PACCAR Inc (NASDAQ:PCAR) Q1 2022 Earnings Conference Call April 26, 2022 11:00 AM ET Company Participants Ken Hastings - Director of Investor Relations Preston Feight - Chief Executive Officer Harrie Schippers - President & Chief Financial Officer Michael Barkley - Senior Vice President & Controller Conference Call Participants Tami Zakaria - JPMorgan Steven Fisher - UBS Tim Thein - Citigroup Jamie Cook - Credit Suisse Steven Volkmann - Jefferies David Raso - Evercore ISI John Joyner - BMO Nicole DeBlase - ...

Employment and Workforce - As of December 31, 2021, the company had approximately 28,500 employees, with about 37% based in the U.S.[50] Environmental Responsibility - The company achieved an A score from CDP in 2021, placing in the top 1.5% of over 13,000 companies reporting greenhouse gas emissions[53] - PACCAR's factories are ISO 14001 certified, and more than 80% are zero waste-to-landfill[52] - The company is launching its SuperTruck 3 program to develop state-of-the-art zero emissions medium- and heavy-duty trucks[58] - The company has established new emissions reduction targets in partnership with the Science Based Targets Initiative (SBTi)[54] - The company’s commitment to environmental responsibility includes significant investments in research and development for technologies that reduce greenhouse gas emissions[55] Financial Performance and Risks - The company reported a potential loss of $210.8 million related to foreign currency exchange contracts from a 10% unfavorable change in exchange rates as of December 31, 2021[196] - The company’s fixed rate loans had a fair value loss of $110.5 million in 2021 due to interest rate fluctuations[196] - The potential loss in fair value for commodity forward contracts from a 10% unfavorable change in prices was $18.4 million as of December 31, 2021[197] Sales and Market Performance - Biofuel capable unit sales represented 49% of the company's total global truck sales[57]

PACCAR Inc (NASDAQ:PCAR) Q4 2021 Earnings Conference Call January 25, 2022 12:00 PM ET Company Participants Ken Hastings - Director of IR Preston Feight - CEO Harrie Schippers - President and CFO Michael Barkley - SVP and Controller Conference Call Participants Chad Dillard - Bernstein Jamie Cook - Credit Suisse Stephen Volkmann - Jefferies Tami Zakaria - JPMorgan David Raso - Evercore Steve Fisher - UBS Robert Wertheimer - Melius Research Jerry Revich - Goldman Sachs Ross Gilardi - Bank of America Nicole D ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 2021 OR ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation ...

PACCAR Inc. (NASDAQ:PCAR) Q3 2021 Earnings Conference Call October 26, 2021 12:00 PM ET Company Participants Ken Hastings - Director of Investor Relations Preston Feight - Chief Executive Officer Harrie Schippers - President and Chief Financial Officer Michael Barkley - Senior Vice President and Controller Conference Call Participants Stephen Volkmann - Jefferies Ann Duignan - JPMorgan David Raso - Evercore ISI Steven Fisher - UBS Joel Tiss - BMO Capital Markets Robert Wertheimer - Melius Research Cha ...

[Report Information](index=1&type=section&id=Report%20Information) [Filing Details](index=1&type=section&id=Filing%20Details) This report is PACCAR Inc's quarterly report (Form 10-Q) for the period ended June 30, 2021, with the company incorporated in Delaware, trading on Nasdaq under PCAR, having filed all required reports, and designated as a large accelerated filer - This report is PACCAR Inc's quarterly report (Form 10-Q) for the period ended June 30, 2021[2](index=2&type=chunk) - The company has filed all required reports in the past 12 months and has been subject to such filing requirements for the past 90 days[3](index=3&type=chunk) Registrant Details | Metric | Detail | | :--- | :--- | | Registrant Name | PACCAR Inc | | State of Incorporation | Delaware | | Securities Code | PCAR | | Registered Exchange | Nasdaq Stock Market | | Filer Type | Large Accelerated Filer | | Common Stock (par value $1.00) | 347,173,392 shares outstanding as of July 29, 2021 | [PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) PACCAR Inc's financial statements show significant growth in net sales and revenues, net income, and diluted EPS for the three and six months ended June 30, 2021, with increased total assets and stockholders' equity; operating cash flow decreased, investing cash flow increased, and financing cash flow significantly decreased due to lower dividend payments [Consolidated Statements of Comprehensive Income](index=3&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) PACCAR Inc reported substantial growth in net sales and revenues, net income, and diluted earnings per share for the three and six months ended June 30, 2021, driven by strong performance in its truck, parts, and financial services segments Key Financial Data for Three Months Ended June 30 (Millions of USD, except per share amounts) | Metric | 2021 | 2020 | Change Rate | | :--- | :--- | :--- | :--- | | Net Sales and Revenues | $5,843.9 | $3,062.2 | 91% | | Net Income | $492.9 | $147.7 | 234% | | Diluted Earnings Per Share | $1.41 | $0.43 | 228% | | Comprehensive Income | $579.7 | $241.7 | 140% | Key Financial Data for Six Months Ended June 30 (Millions of USD, except per share amounts) | Metric | 2021 | 2020 | Change Rate | | :--- | :--- | :--- | :--- | | Net Sales and Revenues | $11,689.4 | $8,223.9 | 42% | | Net Income | $963.0 | $507.1 | 90% | | Diluted Earnings Per Share | $2.76 | $1.46 | 89% | | Comprehensive Income | $983.7 | $317.3 | 210% | [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2021, PACCAR Inc's total assets increased by **3% to $29.0122 billion** from December 31, 2020, primarily driven by increased assets in the truck, parts, and other businesses, with significant growth in stockholders' equity and a slight decrease in financial services liabilities Total Assets (Millions of USD) | Category | June 30, 2021 | December 31, 2020 | Change Rate | | :--- | :--- | :--- | :--- | | Truck, Parts and Other | $13,446.4 | $12,460.2 | 8% | | Financial Services | $15,565.8 | $15,799.8 | -1% | | **Total Assets** | **$29,012.2** | **$28,260.0** | **3%** | Total Liabilities (Millions of USD) | Category | June 30, 2021 | December 31, 2020 | Change Rate | | :--- | :--- | :--- | :--- | | Truck, Parts and Other | $5,881.4 | $5,601.1 | 5% | | Financial Services | $11,947.0 | $12,268.9 | -3% | - As of June 30, 2021, total stockholders' equity was **$11.1838 billion**, a **7.6% increase** from $10.3900 billion as of December 31, 2020[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2021, PACCAR Inc experienced a significant decrease in cash flow from operating activities, an increase in cash outflow from investing activities, and a substantial decrease in cash outflow from financing activities due to reduced dividend payments and changes in borrowing activities Cash Flow Summary (Six Months Ended June 30, Millions of USD) | Activity Category | 2021 | 2020 | Change Amount | | :--- | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $867.7 | $1,360.8 | $(493.1) | | Net Cash Used in Investing Activities | $(666.7) | $(594.1) | $(72.6) | | Net Cash Used in Financing Activities | $(651.5) | $(1,778.4) | $1,126.9 | | Net Decrease in Cash and Cash Equivalents | $(469.8) | $(1,047.1) | $577.3 | | Cash and Cash Equivalents at End of Period | $3,069.8 | $3,128.0 | $(58.2) | - The decrease in operating cash flow was primarily due to an **$823.5 million increase** in cash used for inventory purchases, a **$531.3 million decrease** in cash received from financial services wholesale receivables, and a **$191.0 million increase** in cash outflow for income tax payments[199](index=199&type=chunk) - The decrease in financing cash outflow was mainly due to **reduced dividend payments** ($471.8 million in 2021 vs. $1.018 billion in 2020) and lower cash used for borrowing activities[201](index=201&type=chunk) [Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) As of June 30, 2021, PACCAR Inc's stockholders' equity grew for both the three and six-month periods, primarily due to net income contributions and improved accumulated other comprehensive income (loss), despite cash dividend payments Total Stockholders' Equity (Millions of USD) | Period | June 30, 2021 | June 30, 2020 | Change Amount | | :--- | :--- | :--- | :--- | | Three Months Ended | $11,183.8 | $9,776.8 | $1,407.0 | | Six Months Ended | $11,183.8 | $9,776.8 | $1,407.0 | - For the three and six months ended June 30, 2021, net income was **$492.9 million and $963.0 million**, respectively, serving as the primary driver for stockholders' equity growth[19](index=19&type=chunk) - Cash dividends on common stock were **$0.34 per share** for the three months and **$0.66 per share** for the six months ended June 30, 2021[19](index=19&type=chunk) [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes to consolidated financial statements provide detailed disclosures on accounting policies, revenue recognition, investments, receivables, liabilities, stockholders' equity, income taxes, segment information, derivatives, fair value measurements, employee benefit plans, and commitments and contingencies, explaining key items and changes [NOTE A - Basis of Presentation](index=8&type=section&id=NOTE%20A%20-%20Basis%20of%20Presentation) These unaudited consolidated financial statements are prepared in accordance with GAAP and Form 10-Q instructions, including necessary management adjustments; a new retirement benefit disclosure standard had no material impact, and a new leasing standard expected in 2022 is also