Item 1. FINANCIAL STATEMENTS

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Item 1. FINANCIAL STATEMENTS

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

(Millions, Except Per Share Amounts)

Three Months EndedSix Months Ended
June 30June 30
2025202420252024
TRUCK, PARTS AND OTHER:
Net sales and revenues$6,962.8$8,262.3$13,876.5$16,497.3
Cost of sales and revenues5,995.46,772.311,886.413,446.1
Research and development112.9117.1228.3222.6
Selling, general and administrative139.2142.7282.5290.3
Interest and other (income) expenses, net**(**9.5)(23.6)316.3(50.6)
6,238.07,008.512,713.513,908.4
Truck, Parts and Other Income Before Income Taxes724.81,253.81,163.02,588.9
FINANCIAL SERVICES:
Interest and fees357.6318.0700.6621.4
Operating lease, rental and other revenues190.1191.8375.1397.7
Revenues547.7509.81,075.71,019.1
Interest and other borrowing expenses200.3172.5390.9332.5
Depreciation and other expenses154.9173.6314.6353.9
Selling, general and administrative40.140.878.479.8
Provision for losses on receivables29.211.747.527.8
424.5398.6831.4794.0
Financial Services Income Before Income Taxes123.2111.2244.3225.1
Investment income83.995.8167.7181.3
Total Income Before Income Taxes931.91,460.81,575.02,995.3
Income taxes208.1338.2346.1677.4
Net Income$723.8$1,122.6$1,228.9$2,317.9
Net Income Per Share
Basic$1.38$2.14$2.34$4.41
Diluted$1.37$2.13$2.33$4.40
Weighted Average Number of Common Shares Outstanding
Basic525.9525.3525.9525.1
Diluted526.7526.6526.8526.5
Comprehensive Income$1,117.2$977.6$1,772.5$2,066.6

See Notes to Consolidated Financial Statements.

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Consolidated Balance Sheets

(Millions)

June 30December 31
20252024 *
(Unaudited)
ASSETS
TRUCK, PARTS AND OTHER:
Current Assets
Cash and cash equivalents$5,366.0$6,871.1
Trade and other receivables, net (allowance for losses: 2025 - $1.4, 2024 - $1.2)2,210.31,933.8
Marketable securities2,913.72,778.8
Inventories, net2,456.72,367.1
Other current assets905.5751.2
Total Truck, Parts and Other Current Assets13,852.214,702.0
Property, plant and equipment, net4,397.23,985.6
Other noncurrent assets, net2,532.52,319.8
Total Truck, Parts and Other Assets20,781.921,007.4
FINANCIAL SERVICES:
Cash and cash equivalents183.9189.7
Finance and other receivables, net (allowance for losses: 2025 - $154.2, 2024 - $145.2)20,193.019,314.3
Equipment on operating leases, net1,928.11,891.4
Other assets1,007.91,016.1
Total Financial Services Assets23,312.922,411.5
$44,094.8$43,418.9
  • The December 31, 2024 consolidated balance sheet has been derived from audited financial statements.

See Notes to Consolidated Financial Statements.

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Consolidated Balance Sheets

(Millions)

June 30December 31
20252024 *
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
TRUCK, PARTS AND OTHER:
Current Liabilities
Accounts payable, accrued expenses and other$5,174.2$4,805.1
Dividend payable1,573.8
Total Truck, Parts and Other Current Liabilities5,174.26,378.9
Other liabilities2,310.81,954.3
Total Truck, Parts and Other Liabilities7,485.08,333.2
FINANCIAL SERVICES:
Accounts payable, accrued expenses and other1,074.31,106.4
Commercial paper and bank loans5,100.86,003.8
Term notes10,837.89,891.2
Deferred taxes and other liabilities654.3577.4
Total Financial Services Liabilities17,667.217,578.8
STOCKHOLDERS' EQUITY:
Preferred stock, no par value - authorized 1.0 million shares, none issued
Common stock, $1 par value - authorized 1.2 billion shares, issued 525.5 and 524.4 million shares525.5524.4
Additional paid-in capital389.0344.8
Treasury stock, at cost - .38 million and nil shares**(**35.0)
Retained earnings18,632.817,751.0
Accumulated other comprehensive loss**(**569.7)(1,113.3)
Total Stockholders' Equity18,942.617,506.9
$44,094.8$43,418.9
  • The December 31, 2024 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)

Six Months Ended
June 30
20252024
OPERATING ACTIVITIES:
Net Income$1,228.9$2,317.9
Adjustments to reconcile net income to cash provided by operations:
Depreciation and amortization:
Property, plant and equipment199.5204.3
Other assets212.9262.6
Provision for losses on financial services receivables47.527.8
Other, net**(**8.7)18.3
Pension contributions**(**11.5)(32.2)
Change in operating assets and liabilities:
Trade and other receivables**(**165.1)(573.0)
Wholesale receivables on new trucks304.6(348.2)
Inventories28.9(263.2)
Accounts payable and accrued expenses**(**42.0)542.4
Income taxes, warranty and other**(**51.3)(247.7)
Net Cash Provided by Operating Activities1,743.71,909.0
INVESTING ACTIVITIES:
Originations of retail loans and finance leases**(**2,978.4)(3,117.5)
Collections on retail loans and finance leases2,409.92,513.3
Net decrease (increase) in wholesale receivables on used equipment21.0(64.6)
Purchases of marketable debt securities**(**823.0)(832.1)
Proceeds from sales and maturities of marketable debt securities770.4494.8
Payments for property, plant and equipment**(**387.2)(411.6)
Acquisitions of equipment for operating leases**(**327.5)(453.0)
Proceeds from asset disposals352.8352.9
Contributions to joint venture**(**44.7)(51.7)
Other, net**(**3.4)(.3)
Net Cash Used in Investing Activities**(**1,010.1)(1,569.8)
FINANCING ACTIVITIES:
Payments of cash dividends**(**1,920.3)(1,973.8)
Purchases of treasury stock**(**35.0)(4.0)
Proceeds from stock compensation transactions24.842.3
Net decrease in commercial paper, short-term bank loans and other**(**1,083.9)(185.3)
Proceeds from term debt1,858.51,832.7
Payments on term debt**(**1,269.9)(1,291.2)
Net Cash Used in Financing Activities**(**2,425.8)(1,579.3)
Effect of exchange rate changes on cash and cash equivalents181.3(70.1)
Net Decrease in Cash and Cash Equivalents**(**1,510.9)(1,310.2)
Cash and cash equivalents at beginning of period7,060.87,181.7
Cash and cash equivalents at end of period$5,549.9$5,871.5

See Notes to Consolidated Financial Statements.

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Consolidated Statements of Sto****ckholders’ Equity (Unaudited)

(Millions, Except Per Share Amounts)

Three Months EndedSix Months Ended
June 30June 30
2025202420252024
COMMON STOCK, $1 PAR VALUE:
Balance at beginning of period$525.0$524.1$524.4$523.3
Stock compensation.5.21.11.0
Balance at end of period525.5524.3525.5524.3
ADDITIONAL PAID-IN CAPITAL:
Balance at beginning of period382.0318.3344.8269.1
Stock compensation7.010.944.260.1
Balance at end of period389.0329.2389.0329.2
TREASURY STOCK, AT COST:
Balance at beginning of period**(**4.3)(4.0)
Purchases**(**30.7)**(**35.0)(4.0)
Balance at end of period**(**35.0)(4.0)**(**35.0)(4.0)
RETAINED EARNINGS:
Balance at beginning of period18,082.516,833.717,751.015,780.3
Net income723.81,122.61,228.92,317.9
Cash dividends declared on common stock**(**173.5)(157.7)**(**347.1)(299.6)
Balance at end of period18,632.817,798.618,632.817,798.6
ACCUMULATED OTHER COMPREHENSIVE LOSS:
Balance at beginning of period**(**963.1)(800.2)**(**1,113.3)(693.9)
Other comprehensive income (loss)393.4(145.0)543.6(251.3)
Balance at end of period**(**569.7)(945.2)**(**569.7)(945.2)
Total Stockholders’ Equity$18,942.6$17,702.9$18,942.6$17,702.9
Cash dividends declared on common stock, per share$.33$.30$.66$.57

See Notes to Consolidated Financial Statements.

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Notes to Consolidated Financial Statements (Unaudited)(Millions, Except Share Amounts)

NOTE A - Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10‑Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025. For further information, refer to the consolidated financial statements and footnotes included in PACCAR Inc’s (PACCAR or the Company) Annual Report on Form 10‑K for the year ended December 31, 2024.

Equity Method Investment: In 2024, PACCAR and three partners completed the formation of a U.S. battery manufacturing joint venture, Amplify Cell Technologies, with PACCAR owning a 30 percent interest. The joint venture meets the definition of a variable interest entity since the equity-at-risk is not currently sufficient to support the future operations of the joint venture. All significant decisions require majority or super-majority approval of the board. As a result, PACCAR is not the primary beneficiary and the Company uses the equity method to account for the investment. Under the equity method, the original investments in the joint venture are recorded at cost and subsequently adjusted by the Company's share of equity in income or losses. The investment is included in Truck, Parts and Other "Other noncurrent assets, net" on the Company's Consolidated Balance Sheets. PACCAR's share of the loss is included in Truck, Parts and Other "Interest and other (income) expenses, net" on the Company's Consolidated Statements of Income. PACCAR contributed $44.7 in the six month period ended June 30, 2025 and the maximum required contribution is $830.0. The Company's equity method investment was $233.3 at June 30, 2025.

Earnings per Share: Basic earnings per common share are computed by dividing earnings by the weighted average number of common shares outstanding, plus the effect of any participating securities. Diluted earnings per common share are computed assuming that all potentially dilutive securities are converted into common shares under the treasury stock method.

