Core Insights - Allison Transmission has introduced its Neutral at Stop fuel-saving technology as a standard feature on Kenworth and Peterbilt models equipped with the Allison 4700 Rugged Duty Series transmissions, aimed at enhancing fuel efficiency and reducing operating costs for commercial fleets [1][2][4] Group 1: Technology and Benefits - The Neutral at Stop technology improves vehicle efficiency by automatically shifting the transmission to neutral when the vehicle is stopped, which reduces engine load and fuel consumption [3] - This feature is part of Allison's FuelSense 2.0 package, which can achieve fuel savings of up to 6%, contributing to lower operating costs and a more sustainable operation [4] Group 2: Company Overview - Allison Transmission is a leading designer and manufacturer of propulsion solutions for commercial and defense vehicles, and is the largest global manufacturer of medium- and heavy-duty fully automatic transmissions [6] - The company has a presence in over 150 countries, with regional headquarters in the Netherlands, China, and Brazil, and manufacturing facilities in the USA, Hungary, and India [6]

BELLEVUE, Wash.--(BUSINESS WIRE)--PACCAR Inc's Board of Directors today declared a regular quarterly cash dividend of thirty-three cents ($.33) per share, payable on December 3, 2025, to stockholders of record at the close of business on November 12, 2025. PACCAR is a global technology leader in the design, manufacture and customer support of high-quality light-, medium- and heavy-duty trucks under the Kenworth, Peterbilt and DAF nameplates. PACCAR also designs and manufactures advanced powertr. ...

Summary of Key Points from the Conference Call Industry Overview - **Industry**: U.S. Machinery and Electricals - **Focus**: Impact of recent policy changes by the Trump Administration on various sub-sectors including electricals, construction, agriculture, and trucks [1][11] Core Insights and Arguments 1. Policy Impact on Renewables - The Trump Administration's policies are de-prioritizing renewables, negatively impacting companies like Quanta (PWR) which derives 30% of sales from this sector [2][49] - The OBBBA cuts tax credits for renewables, shortening the eligibility timeframe from 2032 to 2027, leading to a projected slowdown in construction activity post-2025 [16][54] - Construction costs are rising due to stricter domestic content requirements and tariffs, which could drive renewables to ex-growth from 2025-2030 [2][18] 2. Construction Sector Stimulus - The reinstatement of 100% bonus depreciation for qualified property under the OBBBA is expected to stimulate construction activity, unlocking nearly $90 billion in additional non-residential construction spending, a 7% increase compared to 2024 levels [3][67] - This change is anticipated to benefit construction OEMs such as OSK, URI, ETN, CAT, TRMB, HUBB, DE, and J [3][12] 3. Agriculture Equipment Demand - Changes in biofuels policy, including a 75% increase in biomass-based diesel production mandated by the EPA, could lead to a 10% increase in agricultural equipment demand [4][84] - The extension of clean fuel tax credits from 2027 to 2029 and increased subsidies for biofuels are expected to positively impact companies like Deere, AGCO, and CNH [4][101] 4. Truck OEM Competitive Landscape - The Section 232 investigation into commercial vehicle manufacturing is likely to favor U.S.-based manufacturers like PACCAR (PCAR) by reversing the current tariff structure that disadvantages U.S. manufacturers [5][104] - Current tariffs create a cost disadvantage for U.S. truck manufacturers, as they face higher costs due to imported components [107][110] Additional Important Insights - The overall economic reorientation towards investment rather than consumption is expected to benefit the machinery and electrical sectors [13] - The anticipated slowdown in renewable energy construction does not imply a complete decline, as electricity demand continues to grow at a CAGR of 1.5-2% [28][40] - Historical context indicates that previous cuts to renewable tax credits led to significant underperformance in the sector, suggesting potential risks ahead [46] - The bonus depreciation changes are expected to lead to mid-single-digit earnings growth for companies like Oshkosh, Eaton, and United Rentals [79][82] Company Ratings and Price Targets - **Outperform Ratings**: Trimble (TP $99), Jacobs (TP $163), PACCAR (TP $118), Eaton (TP $410), Hubbell (TP $511) [7][8] - **Market-Perform Ratings**: AGCO (TP $118), Caterpillar (TP $447), Deere (TP $548), Cummins (TP $385), United Rentals (TP $885), Titan America (TP $15), Oshkosh (TP $132), Quanta (TP $410) [7][8] This summary encapsulates the key points discussed in the conference call, highlighting the implications of policy changes on various sectors and companies within the U.S. Machinery and Electricals industry.

Group 1 - The new tax law, referred to as the "OBBB," is praised by companies for enhancing consumer capacity and releasing funds, allowing immediate expensing of domestic capital costs for various enterprises [1] - 19% of companies in the Russell 3000 index mentioned the new tax regulation during their earnings calls, indicating a significant awareness and potential impact on corporate strategies [1] - Companies can now fully deduct expenses related to R&D, new equipment, and property in one go, which is expected to save funds and accelerate equipment procurement and facility upgrades [1] Group 2 - Johnson & Johnson views the tax law favorably, linking it to their previously announced $55 billion investment plan in the U.S. and expressing optimism about job creation and innovation [2] - AT&T anticipates saving up to $8 billion in cash taxes from 2025 to 2027, planning to allocate approximately $3.5 billion to expand its fiber network [2] - PACCAR and General Dynamics report increased business inquiries due to released funds, with PACCAR projecting a 4% to 6% growth in parts sales this quarter [3] Group 3 - Companies like Booz Allen and United Rentals have raised their free cash flow expectations by $200 million and $400 million, respectively, due to tax incentives [3] - Northrop Grumman expects to receive $200 million to $250 million in cash tax benefits this year, while Roper Technologies anticipates a tax reduction of about $150 million and $120 million in benefits next year [3] - Some companies, such as Ford and Sherwin-Williams, are still assessing the financial impact of the new tax law, while Boeing does not foresee significant effects this year [3] Group 4 - The tax law may encourage companies to expand their operations in the U.S., but it could also lead to increased costs, complicating the overall financial landscape [4] - Ongoing tariff negotiations add complexity to the situation, suggesting that the financial benefits of the tax law may not be straightforward for all companies [4]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents PACCAR Inc.'s interim financial statements, management's analysis, market risk disclosures, and internal controls [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents PACCAR Inc.'s unaudited consolidated financial statements for the three and six months ended June 30, 2025 and 2024, including comprehensive income, balance sheets, cash flows, stockholders' equity, and detailed notes on accounting policies and segment information [Consolidated Statements of Comprehensive Income](index=3&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) This statement details PACCAR Inc.'s net sales, revenues, income before taxes, net income, diluted EPS, and comprehensive income for the three and six months ended June 30, 2025 and 2024 **Consolidated Statements of Comprehensive Income (Unaudited) (Millions, Except Per Share Amounts)** | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | **Net sales and revenues:** | | | | | | 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 | | **Total Income Before Income Taxes:** | $931.9 | $1,460.8 | $1,575.0 | $2,995.3 | | **Net Income:** | $723.8 | $1,122.6 | $1,228.9 | $2,317.9 | | **Net Income Per Share (Diluted):** | $1.37 | $2.13 | $2.33 | $4.40 | | **Comprehensive Income:** | $1,117.2 | $977.6 | $1,772.5 | $2,066.6 | [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) This statement provides a snapshot of PACCAR Inc.'s assets, liabilities, and stockholders' equity as of June 30, 2025, and December 31, 2024 **Consolidated Balance Sheets (Millions)** | Category | June 30, 2025 (Unaudited) | December 31, 2024 (Audited) | | :--------------------------------- | :-------------------------- | :-------------------------- | | **ASSETS:** | | | | Total Truck, Parts and Other Assets | $20,781.9 | $21,007.4 | | Total Financial Services Assets | $23,312.9 | $22,411.5 | | **Total Assets:** | $44,094.8 | $43,418.9 | | **LIABILITIES AND STOCKHOLDERS' EQUITY:** | | | | Total Truck, Parts and Other Liabilities | $7,485.0 | $8,333.2 | | Total Financial Services Liabilities | $17,667.2 | $17,578.8 | | Total Stockholders' Equity | $18,942.6 | $17,506.9 | | **Total Liabilities and Stockholders' Equity:** | $44,094.8 | $43,418.9 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes PACCAR Inc.'s cash flows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 **Condensed Consolidated Statements of Cash Flows (Unaudited) (Millions)** | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | 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 end of period | $5,549.9 | $5,871.5 | [Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) This statement outlines changes in PACCAR Inc.'s common stock, additional paid-in capital, treasury stock, retained earnings, and accumulated other comprehensive loss **Consolidated Statements of Stockholders' Equity (Unaudited) (Millions, Except Per Share Amounts)** | Equity Component | June 30, 2025 | June 30, 2024 | | :--------------------------------- | :------------ | :------------ | | Common Stock, $1 par value | $525.5 | $524.3 | | Additional Paid-In Capital | $389.0 | $329.2 | | Treasury Stock, at cost | $(35.0) | $(4.0) | | Retained Earnings | $18,632.8 | $17,798.6 | | Accumulated Other Comprehensive Loss | $(569.7) | $(945.2) | | **Total Stockholders' Equity:** | $18,942.6 | $17,702.9 | | Cash dividends declared on common stock, per share (Six Months) | $0.66 | $0.57 | [NOTE A - Basis of Presentation](index=8&type=section&id=NOTE%20A%20-%20Basis%20of%20Presentation) This note describes the accounting principles, significant investments, and new accounting pronouncements affecting the interim financial statements - The unaudited consolidated financial statements are prepared in accordance with GAAP for interim financial information and Form 10-Q instructions, including normal recurring accruals[22](index=22&type=chunk) - PACCAR holds a **30% equity method investment** in Amplify Cell Technologies, a U.S. battery manufacturing joint venture, contributing **$44.7 million** in H1 2025 with a maximum required contribution of **$830.0 million**[23](index=23&type=chunk) - New accounting pronouncements include ASU 2023-09 (Income Taxes) effective after December 15, 2024, requiring additional disclosures, and ASU 2024-03 (Income Statement Expenses) effective after December 15, 2026, expanding expense disclosures[25](index=25&type=chunk)[26](index=26&type=chunk) [NOTE B – Sales and Revenues](index=9&type=section&id=NOTE%20B%20%E2%80%93%20Sales%20and%20Revenues) This note details revenue recognition policies and disaggregates sales and revenues for Truck, Parts, and Financial Services segments - Truck, Parts and Other revenues are recognized when customers obtain control of products or receive service benefits, excluding sales taxes, with revenue from extended warranties and R&M contracts deferred and recognized straight-line over the contract period[27](index=27&type=chunk)[32](index=32&type=chunk) **Truck, Parts and Other Sales and Revenues (Millions)** | Revenue Source | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Truck sales | $4,964.5 | $6,337.6 | $9,936.2 | $12,642.3 | | Revenues from extended warranties, operating leases and other | $278.6 | $240.2 | $532.7 | $476.5 | | Parts sales | $1,677.4 | $1,614.0 | $3,315.0 | $3,239.6 | | Revenues from dealer services and other | $43.5 | $50.3 | $95.8 | $100.6 | | Intersegment eliminations and other | $(1.2) | $20.2 | $(3.2) | $38.3 | | **Total Truck, Parts and Other sales and revenues** | **$6,962.8** | **$8,262.3** | **$13,876.5** | **$16,497.3** | - Financial Services revenues include interest income from loans and finance leases, dealer wholesale financing, and operating lease rentals, with income suspended if receivables are over 90 days past due[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk) **Financial Services Lease Revenues (Millions)** | Lease Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Finance lease revenues | $93.9 | $84.4 | $182.1 | $167.0 | | Operating lease revenues | $156.6 | $162.6 | $307.4 | $337.5 | | **Total lease revenues** | **$250.5** | **$247.0** | **$489.5** | **$504.5** | [NOTE C - Investments in Marketable Securities](index=11&type=section&id=NOTE%20C%20-%20Investments%20in%20Marketable%20Securities) This note describes the classification, fair value measurement, and realized/unrealized gains and losses of marketable debt and equity securities - Marketable debt securities are classified as available-for-sale and stated at fair value, with unrealized gains/losses in AOCI, while marketable equity securities are measured at fair value with gains/losses recognized in investment income[41](index=41&type=chunk)[44](index=44&type=chunk) **Marketable Securities at June 30, 2025 (Millions)** | Security Type | Cost | Unrealized Gains | Unrealized Losses | Fair Value | | :------------------------ | :-------- | :--------------- | :---------------- | :--------- | | Marketable