not anticipated to have a significant impact - The unaudited consolidated financial statements are prepared in accordance with GAAP and Form 10-Q instructions, and include adjustments deemed necessary by management[21](index=21&type=chunk) - The company adopted ASU 2018-14 (Retirement Benefits—Defined Benefit Plans—General) on January 1, 2021, with no material impact on the consolidated financial statements[24](index=24&type=chunk) - FASB-issued ASU 2021-05 (Leases—Lessor—Certain Leases with Variable Lease Payments), effective January 1, 2022, is not expected to have a material impact on the consolidated financial statements[25](index=25&type=chunk) [NOTE B – Sales and Revenues](index=8&type=section&id=NOTE%20B%20%E2%80%93%20Sales%20and%20Revenues) PACCAR recognizes truck, parts, and other business revenue when control transfers, with special accounting for extended warranties, operating leases, and residual value guarantees; financial services revenue primarily from loans and leases, with interest and rental income suspended when receivables are over 90 days past due or collection is uncertain Truck, Parts and Other Sales and Revenues (Three Months Ended June 30, Millions of USD) | Revenue Source | 2021 | 2020 | Change Rate | | :--- | :--- | :--- | :--- | | Truck Sales | $3,950.4 | $1,708.1 | 131% | | Parts Sales | $1,176.1 | $799.4 | 47% | | **Total** | **$5,387.6** | **$2,701.9** | **99%** | - Truck sales revenue is recognized when control of the product transfers to the customer, but for truck sales with residual value guarantees (RVG), it may be accounted for as a sale or an operating lease depending on the customer's economic incentive to return the truck[29](index=29&type=chunk) - Interest income and rental income from financial services operations are suspended when receivables are **90 days or more past due**, or earlier if collectibility is uncertain[35](index=35&type=chunk) Financial Services Lease Revenue (Three Months Ended June 30, Millions of USD) | Lease Type | 2021 | 2020 | Change Rate | | :--- | :--- | :--- | :--- | | Finance Lease Revenue | $48.4 | $45.2 | 7% | | Operating Lease Revenue | $212.1 | $191.7 | 11% | | **Total Lease Revenue** | **$260.5** | **$236.9** | **10%** | [NOTE C - Investments in Marketable Securities](index=11&type=section&id=NOTE%20C%20-%20Investments%20in%20Marketable%20Securities) PACCAR's marketable debt securities are classified as available-for-sale, reported at fair value with credit losses in earnings and unrealized gains/losses in OCI; marketable equity securities are measured at fair value with gains/losses in investment income; total marketable securities were **$1.4346 billion** as of June 30, 2021, with no recognized credit loss allowance - Marketable debt securities are classified as available-for-sale and reported at fair value; marketable equity securities are measured at fair value, with realized and unrealized gains and losses included in investment income[40](index=40&type=chunk)[43](index=43&type=chunk) - As of June 30, 2021, and December 31, 2020, the company did not recognize an allowance for credit losses, as unrealized losses were due to increases in yields for certain securities, and the company expects to receive contractual principal and interest[46](index=46&type=chunk) Marketable Securities Fair Value (Millions of USD) | Category | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Marketable Debt Securities | $1,429.3 | $1,429.0 | | Marketable Equity Securities | $5.3 | $0.0 | | **Total Marketable Securities** | **$1,434.6** | **$1,429.0** | [NOTE D - Inventories](index=12&type=section&id=NOTE%20D%20-%20Inventories) PACCAR's inventories are valued at the lower of cost or market, with US inventories primarily using LIFO and other inventories primarily using FIFO; as of June 30, 2021, net inventories significantly increased to **$2.0546 billion** from December 31, 2020, driven by growth in work-in-process and raw materials - Inventories are valued at the lower of cost or market, with U.S. inventories primarily using the LIFO method and other inventories primarily using the FIFO method[48](index=48&type=chunk) Inventory Composition (Millions of USD) | Category | June 30, 2021 | December 31, 2020 | Change Rate | | :--- | :--- | :--- | :--- | | Finished Products | $646.4 | $610.0 | 6% | | Work-in-Process and Raw Materials | $1,602.6 | $801.9 | 100% | | Less: LIFO Reserve | $(194.4) | $(190.0) | 2% | | **Net Inventories** | **$2,054.6** | **$1,221.9** | **68%** | [NOTE E - Finance and Other Receivables](index=13&type=section&id=NOTE%20E%20-%20Finance%20and%20Other%20Receivables) PACCAR's finance and other receivables include loans, finance leases, and dealer wholesale financing; the company assesses credit risk through continuous monitoring, credit ratings, and internal metrics, categorizing accounts as performing, watch, or at-risk; as of June 30, 2021, net receivables were **$11.8993 billion**, with a slight decrease in allowance for losses and declining balances for nonperforming loans and restructured debt Net Finance and Other Receivables (Millions of USD) | Category | June 30, 2021 | December 31, 2020 | Change Rate | | :--- | :--- | :--- | :--- | | Loans | $6,248.4 | $5,839.1 | 7% | | Finance Leases | $3,806.0 | $3,944.7 | -4% | | Dealer Wholesale Financing | $1,818.3 | $2,012.4 | -10% | | Operating Lease Receivables and Other | $151.9 | $151.5 | 0% | | Less: Allowance for Losses | $(125.3) | $(127.0) | -1% | | **Total** | **$11,899.3** | **$11,820.7** | **1%** | - The company categorizes credit quality indicators into "Performing," "Watch" (31-90 days past due or high-risk performing accounts), and "At-risk" (impaired, over 90 days past due, or non-accrual accounts)[74](index=74&type=chunk) - As of June 30, 2021, the balance of troubled debt restructurings (TDRs) was **$51.8 million**, down from $63.1 million as of December 31, 2020[79](index=79&type=chunk) - As of June 30, 2021, the balance of repossessed vehicles was **$6.8 million**, down from $18.1 million as of December 31, 2020[81](index=81&type=chunk) [NOTE F - Product Support Liabilities](index=19&type=section&id=NOTE%20F%20-%20Product%20Support%20Liabilities) PACCAR's product support liabilities include product warranty reserves and deferred revenue from extended warranty and repair and maintenance (R&M) contracts; warranty expenses are estimated and recorded at the time of product sale based on historical data, while deferred revenue is recognized straight-line over the contract term; as of June 30, 2021, warranty reserves were **$368.7 million** and deferred revenue was **$783.3 million** Warranty Reserves (Millions of USD) | Metric | 2021 (Six Months) | 2020 (Six Months) | | :--- | :--- | :--- | | Balance January 1 | $389.7 | $440.0 | | Costs Accrued | $157.1 | $147.7 | | Payments | $(206.4) | $(224.7) | | Change in Estimate | $29.7 | $47.6 | | **Balance June 30** | **$368.7** | **$406.0** | Extended Warranty and R&M Contract Deferred Revenue (Millions of USD) | Metric | 2021 (Six Months) | 2020 (Six Months) | | :--- | :--- | :--- | | Balance January 1 | $795.8 | $801.4 | | Deferred Revenue | $232.5 | $187.4 | | Revenue Recognized | $(238.7) | $(209.5) | | **Balance June 30** | **$783.3** | **$770.8** | - The company expects to recognize approximately **$140.0 million** of the remaining deferred revenue in 2021, **$260.1 million** in 2022, and **$207.7 million** in 2023[83](index=83&type=chunk) [NOTE G - Stockholders' Equity](index=20&type=section&id=NOTE%20G%20-%20Stockholders'%20Equity) PACCAR's comprehensive income significantly increased in Q2 and H1 2021, driven by net income and positive other comprehensive income (OCI) contributions, particularly foreign currency translation gains; accumulated other comprehensive loss (AOCI) improved, stock-based compensation expense increased, and treasury stock repurchases decreased Comprehensive Income (Three Months Ended June 30, Millions of USD) | Component | 2021 | 2020 | Change Rate | | :--- | :--- | :--- | :--- | | Net Income | $492.9 | $147.7 | 234% | | Net Other Comprehensive Income (Loss) | $86.8 | $94.0 | -7.7% | | **Comprehensive Income** | **$579.7** | **$241.7** | **140%** | Comprehensive Income (Six Months Ended June 30, Millions of USD) | Component | 2021 | 2020 | Change Rate | | :--- | :--- | :--- | :--- | | Net Income | $963.0 | $507.1 | 90% | | Net Other Comprehensive Income (Loss) | $20.7 | $(189.8) | Not Applicable | | **Comprehensive Income** | **$983.7** | **$317.3** | **210%** | - As of June 30, 2021, accumulated other comprehensive loss (AOCI) improved from **$(1.0503 billion)** as of January 1, 2021, to **$(1.0296 billion)**[85](index=85&type=chunk) - Stock-based compensation expense for the six months ended June 30, 2021, was **$9.4 million**, higher than $8.2 million for the same period in 2020[88](index=88&type=chunk) - For the six months ended June 30, 2021, the company repurchased **$1.4 million** of treasury stock, with **$390 million** remaining authorized under the existing $500 million repurchase program[90](index=90&type=chunk) [NOTE H - Income Taxes](index=22&type=section&id=NOTE%20H%20-%20Income%20Taxes) PACCAR's effective tax rates for Q2 and H1 2021 were higher than the corresponding periods in 2020, primarily due to higher research and development tax credits in 2020 Effective Tax Rates | Period | 2021 | 2020 | | :--- | :--- | :--- | | Three Months Ended June 30 | 22.6% | 19.7% | | Six Months Ended June 30 | 22.6% | 21.5% | - The higher effective tax rates in Q2 and H1 2021 were primarily due to higher research and development tax credits in 2020[91](index=91&type=chunk) [NOTE