filings.toolsItem 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 the U.S. and Canada, trucks are sold under the Kenworth and Peterbilt nameplates, in Europe, under the DAF nameplate and in Mexico, 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 included the manufacturing and marketing of industrial winches through October 31, 2024, when PACCAR sold its industrial winch business.
Second Quarter Financial Highlights:
Worldwide net sales and revenues were $7.51 billion in 2025 compared to $8.77 billion in 2024, primarily due to lower truck revenues, partially offset by higher parts and financial services revenues.
Truck sales were $5.24 billion in 2025 compared to $6.58 billion in 2024, due to lower truck deliveries in all major markets.
Parts sales were $1.72 billion in 2025 compared to $1.66 billion in 2024, reflecting higher sales in the U.S. and Canada.
Financial Services revenues were $547.7 million in 2025 compared to $509.8 million in 2024, primarily due to higher interest income driven by portfolio growth and higher portfolio yields.
Net income was $723.8 million ($1.37 per diluted share) in 2025 compared to $1.12 billion ($2.13 per diluted share) in 2024.
Capital investments were $221.1 million in 2025 compared to $219.6 million in 2024.
Research and development (R&D) expenses were $112.9 million in 2025 compared to $117.1 million in 2024.
First Six Months Financial Highlights:
Worldwide net sales and revenues were $14.95 billion in 2025 compared to $17.52 billion in 2024, primarily due to lower truck revenues, partially offset by higher parts and financial services revenues.
Truck sales were $10.47 billion in 2025, compared to $13.12 billion in 2024, due to lower truck deliveries in all major markets.
Parts sales were $3.41 billion in 2025 compared to $3.34 billion in 2024, reflecting higher sales in the U.S. and Canada.
Financial Services revenues were $1.08 billion in 2025 compared to $1.02 billion in 2024, primarily due to higher interest income driven by portfolio growth and higher portfolio yields.
Net income was $1.23 billion ($2.33 per diluted share) in 2025 compared to $2.32 billion ($4.40 per diluted share) in 2024. In 2025, adjusted net income (non-GAAP), excluding a $264.5 million after-tax charge related to civil litigation in Europe was $1.49 billion ($2.83 per diluted share). See Reconciliation of GAAP to Non-GAAP Financial Measures on page 53.
Capital investments were $393.0 million in 2025 compared to $383.9 million in 2024.
Research and development (R&D) expenses were $228.3 million in 2025 compared to $222.6 million in 2024.
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 $23.31 billion. PFS issued $1.84 billion in medium-term notes during the first six months of 2025 to support new business volume and market share growth and repay maturing debt.
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Truck Outlook
Truck industry heavy-duty retail sales in the U.S. and Canada in 2025 are expected to be 230,000 to 260,000 units compared to 268,100 in 2024. In Europe, 2025 truck industry registrations for over 16-tonne vehicles are expected to be 270,000 to 300,000 units compared to 316,100 in 2024. In South America, heavy-duty truck industry registrations in 2025 are projected to be 90,000 to 100,000 units compared to 119,000 in 2024.
The Company has been affected by the import tariffs imposed by the U.S. government since March 2025 and actions taken by other countries. The ongoing impact from import tariffs on truck order intake and profit margins is uncertain due to the rapidly evolving tariff environment. If tariff policy uncertainty continues, economic conditions may likely weaken and truck industry retail sales would likely decline.
Parts Outlook
In 2025, PACCAR Parts sales are expected to increase 2-4% compared to 2024, depending on the economic conditions, including the effect of ongoing tariff uncertainty.
Financial Services Outlook
In 2025, average earning assets are expected to increase 4-6% compared to 2024. The used truck market has been improving, which is reflected in PFS’ quarterly results this year. 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.
Capital Investments and R&D Outlook
Capital investments in 2025 are expected to be $750 to $800 million and R&D is expected to be $450 to $480 million. PACCAR is investing in next generation clean diesel and alternative powertrains, integrated connected vehicle services, expanded manufacturing capabilities, and advanced driver assistance systems that create value for customers. In addition to the capital and R&D investments, the company plans to invest a total project amount of $600 to $900 million in its battery joint venture, Amplify Cell Technologies.
See the Forward-Looking Statements section of Management’s Discussion and Analysis for factors that may affect these outlooks.
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RESULTS OF OPERATIONS:
The Company’s results of operations for the three and six months ended June 30, 2025 and 2024 are presented below.
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30 | June 30 | |||||||||||||||
| ($ in millions, except per share amounts) | 2025 | 2024 | 2025 | 2024 | ||||||||||||
| Net sales and revenues: | ||||||||||||||||
| Truck | $ | 5,243.1 | $ | 6,577.8 | $ | 10,468.9 | $ | 13,118.8 | ||||||||
| Parts | 1,720.9 | 1,664.3 | 3,410.8 | 3,340.2 | ||||||||||||
| Other | (1.2 | ) | 20.2 | (3.2 | ) | 38.3 | ||||||||||
| Truck, Parts and Other | 6,962.8 | 8,262.3 | 13,876.5 | 16,497.3 | ||||||||||||
| Financial Services | 547.7 | 509.8 | 1,075.7 | 1,019.1 | ||||||||||||
| $ | 7,510.5 | $ | 8,772.1 | $ | 14,952.2 | $ | 17,516.4 | |||||||||
| Income before income taxes: | ||||||||||||||||
| Truck | $ | 308.8 | $ | 837.3 | $ | 673.7 | $ | 1,718.9 | ||||||||
| Parts | 416.5 | 413.8 | 843.0 | 869.6 | ||||||||||||
| Other* | (.5 | ) | 2.7 | (353.7 | ) | .4 | ||||||||||
| Truck, Parts and Other | 724.8 | 1,253.8 | 1,163.0 | 2,588.9 | ||||||||||||
| Financial Services | 123.2 | 111.2 | 244.3 | 225.1 | ||||||||||||
| Investment income | 83.9 | 95.8 | 167.7 | 181.3 | ||||||||||||
| Income taxes | (208.1 | ) | (338.2 | ) | (346.1 | ) | (677.4 | ) | ||||||||
| Net income | $ | 723.8 | $ | 1,122.6 | $ | 1,228.9 | $ | 2,317.9 | ||||||||
| Diluted earnings per share | $ | 1.37 | $ | 2.13 | $ | 2.33 | $ | 4.40 | ||||||||
| After-tax return on revenues | 9.6 | % | 12.8 | % | 8.2 | % | 13.2 | % | ||||||||
| After-tax adjusted return on revenues (non-GAAP)** | 10.0 | % |
- In 2025, Other includes a $350.0 million charge related to civil litigation in Europe (EC-related claims) in the first quarter 2025.
** See Reconciliation of GAAP to Non-GAAP Financial Measures for 2025 on page 53.
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 and impact from tariffs, fuel prices, freight tonnage and economic conditions affecting the Company’s results of operations.
2025 Compared to 2024:
Truck
The Company’s Truck segment accounted for 70% of revenues in both the second quarter and first six months of 2025, compared to 75% in both the second quarter and first six months of 2024.