The dilutive and antidilutive options are shown separately in the table below:

Three Months EndedSix Months Ended
June 30June 30
2025202420252024
Additional shares754,8001,301,800896,8001,371,000
Antidilutive options1,280,500657,6001,319,700671,000

New Accounting Pronouncements: In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this ASU require entities to disclose certain, specific categories within the rate reconciliation and enhance disclosures regarding income taxes paid and income tax expense. This ASU is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The amendments in this ASU should be applied on a prospective basis; however, retrospective application is permitted. The implementation of this ASU will result in additional disclosures and will not have an impact on the Company’s consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendments in this ASU expand the disclosures in the notes to the financial statements about specific cost and expense categories presented on the face of the income statement. This ASU is effective for annual periods beginning after December 15, 2026, and interim periods within annual periods beginning after December 15, 2027. Early adoption is permitted. The amendments in this ASU should be applied either (1) prospectively to financial statements issued for reporting periods after the effective date or (2) retrospectively to any or all prior periods presented. The Company is currently evaluating the impact of this update on the related notes to the financial statements.

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Notes to Consolidated Financial Statements (Unaudited)(Millions, Except Share Amounts)

NOTE B – Sales and Revenues

Truck, Parts and Other

The Company enters into sales contracts with customers associated with purchases of the Company’s products and services including trucks, parts, product support, and other related services. Generally, the Company recognizes revenue for the amount of consideration it will receive for delivering a product or service to a customer. Revenue is recognized when the customer obtains control of the product or receives benefits of the service. The Company excludes sales taxes, value added taxes and other related taxes assessed by government agencies from revenue. There are no significant financing components included in product or services revenue since generally customers pay shortly after the products or services are transferred. In the Truck and Parts segments, when the Company grants extended payment terms on selected receivables and charges interest, interest income is recognized when earned.

The following table disaggregates Truck, Parts and Other revenues by major sources:

Three Months EndedSix Months Ended
June 30June 30
2025202420252024
Truck
Truck sales$4,964.5$6,337.6$9,936.2$12,642.3
Revenues from extended warranties, operating leases and other278.6240.2532.7476.5
5,243.16,577.810,468.913,118.8
Parts
Parts sales1,677.41,614.03,315.03,239.6
Revenues from dealer services and other43.550.395.8100.6
1,720.91,664.33,410.83,340.2
Intersegment eliminations and other**(**1.2)20.2**(**3.2)38.3
Truck, Parts and Other sales and revenues$6,962.8$8,262.3$13,876.5$16,497.3

The Company recognizes truck and parts sales as revenues when control of the products is transferred to customers which generally occurs upon shipment, except for certain truck sales which are subject to a residual value guarantee (RVG) by the Company. The standard payment term for trucks and aftermarket parts is typically within 30 days, but the Company may grant extended payment terms on selected receivables. The Company recognizes revenue for the invoice amount adjusted for estimated sales incentives and returns. Sales incentives and returns are estimated based on historical experience and are adjusted to current period revenue when the most likely amount of consideration the Company expects to receive changes or becomes fixed. Truck and parts sales include a standard product warranty which is included in cost of sales. The Company has elected to treat delivery services as a fulfillment activity with revenues recognized when the customer obtains control of the product. Delivery revenue is included in revenues and the related costs are included in cost of sales. The Company is not disclosing truck order backlog, as a significant majority of the backlog has a duration of less than one year.

Truck sales with RVGs that allow customers the option to return their truck are accounted for as a sale when the customer does not have an economic incentive to return the truck to the Company, or as an operating lease when the customer does have an economic incentive to return the truck. The estimate of customers’ economic incentive to return the trucks is based on an analysis of historical guaranteed buyback value and estimated market value. When truck sales with RVGs are accounted for as a sale, revenue is recognized when the truck is transferred to the customer less an amount for expected returns. Expected returns are estimated by using a historical return rate.

Aftermarket parts sales allow for returns which are estimated at the time of sale based on historical data. Parts dealer services and other revenues are recognized as services are performed.

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Notes to Consolidated Financial Statements (Unaudited)(Millions, Except Share Amounts)

The following table presents the balance sheet classification of the estimated value of the returned goods assets and the related return liabilities:

June 30, 2025December 31, 2024
ASSETSLIABILITIESASSETSLIABILITIES
Trucks
Other current assets$113.8$116.7
Accounts payable, accrued expenses and other$118.1$121.7
Other noncurrent assets, net157.8135.9
Other liabilities167.4144.7
$271.6$285.5$252.6$266.4
Parts
Other current assets$103.6$101.7
Accounts payable, accrued expenses and other$247.4$244.4
$103.6$247.4$101.7$244.4

The Company’s total commitment to acquire trucks at a guaranteed value for contracts accounted for as a sale was $615.0 at June 30, 2025.

Revenues from extended warranties, operating leases and other include optional extended warranty and repair and maintenance (R&M) service contracts which can be purchased for periods generally ranging up to five years. The Company defers revenue based on stand-alone observable selling prices when it receives payments in advance and generally recognizes the revenue on a straight-line basis over the warranty or R&M contract periods. See Note F, Product Support Liabilities, in the Notes to the Consolidated Financial Statements for further information. Also included are truck sales with an RVG accounted for as an operating lease. A liability is created for the residual value obligation with the remainder of the proceeds recorded as deferred revenue. The deferred revenue is recognized on a straight-line basis over the guarantee period, which typically ranges from three to five years. Deferred revenue related to trucks sold with an RVG was $25.9 at June 30, 2025. The Company expects to recognize approximately $6.3 of the remaining deferred revenue in 2025, $9.9 in 2026, $6.2 in 2027, $2.5 in 2028 and $1.0 in 2029. For the three and six months ended June 30, 2025, total operating lease revenue from truck sales with RVGs was $4.2 and $7.3, respectively, compared to $8.1 and $17.9 for the three and six months ended June 30, 2024. The Company’s total commitment to acquire trucks at a guaranteed value for contracts accounted for as a lease was $53.6 at June 30, 2025.

Intersegment eliminations and other consists of intersegment eliminations and other revenues not attributable to a reportable segment. Also included within this category was revenue from the industrial winch business through October 31, 2024. Winch sales were recognized when the product was transferred to a customer, which generally occurred upon shipment.

Financial Services

The Company’s Financial Services segment products include loans to customers collateralized by the vehicles being financed, finance leases for retail customers and dealers, dealer wholesale financing which includes floating-rate wholesale loans to PACCAR dealers for new and used trucks, and operating leases which include rentals on Company owned equipment. Interest income from finance and other receivables is recognized using the interest method. Certain loan origination costs are deferred and amortized to interest income over the expected life of the contracts using the straight-line method which approximates the interest method.

Operating lease rental revenue is recognized on a straight-line basis over the term of the lease. Customer contracts may include additional services such as excess mileage, R&M and other services on which revenue is recognized when earned. The Company’s full-service lease arrangements bundle these additional services. Rents for full-service lease contracts are allocated between lease and non-lease components based on the relative stand-alone price of each component. Taxes, such as sales and use and value added, which are collected by the Company from a customer, are excluded from the measurement of lease income and expenses.

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Notes to Consolidated Financial Statements (Unaudited)(Millions, Except Share Amounts)

Recognition of interest income and rental revenue is suspended (put on non-accrual status) when the receivable becomes more than 90 days past the contractual due date or earlier if some other event causes the Company to determine that collection is not probable. Accordingly, no finance receivables more than 90 days past due were accruing interest at June 30, 2025 or December 31, 2024. Recognition is resumed if the receivable becomes current by the payment of all amounts due under the terms of the existing contract and collection of remaining amounts is considered probable (if not contractually modified) or if the customer makes scheduled payments for three months and collection of remaining amounts is considered probable (if contractually modified). Payments received while the finance receivable is on non-accrual status are applied to interest and principal in accordance with the contractual terms.

Finance leases are secured by the trucks and related equipment being leased and the lease terms generally range from three to five years depending on the type and use of the equipment. The lessee is required to either purchase the equipment or guarantee to the Company a stated residual value upon the disposition of the equipment at the end of the finance lease term.

Operating lease terms generally range from three to five years. At the end of the operating lease term, the lessee has the option to return the equipment to the Company or purchase the equipment at its fair market value.

The Company determines its estimate of the residual value of leased vehicles by considering the length of the lease term, the truck model, the expected usage of the truck and anticipated market demand. If the sales price of the truck at the end of the agreement differs from the Company’s estimated residual value, a gain or loss will result. Future market conditions, changes in government regulations and other factors outside the Company’s control could impact the ultimate sales price of trucks returned under these contracts. Residual values are reviewed regularly and adjusted if market conditions warrant.

The following table summarizes Financial Services lease revenues by lease type:

Three Months EndedSix Months Ended
June 30June 30
2025202420252024
Finance lease revenues$93.9$84.4$182.1$167.0
Operating lease revenues156.6162.6307.4337.5
Total lease revenues$250.5$247.0$489.5$504.5

NOTE C - Investments in Marketable Securities

Debt Securities

The Company's investments in marketable debt securities are classified as available-for-sale. These investments are stated at fair value and may include an allowance for credit losses. Changes in the allowance for credit losses are recognized in the current period earnings and any unrealized gains or losses, net of tax, are included as a component of accumulated other comprehensive income (loss) (AOCI).

The Company utilizes third-party pricing services for all of its marketable debt security valuations. The Company reviews the pricing methodology used by the third‑party pricing services, including the manner employed to collect market information. On a quarterly basis, the Company also performs review and validation procedures on the pricing information received from the third‑party providers. These procedures help ensure the fair value information used by the Company is determined in accordance with applicable accounting guidance.