debt securities | $2,886.0 | $25.2 | $2.7 | $2,908.5 | | Marketable equity securities | $10.0 | $0.0 | $4.8 | $5.2 | | **Total marketable securities** | **$2,896.0** | **$25.2** | **$7.5** | **$2,913.7** | - Gross realized gains on marketable debt securities were **$1.6 million** for the six months ended June 30, 2025, compared to **$0.7 million** in 2024, while net unrealized losses on marketable equity securities recognized in investment income were **$1.1 million** in H1 2025, compared to **$1.6 million** in H1 2024[45](index=45&type=chunk)[46](index=46&type=chunk) - The Company had **$2,908.5 million** in marketable debt securities at fair value as of June 30, 2025, with **$574.8 million** maturing within one year and **$2,328.6 million** maturing in one to five years[49](index=49&type=chunk) [NOTE D - Inventories](index=13&type=section&id=NOTE%20D%20-%20Inventories) This note outlines the valuation method for inventories and provides a breakdown of finished products, work in process, and raw materials - Inventories are stated at the lower of cost or net realizable value, principally using the FIFO method[50](index=50&type=chunk) **Inventories, Net (Millions)** | Category | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Finished products | $1,130.4 | $977.1 | | Work in process and raw materials | $1,326.3 | $1,390.0 | | **Total Inventories, net** | **$2,456.7** | **$2,367.1** | [NOTE E - Finance and Other Receivables](index=13&type=section&id=NOTE%20E%20-%20Finance%20and%20Other%20Receivables) This note details the composition of finance and other receivables, including loans, leases, and dealer financing, along with the allowance for credit losses **Finance and Other Receivables, Net (Millions)** | Category | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Loans | $10,027.4 | $9,442.4 | | Finance leases | $5,337.2 | $4,906.6 | | Dealer wholesale financing | $4,799.0 | $4,944.1 | | Operating lease receivables and other | $183.6 | $166.4 | | Less allowance for losses | $(154.2) | $(145.2) | | **Total Finance and Other Receivables, Net** | **$20,193.0** | **$19,314.3** | - The allowance for credit losses increased to **$154.2 million** at June 30, 2025, from **$145.2 million** at December 31, 2024, with a provision for losses of **$47.5 million** in H1 2025 (vs. $27.8 million in H1 2024) and charge-offs of **$50.3 million** (vs. $24.8 million in H1 2024)[51](index=51&type=chunk)[65](index=65&type=chunk) - Finance receivables are categorized by credit quality (performing, watch, at-risk) and aging status, with **1.2%** of worldwide retail loan and lease accounts 30+ days past due at June 30, 2025, consistent with June 30, 2024[68](index=68&type=chunk)[73](index=73&type=chunk)[201](index=201&type=chunk) - The amortized cost basis of finance receivables on non-accrual status decreased to **$304.0 million** at June 30, 2025, from **$383.6 million** at December 31, 2024, primarily due to large fleet customers being charged off upon repossession[73](index=73&type=chunk) - The Company modified **$141.6 million** of finance receivables for customers experiencing financial difficulty in H1 2025, compared to **$134.2 million** in H1 2024, and repossessed inventory was **$70.5 million** at June 30, 2025[75](index=75&type=chunk)[77](index=77&type=chunk) [NOTE F - Product Support Liabilities](index=19&type=section&id=NOTE%20F%20-%20Product%20Support%20Liabilities) This note explains product support liabilities, including warranty reserves and deferred revenues from extended warranties and R&M contracts - Product support liabilities include estimated future payments for product warranties and deferred revenues on optional extended warranties and R&M contracts[79](index=79&type=chunk) **Changes in Product Support Liabilities (Millions)** | Category | January 1, 2025 | June 30, 2025 | | :--------------------------------- | :-------------- | :------------ | | Warranty Reserves | $606.1 | $619.9 | | Deferred Revenues on Extended Warranties and R&M Contracts | $1,302.2 | $1,411.0 | - The Company expects to recognize **$231.6 million** of remaining deferred revenues on extended warranties and R&M contracts in 2025[80](index=80&type=chunk) [NOTE G - Stockholders' Equity](index=20&type=section&id=NOTE%20G%20-%20Stockholders'%20Equity) This note provides details on comprehensive income, accumulated other comprehensive income (loss), stock-based compensation, and treasury stock repurchases **Comprehensive Income (Millions)** | Component | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--------------------------------- | :------------------------------- | :----------------------------- | | Net income | $723.8 | $1,228.9 | | Net other comprehensive income (loss) | $393.4 | $543.6 | | **Comprehensive income** | **$1,117.2** | **$1,772.5** | **Accumulated Other Comprehensive Income (Loss) (AOCI) (Millions)** | AOCI Component | Balance at January 1, 2025 | Balance at June 30, 2025 | | :--------------------------------- | :------------------------- | :----------------------- | | Derivative Contracts | $32.5 | $4.9 | | Marketable Debt Securities | $(0.7) | $16.7 | | Pension Plans | $69.7 | $69.9 | | Foreign Currency Translation | $(1,214.8) | $(661.2) | | **Total AOCI** | **$(1,113.3)** | **$(569.7)** | - Stock-based compensation expense was **$17.6 million** for the six months ended June 30, 2025, and the Company issued **1,058,539 common shares** under stock compensation arrangements[86](index=86&type=chunk) - The Company repurchased **382,552 treasury shares** in H1 2025, including **205,592 shares** under its **$500.0 million** common stock repurchase plan, with **$371.6 million** remaining authorized[87](index=87&type=chunk) [NOTE H - Income Taxes](index=23&type=section&id=NOTE%20H%20-%20Income%20Taxes) This note discusses the effective tax rate and its drivers for the current and prior interim periods - The effective tax rate for Q2 2025 was **22.3%** (vs. 23.2% in Q2 2024) and for H1 2025 was **22.0%** (vs. 22.6% in H1 2024), primarily due to a lower mix of pre-tax income in higher tax rate jurisdictions and the EC claims charge in 2025[88](index=88&type=chunk) [NOTE I - Segment Information](index=24&type=section&id=NOTE%20I%20-%20Segment%20Information) This note presents financial data disaggregated by the Truck, Parts, and Financial Services segments, including sales, income, and assets - PACCAR operates in three segments: Truck, Parts, and Financial Services, with Truck and Parts performance evaluated by operating profits and Financial Services by income before income taxes[89](index=89&type=chunk) **Segment Net Sales and Revenues (Millions)** | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | 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 | | Financial Services | $547.7 | $509.8 | $1,075.7 | $1,019.1 | **Segment Income Before Income Taxes (Millions)** | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Truck | $308.8 | $837.3 | $673.7 | $1,718.9 | | Parts | $416.5 | $413.8 | $843.0 | $869.6 | | Other | $(0.5) | $2.7 | $(353.7) | $0.4 | | Financial Services | $123.2 | $111.2 | $244.3 | $225.1 | | Investment income | $83.9 | $95.8 | $167.7 | $181.3 | **Business Segment Assets (Millions)** | Segment | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Truck | $8,413.4 | $7,563.3 | | Parts | $2,293.5 | $2,097.0 | | Other | $1,795.3 | $1,697.2 | | Cash and marketable securities | $8,279.7 | $9,649.9 | | Financial services | $23,312.9 | $22,411.5 | | **Total Segment Assets** | **$44,094.8** | **$43,418.9** | [NOTE J - Derivative Financial Instruments](index=27&type=section&id=NOTE%20J%20-%20Derivative%20Financial%20Instruments) This note describes the Company's use of derivative contracts for hedging market risks and their fair value measurements - PACCAR uses derivative contracts (interest-rate, foreign-exchange, commodity) to hedge against market risks, with a maximum exposure to counterparty default of **$56.4 million** at June 30, 2025[98](index=98&type=chunk)[99](index=99&type=chunk) - At June 30, 2025, the notional amount of interest-rate contracts was **$3,759.0 million**, foreign-exchange contracts was **$1,889.6 million**, and commodity contracts was **$20.4 million**[102](index=102&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk) **Derivative Financial Instruments Fair Value (Millions)** | Category | June 30, 2025 Assets | June 30, 2025 Liabilities | December 31, 2024 Assets | December 31, 2024 Liabilities | | :--------------------------------- | :------------------- | :-------------------- | :----------------------- | :------------------------ | | Derivatives designated under hedge accounting | $55.9 | $233.3 | $205.6 | $44.1 | | Derivatives not designated as hedging instruments | $0.5 | $1.4 | $1.4 | $2.6 | | **Gross amounts recognized in Balance Sheets** | **$56.4** | **$234.7** | **$207.0** | **$46.7** | - For the six months ended June 30, 2025, the Company recognized **$176.9 million** in gains from interest-rate contracts and **$36.9 million** in gains from foreign-exchange contracts in the Consolidated Statements of Comprehensive Income[108](index=108&type=chunk) - The estimated pre-tax loss from cash flow hedges recorded in AOCI that is expected to be reclassified into earnings in the next 12 months is approximately **$32.5 million**, net of taxes[112](index=112&type=chunk) [NOTE K - Fair Value Measurements](index=31&type=section&id=NOTE%20K%20-%20Fair%20Value%20Measurements) This note outlines the fair value hierarchy and provides disclosures for assets and liabilities measured at fair value on a recurring basis - Fair value measurements are categorized into a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs requiring significant judgment)[117](index=117&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk) **Assets and Liabilities Subject to Recurring Fair Value Measurement at June 30, 2025 (Millions)** | Category | Level 1 | Level 2 | Total | | :--------------------------------- | :------ | :------ | :------ | | **Assets:** | | | | | Marketable debt securities | $210.3 | $2,698.2 | $2,908.5 | | Marketable equity securities | $5.2 | | $5.2 | | Derivatives | | $56.4 | $56.4 | | **Liabilities:** | | | | | Derivatives | | $234.7 | $234.7 | **Fair Value Disclosure of Other Financial Instruments (Millions)** | Instrument | June 30, 2025 Carrying Amount | June 30, 2025 Fair Value | December 31, 2024 Carrying Amount | December 31, 2024 Fair Value | | :--------------------------------- | :------------------------------ | :----------------------- | :-------------------------------- | :--------------------------- | | Financial Services fixed rate loans | $9,632.3 | $9,739.9 | $8,900.6 | $8,889.3 | | Financial Services fixed rate debt | $10,671.9 | $10,775.8 | $9,922.2 | $9,917.6 | [NOTE L - Employee Benefit Plans](index=34&type=section&id=NOTE%20L%20-%20Employee%20Benefit%20Plans) This note details the components of net pension income/expense and contributions made to the Company's pension plans **Net Pension (Income) Expense (Millions)** | Component | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Service cost | $23.2 | $27.6 | $47.4 | $55.4 | | Interest on projected benefit obligation | $36.1 | $33.4 | $71.9 | $67.0 | | Expected return on assets | $(63.1) | $(60.5) | $(125.4) | $(121.1) | | Amortization of prior service costs | $0.4 | $0.4 | $0.7 | $0.7 | | Recognized actuarial loss | $0.1 | $1.6 | $0.8 | $2.8 | | **Net pension (income) expense** | **$(3.3)** | **$2.5** | **$(4.6)** | **$4.8** | - The Company contributed **$11.5 million** to its pension plans during the first six months of 2025, compared to **$32.2 million** in the same period of 2024[132](index=132&type=chunk) [NOTE M – Commitments and Contingencies](index=34&type=section&id=NOTE%20M%20%E2%80%93%20Commitments%20and%20Contingencies) This note addresses ongoing legal proceedings, specifically EC-related claims, and the associated financial charges and management's assessment - PACCAR faces ongoing EC-related claims and lawsuits in Europe following a 2016 settlement, recording an additional pre-tax charge of **$350.0 million** (**$264.5 million** after-tax) in Q1 2025 due to higher estimable settlement costs[133](index=133&type=chunk)[134](index=134&type=chunk) - Management believes it has meritorious defenses to all pending legal claims and does not anticipate other legal proceedings or contingent liabilities will materially affect consolidated financial statements[135](index=135&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=35&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides an overview of PACCAR's business segments, financial highlights, detailed analysis of results, segment outlooks, capital investments, R&D, liquidity, and a reconciliation of GAAP to non-GAAP financial measures [OVERVIEW](index=35&type=section&id=OVERVIEW) This section introduces PACCAR's business segments, highlights key financial results for Q2 and H1 2025, and notes significant financial services activities - PACCAR is a global technology company with Truck, Parts, and Financial Services segments, having sold its industrial winch business on October 31, 2024[137](index=137&type=chunk) **Second Quarter Financial Highlights (Millions, Except Per Share Amounts)** | Metric | Q2 2025 | Q2 2024 | | :--------------------------------- | :------ | :------ | | Worldwide net sales and revenues | $7.51B | $8.77B | | Truck sales | $5.24B | $6.58B | | Parts sales | $1.72B | $1.66B | | Financial Services revenues | $547.7 | $509.8 | | Net income | $723.8 | $1.12B | | Diluted EPS | $1.37 | $2.13 | | Capital investments | $221.1 | $219.6 | | R&D expenses | $112.9 | $117.1 | **First Six Months Financial Highlights (Millions, Except Per Share Amounts)** | Metric | H1 2025 | H1 2024 | | :--------------------------------- | :------ | :------ | | Worldwide net