Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer”~~filer,” “smaller reporting company,” and ~~“smaller reporting~~“emerging growth company” in Rule 12b‑2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Common Stock, $1 par value — ~~351,610,175~~522,805,095 shares as of ~~October 31, 2017~~July 27, 2023

* The December 31, 2022 consolidated balance sheet has been derived from audited financial statements.

~~Information regarding finance receivables evaluated and determined individually and collectively is as follows:~~

~~The recorded investment for finance receivables that are on non-accrual status is as follows:~~

Impaired loans are summarized below. The impaired loans with a specific reserve represent the unpaid principal balance. The recorded investment of impaired loans as of September 30, 2017 and December 31, 2016 was not significantly different than the unpaid principal balance.

~~During the period the loans above were considered impaired, interest income recognized on a cash basis was as follows:~~

The Company's customers are principally concentrated in the transportation industry in North America, Europe, Australia and ~~Australia.~~Brasil. The Company’s portfolio assets are diversified over a large number of customers and dealers with no single customer or dealer balances representing over 5%5% of the total portfolio assets. The Company retains as collateral a security interest in the related equipment.

At the inception of each contract, the Company considers the credit risk based on a variety of credit quality factors including prior payment experience, customer financial information, credit-rating agency ratings, loan-to-value ratios and other internal metrics. On an ongoing basis, the Company monitors credit quality based on past due status and collection experience as there is a meaningful correlation between the past due status of customers and the risk of loss.

The Company has three credit quality indicators: performing, watch and at-risk. Performing accounts pay in accordance with the contractual terms and are not considered high-risk. Watch accounts include accounts 31 to 90 days past due and large accounts that are performing but are considered to be high‑risk. Watch accounts are not ~~impaired.~~collateral dependent. At-risk accounts are ~~accounts that are impaired,~~collateral dependent, including ~~TDRs,~~ accounts over 90 days past due and other accounts on non-accrual status.

The tables below summarize the Company’s finance receivables by aging category. In determining past due status, the Company considers the entire contractual account balance past due when any installment is over 30 days past due. Substantially all customer accounts that were greater than 30 days past due prior to credit modification became current upon modification for aging purposes.

The Company adopted ASU 2022-02 on January 1, 2023. The amortized cost basis of finance receivables modified for fleet customers experiencing financial difficulty was $.6 and $6.6 for the three and six months ended June 30, 2023, respectively. The amortized cost basis of finance receivables modified for owner/operator customers experiencing financial difficulty was nil for the three and six months ended June 30, 2023. Total modifications with customers experiencing financial difficulty represented nil and .1% of the total retail portfolio on an annualized basis for the three and six months ended June 30, 2023, respectively. The modifications provided term extensions and granted customers additional time to pay, primarily in Brasil. The financial effects of the term extensions added a weighted-average of 6 and 20 months to the life of the modified contracts for the three and six months ended June 30, 2023, respectively. The effect on the allowance for credit losses from such modifications was not significant for the three and six months ended June 30, 2023.

All of the finance receivables modified with customers experiencing financial difficulty are current. There were no finance receivables modified with customers experiencing financial difficulty on or after January 1, 2023 that had a payment default in the six months ended June 30, 2023.

Prior to the adoption of ASU 2022-02, when considering whether to modify customer accounts for credit reasons, the Company evaluated the creditworthiness of the customers and modified those accounts that the Company considered likely to perform under the modified terms. When the Company modified a loan or finance lease for credit reasons and granted a concession, the modification was classified as a troubled debt restructuring (TDR). The Company did not typically grant credit modifications for customers that did not meet minimum underwriting standards since the Company normally repossesses the financed equipment in those circumstances. When such modifications did occur, they were considered TDRs.

The Company expects to recognize approximately $137.2 of the remaining deferred revenue on extended warranties and R&M contracts in 2023, $272.8 in 2024, $274.8 in 2025, $209.3 in 2026, $138.5 in 2027 and $71.9 thereafter.

The effective tax rate for the ~~third~~second quarter of ~~2017~~2023 was ~~30.8%~~22.1% compared to ~~30.0%~~21.9% for the second quarter of 2022. The effective tax rate for the first six months of 2023 was 21.4% compared to 22.0% for the first six months of 2022. The higher effective tax rate in the ~~third~~

second quarter of ~~2016,~~2023 was primarily due to ~~the increase in~~a higher mix of pre-tax income ~~generated~~ in jurisdictions with higher tax ~~rates in 2017 as compared to 2016. For the first nine months, the~~rates. The lower effective tax rate ~~was 30.8%~~ in ~~2017 compared to 67.3% in 2016. Substantially all~~the first half of ~~the difference in tax rate was due to the non-deductible expense~~2023 reflect a lower mix of ~~$833.0 for the European Commission charge (EC charge) in 2016.~~foreign pre-tax income.