The Company evaluates its investment in marketable debt securities at the end of each reporting period to determine if a decline in fair value is the result of credit losses or unrealized losses. In assessing credit losses, the Company considers the collectability of principal and interest payments by monitoring changes to issuers’ credit ratings, specific credit events associated with individual issuers as well as the credit ratings of any financial guarantor. The Company considers its intent for selling the security and whether it is more likely than not the Company will be able to hold the security until the recovery of any credit losses and unrealized losses. Charges against the allowance for credit losses occur when a security with credit losses is sold or the Company no longer intends to hold that security.

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Notes to Consolidated Financial Statements (Unaudited)(Millions, Except Share Amounts)

Equity Securities

Marketable equity securities are traded on active exchanges and are measured at fair value. The realized and unrealized gains (losses) are recognized in investment income.

Marketable securities at June 30, 2025 and December 31, 2024 consisted of the following:

UNREALIZEDUNREALIZEDFAIR
At June 30, 2025COSTGAINSLOSSESVALUE
Marketable debt securities
U.S. tax-exempt securities$379.7$2.3$.1$381.9
U.S. taxable municipal / non-U.S. provincial bonds403.33.6.6406.3
U.S. corporate securities892.97.4.8899.5
U.S. government securities208.71.8.2210.3
Non-U.S. corporate securities613.05.7.4618.3
Non-U.S. government securities195.83.0.1198.7
Other debt securities192.61.4.5193.5
Marketable equity securities10.04.85.2
Total marketable securities$2,896.0$25.2$7.5$2,913.7
UNREALIZEDUNREALIZEDFAIR
At December 31, 2024COSTGAINSLOSSESVALUE
Marketable debt securities
U.S. tax-exempt securities$304.5$.6$1.4$303.7
U.S. taxable municipal / non-U.S. provincial bonds381.11.22.2380.1
U.S. corporate securities864.33.13.2864.2
U.S. government securities287.1.11.5285.7
Non-U.S. corporate securities606.63.52.0608.1
Non-U.S. government securities163.51.4.6164.3
Other debt securities166.4.8.8166.4
Marketable equity securities10.03.76.3
Total marketable securities$2,783.5$10.7$15.4$2,778.8

The cost of marketable debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Amortization, accretion, interest and dividend income and realized gains and losses are included in investment income. The cost of securities sold is based on the specific identification method. Gross realized gains were $1.6 and $.7 and gross realized losses were $1.5 and $2.5 for the six months periods ended June 30, 2025 and 2024, respectively.

Net unrealized losses on marketable equity securities recognized in investment income were $1.1 and $1.6 for the six months ended June 30, 2025 and 2024, respectively.

Marketable debt securities with continuous unrealized losses and their related fair values were as follows:

June 30, 2025December 31, 2024
LESS THANTWELVE MONTHSLESS THANTWELVE MONTHS
TWELVE MONTHSOR GREATERTWELVE MONTHSOR GREATER
Fair value$238.6$164.5$932.9$365.5
Unrealized losses.32.45.56.2

The unrealized losses on marketable debt securities above were due to higher yields on certain securities. The Company did not identify any indicators of a credit loss in its assessments. Accordingly, no allowance for credit losses was recorded at June 30, 2025 and December 31, 2024. The Company does not currently intend, and it is more likely than not that it will not be required, to sell the investment securities before recovery of the unrealized losses. The Company expects that the contractual principal and interest will be received on the investment securities.

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Notes to Consolidated Financial Statements (Unaudited)(Millions, Except Share Amounts)

Contractual maturities of marketable debt securities at June 30, 2025 were as follows:

AMORTIZEDFAIR
COSTVALUE
Within one year$573.7$574.8
One to five years2,306.72,328.6
Six to ten years.7.7
More than ten years4.94.4
$2,886.0$2,908.5

NOTE D - Inventories

Inventories are stated at the lower of cost or net realizable value. Cost of inventories is determined principally by the first-in, first-out (FIFO) method. Inventories include the following:

June 30December 31
20252024
Finished products$1,130.4$977.1
Work in process and raw materials1,326.31,390.0
$2,456.7$2,367.1

NOTE E - Finance and Other Receivables

Finance and other receivables include the following:

June 30December 31
20252024
Loans$10,027.4$9,442.4
Finance leases5,337.24,906.6
Dealer wholesale financing4,799.04,944.1
Operating lease receivables and other183.6166.4
20,347.219,459.5
Less allowance for losses:
Loans and leases**(**148.6)(139.2)
Dealer wholesale financing**(**3.1)(3.0)
Operating lease receivables and other**(**2.5)(3.0)
$20,193.0$19,314.3

The net activity of dealer direct loans and dealer wholesale financing on new trucks is shown in the operating section of the Condensed Consolidated Statements of Cash Flows since those receivables finance the sale of Company inventory.

Allowance for Credit Losses

The Company continuously monitors the payment performance of its finance receivables. For large retail finance customers and dealers with wholesale financing, the Company regularly reviews their financial statements and makes site visits and phone contact as appropriate. If the Company becomes aware of circumstances that could cause those customers or dealers to face financial difficulty, whether or not they are past due, the customers are placed on a watch list.

The Company modifies loans and finance leases in the normal course 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.

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Notes to Consolidated Financial Statements (Unaudited)(Millions, Except Share Amounts)

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 Company does not typically grant credit modifications for customers that do not meet minimum underwriting standards since the Company normally repossesses the financed equipment in these circumstances.

On average, commercial and other modifications extended contractual terms by approximately five months in 2025 and four months in 2024, and did not have a significant effect on the weighted average term or interest rate of the total portfolio at June 30, 2025 and December 31, 2024.

The Company has developed a systematic methodology for determining the allowance for credit losses for its two portfolio segments, retail and wholesale. The retail segment consists of retail loans and sales-type finance leases, net of unearned interest. The wholesale segment consists of truck inventory financing loans to dealers that are collateralized by trucks and other collateral. The wholesale segment generally has less risk than the retail segment. Wholesale receivables generally are shorter in duration than retail receivables, and the Company requires periodic reporting of the wholesale dealer’s financial condition, conducts periodic audits of the trucks being financed and in many cases, obtains guarantees or other security such as dealership assets. In determining the allowance for credit losses, retail loans and finance leases are evaluated together since they relate to a similar customer base, their contractual terms require regular payment of principal and interest, generally over three to five years, and they are secured by the same type of collateral. The allowance for credit losses consists of both specific and general reserves.

The Company individually evaluates certain finance receivables for expected credit losses. Finance receivables that are evaluated individually consist of all wholesale accounts and certain large retail accounts with past due balances or otherwise determined to be at a higher risk of loss. In general, finance receivables that are 90 days past due are placed on non-accrual status. Finance receivables on non-accrual status which have been performing for 90 consecutive days are placed on accrual status if it is deemed probable that the Company will collect all principal and interest payments.

Individually evaluated receivables on non-accrual status are generally considered collateral dependent. Large balance retail and all wholesale receivables on non-accrual status are individually evaluated for loss based on the value of the underlying collateral or a discounted cash flow analysis. Small balance receivables on non-accrual status with similar risk characteristics are evaluated as a separate pool to determine the appropriate reserve for losses using the historical loss information discussed below.

The Company evaluates finance receivables that are not individually evaluated and share similar risk characteristics on a collective basis and determines the general allowance for credit losses for both retail and wholesale receivables based on historical loss information, using past due account data, current market conditions, and expected changes in future macroeconomic conditions that affect collectability. Historical credit loss data provides relevant information of expected credit losses. The historical information used includes assumptions regarding the likelihood of collecting current and past due accounts, repossession rates, and the recovery rate on the underlying collateral based on used truck values and other pledged collateral or recourse.

The Company has developed a range of loss estimates for each of its country portfolios based on historical experience, taking into account loss frequency and severity in both strong and weak truck market conditions. A projection is made of the range of estimated credit losses inherent in the portfolio from which an amount is determined based on current market conditions and other factors impacting the creditworthiness of the Company’s borrowers and their ability to repay. Adjustments to historical loss information are made for changes in forecasted economic conditions that are specific to the industry and markets in which the Company conducts business. The Company utilizes economic forecasts from third-party sources and determines expected losses based on historical experience under similar market conditions. After determining the appropriate level of the allowance for credit losses, a provision for losses on finance receivables is charged to income as necessary to reflect management’s estimate of expected credit losses, net of recoveries, inherent in the portfolio.

- 14 -

Notes to Consolidated Financial Statements (Unaudited)(Millions, Except Share Amounts)

In determining the fair value of the collateral, the Company uses a pricing matrix and categorizes the fair value as Level 2 in the hierarchy of fair value measurement. The pricing matrix is reviewed quarterly and updated as appropriate. The pricing matrix considers the make, model and year of the equipment as well as recent sales prices of comparable equipment sold individually, which is the lowest unit of account, through wholesale channels to the Company’s dealers (principal market). The fair value of the collateral also considers the overall condition of the equipment.

Accounts are charged off against the allowance for credit losses when, in the judgment of management, they are considered uncollectible, which generally occurs upon repossession of the collateral. Typically the timing between the repossession and charge-off is not significant. In cases where repossession is delayed (e.g., for legal proceedings), the Company records a partial charge-off. The charge-off is determined by comparing the fair value of the collateral, less cost to sell, to the amortized cost basis.

