PACCAR(PCAR) - 2024 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS This chapter presents the company's unaudited consolidated financial statements for the periods ended September 30, 2024, and 2023, including statements of comprehensive income, balance sheets, cash flows, and stockholders' equity, along with notes detailing accounting policies, revenue, investments, receivables, product support liabilities, equity, income taxes, segment information, derivatives, fair value measurements, pension plans, and commitments and contingencies Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income (Unaudited, in Millions of Dollars, except per share amounts) | Metric | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 | | :--------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Trucks, Parts and Other: Net Sales and Revenues | $7,703.8 | $8,232.3 | $24,201.1 | $24,723.7 | | Cost of Sales and Revenues | 6,427.7 | 6,626.7 | 19,873.8 | 19,971.5 | | Research and Development Expenses | 115.0 | 103.5 | 337.6 | 302.0 | | Selling, General and Administrative Expenses | 144.3 | 143.6 | 434.6 | 448.3 | | Interest and Other (Income) Expense, Net | (24.3) | (16.3) | (74.9) | 544.8 | | Trucks, Parts and Other Pre-Tax Income | 1,041.1 | 1,374.8 | 3,630.0 | 3,457.1 | | Financial Services: Interest and Fees | 334.9 | 269.8 | 956.3 | 716.5 | | Operating Lease, Rental and Other Income | 201.2 | 194.3 | 598.9 | 610.6 | | Financial Services Revenues | 536.1 | 464.1 | 1,555.2 | 1,327.1 | | Interest and Other Borrowing Expenses | 188.4 | 138.5 | 520.9 | 347.8 | | Depreciation and Other Expenses | 176.6 | 146.9 | 530.5 | 427.0 | | Selling, General and Administrative Expenses | 42.2 | 38.7 | 122.0 | 110.9 | | Provision for Losses on Receivables | 22.4 | 6.2 | 50.2 | 14.1 | | Financial Services Pre-Tax Income | 106.5 | 133.8 | 331.6 | 427.3 | | Investment Income | 108.7 | 80.8 | 290.0 | 192.5 | | Total Pre-Tax Income | 1,256.3 | 1,589.4 | 4,251.6 | 4,076.9 | | Income Tax Expense | 284.2 | 360.9 | 961.6 | 893.4 | | Net Income | $972.1 | $1,228.5 | $3,290.0 | $3,183.5 | | Net Income Per Share (Basic) | $1.85 | $2.35 | $6.26 | $6.08 | | Net Income Per Share (Diluted) | $1.85 | $2.34 | $6.25 | $6.07 | | Comprehensive Income | $1,111.9 | $1,068.7 | $3,178.5 | $3,199.3 | Consolidated Balance Sheets Consolidated Balance Sheets (Unaudited, in Millions of Dollars) | Metric | September 30, 2024 | December 31, 2023 | | :--------------------------------- | :------------ | :------------- | | Assets | | | | Trucks, Parts and Other: Cash and Cash Equivalents | $6,642.1 | $6,836.7 | | Trade and Other Receivables, Net | 2,199.2 | 2,198.1 | | Marketable Securities | 2,510.7 | 1,822.6 | | Inventories, Net | 2,644.8 | 2,576.7 | | Other Current Assets | 665.9 | 680.6 | | Total Trucks, Parts and Other Current Assets | 14,662.7 | 14,114.7 | | Operating Lease Equipment, Net | 82.9 | 127.6 | | Property, Plant and Equipment, Net | 4,040.9 | 3,780.1 | | Other Non-Current Assets, Net | 2,014.9 | 1,837.1 | | Total Trucks, Parts and Other Assets | 20,801.4 | 19,859.5 | | Financial Services: Cash and Cash Equivalents | 207.1 | 345.0 | | Finance and Other Receivables, Net | 19,294.3 | 17,571.7 | | Operating Lease Equipment, Net | 1,988.1 | 2,175.4 | | Other Assets | 990.9 | 871.8 | | Total Financial Services Assets | 22,480.4 | 20,963.9 | | Total Assets | $43,281.8 | $40,823.4 | | Liabilities and Stockholders' Equity | | | | Trucks, Parts and Other: Accounts Payable, Accrued Expenses and Other | $5,235.9 | $5,076.3 | | Dividends Payable | - | 1,675.0 | | Total Trucks, Parts and Other Current Liabilities | 5,235.9 | 6,751.3 | | Residual Value Guarantees and Deferred Revenues | 95.7 | 142.6 | | Other Liabilities | 1,978.1 | 2,121.9 | | Total Trucks, Parts and Other Liabilities | 7,309.7 | 9,015.8 | | Financial Services: Accounts Payable, Accrued Expenses and Other | 1,161.5 | 992.3 | | Commercial Paper and Bank Loans | 5,496.6 | 5,609.9 | | Term Notes | 10,023.3 | 8,624.6 | | Deferred Income Taxes and Other Liabilities | 627.1 | 702.0 | | Total Financial Services Liabilities | 17,308.5 | 15,928.8 | | Stockholders' Equity: Common Stock | 524.3 | 523.3 | | Additional Paid-in Capital | 336.0 | 269.1 | | Treasury Stock | (4.5) | - | | Retained Earnings | 18,613.2 | 15,780.3 | | Accumulated Other Comprehensive Loss | (805.4) | (693.9) | | Total Stockholders' Equity | 18,663.6 | 15,878.8 | | Total Liabilities and Stockholders' Equity | $43,281.8 | $40,823.4 | Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (Unaudited, in Millions of Dollars) | Metric | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 | | :--------------------------------- | :-------------------- | :-------------------- | | Operating Activities: | | | | Net Income | $3,290.0 | $3,183.5 | | Net Cash Provided by Operating Activities | 3,195.2 | 3,003.3 | | Investing Activities: | | | | Originations of Retail Loans and Finance Leases | (4,895.9) | (4,557.4) | | Collections of Retail Loans and Finance Leases | 3,646.6 | 3,210.6 | | Purchases of Marketable Debt Securities | (1,356.7) | (796.7) | | Proceeds from Sales and Maturities of Marketable Debt Securities | 714.8 | 660.2 | | Payments for Property, Plant and Equipment | (605.3) | (497.2) | | Acquisitions of Operating Lease Equipment | (637.4) | (401.9) | | Proceeds from Asset Dispositions | 521.6 | 449.0 | | Net Cash Used in Investing Activities | (2,755.3) | (1,931.1) | | Financing Activities: | | | | Cash Dividends Paid | (2,131.1) | (1,377.3) | | Purchases of Treasury Stock | (4.5) | (3.1) | | Proceeds from Term Debt | 3,406.6 | 2,398.2 | | Payments of Term Debt | (2,097.0) | (2,218.3) | | Net Cash (Used in) Provided by Financing Activities | (766.4) | 159.5 | | Effect of Exchange Rate Changes on Cash and Cash Equivalents | (6.0) | (16.3) | | Net (Decrease) Increase in Cash and Cash Equivalents | (332.5) | 1,215.4 | | Cash and Cash Equivalents at Beginning of Period | 7,181.7 | 4,690.9 | | Cash and Cash Equivalents at End of Period | $6,849.2 | $5,906.3 | Consolidated Statements of Stockholders' Equity Consolidated Statements of Stockholders' Equity (Unaudited, in Millions of Dollars, except per share amounts) | Metric | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 | | :--------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Common Stock: Beginning Balance | $524.3 | $522.8 | $523.3 | $522.0 | | Stock-Based Compensation | - | 0.3 | 1.0 | 1.1 | | Common Stock: Ending Balance | 524.3 | 523.1 | 524.3 | 523.1 | | Additional Paid-in Capital: Beginning Balance | 329.2 | 241.8 | 269.1 | 196.1 | | Stock-Based Compensation | 6.8 | 16.5 | 66.9 | 62.2 | | Additional Paid-in Capital: Ending Balance | 336.0 | 258.3 | 336.0 | 258.3 | | Treasury Stock: Beginning Balance | (4.0) | (3.0) | - | - | | Purchases | (0.5) | (0.1) | (4.5) | (3.1) | | Treasury Stock: Ending Balance | (4.5) | (3.1) | (4.5) | (3.1) | | Retained Earnings: Beginning Balance | 17,798.6 | 15,095.5 | 15,780.3 | 13,402.4 | | Net Income | 972.1 | 1,228.5 | 3,290.0 | 3,183.5 | | Cash Dividends Declared on Common Stock | (157.5) | (141.6) | (457.1) | (403.5) | | Retained Earnings: Ending Balance | 18,613.2 | 16,182.4 | 18,613.2 | 16,182.4 | | Accumulated Other Comprehensive Loss: Beginning Balance | (945.2) | (777.8) | (693.9) | (953.4) | | Other Comprehensive Income (Loss) | 139.8 | (159.8) | (111.5) | 15.8 | | Accumulated Other Comprehensive Loss: Ending Balance | (805.4) | (937.6) | (805.4) | (937.6) | | Total Stockholders' Equity | $18,663.6 | $16,023.1 | $18,663.6 | $16,023.1 | | Cash Dividends Declared on Common Stock, Per Share | $0.30 | $0.27 | $0.87 | $0.77 | Notes to Consolidated Financial Statements NOTE A - Basis of Presentation This note outlines the basis of presentation for the unaudited consolidated financial statements, including GAAP compliance, equity method accounting for a battery joint venture, and the expected impact of new accounting standards - The company accounts for its investment in an advanced battery manufacturing joint venture using the equity method, recorded within Trucks, Parts and Other "Other non-current assets, net"[19] - FASB issued ASU 2023-07 (Segment Reporting) and ASU 2023-09 (Income Taxes), which are expected to result in additional disclosures but will not materially impact the company's consolidated financial statements[20][21] NOTE B – Sales and Revenues This note details revenue recognition policies for the company's truck, parts, and financial services businesses, providing breakdowns by major sources and lease types, with revenue recognized upon transfer of control or based on interest or straight-line methods Trucks, Parts and Other Revenue by Major Source (Unaudited, in Millions of Dollars) | Revenue Source | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 | | :--------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Truck Sales | $5,781.2 | $6,412.4 | $18,423.5 | $19,219.7 | | Extended Warranty, Operating Lease and Other Revenues | 245.8 | 224.0 | 722.3 | 658.0 | | Total Trucks | 6,027.0 | 6,636.4 | 19,145.8 | 19,877.7 | | Parts Sales | 1,605.0 | 1,533.5 | 4,844.6 | 4,660.4 | | Dealer Services and Other Revenues | 52.6 | 48.7 | 153.2 | 143.7 | | Total Parts | 1,657.6 | 1,582.2 | 4,997.8 | 4,804.1 | | Winch Sales and Other | 19.2 | 13.7 | 57.5 | 41.9 | | Total Trucks, Parts and Other Sales and Revenues | $7,703.8 | $8,232.3 | $24,201.1 | $24,723.7 | - The company accounts for truck sales with residual value guarantees (RVG) as either sales or operating leases, depending on whether the customer has an economic incentive to return the truck[25] Financial Services Lease Revenue by Lease Type (Unaudited, in Millions of Dollars) | Lease Type | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 | | :--------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Finance Lease Revenue | $86.4 | $72.7 | $253.4 | $194.1 | | Operating Lease Revenue | 163.7 | 180.6 | 501.2 | 564.1 | | Total Lease Revenue | $250.1 | $253.3 | $754.6 | $758.2 | NOTE C - Investments in Marketable Securities This note describes the accounting for marketable debt and equity securities, including fair value measurement, credit loss assessment, and unrealized gains/losses, with total marketable securities at $2,510.7 million as of September 30, 2024 Marketable Securities (Unaudited, in Millions of Dollars) | Security Type | Cost (September 30, 2024) | Unrealized Gains (September 30, 2024) | Unrealized Losses (September 30, 2024) | Fair Value (September 30, 2024) | | :--------------------------------- | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | U.S. Tax-Exempt Securities | $303.9 | $2.3 | $0.7 | $305.5 | | U.S. Taxable Municipal/Non-U.S. Provincial Bonds | 321.5 | 3.0 | 2.3 | 322.2 | | U.S. Corporate Securities | 744.5 | 9.3 | 1.8 | 752.0 | | U.S. Government Securities | 214.1 | 1.5 | 0.3 | 215.3 | | Non-U.S. Corporate Securities | 617.8 | 6.1 | 2.1 | 621.8 | | Non-U.S. Government Securities | 168.5 | 2.2 | 0.5 | 170.2 | | Other Debt Securities | 117.2 | 1.3 | 0.7 | 117.8 | | Total Marketable Debt Securities | 2,487.5 | 25.7 | 8.4 | 2,504.8 | | Marketable Equity Securities | 10.0 | - | 4.1 | 5.9 | | Total Marketable Securities | $2,497.5 | $25.7 | $12.5 | $2,510.7 | | Security Type | Cost (December 31, 