NOTE IJ - Derivative Financial Instruments

As part of its risk management strategy, the Company enters into derivative contracts to hedge against the risks of interest rates, ~~and~~ foreign currency ~~risk.~~rates and commodity prices. Certain derivative instruments designated as ~~either~~fair value hedges, cash flow hedges or ~~fair value~~net investment hedges are subject to hedge accounting. Derivative instruments that are not subject to hedge accounting are held as ~~economic hedges.~~derivatives not designated as hedged instruments. The Company’s policies prohibit the use of derivatives for speculation or trading. At the inception of each hedge relationship, the Company documents its risk management objectives, procedures and accounting treatment. All of the Company’s interest-rate, ~~and~~commodity as well as certain foreign-exchange contracts are transacted under International Swaps and Derivatives Association (ISDA) master agreements. Each agreement permits the net settlement of amounts owed in the event of default and certain other termination events. For derivative financial instruments, the Company has elected not to offset derivative positions in the balance sheet with the same counterparty under the same agreements and is not required to post or receive collateral.

Exposure limits and minimum credit ratings are used to minimize the risks of counterparty default. The Company’s maximum exposure to potential default of its ~~swap~~derivative counterparties is limited to the asset position of its ~~swap~~derivative portfolio. The asset position of the Company’s ~~swap~~derivative portfolio ~~is $47.8~~was $48.0 at ~~September~~June 30, ~~2017.~~2023.

The Company ~~uses regression analysis~~assesses hedges at inception and on an ongoing basis to ~~assess effectiveness of interest-rate contracts on a quarterly basis. For foreign-exchange contracts,~~determine the ~~Company performs quarterly assessments to ensure that critical terms continue to match. All components~~designated derivatives are highly effective in offsetting changes in fair values or cash flow of the ~~derivative instrument’s gain or loss are included in the assessment of hedge effectiveness. Gains or losses on the ineffective portion of cash flow hedges are recognized currently in earnings.~~hedged items. Hedge accounting is discontinued prospectively when the Company determines ~~that~~ a derivative financial instrument has ceased to be a highly effective hedge. Cash flows from derivative instruments are included in Operating activities in the Condensed Consolidated Statements of Cash Flows.

Interest-Rate Contracts:The Company enters into various interest-rate contracts, including interest-rate swaps and cross currency interest-rate swaps. Interest-rate swaps involve the exchange of fixed for floating rate or floating for fixed rate interest payments based on the contractual notional amounts in a single currency. Cross currency interest-rate swaps involve the exchange of notional amounts and interest payments in different currencies. The Company is exposed to interest-rate and exchange-rate risk caused by market volatility as a result of its borrowing activities. The objective of these contracts is to mitigate the fluctuations on earnings, cash flows and fair value of borrowings. Net amounts paid or received are reflected as adjustments to interest expense.

At ~~September~~June 30, ~~2017,~~2023, the notional amount of the Company’s interest-rate contracts was ~~$2,879.5.~~$2,830.2. Notional maturities for all interest-rate contracts are ~~$129.5~~$235.8 for the remainder of ~~2017, $985.8~~2023, $566.0 for ~~2018, $918.2~~2024, $980.2 for ~~2019, $383.4~~2025, $570.8 for ~~2020, $279.7~~2026, $244.3 for ~~2021, $150.3~~2027, $233.1 for ~~2022~~2028 and ~~$32.6~~ thereafter.

Foreign-Exchange Contracts:The Company enters into foreign-exchange contracts to hedge certain anticipated transactions and assets and liabilities denominated in foreign currencies, particularly the Canadian dollar, the euro, the British pound, the Australian dollar, the Brazilian real and the Mexican peso. The objective is to reduce fluctuations in earnings and cash flows associated with changes in foreign currency exchange rates. The Company enters into foreign-exchange contracts as net investment hedges to reduce the foreign currency exposure from its investments in foreign subsidiaries. At ~~September~~June 30, ~~2017,~~2023, the notional amount of the outstanding foreign-exchange contracts was ~~$411.9.~~$2,439.7. Foreign-exchange contracts typically mature within one ~~year.~~year.