The Company’s new truck deliveries are summarized below:
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| June 30 | June 30 | |||||||||||||||||||
| 2025 | 2024 | % CHANGE | 2025 | 2024 | % CHANGE | |||||||||||||||
| U.S. and Canada | 23,000 | 28,700 | (20 | ) | 45,200 | 58,200 | (22 | ) | ||||||||||||
| Europe | 10,600 | 11,500 | (8 | ) | 21,000 | 23,100 | (9 | ) | ||||||||||||
| Mexico, South America, Australia and other | 5,700 | 8,200 | (30 | ) | 13,200 | 15,200 | (13 | ) | ||||||||||||
| Total units | 39,300 | 48,400 | (19 | ) | 79,400 | 96,500 | (18 | ) |
Worldwide new truck deliveries decreased in the second quarter and first six months of 2025 compared to the same periods of 2024, reflecting lower deliveries in all major markets from lower retail demand.
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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 retail sales or registrations 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 six months of 2025, industry retail sales in the heavy-duty market in the U.S. and Canada were 120,800 units compared to 127,600 units in the same period of 2024. The Company’s heavy-duty truck retail market share was 30.4% in the first six months of 2025 compared to 31.5% in the first six months of 2024. The medium-duty market was 49,600 units in the first six months of 2025 compared to 52,300 units in the same period of 2024. The Company’s medium-duty market share was 15.3% in the first six months of 2025 compared to 17.3% in the first six months of 2024.
The over 16‑tonne truck market in Europe in the first six months of 2025 was 151,100 units compared to 174,800 units in the first six months of 2024. DAF over 16‑tonne market share was 14.2% in the first six months of 2025 compared to 13.7% in the same period of 2024. The 6 to 16‑tonne market in the first six months of 2025 was 19,900 units compared to 27,700 units in the same period of 2024. DAF market share in the 6 to 16-tonne market in the first six months of 2025 was 9.9% compared to 8.4% in the same period of 2024.
The over 16-tonne truck market in Brasil in the first six months of 2025 was 41,700 units compared to 44,600 units in the same period of 2024. DAF Brasil market share for the first six months of 2025 was 9.4% compared to 10.3% in the same period in 2024.
The Company’s worldwide truck net sales and revenues are summarized below:
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| June 30 | June 30 | |||||||||||||||||||
| ($ in millions) | 2025 | 2024 | % CHANGE | 2025 | 2024 | % CHANGE | ||||||||||||||
| Truck net sales and revenues: | ||||||||||||||||||||
| U.S. and Canada | $ | 3,315.5 | $ | 4,191.4 | (21 | ) | $ | 6,511.2 | $ | 8,466.9 | (23 | ) | ||||||||
| Europe | 1,190.1 | 1,267.5 | (6 | ) | 2,289.4 | 2,575.7 | (11 | ) | ||||||||||||
| Mexico, South America, Australia and other | 737.5 | 1,118.9 | (34 | ) | 1,668.3 | 2,076.2 | (20 | ) | ||||||||||||
| $ | 5,243.1 | $ | 6,577.8 | (20 | ) | $ | 10,468.9 | $ | 13,118.8 | (20 | ) | |||||||||
| Truck income before income taxes | $ | 308.8 | $ | 837.3 | (63 | ) | $ | 673.7 | $ | 1,718.9 | (61 | ) | ||||||||
| Pre-tax return on revenues | 5.9 | % | 12.7 | % | 6.4 | % | 13.1 | % |
The Company’s worldwide truck net sales and revenues in the second quarter decreased to $5.24 billion in 2025 from $6.58 billion in 2024. Revenues for the first six months decreased to $10.47 billion in 2025 from $13.12 billion in 2024. The decrease in both periods was primarily due to lower truck unit deliveries in all major markets from lower retail demand reflecting economic conditions as well as higher tariff costs resulting from current trade policies primarily in the U.S.
In the second quarter and first six months of 2025, Truck segment income before taxes and pre-tax return on revenues decreased primarily due to lower truck unit deliveries and lower price realization.
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The major factors for the Truck segment changes in net sales and revenues, cost of sales and revenues and gross margin between the three months ended June 30, 2025 and 2024 are as follows:
| NET | COST OF | |||||||||||
| SALES AND | SALES AND | GROSS | ||||||||||
| ($ in millions) | REVENUES | REVENUES | MARGIN | |||||||||
| Three Months Ended June 30, 2024 | $ | 6,577.8 | $ | 5,589.4 | $ | 988.4 | ||||||
| (Decrease) increase | ||||||||||||
| Truck sales volume | (1,248.8 | ) | (1,062.9 | ) | (185.9 | ) | ||||||
| Average truck sales prices | (153.8 | ) | (153.8 | ) | ||||||||
| Average material, labor and other direct costs | 216.6 | (216.6 | ) | |||||||||
| Factory overhead and other indirect costs | (55.3 | ) | 55.3 | |||||||||
| Extended warranties, operating leases and other | 24.9 | 49.1 | (24.2 | ) | ||||||||
| Currency translation | 43.0 | 50.9 | (7.9 | ) | ||||||||
| Total decrease | (1,334.7 | ) | (801.6 | ) | (533.1 | ) | ||||||
| Three Months Ended June 30, 2025 | $ | 5,243.1 | $ | 4,787.8 | $ | 455.3 |
Truck sales volume decreased revenues by $1.25 billion and costs by $1.06 billion, primarily reflecting lower truck deliveries in all major markets.
Average truck sales prices decreased $153.8 million, primarily due to lower price realization, reflecting an increased competitive environment in all markets, partially offset by tariff price increases in the U.S.
Average truck costs increased $216.6 million, primarily reflecting higher mix of trucks with higher content, product support accruals and higher tariff costs in the U.S.
Factory overhead and other indirect costs decreased $55.3 million, primarily due to lower labor costs, maintenance costs and factory supplies from lower truck build rates.
Extended warranties, operating leases and other increased revenues by $24.9 million, primarily due to higher volume of extended warranty and R&M contracts. The increase in extended warranty, operating leases and other cost of $49.1 million reflects higher used truck costs, primarily in Europe, and higher costs from extended warranty and R&M contracts.
The currency translation effect on sales and cost of sales primarily reflects an increase in the value of the euro relative to the U.S. dollar, partially offset by the decline in the value of the Brazilian real, Australian dollar and Canadian dollar relative to the U.S. dollar.
Truck gross margin was 8.7% in the second quarter of 2025 compared to 15.0% in the same period of 2024 due to the factors noted above.