2023) | Unrealized Gains (December 31, 2023) | Unrealized Losses (December 31, 2023) | Fair Value (December 31, 2023) | | :--------------------------------- | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | U.S. Tax-Exempt Securities | $312.5 | $1.2 | $3.0 | $310.7 | | U.S. Taxable Municipal/Non-U.S. Provincial Bonds | 244.9 | 0.8 | 5.6 | 240.1 | | U.S. Corporate Securities | 357.1 | 1.4 | 5.2 | 353.3 | | U.S. Government Securities | 159.2 | 0.6 | 1.7 | 158.1 | | Non-U.S. Corporate Securities | 529.4 | 2.3 | 7.5 | 524.2 | | Non-U.S. Government Securities | 141.0 | 1.5 | 1.3 | 141.2 | | Other Debt Securities | 92.8 | 0.3 | 2.5 | 90.6 | | Total Marketable Debt Securities | 1,836.9 | 8.1 | 26.8 | 1,818.2 | | Marketable Equity Securities | 10.0 | - | 5.6 | 4.4 | | Total Marketable Securities | $1,846.9 | $8.1 | $32.4 | $1,822.6 | - As of September 30, 2024, unrealized losses on marketable debt securities were primarily due to increased yields on certain securities, with no credit losses identified and no intent to sell before recovery[43] NOTE D - Inventories This note outlines the company's inventory valuation method (lower of cost or net realizable value, primarily FIFO) and the composition of its inventory Inventory Composition (Unaudited, in Millions of Dollars) | Inventory Category | September 30, 2024 | December 31, 2023 | | :--------------- | :------------ | :------------- | | Finished Products | $1,253.7 | $1,084.0 | | Work-in-Process and Raw Materials | 1,391.1 | 1,492.7 | | Total | $2,644.8 | $2,576.7 | NOTE E - Finance and Other Receivables This note details the composition of finance and other receivables, credit loss provision methodology, and credit quality monitoring, including modifications and asset repossessions Finance and Other Receivables, Net (Unaudited, in Millions of Dollars) | Receivable Category | September 30, 2024 | December 31, 2023 | | :--------------------------------- | :------------ | :------------- | | Loans | $9,408.2 | $8,594.7 | | Finance Leases | 4,889.3 | 4,785.7 | | Dealer Wholesale Financing | 4,973.5 | 4,147.8 | | Operating Lease Receivables and Other | 169.5 | 176.5 | | Total | 19,440.5 | 17,704.7 | | Less: Allowance for Losses | | | | Loans and Leases | (140.3) | (127.0) | | Dealer Wholesale Financing | (3.0) | (2.7) | | Operating Lease Receivables and Other | (2.9) | (3.3) | | Finance and Other Receivables, Net | $19,294.3 | $17,571.7 | Summary of Changes in Allowance for Credit Losses (Unaudited, in Millions of Dollars) | Metric | 2024 Wholesale | 2024 Dealer Retail | 2024 Customer Retail | 2024 Other* | 2024 Total | | :--------------------------------- | :--------- | :--------------- | :------------- | :---------- | :--------- | | January 1 Balance | $2.7 | $1.9 | $125.1 | $3.3 | $133.0 | | Provision for Losses | 0.4 | (0.4) | 50.8 | (0.6) | 50.2 | | Write-offs | - | - | (38.9) | (0.6) | (39.5) | | Recoveries | - | - | 5.7 | 1.1 | 6.8 | | Currency Translation and Other | (0.1) | - | (3.9) | (0.3) | (4.3) | | September 30 Balance | $3.0 | $1.5 | $138.8 | $2.9 | $146.2 | | Metric | 2023 Wholesale | 2023 Dealer Retail | 2023 Customer Retail | 2023 Other* | 2023 Total | | :--------------------------------- | :--------- | :--------------- | :------------- | :---------- | :--------- | | January 1 Balance | $3.4 | $2.2 | $112.6 | $2.9 | $121.1 | | Provision for Losses | (0.8) | (0.8) | 16.3 | (0.6) | 14.1 | | Write-offs | - | - | (16.0) | (1.2) | (17.2) | | Recoveries | - | - | 4.3 | 1.3 | 5.6 | | Currency Translation and Other | - | - | 1.0 | 0.2 | 1.2 | | September 30 Balance | $2.6 | $1.4 | $118.2 | $2.6 | $124.8 | - The balance of repossessed assets in inventory was $74.1 million as of September 30, 2024, up from $30.4 million at December 31, 2023, primarily comprising vehicles repossessed from loans, finance leases, and operating leases[75] NOTE F - Product Support Liabilities This note covers product support liabilities, including product warranty reserves and deferred revenue from extended warranty and repair and maintenance contracts, with estimates based on historical data and future claims Summary of Changes in Product Support Liabilities (Unaudited, in Millions of Dollars) | Metric | 2024 | 2023 | | :--------------------------------- | :----- | :----- | | Warranty Reserve | | | | January 1 Balance | $767.0 | $437.7 | | Provision for Costs | 462.2 | 484.1 | | Payments | (679.5) | (459.9) | | Changes in Existing Warranty Estimates | 103.6 | 186.1 | | Currency Translation and Other | 2.7 | (2.6) | | September 30 Balance | $656.0 | $645.4 | | Extended Warranty and R&M Contract Deferred Revenue | | | | January 1 Balance | $1,229.1 | $904.9 | | Deferred Revenue | 535.0 | 583.5 | | Revenue Recognized | (444.4) | (339.7) | | Currency Translation | 10.1 | (5.4) | | September 30 Balance | $1,329.8 | $1,143.3 | - The company expects to recognize approximately $105.6 million of deferred revenue from extended warranty and R&M contracts in 2024, $425.3 million in 2025, $341.7 million in 2026, $247.1 million in 2027, $148.7 million in 2028, and $61.4 million thereafter[78] NOTE G - Stockholders' Equity This note details the components of comprehensive income, including net income and other comprehensive income/loss items, along with changes in accumulated other comprehensive loss, stock-based compensation, and share repurchase program updates Components of Comprehensive Income (Unaudited, in Millions of Dollars) | Metric | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 | | :--------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Net Income | $972.1 | $1,228.5 | $3,290.0 | $3,183.5 | | Other Comprehensive