Commodity Contracts: The Company enters into commodity forward contracts to hedge the prices of certain commodities used in the production of trucks. The objective is to reduce the fluctuation in earnings and cash flows associated with adverse movement in commodity prices. At June 30, 2023, the notional amount of the outstanding commodity contracts was $43.6. Commodity contracts mature within one year.

- 2325 -

~~PACCAR Inc – Form 10-Q~~


Notes to Consolidated Financial Statements (Unaudited)	(Millions, Except Share Amounts)

The following table presents the balance sheet classification, fair value, gross and pro forma net amounts of derivative financial instruments:

	September 30, 2017						December 31, 2016
	ASSETS			LIABILITIES			ASSETS			LIABILITIES			June 30, 2023						December 31, 2022
													ASSETS			LIABILITIES			ASSETS			LIABILITIES
Derivatives designated under hedge accounting:
Interest-rate contracts:
Financial Services:
Other assets	$	47.8					$	109.7					$	37.3					$	58.0
Deferred taxes and other liabilities				$	91.3					$	46.3					$	131.6					$	82.6
Foreign-exchange contracts:
Truck, Parts and Other:
Other current assets		1.6						3.9						9.1						57.3
Accounts payable, accrued expenses and other					4.4						1.9						48.8						9.5
Financial Services:
Other current assets																				1.6
Deferred taxes and other liabilities																	6.0						5.1
Commodity contracts:
Truck, Parts and Other:
Other current assets														.8						1.5
Accounts payable, accrued expenses and other																	2.7						.6
	$	49.4		$	95.7		$	113.6		$	48.2		$	47.2		$	189.1		$	118.4		$	97.8
Economic hedges:
Interest-rate contracts:
Financial Services:
Deferred taxes and other liabilities										$	.1
Derivatives not designated as hedging instruments:
Foreign-exchange contracts:
Truck, Parts and Other:
Other current assets	$	.3					$	.8					$	.7					$	1.0
Accounts payable, accrued expenses and other				$	.8						.3					$	.6					$	.1
Financial Services:
Other assets		2.0						4.0						.1
Deferred taxes and other liabilities					.6						.7						.1						.1
Commodity contracts:
Truck, Parts and Other:
Accounts payable, accrued expenses and other																							.2
	$	2.3		$	1.4		$	4.8		$	1.1		$	.8		$	.7		$	1.0		$	.4
Gross amounts recognized in Balance Sheets	$	51.7		$	97.1		$	118.4		$	49.3		$	48.0		$	189.8		$	119.4		$	98.2
Less amounts not offset in financial instruments:
Truck, Parts and Other:
Foreign-exchange contracts		(1.1	)		(1.1	)		(1.0	)		(1.0	)	$	(1.0	)	$	(1.0	)	$	(.1	)	$	(.1	)
Commodity contracts														(.8	)		(.8	)		(.5	)		(.5	)
Financial Services:
Foreign-exchange contracts																				(1.8	)		(1.8	)
Interest-rate contracts		(9.6	)		(9.6	)		(15.4	)		(15.4	)		(21.8	)		(21.8	)		(21.5	)		(21.5	)
Foreign-exchange contracts								(.1	)		(.1	)
Pro forma net amount	$	41.0		$	86.4		$	101.9		$	32.8		$	24.4		$	166.2		$	95.5		$	74.3

- 2426 -

~~PACCAR Inc – Form 10-Q~~


Notes to Consolidated Financial Statements (Unaudited)	(Millions, Except Share Amounts)

The following table presents the amount of loss (gain) from derivative financial instruments recorded in the Consolidated Statements of Comprehensive Income:


	Three Months Ended					Six Months Ended
	June 30, 2023					June 30, 2023
	INTEREST-		FOREIGN-			INTEREST-		FOREIGN-
	RATE		EXCHANGE			RATE		EXCHANGE
Truck, Parts and Other:
Net sales and revenues
Cash flow hedges			$	11.8				$	12.0
Cost of sales and revenues
Cash flow hedges				11.4					11.4
Derivatives not designated as hedging instruments				(2.0	)				(4.0	)
Interest and other (income), net
Cash flow hedges				4.4					6.2
Net investment hedges				(2.0	)				(4.8	)
Derivatives not designated as hedging instruments				3.0					4.9
			$	26.6				$	25.7
Financial Services:
Interest and other borrowing expenses
Cash flow hedges	$	32.6	$	(1.9	)	$	60.0	$	.5
Fair value hedges		2.7					4.3
Derivatives not designated as hedging instruments				.2					(.1	)
	$	35.3	$	(1.7	)	$	64.3	$	.4
Total	$	35.3	$	24.9		$	64.3	$	26.1