The major factors for the Truck segment changes in net sales and revenues, cost of sales and revenues and gross margin between the six months ended June 30, 2025 and 2024 are as follows:
| NET | COST OF | |||||||||||
| SALES AND | SALES AND | GROSS | ||||||||||
| ($ in millions) | REVENUES | REVENUES | MARGIN | |||||||||
| Six Months Ended June 30, 2024 | $ | 13,118.8 | $ | 11,110.6 | $ | 2,008.2 | ||||||
| (Decrease) increase | ||||||||||||
| Truck sales volume | (2,371.8 | ) | (1,971.9 | ) | (399.9 | ) | ||||||
| Average truck sales prices | (268.5 | ) | (268.5 | ) | ||||||||
| Average material, labor and other direct costs | 438.4 | (438.4 | ) | |||||||||
| Factory overhead and other indirect costs | (99.6 | ) | 99.6 | |||||||||
| Extended warranties, operating leases and other | 35.4 | 53.4 | (18.0 | ) | ||||||||
| Currency translation | (45.0 | ) | (26.6 | ) | (18.4 | ) | ||||||
| Total decrease | (2,649.9 | ) | (1,606.3 | ) | (1,043.6 | ) | ||||||
| Six Months Ended June 30, 2025 | $ | 10,468.9 | $ | 9,504.3 | $ | 964.6 |
Truck sales volume decreased revenues by $2.37 billion and costs by $1.97 billion, primarily reflecting lower truck deliveries in all major markets.
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Average truck sales prices decreased by $268.5 million, primarily due to lower price realization in the U.S. and Canada and Europe, reflecting an increased competitive environment in all markets.
Average truck costs increased by $438.4 million, primarily reflecting higher mix of trucks with higher content, increased tariff costs and product support accruals.
Factory overhead and other indirect costs decreased $99.6 million, primarily due to lower labor costs, maintenance costs and factory supplies from lower truck build rates.
Extended warranties, operating leases and other increased revenues by $35.4 million due to higher volume of extended warranty and R&M contracts and higher dealer support services. The increase in extended warranty, operating leases and other cost of $53.4 million reflects higher used truck costs, primarily in Europe, higher dealer support services and higher volume of extended warranty contracts.
The currency translation effect on sales and cost of sales primarily reflects a decline in the value of the Brazilian real, Canadian dollar and the Australian dollar relative to the U.S. dollar, partially offset by the increase in value of the euro relative to the U.S. dollar.
Truck gross margin was 9.2% in the first six months of 2025 compared to 15.3% in the same period of 2024 due to the factors noted above.
Truck SG&A expenses decreased in the second quarter of 2025 to $54.7 million from $59.7 million in the same period of 2024. For the first six months of 2025, Truck SG&A decreased to $112.0 million from $121.4 million in the same period of 2024. The decrease in both periods was primarily due to lower salaries and related expenses, lower professional fees and lower travel and entertainments expenses, partially offset by higher sales and marketing expenses. As a percentage of sales, Truck SG&A was 1.0% and 1.1% for the second quarter and first six months of 2025, respectively, compared to .9% for both second quarter and first six months of 2024.
Parts
The Company’s Parts segment accounted for 23% of revenues in both the second quarter and first six months of 2025, compared to 19% for both the second quarter and first six months of 2024.
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| June 30 | June 30 | |||||||||||||||||||
| ($ in millions) | 2025 | 2024 | % CHANGE | 2025 | 2024 | % CHANGE | ||||||||||||||
| Parts net sales and revenues: | ||||||||||||||||||||
| U.S. and Canada | $ | 1,191.5 | $ | 1,138.6 | 5 | $ | 2,374.1 | $ | 2,289.9 | 4 | ||||||||||
| Europe | 353.0 | 345.6 | 2 | 706.9 | 707.4 | |||||||||||||||
| Mexico, South America, Australia and other | 176.4 | 180.1 | (2 | ) | 329.8 | 342.9 | (4 | ) | ||||||||||||
| $ | 1,720.9 | $ | 1,664.3 | 3 | $ | 3,410.8 | $ | 3,340.2 | 2 | |||||||||||
| Parts income before income taxes | $ | 416.5 | $ | 413.8 | 1 | $ | 843.0 | $ | 869.6 | (3 | ) | |||||||||
| Pre-tax return on revenues | 24.2 | % | 24.9 | % | 24.7 | % | 26.0 | % |
The Company’s worldwide parts net sales and revenues for the second quarter increased to $1.72 billion in 2025 from $1.66 billion in 2024. For the first six months, worldwide parts net sales and revenues increased to $3.41 billion in 2025 from $3.34 billion in 2024. The increase in both periods was primarily due to higher sales in the U.S. and Canada.
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The major factors for the changes in Parts segment net sales and revenues, cost of sales and revenues and gross margin between the three months ended June 30, 2025 and 2024 are as follows:
| NET | COST OF | |||||||||||
| SALES AND | SALES AND | GROSS | ||||||||||
| ($ in millions) | REVENUES | REVENUES | MARGIN | |||||||||
| Three Months Ended June 30, 2024 | $ | 1,664.3 | $ | 1,160.6 | $ | 503.7 | ||||||
| (Decrease) increase | ||||||||||||
| Aftermarket parts volume | (19.3 | ) | (6.7 | ) | (12.6 | ) | ||||||
| Average aftermarket parts sales prices | 60.4 | 60.4 | ||||||||||
| Average aftermarket parts direct costs | 31.8 | (31.8 | ) | |||||||||
| Warehouse and other indirect costs | 11.3 | (11.3 | ) | |||||||||
| Currency translation | 15.5 | 7.7 | 7.8 | |||||||||
| Total increase | 56.6 | 44.1 | 12.5 | |||||||||
| Three Months Ended June 30, 2025 | $ | 1,720.9 | $ | 1,204.7 | $ | 516.2 |
Aftermarket parts sales volume decreased by $19.3 million and related cost of sales decreased by $6.7 million. The decrease in parts sales and costs primarily reflects lower sales volume in most markets, primarily Europe and Mexico.
Average aftermarket parts sales prices increased sales by $60.4 million, primarily due to price realization in all markets as well as tariff cost increases in the U.S. and Canada.
Average aftermarket parts direct costs increased $31.8 million due to higher material costs, primarily in the U.S. and Canada.
Warehouse and other indirect costs increased $11.3 million, primarily due to higher indirect costs, including depreciation expense.
The currency translation effect on sales and cost of sales reflects an increase in the value of the euro relative to the U.S. dollar.
Parts gross margins in the second quarter of 2025 decreased to 30.0% from 30.3% in the second quarter of 2024 due to the factors noted above.
The major factors for the changes in Parts segment net sales and revenues, cost of sales and revenues and gross margin between the six months ended June 30, 2025 and 2024 are as follows:
| NET | COST OF | |||||||||||
| SALES AND | SALES AND | GROSS | ||||||||||
| ($ in millions) | REVENUES | REVENUES | MARGIN | |||||||||
| Six Months Ended June 30, 2024 | $ | 3,340.2 | $ | 2,291.5 | $ | 1,048.7 | ||||||
| (Decrease) increase | ||||||||||||
| Aftermarket parts volume | (41.7 | ) | (16.0 | ) | (25.7 | ) | ||||||
| Average aftermarket parts sales prices | 114.6 | 114.6 | ||||||||||
| Average aftermarket parts direct costs | 82.5 | (82.5 | ) | |||||||||
| Warehouse and other indirect costs | 22.3 | (22.3 | ) | |||||||||
| Currency translation | (2.3 | ) | (4.1 | ) | 1.8 | |||||||
| Total increase (decrease) | 70.6 | 84.7 | (14.1 | ) | ||||||||
| Six Months Ended June 30, 2025 | $ | 3,410.8 | $ | 2,376.2 | $ | 1,034.6 |
Aftermarket parts sales volume decreased by $41.7 million and related cost of sales decreased by $16.0 million. The decrease in parts sales and costs primarily reflects lower sales volume in Europe, Mexico and Brasil, partially offset by higher sales volume in the U.S. and Canada.
