $39.0 million reflects higher costs from extended warranty, R&M contracts, and lower used truck results in Europe.

The currency translation effect on sales and cost of sales primarily reflects an increase in the value of the euro and Brazilian real relative to the U.S. dollar, partially offset by a decrease in the value of Australian dollar relative to the U.S. dollar.

Truck gross margin was 15.6% in the first quarter of 2024 compared to 16.2% in the same period of 2023 due to the factors noted above.

Truck selling, general and administrative (SG&A) expense decreased in the first quarter of 2024 to $61.7 million from $72.4 million in 2023. The decrease was primarily due to lower sales and marketing expenses and professional expenses, partially offset by higher salaries. As a percentage of sales, Truck SG&A was .9% in the first quarter of 2024 compared to 1.1% in the first quarter of 2023.

Parts

The Company’s Parts segment accounted for 19% of revenues in the first quarter of 2024 and 2023.

The Company’s worldwide parts net sales and revenues increased to $1.68 billion in 2024 from $1.62 billion in 2023 reflecting higher sales in all major markets.

The major factors for the changes in Parts segment net sales and revenues, cost of sales and revenues and gross margin between the three months ended March 31, 2024 and 2023 are as follows:

Aftermarket parts sales volume increased by $3.0 million and related cost of sales increased by $1.6 million primarily reflecting higher sales volume in Mexico and Brasil, partially offset by lower sales volume in the U.S. and Canada.

Average aftermarket parts sales prices increased sales by $43.4 million primarily due to moderate price realization in Europe and the U.S.

Average aftermarket parts direct costs increased $22.7 million due to higher material costs, primarily in the U.S. and Europe.

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Warehouse and other indirect costs increased $3.5 million primarily due to higher salaries and related expenses.

The currency translation effect on sales and cost of sales primarily reflects an increase in the value of the euro and Brazilian real and the Canadian dollar relative to the U.S. dollar, partially offset by a decrease in the value of Australian dollar relative to the U.S. dollar.

Parts gross margins in the first quarter of 2024 increased to 32.5% from 32.2% in the first quarter of 2023 due to the factors noted above.

Parts SG&A expense increased in the first quarter of 2024 to $61.3 million from $58.1 million in 2023. The increase was primarily due to higher salaries and related expenses, partially offset by lower sales and marketing costs. As a percentage of sales, Parts SG&A was 3.7% and 3.6% in the first quarter of 2024 and 2023, respectively.

Financial Services

The Company’s Financial Services segment accounted for 6% and 5% of revenues in the first quarter of 2024 and 2023, respectively.

New loan and lease unit volume was $1.52 billion in the first quarter of 2024 compared to $1.43 billion in the first quarter of 2023. The increase in new loan and finance lease volume reflected a higher amount financed per truck in all markets and higher retail sales of PACCAR trucks in North America and Brasil, partially offset by lower retail sales in Europe. The decrease in equipment on operating leases new business volume reflected lower market demand in Europe, partially offset by a higher amount financed per truck

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in all major markets. PFS finance market share of new PACCAR truck sales was 21.4% in the first quarter of 2024 compared to 22.0% in the first quarter of 2023.

In the first quarter of 2024, PFS revenues increased to $509.3 million from $423.2 million in 2023. The increase was primarily due to higher interest income driven by higher portfolio yields. The effects of currency translation increased PFS revenues by $9.9 million for the first quarter of 2024, primarily due to a stronger Mexican peso and euro relative to the U.S. dollar.

PFS income before income taxes decreased to $113.9 million from $148.8 million in 2023. The decrease was primarily due to lower operating lease margins, reflecting lower results on returned lease assets, partially offset by higher finance margins. The effects of currency translation increased PFS income before income taxes by $3.7 million for the first quarter of 2024, primarily due to a stronger Mexican peso relative to the U.S. dollar.