I - Segment Information](index=23&type=section&id=NOTE%20I%20-%20Segment%20Information) PACCAR operates primarily in three segments: Truck, Parts, and Financial Services, with an "Other" business; Truck and Parts segments are evaluated based on operating profit, while Financial Services is evaluated based on pretax earnings; all major segments showed significant growth in net sales and pretax profit in H1 2021 Net Sales and Revenues by Segment (Six Months Ended June 30, Millions of USD) | Segment | 2021 | 2020 | Change Rate | | :--- | :--- | :--- | :--- | | Truck | $8,385.2 | $5,616.0 | 49% | | Parts | $2,372.0 | $1,822.3 | 30% | | Financial Services | $888.3 | $744.0 | 19% | | **Total** | **$11,689.4** | **$8,223.9** | **42%** | Pretax Profit by Segment (Six Months Ended June 30, Millions of USD) | Segment | 2021 | 2020 | Change Rate | | :--- | :--- | :--- | :--- | | Truck | $524.5 | $136.9 | 283% | | Parts | $516.9 | $366.6 | 41% | | Financial Services | $182.9 | $103.8 | 76% | | **Total** | **$1,244.3** | **$646.2** | **92%** | - The Truck and Parts segments sell products through the same independent dealer network, and the Parts segment benefits from costs generated by the Truck segment, leading to certain expenses being allocated between the two segments[93](index=93&type=chunk) [NOTE J - Derivative Financial Instruments](index=24&type=section&id=NOTE%20J%20-%20Derivative%20Financial%20Instruments) PACCAR uses derivatives like interest rate swaps, cross-currency interest rate swaps, and foreign exchange contracts to hedge interest rate and foreign currency risks, prohibiting speculation or trading; these derivatives are designated as fair value, cash flow, or net investment hedges, or not designated, with their fair value and gains/losses recorded according to accounting standards - The company utilizes derivative instruments to hedge interest rate and foreign currency risks, not for speculation or trading[99](index=99&type=chunk) - As of June 30, 2021, the notional amount of the company's interest rate contracts was **$3.924 billion**, and foreign exchange contracts had a notional amount of **$1.6561 billion**[103](index=103&type=chunk)[104](index=104&type=chunk) - For the six months ended June 30, 2021, interest rate contracts in cash flow hedges recognized a **$23.7 million pretax gain**, while foreign exchange contracts recognized an **$(11.9) million pretax loss**[109](index=109&type=chunk) Total Derivative Financial Instrument Assets and Liabilities (Millions of USD) | Category | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Derivative Assets | $19.7 | $20.5 | | Total Derivative Liabilities | $115.9 | $159.9 | [NOTE K - Fair Value Measurements](index=28&type=section&id=NOTE%20K%20-%20Fair%20Value%20Measurements) PACCAR categorizes assets and liabilities subject to recurring fair value measurements into Level 1 (active market quotes) or Level 2 (observable inputs); other financial instruments, such as fixed-rate loans and debt, also disclose fair values, with fixed-rate loans classified as Level 3 - Fair value hierarchy is categorized into: Level 1 (active market quotes), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs requiring significant management judgment)[117](index=117&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk) - Marketable debt securities are primarily classified as Level 2, while U.S. government and agency securities and marketable equity securities are classified as Level 1[120](index=120&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk)[124](index=124&type=chunk) - The fair value of derivative financial instruments is determined using industry-standard valuation models based on observable inputs and is classified as Level 2[123](index=123&type=chunk) Fair Value Disclosure for Financial Services Fixed-Rate Loans and Debt (Millions of USD) | Instrument | June 30, 2021 Carrying Value | June 30, 2021 Fair Value | December 31, 2020 Carrying Value | December 31, 2020 Fair Value | | :--- | :--- | :--- | :--- | :--- | | Fixed-Rate Loans | $5,760.6 | $5,845.2 | $5,319.2 | $5,429.5 | | Fixed-Rate Debt | $6,904.2 | $7,013.9 | $6,482.0 | $6,648.6 | [NOTE L - Employee Benefit Plans](index=30&type=section&id=NOTE%20L%20-%20Employee%20Benefit%20Plans) PACCAR offers several defined benefit pension plans to most employees; for the six months ended June 30, 2021, net pension expense was **$36.3 million**, lower than **$42.5 million** in the prior year, with the company contributing **$12.9 million** to pension plans during this period Net Pension Expense (Six Months Ended June 30, Millions of USD) | Component | 2021 | 2020 | | :--- | :--- | :--- | | Service Cost | $75.4 | $65.2 | | Interest Cost on PBO | $33.3 | $41.3 | | Expected Return on Assets | $(102.3) | $(94.7) | | Recognized Actuarial Loss | $29.5 | $22.0 | | Settlement Loss | $0.0 | $8.0 | | **Net Pension Expense** | **$36.3** | **$42.5** | - For the six months ended June 30, 2021, the company contributed **$12.9 million** to its pension plans, compared to $28.5 million for the same period in 2020[129](index=129&type=chunk) [NOTE M – Commitments and Contingencies](index=31&type=section&id=NOTE%20M%20%E2%80%93%20Commitments%20and%20Contingencies) PACCAR faces various legal proceedings and contingent liabilities, including claims related to an EC investigation; while the company believes it has strong defenses, potential losses cannot be reasonably estimated due to the early stage of these claims - The company faces claims and lawsuits, including class actions, seeking damages related to an European Commission (EC) investigation[131](index=131&type=chunk) - The company believes it has strong defenses, but due to the early stage of the claims, potential losses cannot be reasonably estimated[131](index=131&type=chunk) - Management expects other various litigation and contingent liabilities will not have a material adverse effect on the consolidated financial statements[132](index=132&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=32&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) PACCAR achieved significant financial growth in Q2 and H1 2021, with record net sales and revenues and net income, driven by strong demand in truck and parts businesses and improved financial services performance; the company is optimistic about future markets but expects semiconductor shortages to impact truck deliveries and plans continued investment in R&D and capital expenditures [OVERVIEW](index=32&type=section&id=OVERVIEW) PACCAR, a global technology company in truck design, manufacturing, parts distribution, and financial services, achieved record sales and net income in Q2 and H1 2021, launching new DAF truck models; the company anticipates growth in truck, parts, and financial services markets for 2021, with increased capital and R&D spending, despite expected semiconductor shortages impacting deliveries - PACCAR's businesses include Trucks (design and manufacture of light, medium, and heavy-duty commercial trucks), Parts (distribution of aftermarket parts for trucks and related commercial vehicles), and Financial Services (financing or leasing of PACCAR products)[134](index=134&type=chunk) - The company launched new DAF XF, XG, and XG+ truck models, featuring enhanced fuel efficiency, safety, comfort, and compliance with new European vehicle dimension regulations[137](index=137&type=chunk) - Retail sales for the truck industry in North America, Europe, and South America are expected to grow in 2021, but semiconductor shortages will impact deliveries in the second half of the year[139](index=139&type=chunk)[140](index=140&type=chunk) - PACCAR Parts sales are projected to grow by **20-22%** in 2021, and Financial Services average earning assets are expected to grow by **3-5%**[141](index=141&type=chunk)[142](index=142&type=chunk) - Capital investments for 2021 are estimated at **$550-600 million**, and R&D expenditures at **$340-360 million**, allocated for new models, zero-emission technologies, and advanced systems[143](index=143&type=chunk) 2021 Q2 Financial Highlights (Millions of USD, except per share amounts) | Metric | 2021 | 2020 | Change Rate | | :--- | :--- | :--- | :--- | | Global Net Sales and Revenues | $5,840 | $3,060 | 91% | | Truck Revenues | $4,150 | $1,860 | 123% | | Parts Sales | $1,210 | $823.7 | 47% | | Financial Services Revenues | $456.3 | $360.3 | 27% | | Net Income | $492.9 | $147.7 | 234% | | Diluted Earnings Per Share | $1.41 | $0.43 | 228% | 2021 H1 Financial Highlights (Millions of USD, except per share amounts) | Metric | 2021 | 2020 | Change Rate | | :--- | :--- | :--- | :--- | | Global Net Sales and Revenues | $11,690 | $8,220 | 42% | | Truck Revenues | $8,390 | $5,620 | 49% | | Parts Sales | $2,370 | $1,820 | 30% | | Financial Services Revenues | $888.3 | $744.0 | 19% | | Net Income | $963.0 | $507.1 | 90% | | Diluted Earnings Per Share | $2.76 | $1.46 | 89% | [RESULTS OF OPERATIONS](index=33&type=section&id=RESULTS%20OF%20OPERATIONS) PACCAR delivered strong operating results in Q2 and H1 2021, with substantial growth in net sales and pretax profit across all segments, driven by increased truck deliveries, robust parts demand, and improved financial services performance, leading to enhanced overall pretax profit margins and after-tax return on revenues Consolidated Net Sales and Revenues (Millions of USD) | Period | 2021 | 2020 | Change Rate | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $5,843.9 | $3,062.2 | 91% | | Six Months Ended June 30 | $11,689.4 | $8,223.9 | 42% | Consolidated Net Income (Millions of USD) | Period | 2021 | 2020 | Change