Average aftermarket parts sales prices increased sales by $114.6 million, primarily due to price realization in the U.S. and Canada.
Average aftermarket parts direct costs increased $82.5 million due to higher material costs, primarily in the U.S. and Canada.
Warehouse and other indirect costs increased $22.3 million, primarily due to higher indirect costs, including depreciation expense.
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The currency translation effect on sales reflects a decline in the value of the Brazilian real, Australian dollar and Canadian dollar relative to the U.S. dollar, primarily offset by an increase in the value of the euro relative to the U.S. dollar.
Parts gross margins in the first six months of 2025 decreased to 30.3% from 31.4% in the first six months of 2024 due to the factors noted above.
Parts SG&A expense increased in the second quarter of 2025 to $64.6 million from $62.6 million in the same period of 2024, mainly due to unfavorable currency translation effect, primarily the euro. For the first six months, Parts SG&A increased to $125.5 million in 2025 from $123.9 million in the same period of 2024, primarily due to higher salaries and related expenses, partially offset by lower travel and entertainment expenses.
As a percentage of sales, Parts SG&A was 3.8% for both the second quarter of 2025 and 2024, and 3.7% for both the first six months of 2025 and 2024.
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Financial Services
The Company’s Financial Services segment accounted for 7% of revenues in both the second quarter and first six months of 2025, compared to 6% in both the second quarter and first six months of 2024.
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||
| June 30 | June 30 | |||||||||||||||||||||||
| ($ in millions) | 2025 | 2024 | % CHANGE | 2025 | 2024 | % CHANGE | ||||||||||||||||||
| New loan and lease volume: | ||||||||||||||||||||||||
| U.S. and Canada | $ | 1,044.5 | $ | 1,121.9 | (7 | ) | $ | 1,788.9 | $ | 1,894.7 | (6 | ) | ||||||||||||
| Europe | 329.8 | 283.4 | 16 | 636.2 | 544.3 | 17 | ||||||||||||||||||
| Mexico, Australia, Brasil and other | 479.2 | 510.1 | (6 | ) | 937.6 | 996.3 | (6 | ) | ||||||||||||||||
| $ | 1,853.5 | $ | 1,915.4 | (3 | ) | $ | 3,362.7 | $ | 3,435.3 | (2 | ) | |||||||||||||
| New loan and lease volume by product: | ||||||||||||||||||||||||
| Loans and finance leases | $ | 1,678.5 | $ | 1,633.0 | 3 | $ | 3,030.9 | $ | 2,982.9 | 2 | ||||||||||||||
| Equipment on operating lease | 175.0 | 282.4 | (38 | ) | 331.8 | 452.4 | (27 | ) | ||||||||||||||||
| $ | 1,853.5 | $ | 1,915.4 | (3 | ) | $ | 3,362.7 | $ | 3,435.3 | (2 | ) | |||||||||||||
| New loan and lease unit volume: | ||||||||||||||||||||||||
| Loans and finance leases | 11,750 | 10,780 | 9 | 21,300 | 20,400 | 4 | ||||||||||||||||||
| Equipment on operating lease | 1,600 | 2,130 | (25 | ) | 3,130 | 3,590 | (13 | ) | ||||||||||||||||
| 13,350 | 12,910 | 3 | 24,430 | 23,990 | 2 | |||||||||||||||||||
| Average earning assets: | ||||||||||||||||||||||||
| U.S. and Canada | $ | 12,196.2 | $ | 10,966.1 | 11 | $ | 12,138.2 | $ | 10,646.7 | 14 | ||||||||||||||
| Europe | 4,104.7 | 4,215.3 | (3 | ) | 3,972.5 | 4,346.3 | (9 | ) | ||||||||||||||||
| Mexico, Australia, Brasil and other | 5,027.1 | 4,433.1 | 13 | 4,916.1 | 4,360.4 | 13 | ||||||||||||||||||
| $ | 21,328.0 | $ | 19,614.5 | 9 | $ | 21,026.8 | $ | 19,353.4 | 9 | |||||||||||||||
| Average earning assets by product: | ||||||||||||||||||||||||
| Loans and finance leases | $ | 14,957.2 | $ | 13,510.7 | 11 | $ | 14,690.4 | $ | 13,391.3 | 10 | ||||||||||||||
| Dealer wholesale financing | 4,365.0 | 3,901.3 | 12 | 4,344.3 | 3,736.5 | 16 | ||||||||||||||||||
| Equipment on lease and other | 2,005.8 | 2,202.5 | (9 | ) | 1,992.1 | 2,225.6 | (10 | ) | ||||||||||||||||
| $ | 21,328.0 | $ | 19,614.5 | 9 | $ | 21,026.8 | $ | 19,353.4 | 9 | |||||||||||||||
| Revenues: | ||||||||||||||||||||||||
| U.S. and Canada | $ | 229.4 | $ | 214.7 | 7 | $ | 466.4 | $ | 429.8 | 9 | ||||||||||||||
| Europe | 137.3 | 140.3 | (2 | ) | 260.8 | 284.9 | (8 | ) | ||||||||||||||||
| Mexico, Australia, Brasil and other | 181.0 | 154.8 | 17 | 348.5 | 304.4 | 14 | ||||||||||||||||||
| $ | 547.7 | $ | 509.8 | 7 | $ | 1,075.7 | $ | 1,019.1 | 6 | |||||||||||||||
| Revenues by product: | ||||||||||||||||||||||||
| Loans and finance leases | $ | 278.2 | $ | 241.0 | 15 | $ | 542.5 | $ | 473.0 | 15 | ||||||||||||||
| Dealer wholesale financing | 79.4 | 77.0 | 3 | 158.1 | 148.4 | 7 | ||||||||||||||||||
| Equipment on lease and other | 190.1 | 191.8 | (1 | ) | 375.1 | 397.7 | (6 | ) | ||||||||||||||||
| $ | 547.7 | $ | 509.8 | 7 | $ | 1,075.7 | $ | 1,019.1 | 6 | |||||||||||||||
| Income before income taxes | $ | 123.2 | $ | 111.2 | 11 | $ | 244.3 | $ | 225.1 | 9 |
New loan and lease volume was $1.85 billion in the second quarter of 2025 compared to $1.92 billion in the second quarter of 2024, and for the first six months of 2025 was $3.36 billion compared to $3.44 billion in the same period in 2024. The decrease in both periods was primarily due to lower new loan and lease volume in the U.S and Canada from lower retail sales of PACCAR trucks and lower currency translation effects, mostly offset by higher finance market shares of new PACCAR truck sales. The decrease in equipment on operating lease volume is primarily due to lower market demand in the U.S., partially offset by higher demand in Europe.
