Financial Data and Key Metrics Changes - PACCAR achieved revenues of $7.4 billion and adjusted net income of $770 million in Q1 2025, with PACCAR Parts achieving record quarterly revenues of $1.7 billion and pre-tax income of $427 million [6][10] - PACCAR Financial Services reported pre-tax income of $121 million, a 6% increase from $114 million in the same quarter last year [6][11] - Gross margins for truck parts and other were 14.8% in Q1, with expectations for Q2 margins to be in the range of 13% to 14% due to economic uncertainties and tariffs [8][10] Business Line Data and Key Metrics Changes - PACCAR Parts experienced record revenues and excellent gross margins of 30.7% in Q1, with expectations for parts sales to grow by 2% to 4% in Q2 and for the full year [10][11] - The truck divisions performed well, with PACCAR delivering 40,100 trucks in Q1 and anticipating deliveries of 37,000 to 39,000 trucks in Q2 [7][10] Market Data and Key Metrics Changes - The U.S. and Canadian Class 8 truck market is estimated to be between 235,000 to 265,000 trucks for the year [6] - The European above 16-ton market is projected to be in the range of 270,000 to 300,000 trucks, while the South American market is expected to be between 100,000 to 110,000 vehicles [7] Company Strategy and Development Direction - PACCAR is investing between $700 million to $800 million in capital investments and $450 million to $480 million in R&D for 2025, focusing on next-generation powertrains and advanced driver assistance systems [12][13] - The company is expanding its manufacturing capacity, including a new engine remanufacturing facility in Mississippi and an expansion of the DAF factory in Brazil [12][13] Management's Comments on Operating Environment and Future Outlook - Management noted that economic uncertainties and tariffs are affecting input costs and truck pricing, but they anticipate increased customer demand in the second half of the year as policies stabilize [8][12] - The company remains confident in its ability to manage costs and pricing in response to tariff impacts, emphasizing the importance of maintaining strong relationships with suppliers and customers [20][68] Other Important Information - The adjusted net income of $770 million excludes a $265 million after-tax provision related to EU civil litigation settlements, with progress being made in resolving these issues [10] - The company has a strong focus on maintaining profitability during all phases of the business cycle, with PACCAR Financial Services showing solid portfolio growth and strong credit quality [11][12] Q&A Session Summary Question: Can you elaborate on the guidance for gross margins and tariff costs? - Management indicated uncertainty regarding tariff policies and their impact on costs, noting that they are an American company building trucks for local markets, which helps mitigate some tariff impacts [19][20] Question: How do you view the vocational market and its stability? - The vocational market remains solid, and management expects it to continue being a strength throughout the year, despite pressures in the truckload carrier segment [21][22] Question: What is the comfort level with inventory levels? - PACCAR's inventory for Class A trucks is around 3.1 months, which is lower than the industry average of four months, indicating a comfortable position [36][37] Question: How do you anticipate the impact of EPA emissions changes? - Management discussed the potential changes in regulatory standards and their preparedness to meet future requirements, emphasizing investments in clean diesel technology [44][46] Question: What is the outlook for parts growth and margins? - Management expressed confidence in parts growth despite a soft market, with expectations for margins to remain above 30% [50][51] Question: How are you managing through the dynamic tariff environment? - The company is actively working with suppliers to manage costs and ensure compliance with tariff regulations, maintaining flexibility in pricing strategies [68][109]