Included in Financial Services “Other assets” on the Company’s Consolidated Balance Sheets are used trucks held for sale, net of impairments, of $320.2 million at March 31, 2024 and $309.8 million at December 31, 2023. These trucks are primarily units returned from matured operating leases in the ordinary course of business, and also include trucks acquired from repossessions or through acquisitions of used trucks in trades related to new truck sales and trucks returned from residual value guarantees (RVGs).

The Company recognized losses on used trucks, excluding repossessions, of $10.9 million in the first quarter of 2024 compared to gains of $27.8 million in the first quarter of 2023, including losses on multiple unit transactions of $10.6 million in the first quarter of 2024 compared to $.7 in the first quarter of 2023. Used truck losses related to repossessions, which are recognized as credit losses, were $4.2 million for the first quarter of 2024 and not significant for the first quarter of 2023.

The major factors for the changes in interest and fees, interest and other borrowing expenses and finance margin for the three months ended March 31, 2024 and 2023 are outlined below:

Average finance receivables increased $3.13 billion (excluding foreign exchange effects) in the first quarter of 2024 primarily due to higher average loan, finance lease and dealer wholesale balances.

Average debt balances increased $2.30 billion (excluding foreign exchange effects) in the first quarter of 2024, reflecting higher funding requirements for the portfolio, which includes loans, finance leases, dealer wholesale and equipment on operating lease.

Higher portfolio yields (7.2% in 2024 compared to 6.2% in 2023) increased interest and fees by $34.3 million. The higher portfolio yields were primarily due to higher market rates in all markets.

Higher borrowing rates (4.6% in 2024 compared to 3.2% in 2023) increased interest and other borrowing expenses by $38.2 million and were primarily due to higher debt market rates in all markets.

The currency translation effects reflect an increase in the value of foreign currencies relative to the U.S. dollar, primarily the Mexican peso, Brazilian real and euro.

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The following table summarizes operating lease, rental and other revenues and depreciation and other expenses:

The major factors for the changes in operating lease, rental and other revenues, depreciation and other expenses and lease margin between the three months ended March 31, 2024 and 2023 are outlined below:

Higher sales volume, partially offset by lower market prices of used trucks on trade, primarily in Europe, increased revenues by $12.0 million and related depreciation and other expenses by $13.0 million.

Results on returned lease assets increased depreciation and other expenses by $31.6 million, primarily due to losses on sale of returned lease units in 2024 compared to gains in 2023 and impairment in Europe as a result of lower used truck market values.

Average operating lease assets decreased $457.7 million (excluding foreign exchange effects), which decreased revenues by $48.6 million and related depreciation and other expenses by $43.7 million.

Revenue per asset increased $22.2 million primarily due to higher average truck values financed and higher market rates. Cost per asset increased $33.6 million due to higher depreciation and operating expenses.

The currency translation effects reflect an increase in the value of foreign currencies relative to the U.S. dollar, primarily the Mexican peso and the euro.

Financial Services SG&A for the first quarter of 2024 was $39.0 million compared to $35.2 million in 2023. The increase was primarily due to higher salaries and related expenses and higher professional fees. As an annualized percentage of average earnings assets, Financial Services SG&A was .8% in the first quarter of 2024 and .9% for the same period of 2023.

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The following table summarizes the provision for losses on receivables and net charge-offs:

The provision for losses on receivables was $16.1 million in the first quarter of 2024 from $3.1 million for the same period in 2023, primarily from portfolio growth, an increase in the Company’s 30+ past due accounts in Europe and higher charge-offs. The increased charge-offs were primarily in the U.S. and Canada and Brasil, including one large fleet customer in the U.S. as well as higher average loss severity in all markets from lower used truck market values.

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.

The post-modification balances of accounts modified during the three months ended March 31, 2024 and 2023 are summarized below:

• Amortized cost basis immediately after modification as a percentage of ending retail portfolio, on an annualized basis.