	Three Months Ended						Six Months Ended
	June 30, 2022						June 30, 2022
	INTEREST-			FOREIGN-			INTEREST-			FOREIGN-
	RATE			EXCHANGE			RATE			EXCHANGE
Truck, Parts and Other:
Net sales and revenues
Cash flow hedges				$	8.2					$	15.1
Cost of sales and revenues
Cash flow hedges					(1.0	)					2.7
Derivatives not designated as hedging instruments					.4						(.1	)
Interest and other (income), net
Cash flow hedges											.3
Net investment hedges					(1.5	)					(2.8	)
Derivatives not designated as hedging instruments					(.6	)					1.3
				$	5.5					$	16.5
Financial Services:
Interest and other borrowing expenses
Cash flow hedges	$	(36.5	)				$	(43.1	)
Fair value hedges		.2						.1
Derivatives not designated as hedging instruments				$	.1					$	.2
	$	(36.3	)	$	.1		$	(43.0	)	$	.2
Total	$	(36.3	)	$	5.6		$	(43.0	)	$	16.7

The gain (loss) from commodity contracts recorded in Cost of sales and revenue was $4.6 and $2.4 for the three months and six months ended June 30, 2023, respectively and ($5.5) and ($10.4) for the three months and six months ended June 30, 2022, respectively.

- 27 -


Notes to Consolidated Financial Statements (Unaudited)	(Millions, Except Share Amounts)

Fair Value Hedges

Changes in the fair value of derivatives designated as fair value hedges are recorded in earnings together with the changes in fair value of the hedged item attributable to the risk being hedged. The ~~(income) or expense recognized in earnings~~following table presents the amounts recorded on the Consolidated Balance Sheets related to cumulative basis adjustments for fair value ~~hedges was included in interest~~hedges:


	June 30		December 31
	2023		2022
Financial Services
Term notes:
Carrying amount of the hedged liabilities	$	123.5	$	319.8
Cumulative basis adjustment included in the carrying amount		11.0		27.7

The above table excludes the cumulative basis adjustments on discontinued hedge relationships of $17.7 and ~~other borrowing expenses in the Financial Services segment~~$7.1 as of ~~the Consolidated Statements of Comprehensive Income as follows:~~June 30, 2023 and December 31, 2022, respectively.

Three Months Ended

Nine Months Ended

September 30

September 30

2017

2016

2017

2016

Interest-rate swaps

$
.4

$
3.7

$
1.0

$
(1.3
)
Term notes

(.2
)

(3.8
)

(.6
)

.6

Cash Flow Hedges

Substantially all of the Company’s interest-rate contracts and some foreign-exchange contracts and all commodity contracts have been designated as cash flow hedges. Changes in the fair value of derivatives designated as cash flow hedges are recorded in ~~AOCI to the extent such hedges are considered effective.~~AOCI. Amounts in AOCI are reclassified into net income in the same period in which the hedged transaction affects earnings. The Company elected to exclude the forward premium component (excluded component) on some foreign-exchange cash flow hedges and amortize the excluded component over the life of the derivative instruments. The amortization of the excluded component is recognized in Interest and other (income), net in Truck, Parts and Other segment and Interest and other borrowing expenses in Financial Services segment in the Consolidated Statements of Comprehensive Income. The maximum length of time over which the Company is hedging its exposure to the variability in future cash flows is ~~9.8~~9.5 years. ~~For the three and nine month period ended September 30, 2017 and 2016, the Company recognized no gains or losses on the ineffective portion.~~

The following ~~table~~tables presents the pre-tax effects of ~~derivative instruments~~gain (loss) on cash flow hedges recognized in other comprehensive income (loss) (OCI):