sales and revenues | $14.95B | $17.52B | | Truck sales | $10.47B | $13.12B | | Parts sales | $3.41B | $3.34B | | Financial Services revenues | $1.08B | $1.02B | | Net income | $1.23B | $2.32B | | Diluted EPS | $2.33 | $4.40 | | Adjusted net income (non-GAAP) | $1.49B | | | Adjusted diluted EPS (non-GAAP) | $2.83 | | | Capital investments | $393.0 | $383.9 | | R&D expenses | $228.3 | $222.6 | - PACCAR Financial Services (PFS) has total assets of **$23.31 billion** and issued **$1.84 billion** in medium-term notes in H1 2025 to support growth and repay debt[140](index=140&type=chunk) [Truck Outlook](index=36&type=section&id=Truck%20Outlook) This section provides industry retail sales projections for heavy-duty trucks in key regions and discusses potential impacts of tariffs and economic conditions **2025 Truck Industry Retail Sales Projections (Units)** | Region | 2025 Projection | 2024 Actual | | :--------------------------------- | :-------------- | :---------- | | U.S. and Canada (heavy-duty) | 230,000-260,000 | 268,100 | | Europe (over 16-tonne) | 270,000-300,000 | 316,100 | | South America (heavy-duty) | 90,000-100,000 | 119,000 | - Ongoing impact from U.S. import tariffs since March 2025 creates uncertainty for truck order intake and profit margins, potentially weakening economic conditions and declining truck industry retail sales[143](index=143&type=chunk) [Parts Outlook](index=36&type=section&id=Parts%20Outlook) This section projects PACCAR Parts sales growth for 2025, subject to economic conditions and tariff uncertainties - PACCAR Parts sales are expected to increase **2-4%** in 2025 compared to 2024, subject to economic conditions and tariff uncertainty[144](index=144&type=chunk) [Financial Services Outlook](index=36&type=section&id=Financial%20Services%20Outlook) This section forecasts an increase in average earning assets for Financial Services in 2025 and discusses potential risks from declining freight conditions - Average earning assets for Financial Services are projected to increase **4-6%** in 2025 compared to 2024, with an improving used truck market noted, but declining freight conditions could increase past due accounts, repossessions, and credit losses[145](index=145&type=chunk) [Capital Investments and R&D Outlook](index=36&type=section&id=Capital%20Investments%20and%20R%26D%20Outlook) This section outlines projected capital investments and R&D expenses for 2025, focusing on advanced powertrains, connected vehicles, and manufacturing expansion **2025 Capital Investments and R&D Outlook (Millions)** | Category | 2025 Projection | | :--------------------------------- | :-------------- | | Capital investments | $750-$800 | | R&D expenses | $450-$480 | | Investment in Amplify Cell Technologies JV | $600-$900 | - Investments focus on next-generation clean diesel and alternative powertrains, connected vehicle services, expanded manufacturing, and advanced driver assistance systems[146](index=146&type=chunk) [RESULTS OF OPERATIONS](index=37&type=section&id=RESULTS%20OF%20OPERATIONS) This section summarizes PACCAR's overall financial performance, including total net sales, income before taxes, net income, and diluted earnings per share **Summary of Results of Operations (Millions, Except Per Share Amounts)** | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Net sales and revenues | $7,510.5 | $8,772.1 | $14,952.2 | $17,516.4 | | Total Income before income taxes | $931.9 | $1,460.8 | $1,575.0 | $2,995.3 | | 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% | | [Truck Segment Analysis](index=37&type=section&id=Truck%20Segment%20Analysis) This section analyzes the Truck segment's revenue contribution, worldwide truck deliveries, market share, sales, and income before taxes, highlighting key drivers of change - The Truck segment accounted for **70%** of revenues in Q2 and H1 2025, down from **75%** in the same periods of 2024[153](index=153&type=chunk) **Worldwide New Truck Deliveries (Units)** | Region | Q2 2025 | Q2 2024 | % Change (QoQ) | H1 2025 | H1 2024 | % Change (YoY) | | :--------------------------------- | :------ | :------ | :------------- | :------ | :------ | :------------- | | 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)%** | **Truck Segment Market Share** | Market | H1 2025 Market Share | H1 2024 Market Share | | :--------------------------------- | :------------------- | :------------------- | | U.S. and Canada Heavy-Duty | 30.4% | 31.5% | | U.S. and Canada Medium-Duty | 15.3% | 17.3% | | Europe Over 16-Tonne | 14.2% | 13.7% | | Europe 6 to 16-Tonne | 9.9% | 8.4% | | Brasil Over 16-Tonne | 9.4% | 10.3% | **Worldwide Truck Net Sales and Revenues (Millions)** | Region | Q2 2025 | Q2 2024 | % Change (QoQ) | H1 2025 | H1 2024 | % Change (YoY) | | :--------------------------------- | :------ | :------ | :------------- | :------ | :------ | :------------- | | 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)% | | **Total Truck net sales and revenues** | **$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% | | - Decreases in truck net sales and revenues and income before taxes were primarily due to lower truck unit deliveries across all major markets, lower price realization due to increased competition, and higher tariff costs in the U.S[159](index=159&type=chunk)[160](index=160&type=chunk)[163](index=163&type=chunk)[169](index=169&type=chunk) - Truck SG&A expenses decreased in Q2 and H1 2025 due to lower salaries, professional fees, and travel expenses, partially offset by higher sales and marketing expenses[166](index=166&type=chunk) [Parts Segment Analysis](index=40&type=section&id=Parts%20Segment%20Analysis) This section examines the Parts segment's revenue contribution, worldwide sales, and income before taxes, detailing factors influencing sales and gross margins - The Parts segment's revenue contribution increased to **23%** in Q2 and H1 2025, from **19%** in the same periods of 2024[167](index=167&type=chunk) **Worldwide Parts Net Sales and Revenues (Millions)** | Region | Q2 2025 | Q2 2024 | % Change (QoQ) | H1 2025 | H1 2024 | % Change (YoY) | | :--------------------------------- | :------ | :------ | :------------- | :------ | :------ | :------------- | | 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 | 0% | | Mexico, South America, Australia and other | $176.4 | $180.1 | (2)% | $329.8 | $342.9 | (4)% | | **Total Parts net sales and revenues** | **$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% | | - Increased parts sales were primarily driven by higher sales in the U.S. and Canada, partially offset by lower sales volume in Europe and Mexico, while parts gross margins decreased due to higher material costs and indirect costs[168](index=168&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk)[175](index=175&type=chunk) - Parts SG&A expenses increased in Q2 and H1 2025, mainly due to unfavorable currency translation effects (euro) and higher