For the following credit quality disclosures, finance receivables are classified into two portfolio segments, wholesale and retail. The retail portfolio is further segmented into dealer retail and customer retail. The dealer wholesale segment consists of truck inventory financing to PACCAR dealers. The dealer retail segment consists of loans and leases to participating dealers and franchises that use the proceeds to fund customers’ acquisition of commercial vehicles and related equipment. The customer retail segment consists of loans and leases directly to customers for the acquisition of commercial vehicles and related equipment. Customer retail receivables are further segregated between fleet and owner/operator classes. The fleet class consists of customer retail accounts operating five or more trucks. All other customer retail accounts are considered owner/operator. These two classes have similar measurement attributes, risk characteristics and common methods to monitor and assess credit risk.

The allowance for credit losses is summarized as follows:

2025
DEALERCUSTOMER
WHOLESALERETAILRETAILOTHER*TOTAL
Balance at January 1$3.0$1.5$137.7$3.0$145.2
Provision for losses(****.1).147.6(****.1)47.5
Charge-offs**(**49.9)(****.4)**(**50.3)
Recoveries4.2.24.4
Currency translation and other.27.4(****.2)7.4
Balance at June 30$3.1$1.6$147.0$2.5$154.2
2024
DEALERCUSTOMER
WHOLESALERETAILRETAILOTHER*TOTAL
Balance at January 1$2.7$1.9$125.1$3.3$133.0
Provision for losses.3(.4)28.4(.5)27.8
Charge-offs(24.3)(.5)(24.8)
Recoveries4.51.05.5
Currency translation and other(.1)(4.0)(.2)(4.3)
Balance at June 30$2.9$1.5$129.7$3.1$137.2
  • Operating leases and other trade receivables.

Credit Quality

The Company’s customers are principally concentrated in the transportation industry in North America, Europe, Australia and Brasil. The Company’s portfolio assets are diversified over a large number of customers and dealers with no single customer or dealer balances representing over 5% of the total portfolio assets. The Company retains as collateral a security interest in the related equipment.

- 15 -

Notes to Consolidated Financial Statements (Unaudited)(Millions, Except Share Amounts)

At the inception of each contract, the Company considers the credit risk based on a variety of credit quality factors including prior payment experience, customer financial information, credit-rating agency ratings, loan-to-value ratios and other internal metrics. On an ongoing basis, the Company monitors credit quality based on past due status and collection experience as there is a meaningful correlation between the past due status of customers and the risk of loss.

The Company has three credit quality indicators: performing, watch and at-risk. Performing accounts pay in accordance with the contractual terms and are not considered high-risk. Watch accounts include accounts 31 to 90 days past due and large accounts that are performing but are considered to be high‑risk. Watch accounts are not collateral dependent. At-risk accounts are generally collateral dependent, including accounts over 90 days past due and other accounts on non-accrual status.

The tables below summarize the amortized cost basis of the Company’s finance receivables within each credit quality indicator by year of origination and portfolio class and current period gross charge-offs of the Company’s finance receivables by year of origination and portfolio class.

REVOLVING
At June 30, 2025LOANS20252024202320222021PRIORTOTAL
Amortized cost:
Dealer:
Wholesale:
Performing$4,792.1$4,792.1
Watch6.96.9
$4,799.0$4,799.0
Retail:
Performing$227.1$254.5$624.8$565.5$352.8$154.6$169.6$2,348.9
Watch6.31.913.84.71.72.931.3
$227.1$260.8$626.7$579.3$357.5$156.3$172.5$2,380.2
Total dealer$5,026.1$260.8$626.7$579.3$357.5$156.3$172.5$7,179.2
Customer retail:
Fleet:
Performing$2,312.2$4,128.5$2,635.2$1,351.5$468.6$183.2$11,079.2
Watch34.830.357.345.523.01.9192.8
At-risk10.765.1142.755.215.56.6295.8
$2,357.7$4,223.9$2,835.2$1,452.2$507.1$191.7$11,567.8
Owner/operator:
Performing$354.6$484.0$260.4$163.9$92.2$31.2$1,386.3
Watch.34.23.83.52.0.514.3
At-risk3.06.33.81.91.016.0
$354.9$491.2$270.5$171.2$96.1$32.7$1,416.6
Total customer retail$2,712.6$4,715.1$3,105.7$1,623.4$603.2$224.4$12,984.4
Total$5,026.1$2,973.4$5,341.8$3,685.0$1,980.9$759.5$396.9$20,163.6
Six Months Ended June 30, 2025REVOLVING LOANS20252024202320222021PRIORTOTAL
Gross charge-offs:
Customer retail:
Fleet$.1$4.7$31.2$3.9$4.2$1.7$45.8
Owner/operator.41.2.61.5.2.24.1
Total$.5$5.9$31.8$5.4$4.4$1.9$49.9

- 16 -

Notes to Consolidated Financial Statements (Unaudited)(Millions, Except Share Amounts)
REVOLVING
At December 31, 2024LOANS20242023202220212020PRIORTOTAL
Amortized cost:
Dealer:
Wholesale:
Performing$4,936.1$4,936.1
Watch7.17.1
At-risk.9.9
$4,944.1$4,944.1
Retail:
Performing$229.8$680.8$641.5$404.6$192.8$98.0$141.6$2,389.1
Watch2.023.16.12.14.6.438.3
$229.8$682.8$664.6$410.7$194.9$102.6$142.0$2,427.4
Total dealer$5,173.9$682.8$664.6$410.7$194.9$102.6$142.0$7,371.5
Customer retail:
Fleet:
Performing$4,306.5$2,991.4$1,761.1$781.9$298.2$71.0$10,210.1
Watch11.217.613.95.82.1.951.5
At-risk49.5196.880.841.96.01.5376.5
$4,367.2$3,205.8$1,855.8$829.6$306.3$73.4$10,638.1
Owner/operator:
Performing$524.1$303.7$206.2$145.1$57.6$12.7$1,249.4
Watch2.512.18.02.91.3.427.2
At-risk.91.82.2.91.0.16.9
$527.5$317.6$216.4$148.9$59.9$13.2$1,283.5
Total customer retail$4,894.7$3,523.4$2,072.2$978.5$366.2$86.6$11,921.6
Total$5,173.9$5,577.5$4,188.0$2,482.9$1,173.4$468.8$228.6$19,293.1
Twelve Months Ended December 31, 2024REVOLVING LOANS20242023202220212020PRIORTOTAL
Gross charge-offs:
Customer retail:
Fleet$.9$19.4$12.1$7.5$4.2$7.8$51.9
Owner/operator.12.43.71.01.3.89.3
Total$1.0$21.8$15.8$8.5$5.5$8.6$61.2

- 17 -

Notes to Consolidated Financial Statements (Unaudited)(Millions, Except Share Amounts)

The tables below summarize the Company’s finance receivables by aging category. In determining past due status, the Company considers the entire contractual account balance past due when any installment is over 30 days past due. Substantially all customer accounts that were greater than 30 days past due prior to credit modification became current upon modification for aging purposes.

DEALERCUSTOMER RETAIL
OWNER/
At June 30, 2025WHOLESALERETAILFLEETOPERATORTOTAL
Current and up to 30 days past due$4,799.0$2,380.2$11,412.8$1,389.4$19,981.4
31 – 60 days past due75.714.089.7
Greater than 60 days past due79.313.292.5
$4,799.0$2,380.2$11,567.8$1,416.6$20,163.6
DEALERCUSTOMER RETAIL
OWNER/
At December 31, 2024WHOLESALERETAILFLEETOPERATORTOTAL
Current and up to 30 days past due$4,942.1$2,427.4$10,462.5$1,266.9$19,098.9
31 – 60 days past due1.171.87.980.8
Greater than 60 days past due.9103.88.7113.4
$4,944.1$2,427.4$10,638.1$1,283.5$19,293.1

The amortized cost basis of finance receivables that are on non-accrual status was as follows:

DEALERCUSTOMER RETAIL
OWNER/
At June 30, 2025WHOLESALERETAILFLEETOPERATORTOTAL
Amortized cost basis with a specific reserve$214.3$8.2$222.5
Amortized cost basis with no specific reserve80.6.981.5
Total$294.9$9.1$304.0
DEALERCUSTOMER RETAIL
OWNER/
At December 31, 2024WHOLESALERETAILFLEETOPERATORTOTAL
Amortized cost basis with a specific reserve$350.0$5.5$355.5
Amortized cost basis with no specific reserve$.925.81.428.1
Total$.9$375.8$6.9$383.6

The decrease in amortized cost basis with a specific reserve at June 30, 2025 from December 31, 2024 reflected several large fleet customers being charged off upon repossession of the collateral, primarily in the U.S. and Canada. The increase in amortized cost basis with no specific reserve at June 30, 2025 was due to one large fleet customer in the U.S. The net decrease in the total amortized cost basis of finance receivables that were on non-accrual status also reflected customers paying current and recognition of interest income resumed.

Interest income recognized on a cash basis for finance receivables that are on non-accrual status was as follows:

Three Months EndedSix Months Ended
June 30June 30
2025202420252024
Customer retail:
Fleet$1.1$1.1$5.7$2.1
Owner/operator.1.1.2.2
$1.2$1.2$5.9$2.3

- 18 -

Notes to Consolidated Financial Statements (Unaudited)(Millions, Except Share Amounts)

Customers Experiencing Financial Difficulty

The Company modified $141.6 and $134.2 of finance receivables for customers experiencing financial difficulty during the first six months of 2025 and 2024, respectively. Generally, other than insignificant term extensions and payment delays are credit modifications extending terms and payment delays for more than three months. The amortized cost basis of finance receivables for other than insignificant term extensions and payment delays to customers in financial difficulty were as follows:

Three Months EndedSix Months Ended
June 30June 30
2025202420252024
Customer retail:
Fleet$29.0$83.2$40.6$89.6
Owner/operator.2.3.3.4
$29.2$83.5$40.9$90.0
Annualized % of total retail portfolio.8%2.5%.5%1.3%

The credit modifications granted customers additional time to pay. The financial effects of the term extensions added a weighted-average of 7 months to the life of the modified contracts for both the three months ended June 30, 2025 and 2024, and 7 months for both the six months ended June 30, 2025 and 2024. The effect of modifications is included in the Company's historical loss information used to determine the allowance for credit losses. For certain modifications to customers experiencing financial difficulties that are at-risk at June 30, 2025 and December 31, 2024, the allowance for credit loss is based on the value of underlying collateral or a discounted cash flow analysis.