Core Insights - PACCAR Inc. reported earnings of $1.46 per share for Q1 2025, missing the Zacks Consensus Estimate of $1.57 and declining from $2.27 in the same period last year [1] - Consolidated revenues were $7.44 billion, down from $8.74 billion in Q1 2024, with Truck, Parts, and Others sales at $6.91 billion [1] Revenue Breakdown - Truck segment revenues totaled $5.23 billion, lower than $6.54 billion in the prior-year quarter and missing the estimate of $5.43 billion; global truck deliveries were 40,100 units, down from 48,110 units in Q1 2024 [2] - Parts segment revenues were $1.69 billion, slightly up from $1.68 billion year-over-year and matching estimates; pre-tax income was $426.5 million, down from $455.8 million [3] - Financial Services segment revenues reached $528 million, higher than $509.3 million in the year-ago quarter but below the estimate of $553 million; pre-tax income increased to $121.1 million from $113.9 million [4] Expense and Financial Position - Selling, general and administrative expenses decreased to $143.3 million from $147.6 million year-over-year; R&D expenses rose to $115.4 million from $105.5 million [5] - As of March 31, 2025, PACCAR's cash and marketable debt securities totaled $8.1 billion, down from $9.65 billion as of December 31, 2024 [5] Future Outlook - Capital expenditures for 2025 are projected between $700 million and $800 million; R&D expenses are estimated to be in the range of $450 million to $480 million [6]

Financial Data and Key Metrics Changes - PACCAR achieved revenues of $7.4 billion and adjusted net income of $770 million in Q1 2025, with PACCAR Parts achieving record quarterly revenues of $1.7 billion and pre-tax income of $427 million [6][10] - PACCAR Financial Services reported pre-tax income of $121 million, a 6% increase from $114 million in the same quarter last year [6][12] - Gross margins for truck parts and other were 14.8% in Q1, with expectations for Q2 margins to be in the range of 13% to 14% due to economic uncertainties and tariffs [8][10] Business Line Data and Key Metrics Changes - PACCAR Parts experienced record revenues and excellent gross margins of 30.7% in Q1, with expectations for parts sales to grow by 2% to 4% in Q2 and for the full year [10][11] - The truck divisions performed well, with PACCAR delivering 40,100 trucks in Q1 and anticipating deliveries of 37,000 to 39,000 trucks in Q2 [7][10] Market Data and Key Metrics Changes - The U.S. and Canadian Class 8 market is estimated to be between 235,000 to 265,000 trucks for the year, while the European above 16-ton market is projected to be between 270,000 to 300,000 trucks [6][7] - The South American above 16-ton truck market is expected to be in the range of 100,000 to 110,000 vehicles [7] Company Strategy and Development Direction - PACCAR is investing $700 million to $800 million in capital investments and $450 million to $480 million in R&D for 2025, focusing on next-generation powertrains and advanced driver assistance systems [12][13] - The company is expanding its manufacturing capacity, including a DAF factory in Brazil and a new engine remanufacturing facility in Mississippi [12][13] Management's Comments on Operating Environment and Future Outlook - Management noted that the North American truck market is affected by uncertain economic conditions and tariffs, but anticipates increased customer demand in the second half of the year as policies stabilize [8][12] - The company expressed confidence in its ability to manage costs and pricing amidst tariff uncertainties, emphasizing the importance of maintaining strong relationships with customers [20][30] Other Important Information - The adjusted net income of $770 million excludes a $265 million after-tax provision related to EU civil litigation settlements, with progress being made in resolving these issues [10] - The company has a strong focus on enhancing operational efficiency through connected vehicle technology, which is expected to benefit parts sales [11][52] Q&A Session Summary Question: Can you elaborate on the guidance for gross margins and tariff impacts? - Management indicated that the gross margin guidance for Q2 includes current tariff impacts, but the exact effects are uncertain due to ongoing investigations into tariff policies [55][56] Question: How are you managing inventory levels? - PACCAR reported that its inventory levels for Class A trucks are around 3.1 months, which is lower than the industry average of four months, indicating a comfortable position [36][37] Question: What is the outlook for parts growth? - Management expressed confidence in parts growth despite a soft market, expecting margins to remain above 30% and sales to continue growing due to connected vehicle technology [50][51] Question: How does the company view the impact of EPA emissions changes? - Management stated that they are prepared for potential changes in emissions standards and have made investments in clean diesel technology to meet future requirements [44][46] Question: What is the visibility on orders and deliveries for the rest of the year? - Management indicated that they have a substantial backlog for Q2 and are taking orders for Q3 and Q4, with expectations for stable demand in both North America and Europe [86][87]