salaries, partially offset by lower travel and entertainment expenses[173](index=173&type=chunk) [Financial Services Segment Analysis](index=43&type=section&id=Financial%20Services%20Segment%20Analysis) This section reviews the Financial Services segment's revenue contribution, new loan and lease volume, market share, revenues, and income before taxes, including trends in credit losses - The Financial Services segment's revenue contribution was **7%** in Q2 and H1 2025, up from **6%** in the same periods of 2024[176](index=176&type=chunk) **New Loan and Lease Volume (Millions)** | Metric | Q2 2025 | Q2 2024 | % Change (QoQ) | H1 2025 | H1 2024 | % Change (YoY) | | :--------------------------------- | :------ | :------ | :------------- | :------ | :------ | :------------- | | Total New loan and lease volume | $1,853.5 | $1,915.4 | (3)% | $3,362.7 | $3,435.3 | (2)% | | 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)% | - PFS finance market share of new PACCAR truck sales increased to **26.2%** in Q2 2025 (vs. 24.2% in Q2 2024) and **25.5%** in H1 2025 (vs. 22.8% in H1 2024)[179](index=179&type=chunk) **Financial Services Revenues and Income Before Taxes (Millions)** | Metric | Q2 2025 | Q2 2024 | % Change (QoQ) | H1 2025 | H1 2024 | % Change (YoY) | | :--------------------------------- | :------ | :------ | :------------- | :------ | :------ | :------------- | | Revenues | $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% | - PFS revenues and income before taxes increased primarily due to portfolio growth and higher finance margins, despite negative currency translation effects[180](index=180&type=chunk)[181](index=181&type=chunk) - Used trucks held for sale increased to **$410.3 million** at June 30, 2025, from **$396.5 million** at December 31, 2024, while losses on used trucks (excluding repossessions) decreased to **$7.5 million** in Q2 2025 (vs. $13.6 million in Q2 2024) and **$18.6 million** in H1 2025 (vs. $24.5 million in H1 2024)[182](index=182&type=chunk)[183](index=183&type=chunk)[184](index=184&type=chunk) - The provision for losses on receivables increased to **$29.2 million** in Q2 2025 (vs. $11.7 million in Q2 2024) and **$47.5 million** in H1 2025 (vs. $27.8 million in H1 2024), driven by retail portfolio growth, increased past due accounts in Mexico and Brasil, and higher expected losses[196](index=196&type=chunk) - Worldwide 30+ days past due accounts remained stable at **1.2%** at June 30, 2025, compared to June 30, 2024, with decreases in the U.S., Canada, and Europe offset by increases in Mexico, Australia, and Brasil[201](index=201&type=chunk) [Other Segment Analysis](index=49&type=section&id=Other%20Segment%20Analysis) This section covers non-attributable sales, income, expenses, non-service pension costs, corporate expenses, and investment income within the 'Other' segment - The 'Other' segment includes non-attributable sales, income, and expenses, non-service pension costs, corporate expenses, and the industrial winch business through October 2024[205](index=205&type=chunk) - Other (loss) income before income taxes was **$(353.7) million** for H1 2025, primarily due to a **$350.0 million** EC-related charge in Q1 2025[206](index=206&type=chunk) - Investment income decreased to **$83.9 million** in Q2 2025 (vs. $95.8 million in Q2 2024) and **$167.7 million** in H1 2025 (vs. $181.3 million in H1 2024), mainly due to lower investment yields from lower market interest rates[207](index=207&type=chunk) [Income Taxes Analysis](index=49&type=section&id=Income%20Taxes%20Analysis) This section analyzes the effective tax rate for the interim periods, attributing changes to the mix of pre-tax income and specific charges - The effective tax rate for Q2 2025 was **22.3%** (vs. 23.2% in Q2 2024) and for H1 2025 was **22.0%** (vs. 22.6% in H1 2024), primarily due to a lower mix of pre-tax income in higher tax rate jurisdictions and the EC-related charge in Q1 2025[208](index=208&type=chunk) - Domestic income before taxes decreased in Q2 and H1 2025 due to lower Truck operations, while foreign income before taxes in H1 2025 was significantly impacted by the **$350.0 million** EC-related charge[209](index=209&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=49&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses PACCAR's cash and marketable securities, cash flow activities, credit arrangements, planned capital investments, and funding strategies for Financial Services **Cash and Marketable Securities (Millions)** | Category | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $5,549.9 | $7,060.8 | | Marketable securities | $2,913.7 | $2,778.8 | | **Total Cash and Marketable Securities** | **$8,463.6** | **$9,839.6** | - Total cash and marketable securities decreased by **$1.38 billion** from December 31, 2024, primarily due to higher cash used in financing activities and lower operating cash flow[210](index=210&type=chunk)[211](index=211&type=chunk)[213](index=213&type=chunk) - Net cash provided by operating activities decreased by **$165.3 million** to **$1,743.7 million** in H1 2025, reflecting lower net income[211](index=211&type=chunk) - Net cash used in investing activities decreased by **$559.7 million** to **$1,010.1 million** in H1 2025, mainly due to lower purchases of marketable securities and acquisitions of operating lease equipment[212](index=212&type=chunk) - Net cash used in financing activities increased by **$846.5 million** to **$2,425.8 million** in H1 2025, driven by higher net borrowing activity and lower cash dividends[213](index=213&type=chunk) - The Company has **$5.66 billion** in credit line arrangements, with **$5.10 billion** unused at June 30, 2025, primarily for backup liquidity for commercial paper and medium-term notes[215](index=215&type=chunk) - PACCAR plans **$750-$800 million** in capital investments and **$450-$480 million** in R&D in 2025, including **$600-$900 million** for the Amplify Cell Technologies battery joint venture[219](index=219&type=chunk) - The One Big Beautiful Bill Act (OBBBA) is expected to defer a significant portion of current federal income taxes due to immediate expensing of domestic R&D and permanent reinstatement of bonus depreciation[220](index=220&type=chunk) - Financial Services funding relies on collections and capital markets, with various medium-term note programs in the U.S., Europe, Mexico, Australia, and Brazil[221](index=221&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk)[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk) [RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES](index=53&type=section&id=RECONCILIATION%20OF%20GAAP%20TO%20NON-GAAP%20FINANCIAL%20MEASURES) This section reconciles GAAP to non-GAAP financial measures, excluding a significant after-tax charge to provide a clearer view of operating trends - Non-GAAP measures (adjusted net income, adjusted diluted EPS, adjusted return on revenues, adjusted effective