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In the second quarter of 2025, PFS finance market share of new PACCAR truck sales was 26.2% compared to 24.2% in the second quarter of 2024. In the first six months of 2025, PFS finance market share of new PACCAR truck sales was 25.5% compared to 22.8% in the first six months of 2024. The increase in the second quarter of 2025 reflects higher share in all markets except the U.S. The increase in the first six months of 2025 reflects higher share in all markets.
In the second quarter of 2025, PFS revenues increased to $547.7 million from $509.8 million in the same period of 2024. In the first six months of 2025, PFS revenues increased to $1.08 billion from $1.02 billion in the same period of 2024. The increase in both periods was primarily driven by portfolio growth in all markets except Europe.
PFS income before income taxes increased to $123.2 million in the second quarter of 2025 from $111.2 million in the same period of 2024. In the first six months of 2025, PFS income before income taxes increased to $244.3 million from $225.1 million in the same period of 2024. The increase in both periods was primarily due to higher finance margins from a higher loan and finance lease portfolio. The effect of currency translation decreased PFS income before income taxes by $6.6 million and $16.7 million in the second quarter and first six months of 2025, respectively, primarily due to a decrease in the value of the Mexican peso and Brazilian real 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 $410.3 million at June 30, 2025 and $396.5 million at December 31, 2024. 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.
The Company recognized losses on used trucks, excluding repossessions, of $7.5 million in the second quarter of 2025 compared to $13.6 million in the second quarter of 2024, including $9.0 million of losses on multiple unit transactions in the second quarter of 2025 compared to $7.4 million in the second quarter of 2024. Used truck losses related to repossessions, which are recognized as credit losses, were $3.3 million for the second quarter of 2025 and $1.8 million the second quarter of 2024.
The Company recognized losses on used trucks, excluding repossessions, of $18.6 million in the first six months of 2025 and $24.5 million in the first six months of 2024, including losses on multiple unit transactions of $21.0 million in the first six months of 2025 compared to $18.0 million in the first six months of 2024. Used truck losses related to repossessions, which are recognized as credit losses, were $6.6 million for the first six months of 2025 and $6.0 million first six months of 2024.
The major factors for the changes in interest and fees, interest and other borrowing expenses and finance margin for the three months ended June 30, 2025 and 2024 are outlined below:
| ($ in millions) | INTEREST AND FEES | INTEREST AND OTHER BORROWING EXPENSES | FINANCE MARGIN | |||||||||
| Three Months Ended June 30, 2024 | $ | 318.0 | $ | 172.5 | $ | 145.5 | ||||||
| Increase (decrease) | ||||||||||||
| Average finance receivables | 39.7 | 39.7 | ||||||||||
| Average debt balances | 18.3 | (18.3 | ) | |||||||||
| Yields | 9.4 | 9.4 | ||||||||||
| Borrowing rates | 13.9 | (13.9 | ) | |||||||||
| Currency translation and other | (9.5 | ) | (4.4 | ) | (5.1 | ) | ||||||
| Total increase | 39.6 | 27.8 | 11.8 | |||||||||
| Three Months Ended June 30, 2025 | $ | 357.6 | $ | 200.3 | $ | 157.3 |
Average finance receivables increased $2.11 billion (excluding foreign exchange effects), increasing interest and fees by $39.7 million in the second quarter of 2025, primarily due to higher average loan, finance lease and dealer wholesale balances in North America and Brasil.
Average debt balances increased $1.38 billion (excluding foreign exchange effects), increasing interest and other borrowing costs by $18.3 million in the second quarter of 2025, reflecting higher funding requirements for the portfolio from growth in loans, finance leases and dealer wholesale receivables.
Higher portfolio yields (7.4% in 2025 compared to 7.3% in 2024) increased interest and fees by $9.4 million. The higher portfolio yields were primarily due to higher market rates on new portfolio assets, primarily in the U.S. and Brasil.
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Higher borrowing rates (5.2% in 2025 compared to 4.8% in 2024) increased interest and other borrowing expenses by $13.9 million and were primarily due to higher debt market rates in all markets except Canada.
The currency translation effects reflect a decrease in the value of foreign currencies relative to the U.S. dollar, primarily the Mexican peso and Brazilian real.
The major factors for the changes in interest and fees, interest and other borrowing expenses and finance margin for the six months ended June 30, 2025 and 2024 are outlined below:
| ($ in millions) | INTEREST AND FEES | INTEREST AND OTHER BORROWING EXPENSES | FINANCE MARGIN | |||||||||
| Six Months Ended June 30, 2024 | $ | 621.4 | $ | 332.5 | $ | 288.9 | ||||||
| Increase (decrease) | ||||||||||||
| Average finance receivables | 88.1 | 88.1 | ||||||||||
| Average debt balances | 42.7 | (42.7 | ) | |||||||||
| Yields | 20.6 | 20.6 | ||||||||||
| Borrowing rates | 30.9 | (30.9 | ) | |||||||||
| Currency translation and other | (29.5 | ) | (15.2 | ) | (14.3 | ) | ||||||
| Total increase | 79.2 | 58.4 | 20.8 | |||||||||
| Six Months Ended June 30, 2025 | $ | 700.6 | $ | 390.9 | $ | 309.7 |
Average finance receivables increased $2.36 billion (excluding foreign exchange effects), increasing interest and fees by $88.1 million in the first six months of 2025, higher average loan, finance lease and dealer wholesale balances in North America and Brasil.
Average debt balances increased $1.54 billion (excluding foreign exchange effects), increasing interest and other borrowing expenses by $42.7 million in the first six months of 2025, reflecting higher funding requirements for the portfolio from growth in loans, finance leases and dealer wholesale receivables.
Higher portfolio yields (7.4% in 2025 compared to 7.3% in 2024) increased interest and fees by $20.6 million. The higher portfolio yields were primarily due to higher market rates on new portfolio assets, primarily in the U.S. and Brasil.
Higher borrowing rates (5.1% in 2025 compared to 4.7% in 2024) increased interest and other borrowing expenses by $30.9 million and were primarily due to higher debt market rates in all markets except Canada.
The currency translation effects reflect a decrease in the value of foreign currencies relative to the U.S. dollar, primarily the Mexican peso and Brazilian real.