	Three Months Ended						Nine Months Ended
	September 30, 2017						September 30, 2017						Three Months Ended									Six Months Ended
	INTEREST-			FOREIGN-			INTEREST-			FOREIGN-			June 30, 2023									June 30, 2023
	RATE			EXCHANGE			RATE			EXCHANGE			INTEREST-			FOREIGN-						INTEREST-			FOREIGN-
	CONTRACTS			CONTRACTS			CONTRACTS			CONTRACTS			RATE			EXCHANGE			COMMODITY			RATE			EXCHANGE			COMMODITY
Loss recognized in OCI:
(Loss) gain recognized in OCI:
Truck, Parts and Other				$	(3.0	)				$	(23.4	)				$	(47.1	)	$	(2.0	)				$	(67.2	)	$	1.9
Financial Services	$	(23.2	)				$	(106.3	)				$	(35.6	)		2.6					$	(77.9	)		1.6
	$	(23.2	)	$	(3.0	)	$	(106.3	)	$	(23.4	)	$	(35.6	)	$	(44.5	)	$	(2.0	)	$	(77.9	)	$	(65.6	)	$	1.9


													Three Months Ended									Six Months Ended
													June 30, 2022									June 30, 2022
													INTEREST-			FOREIGN-						INTEREST-			FOREIGN-
													RATE			EXCHANGE			COMMODITY			RATE			EXCHANGE			COMMODITY
Gain (loss) recognized in OCI:
Truck, Parts and Other																$	28.5		$	(43.7	)				$	.1		$	(7.8	)
Financial Services													$	39.8			.2					$	59.7			(.3	)
													$	39.8		$	28.7		$	(43.7	)	$	59.7		$	(.2	)	$	(7.8	)

~~- 25 -~~

~~PACCAR Inc – Form 10-Q~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~(Millions, Except Share Amounts)~~

~~Expense (income) reclassified out of AOCI into income was as follows:~~

Three Months Ended

Nine Months Ended

September 30, 2017

September 30, 2017

INTEREST-

FOREIGN-

INTEREST-

FOREIGN-

RATE

EXCHANGE

RATE

EXCHANGE

CONTRACTS

CONTRACTS

CONTRACTS

CONTRACTS

Truck, Parts and Other:

Net sales and revenues

$
(3.0
)

$
13.3

Cost of sales and revenues

5.5

4.3

Interest and other expense, net

1.0

1.6

Financial Services:

Interest and other borrowing expenses

$
24.6

$
110.4

Total

$
24.6

$
3.5

$
110.4

$
19.2

Three Months Ended

Nine Months Ended

September 30, 2016

September 30, 2016

INTEREST-

FOREIGN-

INTEREST-

FOREIGN-

RATE

EXCHANGE

RATE

EXCHANGE

CONTRACTS

CONTRACTS

CONTRACTS

CONTRACTS

Truck, Parts and Other:

Net sales and revenues

$
(11.1
)

$
(17.6
)
Cost of sales and revenues

.6

Interest and other expense, net

(.3
)

1.6

Financial Services:

Interest and other borrowing expenses

$
28.2

$
78.5

Total

$
28.2

$
(11.4
)

$
78.5

$
(15.4
)

The amount of loss recorded in AOCI at ~~September~~June 30, ~~2017~~2023 that is estimated to be reclassified into earnings in the following 12 months if interest rates and exchange rates remain unchanged is approximately ~~$2.3,~~$26.4, net of taxes. The fixed interest earned on finance receivables will offset the amount recognized in interest expense, resulting in a stable interest margin consistent with the Company’s risk management strategy.

The amount of gains ~~(losses)~~ reclassified out of AOCI into net income based on the probability that the original forecasted transactions would not occur was nil and $.2 for the three months and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2023, respectively and nil and ~~$.3~~$.1 for the ~~three and nine month~~same periods ended ~~September~~June 30, ~~2016, respectively.~~2022.

- 2628 -

~~PACCAR Inc – Form 10-Q~~


Notes to Consolidated Financial Statements (Unaudited)	(Millions, Except Share Amounts)

~~Economic~~Net Investment Hedges

Changes in the fair value of derivatives designated as net investment hedges are recorded in AOCI as an adjustment to the Cumulative Translation Adjustment (CTA). At June 30, 2023, the notional amount of the outstanding net investment hedges was $443.6. For the three and six months ended June 30, 2023, the pre-tax loss recognized in OCI for the net investment hedges were $3.7 and $3.3, respectively and $17.8 and $36.0 for the same periods ending June 30, 2022.

Derivatives Not Designated As Hedging Instruments

For other risk management purposes, the Company enters into derivative instruments that do not qualify for hedge accounting. These derivative instruments are used to mitigate the risk of market volatility arising from borrowings and foreign currency denominated transactions. Changes in the fair value of ~~economic hedges~~derivatives not designated as hedging instruments are recorded in earnings in the period in which the change occurs.