Rate | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $492.9 | $147.7 | 234% | | Six Months Ended June 30 | $963.0 | $507.1 | 90% | - After-tax return on revenues increased from **4.8% to 8.4%** in Q2 2021, and from **6.2% to 8.2%** in H1 2021[146](index=146&type=chunk) [Truck Segment](index=34&type=section&id=Truck%20Segment) The Truck segment achieved significant growth in deliveries, net sales, and pretax profit for Q2 and H1 2021, recovering from 2020's COVID-19 impact due to increased demand across all markets and improved productivity; gross margins substantially improved, but selling, general, and administrative (SG&A) expenses rose due to increased compensation and legal fees Global New Truck Deliveries (Units) | Region | 2021 Q2 | 2020 Q2 | Change Rate | 2021 H1 | 2020 H1 | Change Rate | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | U.S. and Canada | 22,600 | 9,300 | 143% | 45,600 | 31,500 | 45% | | Europe | 11,800 | 6,400 | 84% | 25,500 | 18,000 | 42% | | Mexico, South America, Australia and Other | 5,700 | 2,400 | 138% | 11,200 | 7,000 | 60% | | **Total Units** | **40,100** | **18,100** | **122%** | **82,300** | **56,500** | **46%** | Global Truck Net Sales and Revenues (Millions of USD) | Period | 2021 | 2020 | Change Rate | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $4,152.2 | $1,858.4 | 123% | | Six Months Ended June 30 | $8,385.2 | $5,616.0 | 49% | - Truck segment pretax profit in Q2 2021 turned from a **$46.2 million loss** in the prior year to a **$255.0 million profit**, and for H1, it increased from **$136.9 million to $524.5 million**[151](index=151&type=chunk) - Truck gross margin increased from **2.6% to 9.1%** in Q2 2021 and from **6.2% to 9.2%** in H1, primarily due to higher volumes, improved average sales prices, and lower product support costs[155](index=155&type=chunk)[156](index=156&type=chunk) [Parts Segment](index=36&type=section&id=Parts%20Segment) The Parts segment achieved record net sales and revenues in Q2 and H1 2021, driven by increased demand across all markets and favorable exchange rates, leading to significant pretax profit growth and improved gross margins, despite higher selling, general, and administrative (SG&A) expenses due to increased compensation and related costs Global Parts Net Sales and Revenues (Millions of USD) | Period | 2021 | 2020 | Change Rate | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $1,211.3 | $823.7 | 47% | | Six Months Ended June 30 | $2,372.0 | $1,822.3 | 30% | - Parts segment pretax profit increased from **$151.9 million to $265.6 million** in Q2 2021, and from **$366.6 million to $516.9 million** in H1[160](index=160&type=chunk) - Parts gross margin increased from **25.3% to 28.2%** in Q2 2021 and from **27.0% to 28.2%** in H1, primarily due to higher aftermarket parts volumes and improved average sales prices[165](index=165&type=chunk)[166](index=166&type=chunk) - Parts SG&A expenses increased to **$53.0 million** in Q2 2021 (from $44.7 million in 2020) and to **$104.7 million** in H1 (from $94.0 million in 2020), mainly due to higher compensation and related expenses[163](index=163&type=chunk) [Financial Services Segment](index=38&type=section&id=Financial%20Services%20Segment) The Financial Services segment achieved record revenues and pretax profit in Q2 and H1 2021, driven by increased new loan and lease volumes, improved used truck performance, and reduced credit loss provisions; average earning assets grew, and the percentage of past due accounts decreased, reflecting strong portfolio performance New Loan and Lease Volumes (Millions of USD) | Period | 2021 | 2020 | Change Rate | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $1,560.4 | $897.9 | 74% | | Six Months Ended June 30 | $2,831.9 | $2,023.9 | 40% | Financial Services Revenue (Millions of USD) | Period | 2021 | 2020 | Change Rate | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $456.3 | $360.3 | 27% | | Six Months Ended June 30 | $888.3 | $744.0 | 19% | - Financial Services pretax profit increased from **$55.5 million to $106.5 million** in Q2 2021, and from **$103.8 million to $182.9 million** in H1[171](index=171&type=chunk) - In Q2 2021, the company realized a **$3.3 million gain** on used trucks (excluding repossessed vehicles), compared to a $24.9 million loss in the prior year, reflecting an improved used truck market[173](index=173&type=chunk) - The allowance for receivables losses decreased from **$7.5 million to $(0.5) million** in Q2 2021, and from **$24.5 million to $3.2 million** in H1, primarily due to strong portfolio performance and higher COVID-19 related provisions in 2020[185](index=185&type=chunk) - As of June 30, 2021, the percentage of global retail loan and lease accounts over 30 days past due decreased from **0.5% to 0.3%** compared to December 31, 2020[189](index=189&type=chunk) [Other](index=43&type=section&id=Other) The "Other" segment, comprising industrial winch operations and unallocated sales, revenues, and expenses, including pension non-service costs and corporate expenses, saw a decrease in pretax profit for both Q2 and H1 2021, primarily due to increased compensation costs - The "Other" segment includes the industrial winch manufacturing business and sales, revenues, and expenses not attributable to the reportable segments, as well as pension non-service costs and certain corporate expenses[192](index=192&type=chunk) - "Other" segment pretax profit decreased from **$13.8 million to $4.9 million** in Q2 2021, and from **$15.1 million to $10.1 million** in H1[193](index=193&type=chunk) - The profit decrease was primarily due to increased compensation and related expenses, partially offset by higher benefits from pension non-service costs[193](index=193&type=chunk) [Investment Income](index=43&type=section&id=Investment%20Income) PACCAR's investment income decreased in both Q2 and H1 2021, primarily due to lower US investment yields resulting from declining market interest rates - Investment income decreased from **$9.0 million to $5.0 million** in Q2 2021, and from **$23.8 million to $9.9 million** in H1[194](index=194&type=chunk) - The decline in investment income was primarily due to lower U.S. investment yields resulting from declining market interest rates[194](index=194&type=chunk) [Income Taxes](index=43&type=section&id=Income%20Taxes) PACCAR's effective tax rates for Q2 and H1 2021 were higher than the corresponding periods in 2020, primarily due to higher research and development tax credits in 2020, with both domestic and international pretax profits improving Effective Tax Rates | Period | 2021 | 2020 | | :--- | :--- | :--- | | Three Months Ended June 30 | 22.6% | 19.7% | | Six Months Ended June 30 | 22.6% | 21.5% | - The increase in effective tax rates was primarily due to higher research and development tax credits in 2020[196](index=196&type=chunk) - Both domestic and international pretax profits increased in Q2 and H1 2021, mainly driven by improvements in the truck and parts businesses[198](index=198&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=45&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) PACCAR's total cash and marketable securities decreased in H1 2021, with reduced operating cash flow, increased investing cash outflow, and significantly lower financing cash outflow due to decreased dividend payments and changes in borrowing activities; the company maintains ample credit lines and capital market access to ensure liquidity and financial stability, continuously investing in truck, parts, and financial services growth - As of June 30, 2021, the company's total cash and marketable securities were **$4.5044 billion**, a **$464.2 million decrease** from $4.9686 billion as of December 31, 2020[199](index=199&type=chunk) - Net cash provided by operating activities for H1 2021 was **$867.7 million**, a **$493.1 million decrease** from the prior year, primarily due to increased cash used for inventory purchases and reduced cash received from wholesale receivables[199](index=199&type=chunk) - Net cash used in investing activities for H1 2021 was **$666.7 million**, a **$72.6 million increase** from the prior year, mainly due to increased net originations of retail loans and finance leases[200](index=200&type=chunk) - Net cash used in financing activities for H1 2021 was **$651.5 million**, a **$1.1269 billion decrease** from the prior year, primarily due to reduced dividend payments and lower cash used for borrowing activities[201](index=201&type=chunk) [Credit Lines and Other](index=46&type=section&id=Credit%20Lines%20and%20Other) PACCAR has **$3.61 billion** in credit line arrangements, with **$3.29 billion** unused as of June 30, 2021, primarily for commercial paper and medium-term note backup liquidity; the company also has a **$500 million** common stock repurchase program, with **$390 million** remaining authorized - The company has **$3.61 billion** in credit line arrangements, with **$3.29 billion** unused as of June 30, 2021[202](index=202&type=chunk) - These credit lines are primarily used to provide backup liquidity for commercial paper borrowings and maturing medium-term notes[202](index=202&type=chunk) - As of June 30, 2021, the company had repurchased **$110 million** in shares, with **$390 million** remaining authorized under the $500 million common stock repurchase program[203](index=203&type=chunk) [Truck, Parts and Other](index=46&type=section&id=Truck%20Parts%20and%20Other) Working capital for the Truck, Parts, and Other businesses is primarily funded by cash generated from operations; the company plans **$550-600 million** in