Modification activity increased to $186.1 million in the first three months of 2024 from $84.5 million in the same period of 2023. The increase in modifications for Commercial reasons primarily reflects higher volumes of refinancing, primarily in the U.S. The increase in Insignificant delay modifications, which are customers requesting payment relief for up to three months, primarily reflects higher volumes of contract modifications in the U.S. The increase in Credit modifications primarily reflects higher volumes of contract modifications in Brasil.

The following table summarizes the Company’s 30+ days past due accounts:

Accounts 30+ days past due was 1.2% at March 31, 2024 compared to 1.0% at December 31, 2023 and .5% at March 31, 2023, primarily due to one large fleet customer in the U.S. and Canada and one large fleet customer in Europe. The Company continues to focus on maintaining low past due balances.

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When the Company modifies a 30+ days past due account, the customer is then generally considered current under the revised contractual terms. The Company modified $15.3 million of accounts worldwide during the first quarter of 2024, $35.0 million during the fourth quarter of 2023 and $10.8 million during the first quarter of 2023 that were 30+ days past due and became current at the time of modification. Had these accounts not been modified and continued to not make payments, the pro forma percentage of retail loan and lease accounts 30+ days past due would have been as follows:

Modifications of accounts in prior quarters that were more than 30 days past due at the time of modification are included in past dues if they were not performing under the modified terms at March 31, 2024, December 31, 2023 and March 31, 2023. The effect on the allowance for credit losses from such modifications was not significant at March 31, 2024, December 31, 2023 and March 31, 2023.

The Company’s annualized pre-tax return on average assets for Financial Services was 2.2% in the first quarter of 2024 compared to 3.4% in the same period of 2023.

Other

Other includes the winch business as well as sales, income and expenses not attributable to a reportable segment. Other also includes non-service cost components of pension expense and a portion of corporate expense. Other sales represent less than 1% of consolidated net sales and revenues for the first quarter of 2024 and 2023. Other SG&A decreased to $24.6 million for the first quarter of 2024 from $29.3 million for the first quarter of 2023, primarily due to lower salary related expenses.

For the first quarter of 2024, Other loss before income taxes was $2.3 million compared to $611.7 million in 2023. The decrease in Other loss before income taxes was primarily due to the $600.0 million EC-related charge in the first quarter of 2023 which is discussed in Note M of the consolidated financial statements.

Investment income for the first quarter increased to $85.5 million in 2024 from $49.0 million in 2023. The higher investment income in the first quarter of 2024 was primarily due to higher market interest rates in all regions, as well as higher investment balances.

Income Taxes

The effective tax rate for the first quarter of 2024 was 22.1% compared to 20.1% for the first quarter of 2023. Included in 2023 was the EC-related charge of $600.0 million, which lowered the effective tax rate. Excluding the EC charge and related tax benefit, the effective tax rate was 22.3%.

For the first quarter of 2024, domestic income before income taxes and pre-tax return on revenues increased primarily due to the improved results from Truck operations. For the first quarter of 2024, foreign income before taxes increased as the first three months of 2023 included the EC-related charge of $600.0 million which also reduced foreign pre-tax return on revenues in 2023.

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LIQUIDITY AND CAPITAL RESOURCES:

The Company’s total cash and marketable securities at March 31, 2024 decreased $978.4 million from the balances at December 31, 2023. Total cash and marketable securities are primarily intended to provide liquidity while preserving capital.

The change in cash and cash equivalents is summarized below:

Operating activities: Cash provided by operations increased by $784.2 million to $1,469.0 million in the first three months of 2024 from $684.8 million in 2023. The increased operating cash flow reflects higher net income by $461.4 million and benefits from net changes in operating assets and liabilities of $219.5 million, primarily driven by: lower increases in trade receivables of $208.0 million and wholesale receivables on new trucks of $267.8 million in the Financial Services segment, lower cash outflows for inventories of $197.9 million and income taxes of $151.6 million, partially offset by lower increases in accruals of $597.1 million, including the EC-related charge and product support liabilities.