There were $1.3 and $2.2 finance receivables modified with customers experiencing financial difficulty during the previous twelve months that had a payment default in the three and six months ended June 30, 2025. There were $1.8 and $3.3 finance receivables modified with customers experiencing financial difficulty during the previous twelve months that had a payment default in the three and six months ended June 30, 2024.

Repossessions

When the Company determines a customer is not likely to meet its contractual commitments, the Company repossesses the vehicles which serve as collateral for the loans, finance leases and equipment under operating leases. The Company records the vehicles as used truck inventory included in Financial Services Other assets on the Consolidated Balance Sheets. The balance of repossessed inventory at June 30, 2025 and December 31, 2024 was $70.5 and $80.9, respectively.

Proceeds from the sales of repossessed assets were $75.0 and $28.5 for the six months ended June 30, 2025 and 2024, respectively. These amounts are included in Proceeds from asset disposals in the Condensed Consolidated Statements of Cash Flows. Write-downs of repossessed equipment on operating leases are recorded as impairments and included in Financial Services Depreciation and other expenses on the Consolidated Statements of Comprehensive Income.

NOTE F - Product Support Liabilities

Product support liabilities include estimated future payments related to product warranties and deferred revenues on optional extended warranties and R&M contracts. The Company generally offers one year warranties covering most of its vehicles and related aftermarket parts. For vehicles equipped with engines manufactured by PACCAR, the Company generally offers two year warranties on the engine. Specific terms and conditions vary depending on the product and the country of sale. Optional extended warranty and R&M contracts can be purchased for periods which generally range up to five years. Warranty expenses and reserves are estimated and recorded at the time products or contracts are sold based on historical and current data and reasonable expectations for the future regarding the frequency and cost of warranty claims, net of recoveries. The Company periodically assesses the adequacy of its recorded liabilities and adjusts them as appropriate to reflect actual experience. Revenue from extended warranty and R&M contracts is deferred and recognized to income generally on a straight-line basis over the contract period. Warranty and R&M costs on these contracts are recognized as incurred.

- 19 -

Notes to Consolidated Financial Statements (Unaudited)(Millions, Except Share Amounts)

Changes in product support liabilities are summarized as follows:

WARRANTY RESERVES20252024
Balance at January 1$606.1$767.0
Cost accruals334.2312.9
Payments**(**406.4)(440.2)
Change in estimates for pre-existing warranties59.655.1
Currency translation and other26.4(8.7)
Balance at June 30$619.9$686.1
DEFERRED REVENUES ON EXTENDED WARRANTIES AND R&M CONTRACTS20252024
Balance at January 1$1,302.2$1,229.1
Deferred revenues357.7354.0
Revenues recognized**(**330.4)(285.0)
Currency translation81.5(16.0)
Balance at June 30$1,411.0$1,282.1

The Company expects to recognize approximately $231.6 of the remaining deferred revenues on extended warranties and R&M contracts in 2025, $431.8 in 2026, $338.2 in 2027, $225.9 in 2028, $127.4 in 2029 and $56.1 thereafter.

NOTE G - Stockholders’ Equity

Comprehensive Income

The components of comprehensive income are as follows:

Three Months EndedSix Months Ended
June 30June 30
2025202420252024
Net income$723.8$1,122.6$1,228.9$2,317.9
Other comprehensive (loss) income (OCI):
Unrealized (losses) gains on derivative contracts**(**16.7)25.5**(**38.6)37.6
Tax effect4.5(6.1)11.0(9.8)
**(**12.2)19.4**(**27.6)27.8
Unrealized gains on marketable debt securities7.62.623.3.1
Tax effect**(**1.5)(.6)**(**5.9)
6.12.017.4.1
Pension plans**(**1.5)2.4**(**1.1)10.3
Tax effect1.3(.4)1.3(2.6)
(****.2)2.0.27.7
Foreign currency translation gains (losses)399.7(168.4)553.6(286.9)
Net other comprehensive income (loss)393.4(145.0)543.6(251.3)
Comprehensive income$1,117.2$977.6$1,772.5$2,066.6

- 20 -

Notes to Consolidated Financial Statements (Unaudited)(Millions, Except Share Amounts)

Accumulated Other Comprehensive Income (Loss)

The components of AOCI and the changes in AOCI, net of tax, included in the Consolidated Balance Sheets and the Consolidated Statements of Stockholders’ Equity consisted of the following:

Three Months Ended June 30, 2025DERIVATIVE CONTRACTSMARKETABLE DEBT SECURITIESPENSION PLANSFOREIGN CURRENCY TRANSLATIONTOTAL
Balance at April 1, 2025$17.1$10.6$70.1$**(**1,060.9)$**(**963.1)
Recorded into AOCI**(**123.2)6.0(****.5)399.7282.0
Reclassified out of AOCI111.0.1.3111.4
Net other comprehensive (loss) income**(**12.2)6.1(****.2)399.7393.4
Balance at June 30, 2025$4.9$16.7$69.9$**(**661.2)$**(**569.7)
Three Months Ended June 30, 2024DERIVATIVE CONTRACTSMARKETABLE DEBT SECURITIESPENSION PLANSFOREIGN CURRENCY TRANSLATIONTOTAL
Balance at April 1, 2024$(2.6)$(15.8)$(104.6)$(677.2)$(800.2)
Recorded into AOCI67.52.4.3(168.4)(98.2)
Reclassified out of AOCI(48.1)(.4)1.7(46.8)
Net other comprehensive income (loss)19.42.02.0(168.4)(145.0)
Balance at June 30, 2024$16.8$(13.8)$(102.6)$(845.6)$(945.2)
Six Months Ended June 30, 2025DERIVATIVE CONTRACTSMARKETABLE DEBT SECURITIESPENSION PLANSFOREIGN CURRENCY TRANSLATIONTOTAL
Balance at January 1, 2025$32.5$(****.7)$69.7$**(**1,214.8)$**(**1,113.3)
Recorded into AOCI**(**192.4)17.4(****.9)553.6377.7
Reclassified out of AOCI164.81.1165.9
Net other comprehensive (loss) income**(**27.6)17.4.2553.6543.6
Balance at June 30, 2025$4.9$16.7$69.9$**(**661.2)$**(**569.7)
Six Months Ended June 30, 2024DERIVATIVE CONTRACTSMARKETABLE DEBT SECURITIESPENSION PLANSFOREIGN CURRENCY TRANSLATIONTOTAL
Balance at January 1, 2024$(11.0)$(13.9)$(110.3)$(558.7)$(693.9)
Recorded into AOCI96.31.44.9(286.9)(184.3)
Reclassified out of AOCI(68.5)(1.3)2.8(67.0)
Net other comprehensive income (loss)27.8.17.7(286.9)(251.3)
Balance at June 30, 2024$16.8$(13.8)$(102.6)$(845.6)$(945.2)

- 21 -

Notes to Consolidated Financial Statements (Unaudited)(Millions, Except Share Amounts)

Reclassifications out of AOCI were as follows:

Three Months Ended
LINE ITEM IN THE CONSOLIDATED STATEMENTS OFJune 30
AOCI COMPONENTSCOMPREHENSIVE INCOME20252024
Unrealized losses (gains) on derivative contracts:
Truck, Parts and Other
Foreign-exchange contractsNet sales and revenues$6.8$.4
Cost of sales and revenues**(**1.3)(17.5)
Interest and other (income) expenses, net17.8(.3)
Commodity contractsCost of sales and revenues(****.7)3.3
Financial Services
Foreign-exchange contractsInterest and other borrowing expenses7.0(2.5)
Interest-rate contractsInterest and other borrowing expenses113.1(42.4)
Pre-tax expense increase (reduction)142.7(59.0)
Tax (benefit) expense**(**31.7)10.9
After-tax expense increase (reduction)111.0(48.1)
Unrealized losses (gains) on marketable debt securities:
Marketable debt securitiesInvestment income.2(.5)
Tax expense(****.1).1
After-tax income reduction (increase).1(.4)
Pension plans:
Truck, Parts and Other
Actuarial lossInterest and other (income) expenses, net.11.6
Prior service costsInterest and other (income) expenses, net.4.4
Pre-tax expense increase.52.0
Tax benefit(****.2)(.3)
After-tax expense increase.31.7
Total reclassifications out of AOCI$111.4$(46.8)

- 22 -

Notes to Consolidated Financial Statements (Unaudited)(Millions, Except Share Amounts)
Six Months Ended
LINE ITEM IN THE CONSOLIDATED STATEMENTS OFJune 30
AOCI COMPONENTSCOMPREHENSIVE INCOME20252024
Unrealized losses (gains) on derivative contracts:
Truck, Parts and Other
Foreign-exchange contractsNet sales and revenues$4.0$9.2
Cost of sales and revenues**(**10.8)(24.9)
Interest and other (income) expenses, net30.2(1.4)
Commodity contractsCost of sales and revenues(****.8)5.9
Financial Services
Foreign-exchange contractsInterest and other borrowing expenses12.8(5.1)
Interest-rate contractsInterest and other borrowing expenses175.5(66.9)
Pre-tax expense increase (reduction)210.9(83.2)
Tax (benefit) expense**(**46.1)14.7
After-tax expense increase (reduction)164.8(68.5)
Unrealized gains on marketable debt securities:
Marketable debt securitiesInvestment income(1.7)
Tax expense.4
After-tax income increase(1.3)
Pension plans:
Truck, Parts and Other
Actuarial lossInterest and other (income) expenses, net.82.8
Prior service costsInterest and other (income) expenses, net.7.7
Pre-tax expense increase1.53.5
Tax benefit(****.4)(.7)
After-tax expense increase1.12.8
Total reclassifications out of AOCI$165.9$(67.0)

Stock Compensation Plans

Stock-based compensation expense was $3.9 and $17.6 for the three and six months ended June 30, 2025, and $3.1 and $16.1 for the three and six months ended June 30, 2024, respectively.