capital investments and **$340-360 million** in R&D for 2021 to support new product development and enhance manufacturing and distribution capabilities - Working capital, capital expenditures, research and development, dividends, and stock repurchases for the Truck, Parts, and Other businesses are primarily funded by cash provided by operating activities[204](index=204&type=chunk) - For 2021, PACCAR's total capital investments are projected to be **$550-600 million**, and research and development expenditures are estimated at **$340-360 million**[206](index=206&type=chunk) - The company is investing in the development of new aerodynamic truck models, diesel and zero-emission powertrain technologies, advanced driver assistance systems, connected vehicle services, and next-generation manufacturing and distribution capabilities[206](index=206&type=chunk) [Financial Services](index=46&type=section&id=Financial%20Services) Financial Services operations are primarily funded by collections from existing finance receivables and capital market borrowings, including commercial paper and medium-term notes; the company maintains medium-term note programs in the US, Europe, Mexico, Australia, and Canada to ensure sufficient funding and competitive access to capital markets - Financial services activities are primarily funded by collections from existing finance receivables and capital market borrowings, including commercial paper and medium-term notes[207](index=207&type=chunk) - As of June 30, 2021, PACCAR Financial Corp. (U.S.) had **$5.5 billion** in medium-term notes outstanding, and PACCAR Financial Europe had **1.6 billion euros** available for issuance[208](index=208&type=chunk)[209](index=209&type=chunk) - The company believes its cash balances, investments, committed bank credit facilities, and investment-grade credit ratings will continue to provide ample resources and access to capital markets at competitive rates, thereby maintaining its liquidity and financial stability[213](index=213&type=chunk) [FORWARD-LOOKING STATEMENTS](index=47&type=section&id=FORWARD-LOOKING%20STATEMENTS) This report contains forward-looking statements subject to various risks and uncertainties that could cause actual results to differ materially from expectations, including industry sales declines, competitive pressures, regulatory changes, exchange rate fluctuations, supplier disruptions (like semiconductor shortages), and litigation - This report contains "forward-looking statements" which are subject to risks and uncertainties that could cause actual results to differ materially from expectations[214](index=214&type=chunk) - Key risks and uncertainties include: significant declines in industry sales, competitive pressures, reduced fuel supply or increased prices, increased regulation or tariffs, currency or commodity price fluctuations, lower used truck prices, supplier disruptions (including semiconductors), labor disruptions, pandemics, and litigation[214](index=214&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=48&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) For the six months ended June 30, 2021, there were no material changes in the company's market risk - For the six months ended June 30, 2021, there were no material changes in the company's market risk[216](index=216&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=48&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Company management, with CEO and CFO involvement, assessed the effectiveness of disclosure controls and procedures as of the end of this reporting period and concluded they were effective; no significant changes occurred in internal control over financial reporting during the quarter - As of the end of this reporting period, the company's disclosure controls and procedures were deemed effective[217](index=217&type=chunk) - No significant changes occurred in internal control over financial reporting during the quarter[218](index=218&type=chunk) [PART II. OTHER INFORMATION](index=49&type=section&id=PART%20II.%20OTHER%20INFORMATION) [ITEM 1. LEGAL PROCEEDINGS](index=49&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The discussion of legal proceedings is disclosed by reference to Note M of the consolidated financial statements - The discussion of legal proceedings is disclosed by reference to Note M of the consolidated financial statements[222](index=222&type=chunk) [ITEM 1A. RISK FACTORS](index=49&type=section&id=ITEM%201A.%20RISK%20FACTORS) Risk factors primarily refer to the 2020 Form 10-K annual report, with an update on industry-wide semiconductor supply shortages expected to continue impacting truck deliveries in the second half of the year - Risk factors primarily refer to the 2020 Form 10-K annual report[223](index=223&type=chunk) - The updated risk factors note that industry-wide semiconductor supply shortages are expected to continue impacting truck deliveries in the second half of the year[223](index=223&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=49&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) For the six months ended June 30, 2021, there was no reportable information regarding unregistered sales of equity securities; the company did not repurchase common stock in Q2 2021, with **$390 million** remaining authorized under the existing **$500 million** repurchase program - For the six months ended June 30, 2021, there was no reportable information regarding unregistered sales of equity securities[224](index=224&type=chunk) - The company did not repurchase common stock in Q2 2021, with **$390 million** remaining authorized under the existing **$500 million** repurchase program[225](index=225&type=chunk) [ITEM 6. EXHIBITS](index=49&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed with Form 10-Q, including articles of incorporation, bylaws, instruments defining security holder rights, and material contracts - Exhibits include articles of incorporation, bylaws, instruments defining security holder rights, and material contracts[228](index=228&type=chunk)[229](index=229&type=chunk)[230](index=230&type=chunk) [SIGNATURE](index=52&type=section&id=SIGNATURE) This report is signed by M. T. Barkley, Senior Vice President and Controller of PACCAR Inc, on behalf of the company - This report is signed by M. T. Barkley, Senior Vice President and Controller of PACCAR Inc[232](index=232&type=chunk)

Financial Data and Key Metrics Changes - PACCAR reported second quarter sales of $5.8 billion and net income of $493 million, reflecting strong quarterly performance [8][7] - PACCAR Parts achieved record revenues of $1.2 billion and pretax profits of $266 million, compared to $823 million and $152 million in the same period last year [18][8] - PACCAR Financial Services recorded pretax income of $107 million, indicating robust performance [20] Business Line Data and Key Metrics Changes - PACCAR Parts gross margins grew to 28.2%, benefiting from strong freight demand and investments in e-commerce technology [18] - The new truck introductions in 2021 are the largest in PACCAR's history, with significant advancements in fuel efficiency and technology [9][10] - The next-generation Peterbilt 579 and Kenworth T680 began production in May, featuring enhanced aerodynamics and powertrains [11] Market Data and Key Metrics Changes - U.S. and Canada Class 8 industry retail sales are estimated to be between 260,000 to 280,000 vehicles, with PACCAR's market share at 29.4% [15] - In Europe, truck industry registrations are estimated at 270,000 to 290,000 vehicles, with DAF's market share at 15.7% [15] - The South American above 16-ton market is projected at 100,000 to 110,000 trucks, with DAF Brazil holding a 5.7% market share [15] Company Strategy and Development Direction - PACCAR is focused on zero emissions and ultra-clean diesel powertrains, advanced driver assistance, and autonomous driving systems [22][17] - The company is enhancing its autonomous truck development partnership with Aurora, aiming for a Level 4 autonomous solution [14] - PACCAR is investing $7.3 billion in new vehicle programs and technologies over the past decade, with a projected capital expenditure of $550 million to $600 million for the year [21][22] Management's Comments on Operating Environment and Future Outlook - Management noted strong demand for PACCAR's premium trucks and anticipated improvements in semiconductor supply constraints by year-end [16][30] - The company expects third quarter PACCAR Financial results to align with the strong second quarter performance [20] - Management expressed confidence in the continued growth of the electric vehicle market, with orders expected to increase over time [29] Other Important Information - PACCAR's industry-leading environmental focus includes commitments to science-based carbon reduction targets and high rankings for environmental leadership [17] - The company is experiencing strong customer demand, with Kenworth and Peterbilt sold out for the year [23] Q&A Session Summary Question: Discussion on new product lineup and common platforms - Management confirmed leveraging core competencies in software and electronics across global platforms, enhancing vehicle functionality [25][26][28] Question: Electric vehicle production timeline and charging infrastructure - Orders for electric vehicles are increasing, with production planned as orders come in, and PACCAR is actively rolling out charging stations [29] Question: Supply chain outlook for the fourth quarter - Management acknowledged uncertainty around supply chain deliveries, particularly in semiconductors, affecting production [30][36] Question: Gross margin expectations for Q3 - Management indicated that gross margins might be similar to Q2, influenced by inventory and supply chain dynamics [34][39] Question: Used truck pricing trends - Used truck prices have increased significantly, with North America seeing a growth of over 40% year-over-year [71] Question: Structural margin improvements - Management highlighted opportunities in parts business and finance company as key growth areas, alongside new truck launches [77][78] Question: Pricing strategy amidst strong demand - Management noted that pricing is largely set for the year, but adjustments are made as necessary to match raw material costs [56][119] Question: Electric vehicle order distribution - Orders for electric vehicles are spread across medium-duty and heavy-duty segments, particularly in urban applications [90] Question: Future pricing power in the commercial vehicle industry - Management emphasized ongoing efforts to maintain industry-leading margins while adapting to market dynamics [118][120]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) The company presents its unaudited consolidated financial statements for the three months ended March 31, 2021 and 2020 [Consolidated Statements of Comprehensive Income](index=3&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) PACCAR reported significant growth in net sales, revenues, and net income for Q1 2021 compared to the prior year Q1 2021 vs Q1 2020 Performance | Metric | Q1 2021 (Millions) | Q1 2020 (Millions) | | :--- | :--- | :--- | | **Total Net Sales and Revenues** | $5,845.5 | $5,161.7 | | Truck, Parts and Other Revenues | $5,413.5 | $4,778.0 | | Financial Services Revenues | $432.0 | $383.7 | | **Total Income Before Income Taxes** | $607.3 | $462.2 | | **Net Income** | $470.1 | $359.4 | | **Diluted EPS** | $1.35 | $1.03 | [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets and stockholders' equity increased slightly as of March 31, 2021, compared to year-end 2020 Balance Sheet Summary (Millions) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Total Assets** | **$28,503.4** | **$28,260.0** | | Cash and cash equivalents | $3,320.0 | $3,539.6 | | Inventories, net | $1,465.4 | $1,221.9 | | Finance and other receivables, net | $11,739.6 | $11,820.7 | | **Total Liabilities** | **$17,785.7** | **$17,870.0** | | Commercial paper and bank loans | $3,042.9 | $3,344.4 | | Term notes | $7,521.8 | $7,508.9 | | **Total Stockholders' Equity** | **$10,717.7** | **$10,390.0** | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations increased while cash used in investing and financing activities decreased in Q1 2021 Cash Flow Summary (Millions) | Activity | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $536.9 | $425.9 | | Net Cash Used in Investing Activities | ($215.7) | ($379.8) | | Net Cash Used in Financing Activities | ($508.3) | ($833.7) | | **Net Decrease in Cash and Cash Equivalents** | **($219.6)** | **($852.0)** | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed disclosures on revenue recognition, segment performance, and credit loss allowances Truck, Parts and Other Revenue Breakdown (Millions) | Revenue Source | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Truck Sales | $4,045.0 | $3,583.6 | | Parts Sales | $1,125.9 | $970.0 | | **Total Truck, Parts and Other** | **$5,413.5** | **$4,778.0** | Allowance for Credit Losses Activity (Millions) | Activity | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Balance at January 1 | $127.0 | $118.6 | | Provision for losses | $3.7 | $17.0 | | Charge-offs | ($4.0) | ($10.7) | | Recoveries | $1.5 | $1.5 | | **Balance at March 31** | **$126.8** | **$121.1** | - The effective tax rate for Q1 2021 was **22.6%**, slightly up from **22.2%** in Q1 2020, primarily due to a change in the geographic mix of income[86](index=86&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=30&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses Q1 2021 financial performance, operational achievements, and challenges like the semiconductor shortage [Overview and Outlook](index=30&type=section&id=Overview%20and%20Outlook) The company reports strong Q1 results despite a semiconductor shortage and provides a positive outlook for 2021 - The global semiconductor undersupply, along with other supply chain issues, reduced the company's truck deliveries by about **3,000 units** in Q1 2021[134](index=134&type=chunk)[135](index=135&type=chunk) - PACCAR Parts sales are expected to **increase by 15-18%** in 2021 compared to 2020 levels[136](index=136&type=chunk) - Capital investments for 2021 are projected to be **$575-$625 million**, with R&D expenses expected to be **$350-$375 million**[138](index=138&type=chunk) 2021 Industry Truck Sales/Registrations Outlook | Region | 2021 Outlook (Units) | 2020 Actual (Units) | | :--- | :--- | :--- | | U.S. and Canada | 260,000 - 290,000 | 216,500 | | Europe (>16-tonne) | 260,000 - 290,000 | 230,400 | | South America (Heavy-duty) | 100,000 - 110,000 | 93,000 | [Results of Operations](index=31&type=section&id=Results%20of%20Operations) This section details strong revenue growth across the Truck, Parts, and Financial Services segments in Q1 2021 - The company's heavy-duty truck retail market share in the U.S. and Canada was **28.4%** in Q1 2021, down from **30.4%** in Q1 2020[144](index=144&type=chunk) - Parts segment pre-tax return on revenues was strong at **21.7%** in Q1 2021, slightly up from **21.5%** in Q1 2020, driven by higher sales volume[151](index=151&type=chunk)[152](index=152&type=chunk) - The provision for losses on receivables in the Financial Services segment decreased significantly to **$3.7 million** in Q1 2021 from **$17.0 million** in Q1 2020[165](index=165&type=chunk) Worldwide Truck Deliveries (Units) | Region | Q1 2021 | Q1 2020 | % Change | | :--- | :--- | :--- | :--- | | U.S. and Canada | 23,000 | 22,200 | 4% | | Europe | 13,700 | 11,600 | 18% | | Other | 5,500 | 4,600 | 20% | | **Total** | **42,200** | **38,400** | **10%** | [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained a strong liquidity position with substantial cash reserves and unused credit facilities - Total cash and marketable debt securities stood at **$4.74 billion** at the end of Q1 2021, a decrease of $227.5 million from year-end 2020[177](index=177&type=chunk) - The company has line of credit arrangements totaling **$3.60 billion**, with **$3.24 billion** unused as of March 31, 2021, providing ample backup liquidity[181](index=181&type=chunk) - No shares were repurchased under the company's common stock repurchase plan in Q1 2021; **$390.0 million** remains authorized under the current program[85](index=85&type=chunk)[182](index=182&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=44&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company reports no material changes in its market risk during the first three months of 2021 - There were **no material changes** in the Company's market risk during the three months ended March 31, 2021[194](index=194&type=chunk) [Controls and Procedures](index=44&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that the company's disclosure controls and internal financial reporting controls were effective - The Principal Executive Officer and Principal Financial Officer concluded that the Company's disclosure controls and procedures were **effective** as of the end of the period[195](index=195&type=chunk) - **No changes** in internal controls over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[196](index=196&type=chunk) [PART II. OTHER INFORMATION](index=45&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=45&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company faces ongoing lawsuits in Europe related to a 2016 European Commission settlement - Following a 2016 settlement with the European Commission (EC), PACCAR and its DAF subsidiaries are defendants in various claims and lawsuits in Europe[124](index=124&type=chunk) - Management **cannot reasonably estimate a range of loss**, if any, due to the early stage of these legal proceedings[124](index=124&type=chunk) [Risk Factors](index=45&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company highlights the ongoing semiconductor shortage as a key updated risk factor impacting truck deliveries - The company updated its risk factors to specifically address the automotive industry's undersupply of semiconductors, which reduced truck deliveries by approximately **3,000 units** in Q1 2021[201](index=201&type=chunk) - The supply chain disruption from the semiconductor shortage is anticipated to continue reducing deliveries in the second quarter[201](index=201&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The company reports no unregistered sales of equity securities and no share repurchases during Q1 2021 - The company made **no repurchases** under its **$500.0 million** stock buyback plan during the first quarter of 2021[202](index=202&type=chunk) [Exhibits](index=45&type=section&id=ITEM%206.%20EXHIBITS) This section provides an index of all exhibits filed with the Form 10-Q

PACCAR Inc (NASDAQ:PCAR) Q1 2021 Earnings Conference Call April 27, 2021 11:00 AM ET Company Participants Ken Hastings – Director-Investor Relations Preston Feight – Chief Executive Officer Harrie Schippers – President and Chief Financial Officer Conference Call Participants Steven Fisher – UBS Jerry Revich – Goldman Sachs Ann Duignan – JPMorgan David Raso – Evercore ISI Nicole DeBlase – Deutsche Bank Joel Tiss – BMO Robert Wertheimer – Melius Research Jamie Cook – Credit Suisse Chad Dillard – Bernstein Ros ...