The following table summarizes operating lease, rental and other revenues and depreciation and other expenses:
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30 | June 30 | |||||||||||||||
| ($ in millions) | 2025 | 2024 | 2025 | 2024 | ||||||||||||
| Operating lease and rental revenues | $ | 161.9 | $ | 166.4 | $ | 317.1 | $ | 345.0 | ||||||||
| Used truck sales | 18.8 | 17.4 | 40.9 | 38.1 | ||||||||||||
| Insurance, franchise and other revenues | 9.4 | 8.0 | 17.1 | 14.6 | ||||||||||||
| Operating lease, rental and other revenues | $ | 190.1 | $ | 191.8 | $ | 375.1 | $ | 397.7 | ||||||||
| Depreciation of operating lease equipment | $ | 116.4 | $ | 135.4 | $ | 234.7 | $ | 275.3 | ||||||||
| Vehicle operating expenses | 17.5 | 17.7 | 34.1 | 34.6 | ||||||||||||
| Cost of used truck sales | 19.0 | 18.2 | 41.7 | 40.3 | ||||||||||||
| Insurance, franchise and other expenses | 2.0 | 2.3 | 4.1 | 3.7 | ||||||||||||
| Depreciation and other expenses | $ | 154.9 | $ | 173.6 | $ | 314.6 | $ | 353.9 |
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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 June 30, 2025 and 2024 are outlined below:
| ($ in millions) | OPERATING LEASE, RENTAL AND OTHER REVENUES | DEPRECIATION AND OTHER EXPENSES | LEASE MARGIN | |||||||||
| Three Months Ended June 30, 2024 | $ | 191.8 | $ | 173.6 | $ | 18.2 | ||||||
| Increase (decrease) | ||||||||||||
| Used truck sales | .6 | (.1 | ) | .7 | ||||||||
| Results on returned lease assets | (5.8 | ) | 5.8 | |||||||||
| Average operating lease assets | (27.2 | ) | (21.8 | ) | (5.4 | ) | ||||||
| Revenue and cost per asset | 24.7 | 7.4 | 17.3 | |||||||||
| Currency translation and other | .2 | 1.6 | (1.4 | ) | ||||||||
| Total (decrease) increase | (1.7 | ) | (18.7 | ) | 17.0 | |||||||
| Three Months Ended June 30, 2025 | $ | 190.1 | $ | 154.9 | $ | 35.2 |
Used truck sales from used trucks received on trade increased revenues by $.6 million and decreased related depreciation and other expenses by $.1 million, primarily reflecting improved used truck market prices and a lower sales volume.
Results on returned lease assets decreased depreciation and other expenses by $5.8 million.
Average operating lease assets decreased $245.3 million (excluding foreign exchange effects), which decreased revenues by $27.2 million and related depreciation and other expenses by $21.8 million.
Revenue per asset increased $24.7 million primarily due to higher average truck values financed. Cost per asset increased $7.4 million due to higher depreciation and operating expenses, mainly in Europe.
The currency translation effects reflect an increase in the value of foreign currencies relative to the U.S. dollar, primarily the euro.
The major factors for the changes in operating lease, rental and other revenues, depreciation and other expenses and lease margin between the six months ended June 30, 2025 and 2024 are outlined below:
| ($ in millions) | OPERATING LEASE, RENTAL AND OTHER REVENUES | DEPRECIATION AND OTHER EXPENSES | LEASE MARGIN | |||||||||
| Six Months Ended June 30, 2024 | $ | 397.7 | $ | 353.9 | $ | 43.8 | ||||||
| Increase (decrease) | ||||||||||||
| Used truck sales | 2.3 | .9 | 1.4 | |||||||||
| Results on returned lease assets | (4.4 | ) | 4.4 | |||||||||
| Average operating lease assets | (55.3 | ) | (46.1 | ) | (9.2 | ) | ||||||
| Revenue and cost per asset | 39.0 | 14.4 | 24.6 | |||||||||
| Currency translation and other | (8.6 | ) | (4.1 | ) | (4.5 | ) | ||||||
| Total (decrease) increase | (22.6 | ) | (39.3 | ) | 16.7 | |||||||
| Six Months Ended June 30, 2025 | $ | 375.1 | $ | 314.6 | $ | 60.5 |
Used truck sales from used truck received on trade increased revenues by $2.3 million and related depreciation and other expenses by $.9 million, primarily reflecting improved used truck market prices.
Results on returned lease assets decreased depreciation and other expenses by $4.4 million.
Average operating lease assets decreased $241.9 million (excluding foreign exchange effects), which decreased revenues by $55.3 million and related depreciation and other expenses by $46.1 million.
Revenue per asset increased $39.0 million primarily due to higher average truck values financed. Cost per asset increased $14.4 million due to higher depreciation and operating expenses, mainly in Europe and Mexico.
The currency translation effects reflect a decrease in the value of foreign currencies relative to the U.S. dollar, primarily the Mexican peso.
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Financial Services SG&A for the second quarter of 2025 decreased to $40.1 million from $40.8 million in the second quarter of 2024. For the first six months, Financial Services SG&A decreased to $78.4 million in 2025 from $79.8 million in 2024. The decrease in both periods was primarily due to lower professional fees and travel and entertainment expenses partially offset by higher salaries and related expenses.
As an annualized percentage of average earning assets, Financial Services SG&A was .8% for the second quarter and .7% for the first six months of 2025, respectively and .8% for the same periods in 2024.
The following table summarizes the provision for losses on receivables and net charge-offs:
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, 2025 | June 30, 2025 | |||||||||||||||
| ($ in millions) | PROVISION FOR LOSSES ON RECEIVABLES | NET CHARGE- OFFS | PROVISION FOR LOSSES ON RECEIVABLES | NET CHARGE- OFFS | ||||||||||||
| U.S. and Canada | $ | 14.8 | $ | 17.5 | $ | 22.1 | $ | 30.9 | ||||||||
| Europe | 2.7 | 3.1 | 4.9 | 5.2 | ||||||||||||
| Mexico, Australia, Brasil and other | 11.7 | 4.3 | 20.5 | 9.8 | ||||||||||||
| $ | 29.2 | $ | 24.9 | $ | 47.5 | $ | 45.9 |
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, 2024 | June 30, 2024 | |||||||||||||||
| ($ in millions) | PROVISION FOR LOSSES ON RECEIVABLES | NET CHARGE- OFFS | PROVISION FOR LOSSES ON RECEIVABLES | NET CHARGE- OFFS | ||||||||||||
| U.S. and Canada | $ | 7.7 | $ | 4.7 | $ | 16.1 | $ | 10.3 | ||||||||
| Europe | 1.5 | 4.5 | 5.3 | 5.0 | ||||||||||||
| Mexico, Australia, Brasil and other | 2.5 | 1.5 | 6.4 | 4.0 | ||||||||||||
| $ | 11.7 | $ | 10.7 | $ | 27.8 | $ | 19.3 |
The provision for losses on receivables was $29.2 million in the second quarter of 2025 compared to $11.7 million in 2024, and in the first six months, the provision for losses on receivables was $47.5 million in 2025 compared to $27.8 million in 2024. The increase in provision for losses in the second quarter and first six months of 2025 compared to 2024 was primarily driven by retail portfolio growth in North America and Brasil, an increase in 30+ past due accounts in Mexico and Brasil, and higher expected losses. The increase in charge-offs in the U.S. and Canada reflected a soft truckload market and included several large fleet customers, which were provisioned for previously. The higher charge-offs in both periods also reflected higher average loss severity in all markets, primarily due to normalizing used truck market values when compared to previous periods.
The Company modifies loans and finance leases as a normal part of its Financial Services operations. The Company may modify loans and finance leases for commercial reasons or for credit reasons. Modifications for commercial reasons are changes to contract terms for customers that are not considered to be in financial difficulty. Insignificant delays are modifications extending terms up to three months for customers experiencing some short-term financial stress, but not considered to be in financial difficulty. Modifications for credit reasons are changes to contract terms for customers considered to be in financial difficulty. The Company’s modifications typically result in granting more time to pay the contractual amounts owed and charging a fee and interest for the term of the modification. When considering whether to modify customer accounts for credit reasons, the Company evaluates the creditworthiness of the customers and modifies those accounts that the Company considers likely to perform under the modified terms.