During the first six months of 2025, the Company issued 1,058,539 common shares under deferred and stock compensation arrangements.

Other Capital Stock Changes

During the first six months of 2025, the Company purchased 382,552 treasury shares, of which 176,960 shares were acquired under the Company’s Long-Term Incentive Plan and 205,592 of shares were repurchased pursuant to the Company's common stock repurchase plan. Stock repurchases of $371.6 remain authorized under the current $500.0 program approved by the PACCAR Board of Directors on December 4, 2018.

NOTE H - Income Taxes

The effective tax rate for the second quarter of 2025 was 22.3% compared to 23.2% for the second quarter of 2024, primarily due to a lower mix of pre-tax income in jurisdictions with higher tax rates. The effective tax rate for the first six months of 2025 was 22.0% compared to 22.6% for the first six months of 2024, reflecting the EC claims charge and the related tax benefits in 2025.

- 23 -

Notes to Consolidated Financial Statements (Unaudited)(Millions, Except Share Amounts)

NOTE I - Segment Information

PACCAR operates in three principal segments: Truck, Parts and Financial Services. The Company evaluates the performance of its Truck and Parts segments based on operating profits, which excludes investment income, other income and expense and income taxes. The Financial Services segment’s performance is evaluated based on income before income taxes. The accounting policies of the reportable segments are the same as those applied in the consolidated financial statements as described in Note A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

Truck and Parts

The Truck segment includes the design and manufacture of high-quality, light-, medium- and heavy-duty commercial trucks and the Parts segment includes the distribution of aftermarket parts for trucks and related commercial vehicles, both of which are sold through the same network of independent dealers. These segments derive a large proportion of their revenues and operating profits from operations in North America and Europe. The Truck segment incurs substantial costs to design, manufacture and sell trucks to its customers. The sale of new trucks provides the Parts segment with the basis for parts sales that may continue over the life of the truck, but are generally concentrated in the first five years after truck delivery. To reflect the benefit the Parts segment receives from costs incurred by the Truck segment, certain expenses are allocated from the Truck segment to the Parts segment. The expenses allocated are based on a percentage of the average annual expenses for factory overhead, engineering, research and development and selling, general and administrative (SG&A) expenses for the preceding five years. The allocation is based on the ratio of the average parts direct margin dollars (net sales less material and labor costs) to the total truck and parts direct margin dollars for the previous five years. The Company believes such expenses have been allocated on a reasonable basis. Truck segment assets related to the indirect expense allocation are not allocated to the Parts segment. Other expenses (income) included in the Truck and Parts segments is primarily the effects of foreign currency translation.

Financial Services

The Financial Services segment derives its earnings primarily from financing or leasing of PACCAR products and services provided to truck customers and dealers. Revenues are primarily generated from operations in North America and Europe.

In Europe, the marketing of used trucks, including those units sold by the Truck segment subject to a RVG, is performed by the Financial Services segment. When a customer returns the truck at the end of the RVG contract, the Company’s Truck segment records a reduction in a RVG liability and the Company’s Financial Services segment records a used truck asset and revenue from the subsequent sale. Certain gains and losses from the sale of these used trucks are shared with the Truck segment.

Other

Included in Other is sales, income and expenses not attributable to a reportable segment, as well as the Company's industrial winch manufacturing business through October 31, 2024. The primary items include non-service cost components of pension expense, certain corporate income and expense and a charge for civil litigation claims in Europe. Intercompany interest (expense) income on dealer wholesale financing and on cash advances with the financial services companies are also included.

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Notes to Consolidated Financial Statements (Unaudited)(Millions, Except Share Amounts)
Three Months Ended June 30, 2025
TruckPartsOtherTruck, Parts and OtherFinancial ServicesTotal
Net sales and revenues$5,340.9$1,739.1$**(**1.2)$7,078.8$547.7$7,626.5
Less intersegment**(**97.8)**(**18.2)**(**116.0)**(**116.0)
External Customers$5,243.1$1,720.9$**(**1.2)$6,962.8$547.7$7,510.5
Cost of sales and revenues4,787.81,204.72.95,995.45,995.4
Research and development81.931.0112.9112.9
Selling, general and administrative54.764.619.9139.240.1179.3
Interest and other borrowing expenses200.3200.3
Depreciation and other expenses154.9154.9
Provision for losses on receivables29.229.2
Other segment expenses (income)9.94.1**(**23.5)**(**9.5)**(**9.5)
$308.8$416.5$(****.5)$724.8$123.2$848.0
Investment income83.9
Income (loss) before income taxes$308.8$416.5$(****.5)$724.8$123.2$931.9
Depreciation and amortization$93.1$2.9$6.4$102.4$104.9$207.3
Expenditures for long-lived assets$213.4$3.1$5.3$221.8$166.1$387.9
Six Months Ended June 30, 2025
TruckPartsOtherTruck, Parts and OtherFinancial ServicesTotal
Net sales and revenues$10,731.7$3,447.8$**(**3.2)$14,176.3$1,075.7$15,252.0
Less intersegment**(**262.8)**(**37.0)**(**299.8)**(**299.8)
External Customers$10,468.9$3,410.8$**(**3.2)$13,876.5$1,075.7$14,952.2
Cost of sales and revenues9,504.32,376.25.911,886.411,886.4
Research and development167.361.0228.3228.3
Selling, general and administrative112.0125.545.0282.578.4360.9
Interest and other borrowing expenses390.9390.9
Depreciation and other expenses314.6314.6
Provision for losses on receivables47.547.5
Other segment expenses*11.65.1299.6316.3316.3
$673.7$843.0$**(**353.7)$1,163.0$244.3$1,407.3
Investment income167.7
Income (loss) before income taxes$673.7$843.0$**(**353.7)$1,163.0$244.3$1,575.0
Depreciation and amortization$184.0$7.2$12.5$203.7$208.7$412.4
Expenditures for long-lived assets$375.5$6.4$20.0$401.9$318.6$720.5
  • In the first quarter of 2025, Other includes a $350.0 million charge related to civil litigation in Europe (EC-related claims) which is discussed in Note M.

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Notes to Consolidated Financial Statements (Unaudited)(Millions, Except Share Amounts)
Three Months Ended June 30, 2024
TruckPartsOtherTruck, Parts and OtherFinancial ServicesTotal
Net sales and revenues$6,674.3$1,685.1$20.2$8,379.6$509.8$8,889.4
Less intersegment(96.5)(20.8)(117.3)(117.3)
External Customers$6,577.8$1,664.3$20.2$8,262.3$509.8$8,772.1
Cost of sales and revenues5,589.41,160.622.36,772.36,772.3
Research and development89.827.1.2117.1117.1
Selling, general and administrative59.762.620.4142.740.8183.5
Interest and other borrowing expenses172.5172.5
Depreciation and other expenses173.6173.6
Provision for losses on receivables11.711.7
Other segment expenses (income)1.6.2(25.4)(23.6)(23.6)
$837.3$413.8$2.7$1,253.8$111.2$1,365.0
Investment income95.8
Income before income taxes$837.3$413.8$2.7$1,253.8$111.2$1,460.8
Depreciation and amortization$93.4$4.9$6.5$104.8$127.1$231.9
Expenditures for long-lived assets$201.6$16.5$12.4$230.5$281.7$512.2
Six Months Ended June 30, 2024
TruckPartsOtherTruck, Parts and OtherFinancial ServicesTotal
Net sales and revenues$13,353.2$3,380.4$38.3$16,771.9$1,019.1$17,791.0
Less intersegment(234.4)(40.2)(274.6)(274.6)
External Customers$13,118.8$3,340.2$38.3$16,497.3$1,019.1$17,516.4
Cost of sales and revenues11,110.62,291.544.013,446.113,446.1
Research and development167.954.3.4222.6222.6
Selling, general and administrative121.4123.945.0290.379.8370.1
Interest and other borrowing expenses332.5332.5
Depreciation and other expenses353.9353.9
Provision for losses on receivables27.827.8
Other segment expenses (income).9(51.5)(50.6)(50.6)
$1,718.9$869.6$.4$2,588.9$225.1$2,814.0
Investment income181.3
Income before income taxes$1,718.9$869.6$.4$2,588.9$225.1$2,995.3
Depreciation and amortization$193.0$8.7$12.5$214.2$252.7$466.9
Expenditures for long-lived assets$351.3$22.0$23.6$396.9$440.0$836.9
June 30December 31
Business Segment Data20252024
Segment Assets:
Truck$8,413.4$7,563.3
Parts2,293.52,097.0
Other1,795.31,697.2
Cash and marketable securities8,279.79,649.9
20,781.921,007.4
Financial services23,312.922,411.5
$44,094.8$43,418.9

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Notes to Consolidated Financial Statements (Unaudited)(Millions, Except Share Amounts)

NOTE J - Derivative Financial Instruments

As part of its risk management strategy, the Company enters into derivative contracts to hedge against the risks of interest rates, foreign currency rates and commodity prices. Certain derivative instruments designated as fair value hedges, cash flow hedges or net investment hedges are subject to hedge accounting. Derivative instruments that are not subject to hedge accounting are held as derivatives not designated as hedged instruments. The Company’s policies prohibit the use of derivatives for speculation or trading. At the inception of each hedge relationship, the Company documents its risk management objectives, procedures and accounting treatment. All of the Company’s interest-rate, commodity as well as certain foreign-exchange contracts are transacted under International Swaps and Derivatives Association (ISDA) master agreements. Each agreement permits the net settlement of amounts owed in the event of default and certain other termination events. For derivative financial instruments, the Company has elected not to offset derivative positions in the balance sheet with the same counterparty under the same agreements and is not required to post or receive collateral.