Part I [Business](index=3&type=section&id=ITEM%201.%20BUSINESS) PACCAR is a global company operating in three main segments: Truck, Parts, and Financial Services, with its largest segment, Truck, accounting for 70% of 2020 revenues - PACCAR operates through three principal industry segments: **Truck Segment** (70% of 2020 total net sales and revenues), **Parts Segment** (21% of 2020 revenues), and **Financial Services Segment** (8% of 2020 revenues and 56% of total assets)[13](index=13&type=chunk)[15](index=15&type=chunk)[28](index=28&type=chunk) - As of December 31, 2020, the company had approximately **26,000 employees**, with about **38%** located in the U.S[47](index=47&type=chunk) Segment Revenue Contribution | Metric | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | **Truck Segment Revenue %** | 70% | 78% | - | | **Parts Segment Revenue %** | 21% | 16% | - | | **Financial Services Revenue %** | 8% | 6% | - | | **Industrial Winch Sales %** | <1% | <1% | <1% | - The company's truck production backlog was **$7.6 billion** at the end of 2020, with **$4.6 billion** considered firm (scheduled for delivery within 90 days)[25](index=25&type=chunk) [Risk Factors](index=9&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company identifies significant risks that could negatively impact its financial condition, including market variability, production costs, and financial services risks - **Business and Industry Risks:** The commercial vehicle market is highly sensitive to economic conditions, and the company faces variability in material costs and component shortages, including the ongoing semiconductor supply shortage[52](index=52&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk) - **Political, Regulatory, and Economic Risks:** The COVID-19 pandemic, the U.K.'s exit from the EU, and the transition away from LIBOR introduce uncertainties, with approximately **10%** of the company's 2020 worldwide truck production located in the U.K[63](index=63&type=chunk)[65](index=65&type=chunk)[67](index=67&type=chunk) - **Other Significant Risks:** The company is exposed to information technology system disruptions, security breaches, product recalls, lawsuits, and extensive trade and environmental regulations[60](index=60&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk) [Unresolved Staff Comments](index=11&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) The company reports that there are no unresolved staff comments from the SEC - None[76](index=76&type=chunk) [Properties](index=12&type=section&id=ITEM%202.%20PROPERTIES) PACCAR owns and operates manufacturing plants and parts distribution centers across the U.S., Canada, Europe, Australia, Mexico, and Brasil Facility Locations | Facility Type | U.S | Canada | Australia | Mexico | Europe | Central/So. America | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Truck Plants** | 4 | 1 | 1 | 1 | 3 | 1 | | **Parts Centers** | 6 | 2 | 2 | 1 | 5 | 2 | | **Other (Winch)** | 2 | — | — | — | — | — | [Legal Proceedings](index=12&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) Information regarding the company's legal proceedings is incorporated by reference from Note L, "Commitments and Contingencies," in the Notes to Consolidated Financial Statements - Refer to Note L – "Commitments and Contingencies" in the Notes to Consolidated Financial Statements (Part II, Item 8) for discussion on litigation matters[79](index=79&type=chunk) [Mine Safety Disclosures](index=12&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company - Not applicable[80](index=80&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=13&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) PACCAR's common stock (PCAR) is traded on the Nasdaq Stock Market, with total dividends of **$1.98 per share** declared in 2020 2020 Dividend and Stock Price Data | Quarter | 2020 Dividends Declared | 2020 Stock Price High | 2020 Stock Price Low | | :--- | :--- | :--- | :--- | | First | $0.32 | $79.66 | $49.11 | | Second | $0.32 | $79.48 | $58.21 | | Third | $0.32 | $91.30 | $74.00 | | Fourth | $0.32 | $0.32 | $82.85 | | Year-End Extra | $0.70 | - | - | | **Total** | **$1.98** | - | - | - On December 4, 2018, the Board approved a **$500.0 million** stock repurchase plan, with **$110.0 million** of shares repurchased as of December 31, 2020, and no repurchases in Q4 2020[91](index=91&type=chunk) - The company's cumulative total stockholder return for the five years ending December 31, 2020, was **118.07%**, lagging the Peer Group Index's **202.22%** but outperforming the S&P 500 Index's **103.04%**[90](index=90&type=chunk)[91](index=91&type=chunk) [Selected Financial Data](index=15&type=section&id=ITEM%206.%20SELECTED%20FINANCIAL%20DATA) This section presents a five-year summary of key financial data, showing a significant decrease in 2020 revenues and net income compared to 2019 Key Financial Data | (in millions, except per share data) | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | **Total Revenues** | $18,728.5 | $25,599.7 | $23,495.7 | | **Net Income** | $1,298.4 | $2,387.9 | $2,195.1 | | **Diluted Net Income Per Share** | $3.74 | $6.87 | $6.24 | | **Cash Dividends Declared Per Share** | $1.98 | $3.58 | $3.09 | | **Total Assets** | $28,260.0 | $28,361.1 | $25,482.4 | | **Stockholders' Equity** | $10,390.0 | $9,706.1 | $8,592.9 | [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=16&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) PACCAR's 2020 financial results were significantly impacted by the COVID-19 pandemic, leading to a **27%** decrease in revenues and a **46%** drop in net income, while the company pursued strategic initiatives for autonomous and zero-emissions vehicles [Overview and Outlook](index=16&type=section&id=7.1%20Overview%20and%20Outlook) The COVID-19 pandemic significantly impacted 2020 results, causing production suspensions and reduced demand, while the company advanced autonomous and zero-emissions vehicle development 2020 Financial Highlights vs. 2019 | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Net Sales & Revenues | $18.73 billion | $25.60 billion | | Net Income | $1.30 billion | $2.39 billion | | Diluted EPS | $3.74 | $6.87 | | Capital Investments | $569.5 million | $743.9 million | | R&D Expenses | $273.9 million | $326.6 million | - PACCAR signed a strategic agreement with Aurora to develop autonomous Peterbilt 579 and Kenworth T680 trucks, with deliveries expected in the next several years[98](index=98&type=chunk) - The company is developing zero-emissions vehicles, including fuel cell electric and battery electric trucks, with over **60** currently in customer testing and production of a few hundred units anticipated for 2021[99](index=99&type=chunk) 2021 Outlook | Metric | 2021 Projection | | :--- | :--- | | U.S. & Canada Truck Sales | 250,000 - 280,000 units | | Europe Truck Sales (>16t) | 250,000 - 280,000 units | | Parts Sales Growth | 7-9% increase from 2020 | | Capital Investments | $575 - $625 million | | R&D Expenses | $350 - $375 million | [Results of Operations](index=18&type=section&id=7.2%20Results%20of%20Operations) In 2020, total revenues decreased **27%** to **$18.73 billion**, and income before taxes fell **46%** to **$1.66 billion** compared to 2019, primarily due to a **69%** drop in Truck segment income Income Before Income Taxes by Segment (2020 vs. 2019) | Segment (in millions) | 2020 | 2019 | % Change | | :--- | :--- | :--- | :--- | | Truck | $581.4 | $1,904.9 | (69)% | | Parts | $799.3 | $830.8 | (4)% | | Financial Services | $223.1 | $298.9 | (25)% | | **Total Income Before Taxes** | **$1,657.9** | **$3,099.2** | **(46)%** | Truck Deliveries by Region (2020 vs. 2019) | Region | 2020 Units | 2019 Units | % Change | | :--- | :--- | :--- | :--- | | U.S. and Canada | 73,300 | 117,200 | (37)% | | Europe | 42,900 | 59,900 | (28)% | | Other | 17,100 | 21,700 | (21)% | | **Total Units** | **133,300** | **198,800** | **(33)%** | - Truck segment gross margin decreased to **7.5%** in 2020 from **12.1%** in 2019, primarily due to lower sales volume, higher product support costs, and inefficiencies related to the COVID-19 pandemic[119](index=119&type=chunk)[120](index=120&type=chunk) - Financial Services' provision for losses on receivables increased to **$28.8 million** in 2020 from **$15.4 million** in 2019, driven by portfolio growth and challenging economic conditions from the pandemic[135](index=135&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=7.3%20Liquidity%20and%20Capital%20Resources) PACCAR maintained a strong liquidity position, ending 2020 with **$5.0 billion** in cash and marketable securities, and increased net cash from operating activities to **$3.0 billion** Cash and Marketable Securities | (in millions) | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $3,539.6 | $4,175.1 | | Marketable debt securities | $1,429.0 | $1,162.1 | | **Total** | **$4,968.6** | **$5,337.2** | Summary of Cash Flows (in millions) | Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,987.2 | $2,860.3 | | Net cash used in investing activities | ($1,875.8) | ($2,207.4) | | Net cash (used in) provided by financing