tax rate) exclude a **$264.5 million** after-tax charge related to civil litigation in Europe to provide a clearer view of operating trends[230](index=230&type=chunk)[231](index=231&type=chunk) **Reconciliation of GAAP to Non-GAAP Financial Measures (Six Months Ended June 30, 2025) (Millions, Except Per Share Amounts)** | Metric | GAAP | EC-related claims, net of taxes | Non-GAAP | | :--------------------------------- | :----- | :------------------------------ | :------- | | Net income | $1,228.9 | $264.5 | $1,493.4 | | Per diluted share | $2.33 | $0.50 | $2.83 | | After-tax return on revenues | 8.2% | 1.8% | 10.0% | | Effective tax rate | 22.0% | 0.4% | 22.4% | [FORWARD-LOOKING STATEMENTS](index=54&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section highlights that the report contains forward-looking statements subject to various risks and uncertainties, including market declines, competition, and litigation - This report contains forward-looking statements subject to various risks and uncertainties, including declines in industry sales, competitive pressures, tariffs, currency fluctuations, lower used truck prices, supplier interruptions, and litigation[233](index=233&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=55&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) There were no material changes in the Company's market risk during the three months ended June 30, 2025, with further details available in the 2024 Annual Report on Form 10-K - No material changes in market risk occurred during the three months ended June 30, 2025[235](index=235&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=55&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management, including the Principal Executive and Financial Officers, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls over financial reporting during the quarter - The Company's disclosure controls and procedures were effective as of June 30, 2025[236](index=236&type=chunk) - No material changes in internal controls over financial reporting occurred during the fiscal quarter ended June 30, 2025[237](index=237&type=chunk) [PART II. OTHER INFORMATION](index=56&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information including legal proceedings, risk factors, equity security transactions, defaults, mine safety, other disclosures, and exhibits [ITEM 1. LEGAL PROCEEDINGS](index=56&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) This section refers to Note M in the financial statements for details on legal proceedings, specifically the ongoing EC-related claims and lawsuits - Legal proceedings are discussed in Note M – 'Commitments and Contingencies' of the Consolidated Financial Statements[240](index=240&type=chunk) [ITEM 1A. RISK FACTORS](index=56&type=section&id=ITEM%201A.%20RISK%20FACTORS) No material changes to the Company's risk factors were reported during the three months ended June 30, 2025, with comprehensive risk factor information available in the 2024 Annual Report on Form 10-K - No material changes in the Company's risk factors occurred during the three months ended June 30, 2025[241](index=241&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES](index=56&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%2C%20USE%20OF%20PROCEEDS%2C%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) This section reports on issuer purchases of equity securities, noting that PACCAR repurchased 205,592 shares of common stock in May 2025 under its authorized $500.0 million repurchase plan - PACCAR repurchased **205,592 shares** of common stock in May 2025 at an average price of **$89.60 per share** under its **$500.0 million** repurchase plan[243](index=243&type=chunk) - As of June 30, 2025, **$371,580,963** remains authorized for repurchase under the current program[243](index=243&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=56&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) No defaults upon senior securities were reported for the period - There were no defaults upon senior securities[244](index=244&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=56&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the Company - Mine safety disclosures are not applicable to PACCAR Inc[245](index=245&type=chunk) [ITEM 5. OTHER INFORMATION](index=56&type=section&id=ITEM%205.%20OTHER%20INFORMATION) No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted, modified, or terminated by the Company's directors or officers during the quarter ended June 30, 2025 - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted, modified, or terminated by directors or officers during the quarter ended June 30, 2025[246](index=246&type=chunk) [ITEM 6. EXHIBITS](index=57&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including articles of incorporation, bylaws, instruments defining rights of security holders, material contracts, and certifications - The report includes an index to exhibits, detailing various corporate documents, debt instruments, material contracts, and certifications[249](index=249&type=chunk)[250](index=250&type=chunk)[251](index=251&type=chunk) [SIGNATURE](index=59&type=section&id=SIGNATURE) The report is duly signed on behalf of PACCAR Inc by B. J. Poplawski, Senior Vice President and Chief Financial Officer, as of July 31, 2025 - The report was signed by B. J. Poplawski, Senior Vice President and Chief Financial Officer of PACCAR Inc, on July 31, 2025[253](index=253&type=chunk)

Core Insights - Allison Transmission has launched the Allison 4000 Series™ fully automatic transmission, now compatible with the CARB low NOx compliant PACCAR MX-13 engine for Kenworth T880 and Peterbilt Model 567 trucks, aiming to optimize performance while reducing NOx emissions [1][2]. Company Overview - Allison Transmission is a leading designer and manufacturer of propulsion solutions for commercial and defense vehicles, recognized as the largest global manufacturer of medium- and heavy-duty fully automatic transmissions [6]. - The company was founded in 1915 and is headquartered in Indianapolis, Indiana, with a presence in over 150 countries and regional headquarters in the Netherlands, China, and Brazil [6]. Product Features - The Allison 4000 Series transmission is designed to balance performance and fuel efficiency, utilizing a torque converter to significantly enhance engine torque, improving startability and overall productivity [4]. - The transmission is available in various configurations, offering six or seven forward gears depending on the model [3]. Fuel Efficiency Technology - Allison's FuelSense® 2.0 technology is available on the Peterbilt Model 567 and standard on Kenworth T880 models, designed to optimize performance in automatic transmissions for commercial vehicles [5]. - This technology can provide quantifiable fuel savings of up to 6% by dynamically adjusting shift points and torque based on load and driving conditions [5].