Income (Loss) (OCI): | | | | | | Unrealized (Loss) Gain on Derivative Contracts | (6.3) | 29.8 | 21.5 | (18.8) | | Unrealized Gain on Marketable Debt Securities | 26.8 | 1.8 | 26.9 | 4.6 | | Pension Plans | 2.2 | 0.7 | 9.9 | 3.6 | | Foreign Currency Translation Gain (Loss) | 117.1 | (192.1) | (169.8) | 26.4 | | Net Other Comprehensive Income (Loss) | 139.8 | (159.8) | (111.5) | 15.8 | | Comprehensive Income | $1,111.9 | $1,068.7 | $3,178.5 | $3,199.3 | - Stock-based compensation expense for the first nine months of 2024 was $19.5 million, higher than $18.4 million for the same period in 2023[85] - As of September 30, 2024, the company had repurchased $110.0 million of shares under its $500.0 million common stock repurchase program, with no repurchases made in the first nine months of 2024[86] NOTE H - Income Taxes This note discloses the company's effective tax rates for the third quarter and first nine months of 2024 and 2023, explaining the impact of European Commission-related charges on the 2023 effective tax rate Effective Tax Rates (Unaudited) | Period | 2024 Effective Tax Rate | 2023 Effective Tax Rate | | :----------------- | :------------- | :------------- | | Third Quarter | 22.6% | 22.7% | | First Nine Months | 22.6% | 21.9% | - The first quarter of 2023 included $600.0 million in European Commission-related charges, which reduced the effective tax rate for that year[87] NOTE I - Segment Information This note describes PACCAR's three operating segments: Trucks, Parts, and Financial Services, detailing their assessment metrics, inter-segment cost allocation, and the handling of used truck sales in Europe Segment Net Sales and Revenues (Unaudited, in Millions of Dollars) | Segment | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 | | :----------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Trucks | $6,027.0 | $6,636.4 | $19,145.8 | $19,877.7 | | Parts | 1,657.6 | 1,582.2 | 4,997.8 | 4,804.1 | | Other | 19.2 | 13.7 | 57.5 | 41.9 | | Trucks, Parts and Other | 7,703.8 | 8,232.3 | 24,201.1 | 24,723.7 | | Financial Services | 536.1 | 464.1 | 1,555.2 | 1,327.1 | | Total | $8,239.9 | $8,696.4 | $25,756.3 | $26,050.8 | Segment Pre-Tax Income (Loss) (Unaudited, in Millions of Dollars) | Segment | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 | | :----------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Trucks | $630.8 | $960.9 | $2,349.7 | $2,803.5 | | Parts | 406.7 | 412.3 | 1,276.3 | 1,270.2 | | Other* | 3.6 | 1.6 | 4.0 | (616.6) | | Trucks, Parts and Other | 1,041.1 | 1,374.8 | 3,630.0 | 3,457.1 | | Financial Services | 106.5 | 133.8 | 331.6 | 427.3 | | Investment Income | 108.7 | 80.8 | 290.0 | 192.5 | | Total | $1,256.3 | $1,589.4 | $4,251.6 | $4,076.9 | Segment Depreciation and Amortization (Unaudited, in Millions of Dollars) | Segment | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 | | :----------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Trucks | $90.7 | $102.1 | $283.7 | $301.1 | | Parts | 2.2 | 3.6 | 10.9 | 10.9 | | Other | 6.1 | 6.4 | 18.6 | 18.7 | | Trucks, Parts and Other | 99.0 | 112.1 | 313.2 | 330.7 | | Financial Services | 127.8 | 121.8 | 380.5 | 347.7 | | Total | $226.8 | $233.9 | $693.7 | $678.4 | NOTE J - Derivative Financial Instruments This note explains the company's use of derivative contracts to hedge interest rate, foreign exchange, and commodity price risks, distinguishing between designated and undesignated instruments, and disclosing nominal amounts, fair values, and income statement impacts - As of September 30, 2024, the company's notional amounts for interest rate contracts were $3,306.8 million, foreign exchange contracts were $2,052.1 million, and commodity contracts were $6.6 million[97][98][99] Balance Sheet Classification and Fair Value of Derivative Financial Instruments (Unaudited, in Millions of Dollars) | Derivative Type | September 30, 2024 Assets | September 30, 2024 Liabilities | December 31, 2023 Assets | December 31, 2023 Liabilities | | :--------------------------------- | :---------------- | :---------------- | :----------------- | :----------------- | | Derivatives Designated as Hedging Instruments: | | | | | | Interest Rate Contracts | $46.2 | $92.9 | $17.3 | $131.1 | | Foreign Exchange Contracts | 17.1 | 23.4 | 1.5 | 24.7 | | Commodity Contracts | - | 0.7 | 1.2 | 0.8 | | Derivatives Not Designated as Hedging Instruments: | | | | | | Foreign Exchange Contracts | 0.3 | 0.3 | 1.0 | 3.5 | | Total Balance Sheet Recognition | $63.6 | $117.3 | $21.0 | $160.1 | - As of September 30, 2024, the amount of loss recorded in Accumulated Other Comprehensive Income (AOCI) expected to be reclassified into earnings within the next 12 months was approximately $2.0 million (net of tax)[106] NOTE K - Fair Value Measurements This note defines fair value measurements across three levels, detailing valuation methods for marketable securities and derivatives, and disclosing fair values of assets and liabilities by level, including other financial instruments not measured at fair value Assets and Liabilities Measured at Fair Value by Level (Unaudited, in Millions of Dollars) | Asset/Liability Category | September 30, 2024 Level 1 | September 30, 2024 Level 2 | September 30, 2024 Total | | :--------------------------------- | :------------------- | :------------------- | :---------------- | | Assets: | | | | | Marketable Debt Securities | $215.3 | $2,289.5 | $2,504.8 | | Marketable Equity Securities | 5.9 | - | 5.9 | | Total Marketable Securities | $221.2 | $2,289.5 | $2,510.7 | | Derivative Instruments Assets | - | $63.6 | $63.6 | | Liabilities: | | | | | Derivative