Investing activities: Cash used in investing activities increased by $233.4 million to $526.1 million in the first three months of 2024 from $292.7 million in 2023. The increase in net cash used in investing activities reflects increased net originations for retail loans and financing leases of $72.7 million, an increase in wholesale receivables on used equipment of $65.8 million and higher cash used in the acquisition of property, plant and equipment of $52.6 million.

Financing activities: Cash used in financing activities was $1,880.0 million for the first three months of 2024, $1,189.2 million higher than the $690.8 million used in 2023. The increase reflects higher cash dividends and lower net borrowing activity. In the first three months of 2024, the company paid $1.82 billion in dividends compared to $1.11 billion in 2023, due to a higher year-end dividend paid in January 2024. Cash used in net borrowing activities was $94.9 million, $491.9 million lower than the cash provided by net borrowing activities of $397.0 million in 2023.

Credit Lines and Other

The Company has line of credit arrangements of $4.12 billion, of which $3.63 billion were unused at March 31, 2024. Included in these arrangements are $3.00 billion of committed bank facilities, of which $1.00 billion expires in June 2024, $1.00 billion expires in June 2026 and $1.00 billion expires in June 2028. The Company intends to extend or replace these credit facilities on or before expiration. This extension or replacement could include similar borrowing capacity or upsizing the facility. These credit facilities are maintained primarily to provide backup liquidity for commercial paper borrowings and maturing medium-term notes. There were no borrowings under the committed bank facilities for the three months ended March 31, 2024.

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 March 31, 2024, the Company has repurchased $110.0 million of shares under this plan. There were no repurchases made under this plan during the three months of 2024.

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Truck, Parts and Other

The Company provides funding for working capital, capital expenditures, R&D, dividends, stock repurchases and other business initiatives and commitments primarily from cash provided by operations. Management expects this method of funding to continue in the future.

Investments for manufacturing property, plant and equipment in the first three months of 2024 were $162.2 million compared to $127.9 million for the same period of 2023. Over the past decade, the Company’s combined investments in worldwide capital projects and R&D totaled $7.84 billion and have significantly increased the operating capacity and efficiency of its facilities and enhanced the quality and operating efficiency of the Company’s premium products.

In 2024, total capital investments for PACCAR are expected to be $700 to $750 million and R&D is expected to be $460 to $500 million. The Company is increasing its investment in advanced new trucks and powertrains, advanced manufacturing capabilities and capacity, and aftermarket distribution capabilities and capacity.

Financial Services

The Company funds its financial services activities primarily from collections on existing finance receivables and borrowings in the capital markets. 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.

In November 2021, 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 March 31, 2024 was $6.65 billion. The registration expires in November 2024 and does not limit the principal amount of debt securities that may be issued during that period.

As of March 31, 2024, the Company’s European finance subsidiary, PACCAR Financial Europe, had €907.4 million available for issuance under a €2.50 billion medium-term note program listed on the Euro MTF Market of the Luxembourg Stock Exchange. This program renews annually and expires in September 2024.

In August 2021, PACCAR Financial Mexico registered a 10.00 billion Mexican peso program with the Comision Nacional Bancaria y de Valores to issue medium-term notes and commercial paper. The registration expires in August 2026 and limits the amount of commercial paper (up to one year) to 5.00 billion Mexican pesos. At March 31, 2024, 4.32 billion Mexican pesos were available for issuance.

In August 2018, the Company’s Australian subsidiary, PACCAR Financial Pty. Ltd. (PFPL Australia), established a medium-term note program. The program does not limit the principal amount of debt securities that may be issued under the program. The total amount of medium-term notes outstanding for PFPL Australia as of March 31, 2024 was 850.0 million Australian dollars.

In May 2021, the Company’s Canadian subsidiary, PACCAR Financial Ltd. (PFL Canada), established a medium-term note program. The program does not limit the principal amount of debt securities that may be issued under the program. The total amount of medium-term notes outstanding for PFL Canada as of March 31, 2024 was 150.0 million Canadian dollars.