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The post-modification balances of accounts modified during the six months ended June 30, 2025 and 2024 are summarized below:
| 2025 | 2024 | |||||||||||||||
| ($ in millions) | AMORTIZED COST BASIS | % OF TOTAL PORTFOLIO* | AMORTIZED COST BASIS | % OF TOTAL PORTFOLIO* | ||||||||||||
| Commercial | $ | 182.3 | 2.4 | % | $ | 223.1 | 3.3 | % | ||||||||
| Insignificant delay | 171.8 | 2.2 | % | 98.9 | 1.4 | % | ||||||||||
| Credit | 141.6 | 1.9 | % | 134.2 | 2.0 | % | ||||||||||
| $ | 495.7 | 6.5 | % | $ | 456.2 | 6.7 | % |
- Amortized cost basis immediately after modification as a percentage of ending retail portfolio, on an annualized basis.
Modification activity was $495.7 million in the first six months of 2025 and $456.2 million in the same period of 2024. The decrease in modifications for Commercial reasons primarily reflects lower volumes of refinancing, primarily in the U.S. The increase in Insignificant delay modifications primarily reflects an increase in customers requesting payment relief for up to three months, primarily in the U.S. The increase in Credit modifications for customers in financial difficulty reflects higher volumes of contract modifications in Brasil and Mexico mostly offset by lower volume of contract modifications in the U.S.
The following table summarizes the Company’s 30+ days past due accounts:
| June 30 2025 | December 31 2024 | June 30 2024 | ||||||||||
| Percentage of retail loan and lease accounts 30+ days past due: | ||||||||||||
| U.S. and Canada | .8 | % | 1.2 | % | 1.1 | % | ||||||
| Europe | .6 | % | .8 | % | 1.5 | % | ||||||
| Mexico, Australia, Brasil and other | 2.4 | % | 2.0 | % | 1.4 | % | ||||||
| Worldwide | 1.2 | % | 1.3 | % | 1.2 | % |
Accounts 30+ days past due was 1.2% at June 30, 2025 compared to 1.3% at December 31, 2024 and 1.2% at June 30, 2024. The decreased percentage of past due accounts as of June 30, 2025 compared to December 31, 2024 is primarily due to lower past due accounts in the U.S. and Canada and Europe, partially offset by increases in past due accounts in Mexico, Australia and Brasil. The Company continues to focus on maintaining low past due balances.
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 $60.8 million of accounts worldwide during the second quarter of 2025, $40.7 million during the fourth quarter of 2024 and $23.0 million during the second quarter of 2024 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:
| June 30 2025 | December 31 2024 | June 30 2024 | ||||||||||
| Pro forma percentage of retail loan and lease accounts 30+ days past due: | ||||||||||||
| U.S. and Canada | .9 | % | 1.4 | % | 1.1 | % | ||||||
| Europe | .7 | % | .8 | % | 1.5 | % | ||||||
| Mexico, Australia, Brasil and other | 3.8 | % | 2.6 | % | 1.9 | % | ||||||
| Worldwide | 1.6 | % | 1.6 | % | 1.4 | % |
The Company typically requires customers to pay current before granting modifications. The higher pro forma percentage of retail loan and lease accounts 30+ days past due at June 30, 2025 in Mexico, Australia, Brasil and other was primarily due to accounts modified in Brasil and Mexico.
A contract modification that improves the past due status reduces the probability of default. The effect of modifications is included in the Company’s historical loss information used to determine the allowance for credit losses. 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 June 30, 2025, December 31, 2024 and June 30, 2024. The effect on the allowance for credit losses from such modifications was not significant at June 30, 2025, December 31, 2024 and June 30, 2024.
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The Company’s annualized pre-tax return on average assets for Financial Services was 2.1% for both the second quarter of 2025 and the second quarter of 2024 and was 2.2% for both the first six months of 2025 and first six months of 2024.
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. 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 both the second quarter and first six months of 2025 and 2024. Other SG&A decreased to $19.9 million for the second quarter of 2025 from $20.4 million for the second quarter of 2024, primarily due to lower salaries and related expenses. Other SG&A was $45.0 million for both the first six months of 2025 and 2024.
For the second quarter of 2025, Other (loss) income before income taxes was $(.5) million compared to $2.7 million in 2024. For the first six months of 2025, Other (loss) income before tax was $(353.7) million compared to $.4 million in the same period of 2024, primarily due to the EC-related charge in the first quarter of 2025, which is discussed in Note M of the consolidated financial statements.
Investment income for the second quarter decreased to $83.9 million in 2025 compared to $95.8 million in 2024. For the first six months, investment income decreased to $167.7 million in 2025 from $181.3 million in 2024. The decrease in both periods is primarily due to lower investment yields from lower market interest rates in the U.S. and Europe, partially offset by an increase in average investment balance, primarily in the U.S.
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. 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. The lower effective tax rate in the second quarter of 2025 was primarily due to a lower mix of pre-tax income in jurisdictions with higher tax rates. Included in the first quarter of 2025 was the EC-related charge of $350.0 million, which lowered the effective tax rate. Excluding the EC charge and related tax benefits, the effective tax rate for the first six months of 2025 was 22.4%.
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30 | June 30 | |||||||||||||||
| ($ in millions) | 2025 | 2024 | 2025 | 2024 | ||||||||||||
| Domestic income before taxes | $ | 605.2 | $ | 968.5 | $ | 1,252.7 | $ | 1,996.2 | ||||||||
| Foreign income before taxes | 326.7 | 492.3 | 322.3 | 999.1 | ||||||||||||
| Total income before taxes | $ | 931.9 | $ | 1,460.8 | $ | 1,575.0 | $ | 2,995.3 | ||||||||
| Domestic pre-tax return on revenues | 13.9 | % | 19.3 | % | 14.6 | % | 19.7 | % | ||||||||
| Foreign pre-tax return on revenues | 10.4 | % | 13.1 | % | 5.1 | % | 13.5 | % | ||||||||
| Total pre-tax return on revenues | 12.4 | % | 16.7 | % | 10.5 | % | 17.1 | % |
For the second quarter and first six months of 2025, domestic income before income taxes decreased primarily due to lower Truck operation results. For the second quarter of 2025, foreign income before income taxes decreased primarily due to lower Truck operation results in Europe and Mexico. For the first six months of 2025, foreign income before taxes included the EC-related charge of $350.0 million in the first quarter 2025, which also reduced foreign pre-tax return on revenues. For the second quarter and first six months of 2025, total pre-tax return on revenues decreased, reflecting lower returns in Truck operations.
LIQUIDITY AND CAPITAL RESOURCES:
| June 30 | December 31 | ||||||
| ($ in millions) | 2025 | 2024 | |||||
| Cash and cash equivalents | $ | 5,549.9 | $ | 7,060.8 | |||
| Marketable securities | 2,913.7 | 2,778.8 | |||||
| $ | 8,463.6 | $ | 9,839.6 |
The Company’s total cash and marketable securities at June 30, 2025 decreased $1.38 billion from the balances at December 31, 2024. Total cash and marketable securities are primarily intended to provide liquidity while preserving capital.