Exposure limits and minimum credit ratings are used to minimize the risks of counterparty default. The Company’s maximum exposure to potential default of its derivative counterparties is limited to the asset position of its derivative portfolio. The asset position of the Company’s derivative portfolio was $56.4 at June 30, 2025.

The Company assesses hedges at inception and on an ongoing basis to determine the designated derivatives are highly effective in offsetting changes in fair values or cash flow of the hedged items. Hedge accounting is discontinued prospectively when the Company determines a derivative financial instrument has ceased to be a highly effective hedge. Cash flows from derivative instruments are included in Operating activities in the Condensed Consolidated Statements of Cash Flows.

Interest-Rate Contracts: The Company enters into various interest-rate contracts, including interest-rate swaps and cross currency interest-rate swaps. Interest-rate swaps involve the exchange of fixed for floating rate or floating for fixed rate interest payments based on the contractual notional amounts in a single currency. Cross currency interest-rate swaps involve the exchange of notional amounts and interest payments in different currencies. The Company is exposed to interest-rate and exchange-rate risk caused by market volatility as a result of its borrowing activities. The objective of these contracts is to mitigate the fluctuations on earnings, cash flows and fair value of borrowings. Net amounts paid or received are reflected as adjustments to interest expense.

At June 30, 2025, the notional amount of the Company’s interest-rate contracts was $3,759.0 with amounts expiring over the next 8.7 years. Notional maturities for all interest-rate contracts are $612.0 for the remainder of 2025, $1,057.4 for 2026, $801.3 for 2027, $477.9 for 2028, $367.8 for 2029, $442.6 for 2030 and thereafter.

Foreign-Exchange Contracts: The Company enters into foreign-exchange contracts to hedge certain anticipated transactions and assets and liabilities denominated in foreign currencies, particularly the Canadian dollar, the euro, the British pound, the Australian dollar, the Brazilian real and the Mexican peso. The objective is to reduce fluctuations in earnings and cash flows associated with changes in foreign currency exchange rates. The Company enters into foreign-exchange contracts as net investment hedges to reduce the foreign currency exposure from its investments in foreign subsidiaries. At June 30, 2025, the notional amount of the outstanding foreign-exchange contracts was $1,889.6. Foreign-exchange contracts typically mature within one year.

Commodity Contracts: The Company enters into commodity forward contracts to hedge the prices of certain commodities used in the production of trucks. The objective is to reduce the fluctuation in earnings and cash flows associated with adverse movement in commodity prices. At June 30, 2025, the notional amount of the outstanding commodity contracts was $20.4. Commodity contracts mature within one year.

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Notes to Consolidated Financial Statements (Unaudited)(Millions, Except Share Amounts)

The following table presents the balance sheet classification, fair value, gross and pro forma net amounts of derivative financial instruments:

June 30, 2025December 31, 2024
ASSETSLIABILITIESASSETSLIABILITIES
Derivatives designated under hedge accounting:
Interest-rate contracts:
Financial Services:
Other assets$46.6$132.2
Deferred taxes and other liabilities$132.2$41.1
Foreign-exchange contracts:
Truck, Parts and Other:
Other current assets9.167.6
Accounts payable, accrued expenses and other96.63.0
Financial Services:
Other assets5.8
Deferred taxes and other liabilities4.1
Commodity contracts:
Truck, Parts and Other:
Other current assets.2
Accounts payable, accrued expenses and other.4
$55.9$233.3$205.6$44.1
Derivatives not designated as hedging instruments:
Foreign-exchange contracts:
Truck, Parts and Other:
Other current assets$.4$1.2
Accounts payable, accrued expenses and other$1.3$2.4
Financial Services:
Other assets.1.2
Deferred taxes and other liabilities.1.2
$.5$1.4$1.4$2.6
Gross amounts recognized in Balance Sheets$56.4$234.7$207.0$46.7
Less amounts not offset in financial instruments:
Truck, Parts and Other:
Foreign-exchange contracts$**(**1.2)$**(**1.2)$(.9)$(.9)
Financial Services:
Interest-rate contracts**(**13.1)**(**13.1)(11.4)(11.4)
Pro forma net amount$42.1$220.4$194.7$34.4

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Notes to Consolidated Financial Statements (Unaudited)(Millions, Except Share Amounts)

The following table presents the amount of loss (gain) from derivative financial instruments recorded in the Consolidated Statements of Comprehensive Income:

Three Months EndedSix Months Ended
June 30, 2025June 30, 2025
INTEREST-FOREIGN-INTEREST-FOREIGN-
RATEEXCHANGERATEEXCHANGE
Truck, Parts and Other:
Net sales and revenues
Cash flow hedges$6.8$4.0
Cost of sales and revenues
Cash flow hedges**(**1.3)**(**10.8)
Derivatives not designated as hedging instruments.3(****.4)
Interest and other (income) expenses, net
Cash flow hedges17.830.2
Net investment hedges**(**2.5)**(**6.6)
Derivatives not designated as hedging instruments6.57.8
$27.6$24.2
Financial Services:
Interest and other borrowing expenses
Cash flow hedges$113.1$7.0$175.5$12.8
Fair value hedges.41.4
Derivatives not designated as hedging instruments(****.2)(****.1)
$113.5$6.8$176.9$12.7
Total$113.5$34.4$176.9$36.9
Three Months EndedSix Months Ended
June 30, 2024June 30, 2024
INTEREST-FOREIGN-INTEREST-FOREIGN-
RATEEXCHANGERATEEXCHANGE
Truck, Parts and Other:
Net sales and revenues
Cash flow hedges$.4$9.2
Cost of sales and revenues
Cash flow hedges(17.5)(24.9)
Derivatives not designated as hedging instruments(.6).2
Interest and other (income) expenses, net
Cash flow hedges1.22.5
Net investment hedges(2.1)(5.6)
Derivatives not designated as hedging instruments(7.6)(7.5)
$(26.2)$(26.1)
Financial Services:
Interest and other borrowing expenses
Cash flow hedges$(42.4)$(2.8)$(66.9)$(5.0)
Fair value hedges2.35.1
Derivatives not designated as hedging instruments2.42.2
$(40.1)$(.4)$(61.8)$(2.8)
Total$(40.1)$(26.6)$(61.8)$(28.9)

The gain (loss) from commodity contracts recorded in Cost of sales and revenues was $.7 and $.8 for the three and six months ended June 30, 2025, respectively, and $(3.3) and $(5.9) for the three and six months ended June 30, 2024, respectively.

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Notes to Consolidated Financial Statements (Unaudited)(Millions, Except Share Amounts)

Fair Value Hedges

Changes in the fair value of derivatives designated as fair value hedges are recorded in earnings together with the changes in fair value of the hedged item attributable to the risk being hedged. The following table presents the amounts recorded on the Consolidated Balance Sheets related to cumulative basis adjustments for fair value hedges:

June 30December 31
20252024
Financial Services
Term notes:
Carrying amount of the hedged liabilities$656.4$543.1
Cumulative basis adjustment increase (decrease) included in the carrying amount6.2(8.6)

The above table excludes the cumulative basis adjustments on discontinued hedge relationships of $(1.4) and $(2.9) as of June 30, 2025 and December 31, 2024, respectively.

Cash Flow Hedges

Substantially all of the Company’s interest-rate contracts and some foreign-exchange contracts and commodity contracts have been designated as cash flow hedges. Changes in the fair value of derivatives designated as cash flow hedges are recorded in AOCI. Amounts in AOCI are reclassified into net income in the same period in which the hedged transaction affects earnings. The Company elected to exclude the forward premium component (excluded component) on some foreign-exchange cash flow hedges and amortize the excluded component over the life of the derivative instruments. The amortization of the excluded component is recognized in Interest and other (income) expenses, net in Truck, Parts and Other segment and Interest and other borrowing expenses in Financial Services segment in the Consolidated Statements of Comprehensive Income. The maximum length of time over which the Company is hedging its exposure to the variability in future cash flows is 7.4 years.

The following table presents the pre-tax effects of (loss) gain on cash flow hedges recognized in other comprehensive income (loss) (OCI):

Three Months EndedSix Months Ended
June 30, 2025June 30, 2025
INTEREST-FOREIGN-INTEREST-FOREIGN-
RATEEXCHANGECOMMODITYRATEEXCHANGECOMMODITY
(Loss) gain recognized in OCI:
Truck, Parts and Other$**(**31.2)$1.6$**(**42.5)$1.4
Financial Services$**(**124.1)**(**5.7)$**(**196.1)**(**14.8)
$**(**124.1)$**(**36.9)$1.6$**(**196.1)$**(**57.3)$1.4
Three Months EndedSix Months Ended
June 30, 2024June 30, 2024
INTEREST-FOREIGN-INTEREST-FOREIGN-
RATEEXCHANGECOMMODITYRATEEXCHANGECOMMODITY
Gain (loss) recognized in OCI:
Truck, Parts and Other$33.5$(8.4)$47.0$(13.0)
Financial Services$56.92.4$81.65.1
$56.9$35.9$(8.4)$81.6$52.1$(13.0)

The amount of loss recorded in AOCI at June 30, 2025 that is estimated to be reclassified into earnings in the following 12 months if interest rates and exchange rates remain unchanged is approximately $32.5, net of taxes. The fixed interest earned on finance receivables will offset the amount recognized in interest expense, resulting in a stable interest margin consistent with the Company’s risk management strategy.