Company Performance - Paccar reported quarterly earnings of $1.46 per share, missing the Zacks Consensus Estimate of $1.57 per share, and down from $2.27 per share a year ago, representing an earnings surprise of -7.01% [1] - The company posted revenues of $6.91 billion for the quarter, missing the Zacks Consensus Estimate by 2.28%, and down from $8.24 billion year-over-year [2] - Over the last four quarters, Paccar has surpassed consensus EPS estimates only once and has topped consensus revenue estimates just once [2] Stock Movement and Outlook - Paccar shares have declined approximately 11.5% since the beginning of the year, compared to a -6% decline in the S&P 500 [3] - The company's earnings outlook will be crucial for future stock performance, with current consensus EPS estimates at $1.68 for the coming quarter and $6.62 for the current fiscal year [4][7] - The current Zacks Rank for Paccar is 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Context - The Automotive - Domestic industry, to which Paccar belongs, is currently ranked in the bottom 19% of over 250 Zacks industries, suggesting potential challenges ahead [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact Paccar's stock performance [5]

Financial Performance - PACCAR reported quarterly revenues of $7.44 billion in Q1 2025, down from $8.74 billion in Q1 2024, reflecting a decrease of approximately 14.9%[1] - Net income for Q1 2025 was $505.1 million ($0.96 per diluted share), including a $264.5 million after-tax charge related to civil litigation in Europe[1] - Adjusted net income (non-GAAP) for Q1 2025 was $769.6 million ($1.46 per diluted share), compared to $1.20 billion ($2.27 per diluted share) in Q1 2024[1][3] - Net income for Q1 2025 decreased to $505.1 million from $1,195.3 million in Q1 2024, representing a decline of approximately 57.8%[25] - Total sales and revenues for Q1 2025 were $7,441.7 million, down from $8,744.3 million in Q1 2024, a decrease of about 14.9%[27] - Truck segment revenue fell to $5,225.8 million in Q1 2025 from $6,541.0 million in Q1 2024, a decline of approximately 20.1%[27] - Adjusted net income (non-GAAP) for Q1 2025 was $769.6 million, compared to $1,534.5 million in Q1 2024, reflecting a decrease of approximately 50.2%[35] Cash Flow and Dividends - Cash and cash equivalents at the end of Q1 2025 were $5,517.7 million, down from $6,194.5 million at the end of Q1 2024, a decrease of about 10.9%[25] - Net cash provided by operating activities for Q1 2025 was $910.3 million, compared to $1,469.0 million in Q1 2024, a decline of approximately 38.0%[25] - Payments of cash dividends in Q1 2025 totaled $1,747.0 million, slightly lower than $1,816.5 million in Q1 2024, a decrease of about 3.8%[25] - The company experienced a net decrease in cash and cash equivalents of $1,543.1 million in Q1 2025, compared to a decrease of $987.2 million in Q1 2024[25] Investments and Expenditures - The company invested $171.9 million in capital projects and $115.4 million in research and development in Q1 2025[3][14] - PACCAR plans to invest between $700-$800 million in capital expenditures and $450-$480 million in R&D expenses for the full year 2025[14] Market Performance - DAF Brasil has achieved a 10% market share in the above 16-tonne truck market in Brazil, with plans for further expansion across South America[6] - The North American Class 8 truck market is projected to have retail sales between 235,000 and 265,000 trucks in 2025[4] Assets and Equity - PACCAR's total assets amounted to $42.72 billion as of March 31, 2025, with stockholders' equity at $18.02 billion[23] Deliveries - New truck deliveries decreased to 40,100 units in Q1 2025 from 48,100 units in Q1 2024, a reduction of about 16.5%[31] Charges and Litigation - The company recorded a pretax charge of $350.0 million related to civil litigation in Europe, impacting overall profitability[34]