Instruments Liabilities | - | $117.3 | $117.3 | | Asset/Liability Category | December 31, 2023 Level 1 | December 31, 2023 Level 2 | December 31, 2023 Total | | :--------------------------------- | :-------------------- | :-------------------- | :----------------- | | Assets: | | | | | Marketable Debt Securities | $158.1 | $1,660.1 | $1,818.2 | | Marketable Equity Securities | 4.4 | - | 4.4 | | Total Marketable Securities | $162.5 | $1,660.1 | $1,822.6 | | Derivative Instruments Assets | - | $21.0 | $21.0 | | Liabilities: | | | | | Derivative Instruments Liabilities | - | $160.1 | $160.1 | Fair Value Disclosure for Other Financial Instruments Not Measured at Fair Value (Unaudited, in Millions of Dollars) | Asset/Liability Category | September 30, 2024 Carrying Value | September 30, 2024 Fair Value | December 31, 2023 Carrying Value | December 31, 2023 Fair Value | | :--------------------------------- | :-------------------- | :-------------------- | :--------------------- | :--------------------- | | Assets: | | | | | | Financial Services Fixed Rate Loans | $8,879.9 | $9,034.5 | $8,126.8 | $8,214.4 | | Liabilities: | | | | | | Financial Services Fixed Rate Debt | 10,036.4 | 10,119.8 | 8,720.3 | 8,693.7 | NOTE L - Pension Plans This note details the components of the company's net pension expense (income) and discloses the contributions made to pension plans for the third quarter and first nine months of 2024 and 2023 Components of Net Pension Expense (Income) (Unaudited, in Millions of Dollars) | Component | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 | | :--------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Service Cost | $25.3 | $23.5 | $80.7 | $70.4 | | Interest Cost on Projected Benefit Obligation | 34.4 | 32.0 | 101.4 | 95.7 | | Expected Return on Assets | (60.8) | (57.8) | (181.9) | (172.9) | | Amortization of Prior Service Cost | 0.3 | 0.3 | 1.0 | 1.0 | | Actuarial Loss Recognized | 2.5 | 1.3 | 5.3 | 3.7 | | Net Pension Expense (Income) | $1.7 | $(0.7) | $6.5 | $(2.1) | - The company contributed $34.7 million to pension plans in the first nine months of 2024, higher than $17.1 million for the same period in 2023[121] NOTE M – Commitments and Contingencies This note discloses legal proceedings and claims related to the European Commission (EC) investigation, including class action lawsuits in the UK and Israel, and the $600.0 million pre-tax charge recorded in Q1 2023 for EC-related claims - The company faces legal proceedings and claims related to the European Commission (EC) investigation, including class action lawsuits in the UK and Israel[122] - In the first quarter of 2023, the company recorded a $600.0 million (net of tax $446.4 million) non-recurring pre-tax charge to estimate the total cost of EC-related claims[122] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This chapter provides a detailed analysis of PACCAR's financial condition and operating results for the third quarter and first nine months ended September 30, 2024, covering business overview, financial highlights, segment performance, outlook, and liquidity Overview PACCAR, a global technology company, saw slight declines in net sales and revenue in Q3 and the first nine months of 2024 due to lower truck revenue, offset by growth in parts and financial services, while continuing capital and R&D investments 2024 Third Quarter Financial Highlights (Unaudited, in Millions of Dollars, except per share amounts) | Metric | 2024 | 2023 | | :--------------------------------- | :----- | :----- | | Global Net Sales and Revenues | $8,240 | $8,700 | | Truck Revenues | $6,030 | $6,640 | | Parts Sales | $1,660 | $1,580 | | Financial Services Revenues | $536.1 | $464.1 | | Net Income | $972.1 | $1,230 | | Diluted Net Income Per Share | $1.85 | $2.34 | | Capital Investments | $183.8 | $174.5 | | Research and Development Expenses | $115.0 | $103.5 | 2024 First Nine Months Financial Highlights (Unaudited, in Millions of Dollars, except per share amounts) | Metric | 2024 | 2023 | | :--------------------------------- | :----- | :----- | | Global Net Sales and Revenues | $25,760 | $26,050 | | Truck Revenues | $19,150 | $19,880 | | Parts Sales | $5,000 | $4,800 | | Financial Services Revenues | $1,560 | $1,330 | | Net Income | $3,290 | $3,180 | | Diluted Net Income Per Share | $6.25 | $6.07 | | Capital Investments | $567.7 | $486.5 | | Research and Development Expenses | $337.6 | $302.0 | - PACCAR Parts opened a new 240,000 square-foot Parts Distribution Center (PDC) in Massbach, Germany, to accelerate parts delivery to dealers and customers in the region[126] - PACCAR Financial Services (PFS) Group's total loans and leases reached $22.48 billion, with $3.25 billion in medium-term notes issued in the first nine months of 2024 to support new business volume and repay maturing debt[127] Outlook The company forecasts a decline in US and Canadian heavy-duty truck retail sales and European truck registrations for 2024, with stable South American markets and continued growth in parts sales, while planning increased capital and R&D investments - US and Canadian heavy-duty truck retail sales are projected to be 250,000 to 270,000 units in 2024 (down from 297,000 units in 2023) and 250,000 to 280,000 units in 2025[128] - European truck registrations for 16-tonne and above are expected to be 290,000 to 310,000 units in 2024 (down from 343,300 units in 2023) and 270,000 to 300,000 units in 2025[128] - South American heavy-duty truck registrations are projected to be 110,000 to 120,000 units in 2024 (up from 105,000 units in 2023) and remain similar in 2025[128] - PACCAR Parts sales