activities | ($1,808.5) | $83.4 | - The company has line of credit arrangements totaling **$3.52 billion**, of which **$3.29 billion** were unused at December 31, 2020, including **$3.00 billion** of committed bank facilities[152](index=152&type=chunk) [Critical Accounting Policies](index=29&type=section&id=7.4%20Critical%20Accounting%20Policies) Management identifies several accounting policies as critical due to their reliance on sensitive estimates and judgments, including operating leases, allowance for credit losses, and product warranty reserves - **Operating Leases:** A hypothetical **10%** decrease in used truck values worldwide would result in approximately **$80.7 million** in additional depreciation expense in 2021[174](index=174&type=chunk) - **Allowance for Credit Losses:** A hypothetical **100 basis point** increase in 30+ days past due accounts (from **0.5%** to **1.5%**) would likely increase the estimate of credit losses by a range of **$2 million** to **$36 million**[180](index=180&type=chunk) - **Product Warranty:** A hypothetical **0.2%** increase in warranty expense as a percentage of Truck, Parts and Other net sales would have increased 2020 warranty expense by approximately **$34 million**[181](index=181&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) PACCAR is exposed to market risks from fluctuations in interest rates and foreign currency exchange rates, which it mitigates using derivative contracts - **Interest-Rate Risk:** A hypothetical **100 basis point** increase in interest rates would result in a net fair value gain of **$5.9 million** on the company's portfolio of interest-rate sensitive instruments as of year-end 2020[184](index=184&type=chunk) - **Currency Risk:** A **10%** unfavorable change in foreign currency exchange rates would lead to a potential loss in fair value of **$155.2 million** for foreign currency exchange contracts, largely offset by gains in the value of the underlying hedged items[184](index=184&type=chunk) [Financial Statements and Supplementary Data](index=32&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section contains the audited consolidated financial statements for the fiscal year ended December 31, 2020, including the Statements of Income, Comprehensive Income, Balance Sheets, Cash Flows, and Stockholders' Equity, along with accompanying Notes and independent auditor reports [Consolidated Financial Statements](index=32&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements detail PACCAR's financial performance and position, reporting **$1.30 billion** in net income on **$18.73 billion** in revenues for 2020 Key Financial Statement Data (2020) | Metric (in millions) | Amount | | :--- | :--- | | **Income Statement:** | | | Total Revenues | $18,728.5 | | Net Income | $1,298.4 | | **Balance Sheet (Year-End):** | | | Total Assets | $28,260.0 | | Total Liabilities | $17,870.0 | | Total Stockholders' Equity | $10,390.0 | | **Cash Flow Statement:** | | | Net Cash from Operating Activities | $2,987.2 | [Notes to Consolidated Financial Statements](index=38&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed disclosure on PACCAR's accounting policies, segment information, financial instruments, debt, and other commitments, including the adoption of the new credit loss standard and specifics on borrowings - **Adoption of New Credit Loss Standard (ASU 2016-13):** The company adopted the new standard on January 1, 2020, resulting in a cumulative-effect adjustment that decreased retained earnings by **$4.6 million**[249](index=249&type=chunk)[250](index=250&type=chunk) - **Financial Services Receivables:** Total finance and other receivables were **$11.82 billion** at year-end 2020, with an allowance for credit losses of **$127.0 million**, and **99.5%** of the retail loan and lease portfolio was current or less than 30 days past due[261](index=261&type=chunk)[140](index=140&type=chunk) - **Borrowings:** Total Financial Services borrowings were **$10.85 billion** at year-end 2020, primarily consisting of commercial paper (**$3.11 billion**) and term notes (**$7.51 billion**)[287](index=287&type=chunk) - **Legal Contingencies:** Following a 2016 European Commission settlement, the company faces claims and lawsuits in various European jurisdictions alleging EC-related claims, with no reasonably estimable range of loss[302](index=302&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=77&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) The company reports that it has had no disagreements with its independent auditors, Ernst & Young LLP, on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedure - The registrant has not had any disagreements with its independent auditors on accounting or financial disclosure matters[404](index=404&type=chunk) [Controls and Procedures](index=77&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2020, with no material changes in Q4 2020 - Management concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by this report (December 31, 2020)[405](index=405&type=chunk) - Management concluded that the Company maintained effective internal control over financial reporting as of December 31, 2020, based on the COSO 2013 framework[383](index=383&type=chunk) - There were no changes in internal controls over financial reporting during Q4 2020 that materially affected, or are reasonably likely to materially affect, these controls[407](index=407&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=78&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) Information regarding directors, corporate governance, and the audit committee is incorporated by reference from the company's proxy statement for the annual stockholders' meeting on April 27, 2021 - Information regarding directors, the audit committee, and audit committee financial experts is incorporated by reference from the proxy statement for the April 27, 2021 annual stockholders meeting[411](index=411&type=chunk)[414](index=414&type=chunk) - Information about the Company's executive officers is included in Part I, Item 1 of this Form 10-K[411](index=411&type=chunk) [Executive Compensation](index=78&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) All information related to executive compensation, including compensation of directors and executive officers and the Compensation Committee Report, is incorporated by reference from the company's proxy statement - The required information is incorporated by reference from the proxy statement for the annual stockholders meeting of April 27, 2021[414](index=414&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=78&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20RELATED%20STOCKHOLDER%20MATTERS) Information regarding the security ownership of certain beneficial owners, directors, and executive officers is incorporated by reference from the company's proxy statement, while equity compensation plan details are in Part II, Item 5 - Stock ownership information is incorporated by reference from the proxy statement for the annual stockholders meeting of April 27, 2021[414](index=414&type=chunk) - Information regarding equity compensation plans is provided in Item 5 of this Form 10‑K[415](index=415&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=79&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) The company reports no related party transactions in 2020, and information concerning director independence is incorporated by reference from the proxy statement - No transactions with management and others as defined by Item 404 of Regulation S‑K occurred in 2020[416](index=416&type=chunk) - Information concerning director independence is incorporated by reference from the proxy statement for the annual stockholders meeting of April 27, 2021[416](index=416&type=chunk) [Principal Accounting Fees and Services](index=79&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTING%20FEES%20AND%20SERVICES) Information regarding the fees paid to and services provided by the company's principal independent auditor, Ernst & Young LLP, is incorporated by reference from the proxy statement - Principal accounting fees and services information is incorporated by reference from the proxy statement for the annual stockholders meeting of April 27, 2021[417](index=417&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=80&type=section&id=ITEM%2015.%20EXHIBITS%2C%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists the financial statements, schedules, and exhibits filed as part of the 10-K report, with financial statements included in Item 8 and a detailed index of all exhibits provided - Lists the consolidated financial statements of PACCAR Inc included in Item 8[419](index=419&type=chunk) - States that all financial statement schedules are omitted because they are not applicable or the information is included in the financial statements and notes[419](index=419&type=chunk) - Provides a detailed index of all exhibits filed with the report, such as governance documents, debt instruments, material contracts, and required certifications[420](index=420&type=chunk)[421](index=421&type=chunk)[422](index=422&type=chunk)