Core Viewpoint - Paccar (PCAR) is expected to report a significant decline in quarterly earnings and revenues, with analysts predicting earnings of $1.57 per share, a decrease of 30.8% year-over-year, and revenues of $7.07 billion, down 14.1% from the previous year [1]. Earnings Estimates - The consensus EPS estimate has been revised downward by 9.4% in the last 30 days, indicating a reassessment by analysts [2]. - Changes in earnings estimates are crucial for predicting investor reactions, as empirical research shows a strong correlation between earnings estimate revisions and short-term stock performance [3]. Revenue Projections - Analysts project 'Sales and Revenues- Parts' to be $1.72 billion, reflecting a year-over-year increase of 2.8% [5]. - 'Sales and Revenues- Truck' is expected to reach $5.32 billion, indicating a decline of 18.7% from the same quarter last year [5]. - 'Sales and Revenues- Other' is forecasted at $17.87 million, a decrease of 1.3% year-over-year [5]. - 'Sales and Revenues- Financial Services' is estimated at $512.73 million, showing a slight increase of 0.7% from the prior year [6]. Delivery Estimates - Total 'Truck deliveries' are projected at 39,856, down from 48,100 in the same quarter last year [6]. - 'Truck deliveries - Other' are expected to be 7,206, slightly up from 7,000 year-over-year [6]. - 'Truck deliveries - Europe' is estimated at 10,502, down from 11,600 in the previous year [7]. - 'Truck deliveries - U.S and Canada' are forecasted at 22,148, compared to 29,500 in the same quarter last year [7]. Profit Estimates - 'Pretax Profit- Financial Services' is estimated at $105.99 million, down from $113.90 million year-over-year [8]. - 'Pretax Profit- Parts' is projected to be $420.38 million, compared to $455.80 million in the same quarter last year [8]. - 'Pretax Profit- Truck' is expected to reach $508.81 million, a significant decrease from $881.60 million in the previous year [9]. Stock Performance - Paccar shares have declined by 5.6% over the past month, compared to a 4.8% decline in the Zacks S&P 500 composite [9].

Core Insights - Methode Electronics, Inc.'s Grakon business unit has been recognized as a top-performing supplier by PACCAR, a manufacturer of Kenworth and Peterbilt trucks [1][4] - The recognition is part of PACCAR's Supplier Performance Management (SPM) Program, which evaluates suppliers based on product development, operations, aftermarket support, and alignment with PACCAR's business objectives [2] - Grakon has played a significant role in multiple PACCAR launches, providing advanced lighting solutions for various truck models [3] Company Overview - Grakon, LLC specializes in the design, development, and manufacture of advanced lighting systems, controls, and components for OEM manufacturers in heavy trucks, buses, rail, commercial electric vehicles, and power sports markets [5] - Grakon operates as a business unit of Methode Electronics, Inc., which is a global supplier of custom-engineered solutions with a presence in North America, Europe, the Middle East, and Asia [5]

Core Insights - Methode Electronics, Inc.'s Grakon business unit has been recognized as a top-performing supplier by PACCAR, a manufacturer of Kenworth and Peterbilt trucks [1][4] - The recognition is part of PACCAR's Supplier Performance Management (SPM) Program, which evaluates suppliers based on product development, operations, aftermarket support, and alignment with PACCAR's business objectives [2] - Grakon has played a significant role in multiple PACCAR launches, providing advanced interior and exterior lighting solutions [3] Company Overview - Grakon, LLC specializes in the design, development, and manufacture of advanced lighting systems, controls, and components for various markets, including heavy trucks, buses, and commercial electric vehicles [5] - Grakon operates as a business unit of Methode Electronics, Inc., which is a global supplier of custom-engineered solutions with a presence in North America, Europe, the Middle East, and Asia [5]

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

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