are expected to grow 3-5% in 2024 compared to 2023, with potential for another 3-5% growth in 2025 over 2024[129] - Average earning assets are projected to grow 8-11% in 2024 compared to 2023, and remain flat in 2025 compared to 2024[130] - Capital investments are estimated at $760 million to $800 million for 2024 and $700 million to $800 million for 2025; R&D expenses are projected at $450 million to $470 million for 2024 and $480 million to $530 million for 2025[131] - The company plans to invest $600 million to $900 million in the Amplify Cell Technologies battery joint venture over the next few years[131] Results of Operations - Segment Analysis Truck Segment The Truck segment experienced declines in global new truck deliveries, net sales, and pre-tax income in Q3 and the first nine months of 2024, primarily due to reduced European deliveries and increased material, labor, and warranty costs, leading to lower gross margins Global New Truck Deliveries (Unaudited, in Units) | Region | Third Quarter 2024 | Third Quarter 2023 | Change (%) | First Nine Months 2024 | First Nine Months 2023 | Change (%) | | :--------------------------------- | :------------- | :------------- | :---------- | :------------- | :------------- | :---------- | | U.S. and Canada | 25,900 | 27,500 | (6) | 84,100 | 81,000 | 4 | | Europe | 10,000 | 14,500 | (31) | 33,100 | 48,300 | (31) | | Mexico, South America, Australia and Other | 9,000 | 8,100 | 11 | 24,200 | 23,800 | 2 | | Total Units | 44,900 | 50,100 | (10) | 141,400 | 153,100 | (8) | - For the first nine months of 2024, US and Canadian heavy-duty truck market share was 31.1% (up from 28.4% in 2023), and medium-duty truck market share was 17.2% (up from 13.5% in 2023)[136] - For the first nine months of 2024, European 16-tonne and above truck market share was 14.0% (down from 15.9% in 2023), and 6- to 16-tonne truck market share was 9.1% (up from 9.0% in 2023)[137] Global Truck Net Sales and Revenues (Unaudited, in Millions of Dollars) | Region | Third Quarter 2024 | Third Quarter 2023 | Change (%) | First Nine Months 2024 | First Nine Months 2023 | Change (%) | | :--------------------------------- | :------------- | :------------- | :---------- | :------------- | :------------- | :---------- | | U.S. and Canada | $3,669.3 | $4,006.8 | (8) | $12,136.2 | $11,715.0 | 4 | | Europe | 1,123.6 | 1,558.8 | (28) | 3,699.3 | 5,155.7 | (28) | | Mexico, South America, Australia and Other | 1,234.1 | 1,070.8 | 15 | 3,310.3 | 3,007.0 | 10 | | Total Truck Net Sales and Revenues | $6,027.0 | $6,636.4 | (9) | $19,145.8 | $19,877.7 | (4) | | Truck Pre-Tax Income | $630.8 | $960.9 | (34) | $2,349.7 | $2,803.5 | (16) | | Pre-Tax Income Return | 10.5% | 14.5% | | 12.3% | 14.1% | | - Third quarter 2024 truck gross margin was 13.0%, down from 16.8% in the same period of 2023, primarily due to lower truck volumes and higher average material, labor, and warranty costs[142] - First nine months 2024 truck gross margin was 14.6%, down from 16.3% in the same period of 2023, primarily due to lower truck volumes and higher average material and labor costs[143] Parts Segment The Parts segment achieved increased global net sales and revenue in Q3 and the first nine months of 2024 across all markets, but gross margins declined due to rising material costs and increased warehouse and other overhead expenses Global Parts Net Sales and Revenues (Unaudited, in Millions of Dollars) | Region | Third Quarter 2024 | Third Quarter 2023 | Change (%) | First Nine Months 2024 | First Nine Months 2023 | Change (%) | | :--------------------------------- | :------------- | :------------- | :---------- | :------------- | :------------- | :---------- | | U.S. and Canada | $1,129.2 | $1,099.8 | 3 | $3,419.1 | $3,348.2 | 2 | | Europe | 345.5 | 325.1 | 6 | 1,052.9 | 1,001.5 | 5 | | Mexico, South America, Australia and Other | 182.9 | 157.3 | 16 | 525.8 | 454.4 | 16 | | Total Parts Net Sales and Revenues | $1,657.6 | $1,582.2 | 5 | $4,997.8 | $4,804.1 | 4 | | Parts Pre-Tax Income | $406.7 | $412.3 | (1) | $1,276.3 | $1,270.2 | 0 | | Pre-Tax Income Return | 24.5% | 26.1% | | 25.5% | 26.4% | | - Third quarter 2024 parts gross margin was 30.1%, down from 31.5% in the same period of 2023, primarily due to higher material costs and increased warehouse and other overhead expenses[147] - First nine months 2024 parts gross margin was 31.0%, down from 31.8% in the same period of 2023, primarily due to higher material costs and increased warehouse and other overhead expenses[150] Financial Services Segment The Financial Services segment saw growth in new loan and lease volumes, average earning assets, and revenue, but pre-tax income declined due to lower operating lease margins, increased credit loss provisions, and higher net charge-offs New Loan and Lease Volume (Unaudited, in Millions of Dollars) | Region | Third Quarter 2024 | Third Quarter 2023 | Change (%) | First Nine Months 2024 | First Nine Months 2023 | Change (%) | | :--------------------------------- | :------------- | :------------- | :---------- | :------------- | :------------- | :---------- | | U.S. and Canada | $1,079.0 | $1,032.7 | 4 | $2,973.7 | $2,699.6 | 10 | | Europe | 336.7 | 368.6 | (9) | 881.0 | 1,136.9 | (23) | | Mexico, Australia, Brazil and Other | 595.9 | 500.3 | 19 | 1,592.2 | 1,407.6 | 13 | | Total | $2,011.6 | $1,901.6 | 6 | $5,446.9 | $5,244.1 | 4 | Average Earning Assets (Unaudited, in Millions of Dollars) | Region | Third Quarter 2024 | Third Quarter 2023 | Change (%) | First Nine Months 2024 | First Nine Months 2023 | Change (%) | | :--------------------------------- | :------------- | :------------- | :---------- | :------------- | :------------- | :---------- | | U.S. and Canada | $11,621.0 | $9,644.9 | 20 | $10,974.1 | $9,268.7 | 18 | | Europe | 4,084.0 | 4,445.6 | (8) | 4,260.3 | 4,432.2 | (4) | | Mexico, Australia, Brazil and Other | 4,595.3 | 3,803.2 | 21 | 4,443.8 | 3,447.8 | 29 | | Total | $20,300.3 | $17,893.7 | 13 | $19,678.2 | $17,148.7 | 15 | Financial Services Revenue (Unaudited, in Millions of Dollars) | Region | Third Quarter 2024 | Third Quarter 2023 | Change (%) | First Nine Months 2024 | First Nine Months 2023 | Change (%) | | :--------------------------------- | :------------- | :------------- | :---------- | :------------- | :------------- | :---------- | | U.S. and Canada | $231.8 | $190.6 | 22 | $661.6 | $559.9 | 18 | | Europe | 146.0 | 138.2 | 6 | 430.9 | 413.2 | 4 | | Mexico, Australia, Brazil and Other | 158.3 | 135.3 | 17 | 462.7 | 354.0 | 31 | | Total | $536.1 | $464.1 | 16 | $1,555.2 | $1,327.1 | 17 | Financial Services Pre-Tax Income (Unaudited, in Millions of Dollars) | Period | Third Quarter 2024 | Third Quarter 2023 | Change (%) | First Nine Months 2024 | First Nine Months 2023 | Change (%) | | :----------------- | :------------- | :------------- | :---------- | :------------- | :------------- | :---------- | | Pre-Tax Income | $106.5 | $133.8 | (20) | $331.6 | $427.3 | (22) | - PFS's finance market share of new PACCAR truck sales was 26.9% in the third quarter of 2024, up from 23.7% in the same period of 2023; for the first nine months of 2024, it was 24.2%, up from 23.4% in the same period of 2023[154] - The company recognized $13.0 million in used truck losses (excluding repossessions) in the third quarter of 2024, compared to $4.3 million in gains in the same period of 2023; for the first nine months of 2024, used truck losses were $37.5 million, compared to $51.2 million in gains in the same period of 2023[158][159] Allowance for Credit Losses and Net Charge-Offs (Unaudited, in Millions of Dollars) | Region | Third Quarter 2024 Provision for Losses | Third Quarter 2024 Net Charge-Offs | First Nine Months 2024 Provision for Losses | First Nine Months 2024 Net Charge-Offs | | :--------------------------------- | :----------------------- | :--------------------- | :----------------------- | :--------------------- | | U.S. and Canada | $10.7 | $5.5 | $26.8 | $15.8 | | Europe | 7.3 | 6.1 | 12.6 | 11.1 | | Mexico, Australia, Brazil and Other | 4.4 | 1.8 | 10.8 | 5.8 | | Total | $22.4 | $13.4 | $50.2 | $32.7 | | Region | Third Quarter 2023 Provision for Losses | Third Quarter 2023 Net Charge-Offs | First Nine Months 2023 Provision for Losses | First Nine Months 2023 Net Charge-Offs | | :--------------------------------- | :----------------------- | :--------------------- | :----------------------- | :--------------------- | | U.S. and Canada | $0.9 | $1.1 | $2.0 | $3.0 | | Europe | 0.5 | 0.6 | 1.5 | 1.6 | | Mexico, Australia, Brazil and Other | 4.8 | 3.7 | 10.6 | 7.0 | | Total | $6.2 | $5.4 | $14.1 | $11.6 | - Modification activity increased to $680.8 million for the first nine months of 2024, up from $236.3 million in the same period of 2023, primarily reflecting higher refinancing volumes and increased contract modifications in the US, Brazil, and Europe[174] Retail Loans and Leases 30+ Days Past Due as a Percentage of Portfolio (Unaudited) | Region | September 30, 2024 | December 31, 2023 | September 30, 2023 | | :--------------------------------- | :------------ | :------------- | :------------ | | U.S. and Canada | 1.1% | 0.8% | 0.4% | | Europe | 0.9% | 0.5% | 1.4% | | Mexico, Australia, Brazil and Other | 1.6% | 1.9% | 1.5% | | Global | 1.2% | 1.0% | 0.8% | Other The 'Other' segment, including the winch business and unallocated corporate expenses, reported increased pre-tax income in Q3 2024 due to lower corporate expenses, and a significant improvement for the first nine months compared to a 2023 loss impacted by EC-related charges - Third quarter 2024 pre-tax income for Other operations was $3.6 million, up from $1.6 million in the same period of 2023, primarily due to lower corporate expenses[178] - First nine months 2024 pre-tax income for Other operations was $4.0 million, compared to a $616.6 million loss in the same period of 2023, primarily due to the EC-related charges recorded in the first quarter of 2023[178] - Investment income increased to $108.7 million in the third quarter of 2024 and $290.0 million for the first nine months of 2024, driven by higher investment balances and improved yields from rising market interest rates[179] Liquidity and Capital Resources As of September 30, 2024, the company held $9.36 billion in cash and marketable securities, with cash from operations increasing, but cash used in investing and financing activities also rising due to higher dividend payments and reduced net borrowings Cash and Cash Equivalents and Marketable Securities (Unaudited, in Millions of Dollars) | Metric | September 30, 2024 | December 31, 2023 | | :--------------------------------- | :------------ | :------------- | | Cash and Cash Equivalents | $6,849.2 | $7,181.7 | | Marketable Securities | 2,510.7 | 1,822.6 | | Total | $9,359.9 | $9,004.3 | Summary of Changes in Cash and Cash Equivalents (Unaudited, in Millions of Dollars) | Activity Category | First Nine Months 2024 | First Nine Months 2023 | | :--------------------------------- | :------------- | :------------- | | Net Cash Provided by Operating Activities | $3,195.2 | $3,003.3 | | Net Cash Used in Investing Activities | (2,755.3) | (1,931.1) | | Net Cash (Used in) Provided by Financing Activities | (766.4) | 159.5 | | Effect