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Notes to Consolidated Financial Statements (Unaudited)(Millions, Except Share Amounts)

The amount of loss reclassified out of AOCI into net income based on the probability that the original forecasted transactions would not occur was $.1 and $.1 for the three and six months ended June 30, 2025, respectively, and $.8 and $2.8 for the same periods ended June 30, 2024.

Net Investment Hedges

Changes in the fair value of derivatives designated as net investment hedges are recorded in AOCI as an adjustment to the Cumulative Translation Adjustment (CTA). At June 30, 2025, the notional amount of the outstanding net investment hedges was $638.1. For the three and six months ended June 30, 2025, the pre-tax (loss) gain recognized in OCI for the net investment hedges was $(48.5) and $(104.1), respectively, and $.3 and $12.4 for the same periods ending June 30, 2024.

NOTE K - Fair Value Measurements

Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Inputs to valuation techniques used to measure fair value are either observable or unobservable. These inputs have been categorized into the fair value hierarchy described below.

Level 1 – Valuations are based on quoted prices that the Company has the ability to obtain in actively traded markets for identical assets or liabilities. Since valuations are based on quoted prices that are readily and regularly available in an active market or exchange traded market, valuation of these instruments does not require a significant degree of judgment.

Level 2 – Valuations are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3 – Valuations are based on model-based techniques for which some or all of the assumptions are obtained from indirect market information that is significant to the overall fair value measurement and which require a significant degree of management judgment.

The Company uses the following methods and assumptions to measure fair value for assets and liabilities subject to recurring fair value measurements.

Marketable Debt Securities: The Company’s marketable debt securities consist of municipal bonds, government obligations, investment-grade corporate obligations, commercial paper, asset-backed securities and term deposits. The fair value of U.S. government obligations is determined using the market approach and is based on quoted prices in active markets and are categorized as Level 1.

The fair value of non-U.S. government bonds, municipal bonds, corporate bonds, asset-backed securities, commercial paper and term deposits is determined using the market approach and is primarily based on matrix pricing as a practical expedient which does not rely exclusively on quoted prices for a specific security. Significant inputs used to determine fair value include interest rates, yield curves, credit rating of the security and other observable market information and are categorized as Level 2.

Marketable Equity Securities: The Company’s equity securities are traded on active exchanges and are classified as Level 1.

Derivative Financial Instruments: The Company’s derivative contracts consist of interest-rate swaps, cross currency swaps, foreign currency exchange and commodity contracts. These derivative contracts are traded over the counter, and their fair value is determined using industry standard valuation models, which are based on the income approach (i.e., discounted cash flows). The significant observable inputs into the valuation models include interest rates, yield curves, currency exchange rates, credit default swap spreads, forward rates and commodity prices and are categorized as Level 2.

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Notes to Consolidated Financial Statements (Unaudited)(Millions, Except Share Amounts)

Assets and Liabilities Subject to Recurring Fair Value Measurement

The Company’s assets and liabilities subject to recurring fair value measurements are either Level 1 or Level 2 as follows:

At June 30, 2025LEVEL 1LEVEL 2TOTAL
Assets:
Marketable debt securities
U.S. tax-exempt securities$381.9$381.9
U.S. taxable municipal / non-U.S. provincial bonds406.3406.3
U.S. corporate securities899.5899.5
U.S. government securities$210.3210.3
Non-U.S. corporate securities618.3618.3
Non-U.S. government securities198.7198.7
Other debt securities193.5193.5
Total marketable debt securities$210.3$2,698.2$2,908.5
Marketable equity securities$5.2$5.2
Total marketable securities$215.5$2,698.2$2,913.7
Derivatives
Cross currency swaps$29.5$29.5
Interest-rate swaps17.117.1
Foreign-exchange contracts9.69.6
Commodity contracts.2.2
Total derivative assets$56.4$56.4
Liabilities:
Derivatives
Cross currency swaps$122.3$122.3
Interest-rate swaps9.99.9
Foreign-exchange contracts102.1102.1
Commodity contracts.4.4
Total derivative liabilities$234.7$234.7

- 32 -

Notes to Consolidated Financial Statements (Unaudited)(Millions, Except Share Amounts)
At December 31, 2024LEVEL 1LEVEL 2TOTAL
Assets:
Marketable debt securities
U.S. tax-exempt securities$303.7$303.7
U.S. taxable municipal / non-U.S. provincial bonds380.1380.1
U.S. corporate securities864.2864.2
U.S. government securities$285.7285.7
Non-U.S. corporate securities608.1608.1
Non-U.S. government securities164.3164.3
Other debt securities166.4166.4
Total marketable debt securities$285.7$2,486.8$2,772.5
Marketable equity securities$6.3$6.3
Total marketable securities$292.0$2,486.8$2,778.8
Derivatives
Cross currency swaps$121.3$121.3
Interest-rate swaps10.910.9
Foreign-exchange contracts74.874.8
Total derivative assets$207.0$207.0
Liabilities:
Derivatives
Cross currency swaps$28.7$28.7
Interest-rate swaps12.412.4
Foreign-exchange contracts5.65.6
Total derivative liabilities$46.7$46.7

Fair Value Disclosure of Other Financial Instruments

For financial instruments that are not recognized at fair value, the Company uses the following methods and assumptions to determine the fair value. These instruments are categorized as Level 2, except cash which is categorized as Level 1 and fixed rate loans which are categorized as Level 3.

Cash and Cash Equivalents: Carrying amounts approximate fair value.

Financial Services Net Receivables: For floating-rate loans, floating-rate wholesale financing and operating lease and other trade receivables, carrying values approximate fair values. For fixed rate loans, fair values are estimated using the income approach by discounting cash flows to their present value based on assumptions regarding the credit and market risks to approximate current rates for comparable loans. Finance lease receivables and related allowance for credit losses have been excluded from the accompanying table.

Debt: The carrying amounts of Financial Services commercial paper, variable rate bank loans and variable rate term notes approximate fair value. For fixed rate debt, fair values are estimated using the income approach by discounting cash flows to their present value based on current rates for comparable debt.

The Company’s estimate of fair value for fixed rate loans and debt that are not carried at fair value was as follows:

June 30, 2025December 31, 2024
CARRYINGFAIRCARRYINGFAIR
AMOUNTVALUEAMOUNTVALUE
Assets:
Financial Services fixed rate loans$9,632.3$9,739.9$8,900.6$8,889.3
Liabilities:
Financial Services fixed rate debt10,671.910,775.89,922.29,917.6

- 33 -

Notes to Consolidated Financial Statements (Unaudited)(Millions, Except Share Amounts)

NOTE L - Employee Benefit Plans

The Company has several defined benefit pension plans, which cover a majority of its employees. The following information details the components of net pension (income) expense for the Company’s defined benefit plans:

Three Months EndedSix Months Ended
June 30June 30
2025202420252024
Service cost$23.2$27.6$47.4$55.4
Interest on projected benefit obligation36.133.471.967.0
Expected return on assets**(**63.1)(60.5)**(**125.4)(121.1)
Amortization of prior service costs.4.4.7.7
Recognized actuarial loss.11.6.82.8
Net pension (income) expense$**(**3.3)$2.5$**(**4.6)$4.8

The components of net pension expense other than service cost are included in Interest and other (income) expenses, net on the Consolidated Statements of Comprehensive Income.

During the three and six months ended June 30, 2025, the Company contributed $5.0 and $11.5 to its pension plans, respectively, and $6.2 and $32.2 for the three and six months ended June 30, 2024, respectively.

NOTE M – Commitments and Contingencies

On July 19, 2016, the European Commission (EC) concluded its investigation of all major European truck manufacturers and reached a settlement with DAF Trucks N.V., DAF Trucks Deutschland GmbH and PACCAR Inc (collectively “the Company”). Following the settlement, certain EC-related claims and lawsuits have been filed in various jurisdictions primarily in Europe against all major European truck manufacturers including the Company and certain subsidiaries. These claims and lawsuits include individual and collective proceedings seeking monetary damages, including class actions in the United Kingdom (U.K.), the Netherlands, and Israel. In certain jurisdictions, additional claimants may bring EC-related claims and lawsuits against the Company or its subsidiaries.

Several European courts have issued judgments; some have been favorable while others have been unfavorable and have been appealed. The Company believes it has meritorious defenses to all pending legal claims. In the first quarter 2023, the Company recorded a pre-tax charge of $600.0 ($446.4 after-tax) for the estimable total cost. The Company has settled with the majority of claimants and continues to pursue appropriate resolutions. Due to higher settlement costs, the Company updated its estimate and recorded an additional pre-tax charge of $350.0 ($264.5 after-tax) for the total estimable remaining costs in Interest and other (income) expenses, net in the first quarter of 2025.

PACCAR is also a defendant in various other legal proceedings and, in addition, there are various other contingent liabilities arising in the normal course of business. After consultation with legal counsel, management does not anticipate that disposition of these various other proceedings and contingent liabilities will have a material effect on the consolidated financial statements.

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