The Company’s Brazilian subsidiary, Banco PACCAR S.A., established a lending program in December 2021 with the local development bank, Banco Nacional de Desenvolvimento Economico e Social (BNDES) for qualified customers to receive preferential conditions and generally market interest rates. The program is limited to 1.16 billion Brazilian reais and has 896.7 million Brazilian reais outstanding as of March 31, 2024. The Brazilian subsidiary is establishing a Letra Financeira program and is intending to issue term debt in the second quarter of 2024.

The Company believes its cash balances and investments, collections on existing finance receivables, committed bank facilities 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. In the event of a decrease in the Company’s credit ratings or a disruption in the financial markets, the Company may not be able to refinance its maturing debt in the financial markets. In such circumstances, the Company would be exposed to liquidity risk to the degree that the timing of debt maturities differs from the timing of receivable collections from customers. The Company believes its various sources of liquidity, including committed bank facilities, would continue to provide it with sufficient funding resources to service its maturing debt obligations.

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RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES:

This Form 10-Q includes “adjusted net income (non-GAAP)” and “adjusted net income per diluted share (non-GAAP)”, which are financial measures that are not in accordance with U.S. generally accepted accounting principles (“GAAP”), since they exclude a charge for EC-related claims. These measures differ from the most directly comparable measures calculated in accordance with GAAP and may not be comparable to similarly titled non-GAAP financial measures used by other companies.

For the first quarter of 2023, adjustment for the EC-related claims relates to a pre-tax charge of $600.0 million ($446.4 million after-tax) for estimable total costs recorded in Interest and other (income) expenses, net.

Management utilizes these non-GAAP measures to evaluate the Company’s performance and believes these measures allow investors and management to evaluate operating trends by excluding a significant non-recurring charge that is not representative of underlying operating trends.

Reconciliations from the most directly comparable GAAP measures to adjusted net income (non-GAAP) and adjusted net income per diluted shares (non-GAAP) are as follows:

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FORWARD-LOOKING STATEMENTS:

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements relating to future results of operations or financial position and any other statement that does not relate to any historical or current fact. Such statements are based on currently available operating, financial and other information and are subject to risks and uncertainties that may affect actual results. Risks and uncertainties include, but are not limited to: a significant decline in industry sales; competitive pressures; reduced market share; reduced availability of or higher prices for fuel; increased safety, emissions, or other regulations or tariffs resulting in higher costs and/or sales restrictions; currency or commodity price fluctuations; lower used truck prices; insufficient or under-utilization of manufacturing capacity; supplier interruptions; insufficient liquidity in the capital markets; fluctuations in interest rates; changes in the levels of the Financial Services segment new business volume due to unit fluctuations in new PACCAR truck sales or reduced market shares; changes affecting the profitability of truck owners and operators; price changes impacting truck sales prices and residual values; insufficient supplier capacity or access to raw materials and components, including semiconductors; labor disruptions; shortages of commercial truck drivers; increased warranty costs; cybersecurity risks to the Company’s information technology systems; pandemics; climate-related risks; global conflicts; litigation, including European Commission (EC) settlement-related claims; or legislative and governmental regulations. A more detailed description of these and other risks is included under the headings Part I, Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10‑K for the year ended December 31, 2023 and in Part II, Item 1, “Legal Proceedings” and Part II, Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q.

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There were no material changes in the Company’s market risk during the three months ended March 31, 2024. For additional information, refer to Item 7A as presented in the 2023 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 2023 Annual Report on Form 10-K. There have been no material changes in the Company’s risk factors during the three months ended March 31, 2024.

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 March 31, 2024.

(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 March 31, 2024, the Company has repurchased $110.0 million of shares under this plan. There were no repurchases made under this plan during the first three months of 2024.

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 March 31, 2024, 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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