Core Insights - PACCAR Inc. reported second-quarter earnings per share of $1.37, surpassing analyst expectations of $1.34, while quarterly sales of $6.962 billion fell short of the anticipated $6.979 billion [1] Group 1: Financial Performance - The company's second-quarter earnings exceeded analyst consensus, indicating strong profitability [1] - Quarterly sales slightly missed estimates, suggesting potential challenges in revenue generation [1] Group 2: Strategic Investments - PACCAR's investments in new truck models, advanced manufacturing, and technology-enabled aftermarket solutions are expected to drive growth for both customers and the company [2] Group 3: Stock Performance and Analyst Ratings - Following the earnings announcement, PACCAR shares increased by 3.2%, reaching a trading price of $101.73 [2] - Truist Securities analyst maintained a Hold rating and reduced the price target from $102 to $98 [4] - JP Morgan analyst kept a Neutral rating and raised the price target from $95 to $97 [4] - UBS analyst upgraded PACCAR from Sell to Neutral and increased the price target from $81 to $100 [4]

Core Insights - PACCAR Inc. reported Q2 2025 earnings of $1.37 per share, exceeding the Zacks Consensus Estimate of $1.28 but down from $2.13 in the same quarter last year [1][10] - Consolidated revenues for the quarter were $7.51 billion, a decrease from $8.77 billion in Q2 2024, with Truck, Parts, and Others sales at $6.96 billion [1][10] Trucks Segment - Revenues from the Trucks segment were $5.24 billion, lower than $6.58 billion in the prior-year quarter but above the estimate of $5.03 billion [2] - Global truck deliveries totaled 39,300 units, surpassing the projection of 38,203 units but down from 48,400 units in Q2 2024 [2] - Pre-tax income for the Trucks segment was $308.8 million, falling short of the estimate of $412 million and down 63.2% year-over-year [2] Parts Segment - Revenues from the Parts segment reached $1.72 billion, an increase from $1.66 billion in the year-ago period and above the estimate of $1.7 billion [3] - Pre-tax income for the Parts segment was $416.5 million, slightly up from $413.8 million reported last year and exceeding the forecast of $335.3 million [3] Financial Services Segment - Financial Services segment revenues were $547.7 million, higher than $509.8 million in the prior-year quarter and above the estimate of $536.5 million [4] - Pre-tax income for the Financial Services segment increased to $123.2 million from $111.2 million in the year-ago period, also surpassing the projection of $112.3 million [4] Expenses and Cash Position - Selling, general and administrative expenses decreased to $139.2 million from $142.7 million in the prior-year period [5] - Research & development expenses were $112.9 million compared to $117.1 million in the year-ago quarter [5] - As of June 30, 2025, PACCAR's cash and marketable debt securities totaled $8.28 billion, down from $9.65 billion as of December 31, 2024 [5] Capital Expenditure and R&D Outlook - Capital expenditures for 2025 are now projected to be in the range of $750-$800 million, up from the previous estimate of $700-$800 million [6] - Research & development expenses are estimated to be between $450-$480 million [6] Zacks Rank and Comparisons - PACCAR currently holds a Zacks Rank 3 (Hold) [7] - Comparatively, Geely Automobile Holdings Limited, Adient plc, and Ferrari N.V. have a Zacks Rank 1 (Strong Buy) [7]

Core Insights - Paccar reported Q2 2025 results that exceeded analyst expectations for both profit and revenue, with earnings per share (GAAP) at $1.37 against an estimate of $1.29 and revenue at $7.51 billion compared to a consensus of $7.00 billion, despite significant year-over-year declines in both metrics [1][2] Financial Performance - Earnings per share (GAAP) for Q2 2025 was $1.37, down 35.7% from $2.13 in Q2 2024 [2] - Revenue (GAAP) reached $7.51 billion, a decrease of 14.3% from $8.77 billion in Q2 2024 [2] - Net income (GAAP) was $723.8 million, reflecting a 35.5% decline from $1.12 billion in Q2 2024 [2] - The PACCAR Parts segment reported revenue of $1.72 billion, a 3.6% increase year-over-year, while pretax profit improved slightly by 0.7% [2][7] Business Segments Overview - The Truck segment, which is crucial for Paccar, experienced a 20.3% drop in total sales compared to Q2 2024, with truck deliveries down 18.8% to 39,300 units [5] - The Financial Services segment saw a 7.4% increase in revenue and a 10.8% rise in pretax profit compared to Q2 2024, benefiting from a recovering used truck market [8] Market Dynamics - Paccar maintained a 30.4% market share in North America during the first half of 2025, although overall market conditions were soft [5] - The company faced challenges from tariff impacts and cost inflation, which compressed truck margins [6][10] Strategic Focus - Key priorities for Paccar include maintaining production efficiency, ensuring a flexible supply chain, and investing in new truck technologies and zero-emission vehicles [4] - The company continues to invest in updated manufacturing and alternative powertrains in anticipation of stricter emissions standards [13] Future Outlook - Paccar expects continued growth in the Parts segment and stable performance in Financial Services, while remaining cautious about truck demand in upcoming quarters [12] - North American truck market retail sales are projected to be between 230,000 and 260,000 units for 2025, with varying demand across different segments [12]

Financial Data and Key Metrics Changes - PACCAR achieved revenues of $7.5 billion and adjusted net income of $724 million in the second quarter [6] - PACCAR Parts recorded quarterly revenues of $1.72 billion and pretax income of $417 million, marking record revenues [6] - PACCAR Financial Services increased pretax income to $123 million, up from $111 million a year earlier [11] - Gross margins for PACCAR's truck, parts, and other segments were 13.9% in the second quarter, with expectations of around 13% for the third quarter [8] Business Line Data and Key Metrics Changes - PACCAR Parts is projected to grow year-over-year part sales by 4% to 6% in the third quarter [10] - PACCAR delivered 39,300 trucks in the second quarter and anticipates delivering around 32,000 to 33,000 in the third quarter [8] - The truck market in North America is estimated to be between 230,000 to 260,000 trucks for the year [6] Market Data and Key Metrics Changes - The European above 16-ton market is projected to be in the range of 270,000 to 300,000 trucks for 2025 [7] - The South American above 16-ton truck market is expected to be between 90,000 to 100,000 vehicles this year [7] - Customer demand in the less-than-truckload and vocational segments is reported to be good [6] Company Strategy and Development Direction - PACCAR is investing $750 million to $800 million in capital investments and $450 million to $480 million in R&D for technology and innovation projects [12] - The company is focused on delivering industry-leading support for customers through PACCAR Parts and Financial Services [10][12] - PACCAR aims to enhance market clarity and benefit from tariff policy clarifications [9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the North American market strengthening as tariff policies become clearer and the truckload market gains momentum [9] - The company anticipates that regulatory emission standards will drive truck purchases as customers prepare for upcoming changes [34] - Management noted that the vocational market remains strong due to ongoing infrastructure spending [81] Other Important Information - PACCAR's engine remanufacturing plant is expected to be operational in the first quarter of next year, with an annual capacity of about 5,000 remanufactured engines [68] - The company is building another used truck center in Warsaw, Poland, to support the sale of premium used trucks [11] Q&A Session Summary Question: Comments on strong sequential price improvement performance - Management noted that tariffs had a significant impact on pricing in Q2 and expect an increased impact in Q3 [15][16] Question: Discussions on Section 232 with the government - Management indicated ongoing investigations and speculated that conclusions could be reached sooner than expected [18] Question: Impact of the One Big Beautiful Bill Act on customer engagement - Management confirmed that customers are starting to engage regarding the '26 order season due to cash benefits from the legislation [24][25] Question: Stability of U.S. and Canada deliveries in the second half - Management highlighted factors such as overcapacity and regulatory standards that could influence order dynamics [32][34] Question: Guidance for parts growth in Q3 - Management reiterated strong performance in parts and expected continued growth due to effective customer service [37][39] Question: Inventory setup and industry dynamics - Management expressed confidence in their inventory position compared to industry averages [56] Question: Medium duty truck market outlook - Management indicated a favorable inventory position and potential for improvement in the medium duty market [96][97] Question: Pricing dynamics and customer relationships - Management confirmed that tariff surcharges are included in pricing, allowing for future pricing stability [85] Question: Growth opportunities in trucks versus parts and financial services - Management emphasized that trucks will continue to be essential for freight movement, with parts and financial services as growth areas [92]