of Exchange Rate Changes on Cash and Cash Equivalents | (6.0) | (16.3) | | Net (Decrease) Increase in Cash and Cash Equivalents | (332.5) | 1,215.4 | | Cash and Cash Equivalents at Beginning of Period | 7,181.7 | 4,690.9 | | Cash and Cash Equivalents at End of Period | $6,849.2 | $5,906.3 | - The company has $5.3 billion in credit facilities, with $4.73 billion unused as of September 30, 2024, primarily serving as backup liquidity for commercial paper borrowings and medium-term notes[185] - Capital investments are estimated at $760 million to $800 million for 2024 and $700 million to $800 million for 2025; R&D expenses are projected at $450 million to $470 million for 2024 and $480 million to $530 million for 2025[188] Reconciliation of GAAP to Non-GAAP Financial Measures This chapter reconciles GAAP to non-GAAP financial measures, adjusting 2023 net income and diluted EPS to exclude non-recurring EC-related after-tax charges, which management uses to assess performance and operating trends Reconciliation of GAAP to Non-GAAP Financial Measures (Unaudited, in Millions of Dollars, except per share amounts) | Metric | Nine Months Ended September 30, 2023 | | :--------------------------------- | :-------------------- | | Net Income (GAAP) | $3,183.5 | | EC-Related Claims, After-Tax | 446.4 | | Adjusted Net Income (Non-GAAP) | $3,629.9 | | Diluted Net Income Per Share (GAAP) | $6.07 | | EC-Related Claims, After-Tax | 0.85 | | Adjusted Diluted Net Income Per Share (Non-GAAP) | $6.92 | | Net Income Return (GAAP) | 12.2% | | EC-Related Claims, After-Tax | 1.7% | | Adjusted Net Income Return (Non-GAAP) | 13.9% | Forward-Looking Statements This chapter contains forward-looking statements subject to various risks and uncertainties that could cause actual results to differ, including industry sales, competition, regulations, exchange rates, supply chain disruptions, and litigation - Forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ from expectations[200] - Key risks include significant declines in industry sales, competitive pressures, fuel price volatility, increased regulations or tariffs, fluctuations in exchange or commodity prices, lower used truck prices, insufficient manufacturing capacity, supplier disruptions, inadequate capital market liquidity, interest rate volatility, changes in financial services new business volume, changes in truck owner and operator profitability, cybersecurity risks, pandemics, climate-related risks, global conflicts, and litigation (including EC-related claims)[200] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The company's market risk did not materially change for the three months ended September 30, 2024, with further information available in Item 7A of the 2023 Form 10-K annual report - The company's market risk did not materially change for the three months ended September 30, 2024[201] ITEM 4. CONTROLS AND PROCEDURES Management, with CEO and CFO involvement, assessed the effectiveness of disclosure controls and procedures as of the reporting period end, concluding they are effective, with no material changes to internal control over financial reporting during the quarter - The company's disclosure controls and procedures were effective as of the end of the reporting period[202] - No material changes occurred in the company's internal control over financial reporting during the quarter[203] PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Discussion of legal proceedings can be found in Note M – "Commitments and Contingencies" to the consolidated financial statements - Discussion of legal proceedings can be found in Note M to the consolidated financial statements[205] ITEM 1A. RISK FACTORS Information on risk factors refers to Part I, Item 1A of the 2023 Form 10-K annual report, with no material changes for the three months ended September 30, 2024 - Risk factor information refers to Part I, Item 1A of the 2023 Form 10-K annual report[206] - The company's risk factors did not materially change for the three months ended September 30, 2024[206] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES This chapter discloses issuer purchases of equity securities, noting PACCAR repurchased $110 million of shares under its $500 million common stock repurchase program as of September 30, 2024, with no repurchases in the first nine months of 2024 - As of September 30, 2024, PACCAR had repurchased $110 million of shares under its $500 million common stock repurchase program[207] - No share repurchases were made under the program in the first nine months of 2024[207] ITEM 3. DEFAULTS UPON SENIOR SECURITIES This chapter reports no defaults upon senior securities - No defaults upon senior securities[207] ITEM 4. MINE SAFETY DISCLOSURES This chapter states that mine safety disclosures are not applicable - Mine safety disclosures are not applicable[207] ITEM 5. OTHER INFORMATION This chapter reports that company directors or officers did not adopt, modify, or terminate any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended September 30, 2024 - Company directors or officers did not adopt, modify, or terminate any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the reporting period[208] ITEM 6. EXHIBITS This chapter lists all exhibits filed with the report, including articles of incorporation, bylaws, instruments defining security holder rights, medium-term note forms, and other material contracts and certifications - Exhibits include articles of incorporation, bylaws, instruments defining security holder rights, medium-term note forms, material contracts, and certification documents[212][213][214]