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The change in cash and cash equivalents is summarized below:
| ($ in millions) | |||||||
| Six Months Ended June 30, | 2025 | 2024 | |||||
| Operating activities: | |||||||
| Net income | $ | 1,228.9 | $ | 2,317.9 | |||
| Net income items not affecting cash | 451.2 | 513.0 | |||||
| Changes in operating assets and liabilities, net | 63.6 | (921.9 | ) | ||||
| Net cash provided by operating activities | 1,743.7 | 1,909.0 | |||||
| Net cash used in investing activities | (1,010.1 | ) | (1,569.8 | ) | |||
| Net cash used in financing activities | (2,425.8 | ) | (1,579.3 | ) | |||
| Effect of exchange rate changes on cash and cash equivalents | 181.3 | (70.1 | ) | ||||
| Net decrease in cash and cash equivalents | (1,510.9 | ) | (1,310.2 | ) | |||
| Cash and cash equivalents at beginning of period | 7,060.8 | 7,181.7 | |||||
| Cash and cash equivalents at end of period | $ | 5,549.9 | $ | 5,871.5 |
Operating activities: Cash provided by operations decreased by $165.3 million to $1,743.7 million in the first six months of 2025 from $1,909.0 million in 2024. The decreased operating cash flow reflects lower net income by $1,089.0 million, lower cash provided from net income items not affecting cash of $61.8 million, primarily deferred income taxes, and higher cash provided from net changes in operating assets and liabilities of $985.5 million. The net changes in operating assets and liabilities are mainly due to higher cash provided by net changes in operating assets, primarily wholesale receivables on new trucks in the Financial Services segment of $652.8 million, trade and other receivables of $407.9 million and inventory of $292.1 million, partially offset by a net decrease in accounts payable and accruals of $388.0 million.
Investing activities: Cash used in investing activities decreased by $559.7 million to $1,010.1 million in the first six months of 2025 from $1,569.8 million in 2024. The decrease in net cash used in investing activities reflects lower purchases of marketable securities, net of proceeds from sales and maturities, of $284.7 million, lower acquisition of equipment for operating leases of $125.5 million and a net decrease in wholesale receivables on used equipment of $85.6 million.
Financing activities: Cash used in financing activities was $2,425.8 million for the first six months of 2025, $846.5 million higher than the $1,579.3 million used in 2024, reflecting higher net borrowing activity and lower cash dividends. Cash used in net borrowing activities was $495.3 million in 2025, $851.5 million higher than the cash provided by net borrowing activities of $356.2 million in 2024. In the first six months of 2025, the Company paid $1.92 billion in dividends compared to $1.97 billion in 2024.
The effect of exchange rate changes on cash increased cash and cash equivalents by $181.3 million in the first six months of 2025, reflecting an increase in the value of foreign currencies relative to the U.S. dollar, primarily the euro, the British pound and Brazilian real. In the first six months of 2024, a decrease in the value of foreign currencies relative to the U.S. dollar, primarily the euro, the Brazilian real and the Australian dollar, decreased cash and cash equivalents by $70.1 million.
Credit Lines and Other
The Company has line of credit arrangements of $5.66 billion, of which $5.10 billion were unused at June 30, 2025. Included in these arrangements are $4.00 billion of committed bank facilities, of which $1.50 billion expires in June 2026, $1.25 billion expires in June 2028 and $1.25 billion expires in June 2030. The Company intends to extend or replace these credit facilities on or before expiration to maintain facilities of similar amounts and duration. 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 six months ended June 30, 2025.
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 June 30, 2025, the Company has repurchased $128.4 million of shares under this plan.
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.
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Investments for manufacturing property, plant and equipment in the first six months of 2025 were $390.5 million compared to $380.1 million for the same period of 2024. Over the past decade, the Company’s combined investments in worldwide capital projects and R&D totaled $8.90 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 2025, total capital investments for PACCAR are expected to be $750 to $800 million and R&D is expected to be $450 to $480 million. PACCAR is investing in next generation clean diesel and alternative powertrains, integrated connected vehicle services, expanded manufacturing capabilities, and advanced driver assistance systems that create value for customers. In addition to the capital and R&D investments, the company plans to invest a total project amount of $600 to $900 million in its battery joint venture, Amplify Cell Technologies.
On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted in the U.S. The most significant impacts to the Company of the OBBBA are the immediate expensing of domestic Research and Development expenditures and the permanent reinstatement of bonus depreciation for qualifying properties. The Company expects the impact will defer the payment of a significant portion of current federal income taxes and will have an immaterial impact to the Company's Consolidated Statements of Comprehensive Income.
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 2024, 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 June 30, 2025 was $7.80 billion. The registration expires in November 2027 and does not limit the principal amount of debt securities that may be issued during that period.
As of June 30, 2025, the Company’s European finance subsidiary, PACCAR Financial Europe, had €550.0 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 May 2026.
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 June 30, 2025, 5.55 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 June 30, 2025 was 700.0 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. There were no borrowings under this program as of June 30, 2025.
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 2.70 billion Brazilian reais and has 1.07 billion Brazilian reais outstanding as of June 30, 2025. The Brazilian subsidiary also established a Letra Financeira (LF) program in May 2024 and the program does not limit the principal amount of debt securities that may be issued under the program. A total of 500.0 million Brazilian reais medium-term notes were outstanding as of June 30, 2025.
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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.
Adjustment for the EC-related claims relates to a pre-tax charge of $350.0 million ($264.5 million after-tax) for estimable total costs recorded in Interest and other (income) expenses, net in the first quarter 2025.
The Company utilizes these non-GAAP measures to allow investors and management to evaluate operating trends by excluding a significant charge that is not representative of company performance.
Reconciliations from the most directly comparable GAAP measures to adjusted net income (non-GAAP) and adjusted net income per diluted shares (non-GAAP) are as follows:
| Six Months Ended | ||||
| ($ in millions, except per share amounts) | June 30, 2025 | |||
| Net income | $ | 1,228.9 | ||
| EC-related claims, net of taxes | 264.5 | |||
| Adjusted net income (non-GAAP) | $ | 1,493.4 | ||
| Per diluted share | ||||
| Net income | $ | 2.33 | ||
| EC-related claims, net of taxes | .50 | |||
| Adjusted net income (non-GAAP) | $ | 2.83 | ||
| After-tax return on revenues | 8.2 | % | ||
| EC-related claims, net of taxes | 1.8 | % | ||
| After-tax adjusted return on revenues (non-GAAP) * | 10.0 | % | ||
| Tax rate | ||||
| Effective tax rate | 22.0 | % | ||
| EC-related claims | .4 | % | ||
| Adjusted effective tax rate (non-GAAP) ** | 22.4 | % | ||
| * Calculated using adjusted net income. | ||||
| ** Calculated using adjusted pre-tax net income. |
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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, 2024 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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