~~The expense (income) recognized in earnings related to economic hedges was as follows:~~

Three Months Ended

Nine Months Ended

September 30, 2017

September 30, 2017

INTEREST-

FOREIGN-

INTEREST-

FOREIGN-

RATE

EXCHANGE

RATE

EXCHANGE

CONTRACTS

CONTRACTS

CONTRACTS

CONTRACTS

Truck, Parts and Other:

Cost of sales and revenues

$
.6

$
1.3

Interest and other expense, net

(1.0
)

3.2

Financial Services:

Interest and other borrowing expenses

4.8

$
(.1
)

43.4

Selling, general and administrative

.8

Total

$
4.4

$
(.1
)

$
48.7

Three Months Ended

Nine Months Ended

September 30, 2016

September 30, 2016

INTEREST-

FOREIGN-

INTEREST-

FOREIGN-

RATE

EXCHANGE

RATE

EXCHANGE

CONTRACTS

CONTRACTS

CONTRACTS

CONTRACTS

Truck, Parts and Other:

Net sales and revenues

$
(.4
)

$
(.4
)
Cost of sales and revenues

.3

1.4

Interest and other expense, net

(1.3
)

(.5
)
Financial Services:

Interest and other borrowing expenses

$
.1

(3.1
)

$
.1

(11.3
)
Selling, general and administrative

(.9
)

(2.5
)
Total

$
.1

$
(5.4
)

$
.1

$
(13.3
)

~~- 27 -~~

~~PACCAR Inc – Form 10-Q~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~(Millions, Except Share Amounts)~~

NOTE JK - Fair Value Measurements

Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at themeasurement date. Inputs to valuation techniques used to measure fair value are either observable or unobservable. These inputs have been categorized into the fair value hierarchy described below.

Level 1 – Valuations are based on quoted prices that the Company has the ability to obtain in actively traded markets for identical assets or liabilities. Since valuations are based on quoted prices that are readily and regularly available in an active market or exchange traded market, valuation of these instruments does not require a significant degree of judgment.

Level 2 – Valuations are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3 – Valuations are based on model-based techniques for which some or all of the assumptions are obtained from indirect market information that is significant to the overall fair value measurement and which require a significant degree of management judgment.

There were no transfers of assets or liabilities between Level 1 and Level 2 of the fair value hierarchy during the nine months ended September 30, 2017. The Company’s policy is to recognize transfers between levels at the end of the reporting period.

The Company uses the following methods and assumptions to measure fair value for assets and liabilities subject to recurring fair value measurements.

Marketable Debt Securities: The Company’s marketable debt securities consist of municipal bonds, government obligations, investment-grade corporate obligations, commercial paper, asset-backed securities and term deposits. The fair value of U.S. government obligations is determined using the market approach and is based on quoted prices in active markets and are categorized as Level 1.

The fair value of U.S. government agency obligations, non-U.S. government bonds, municipal bonds, corporate bonds, asset-backed securities, commercial paper and term deposits is determined using the market approach and is primarily based on matrix pricing as a practical expedient which does not rely exclusively on quoted prices for a specific security. Significant inputs used to determine fair value include interest rates, yield curves, credit rating of the security and other observable market information and are categorized as Level 2.

Marketable Equity Securities: The Company’s equity securities are traded on active exchanges and are classified as Level 1.

Derivative Financial Instruments: The Company’s derivative contracts consist of interest-rate swaps, cross currency swaps, ~~and~~ foreign currency exchange and commodity contracts. These derivative contracts are traded over the counter, and their fair value is determined using industry standard valuation models, which are based on the income approach (i.e., discounted cash flows). The significant observable inputs into the valuation models include interest rates, yield curves, currency exchange rates, credit default swap spreads, ~~and~~ forward rates and commodity prices and are categorized as Level 2.

- 2829 -

~~PACCAR Inc – Form 10-Q~~


Notes to Consolidated Financial Statements (Unaudited)	(Millions, Except Share Amounts)

Assets and Liabilities Subject to Recurring Fair Value Measurement

The Company’s assets and liabilities subject to recurring fair value measurements are either Level 1 or Level 2 as follows:

At September 30, 2017	LEVEL 1		LEVEL 2		TOTAL

At June 30, 2023							LEVEL 1		LEVEL 2		TOTAL
Assets:
Marketable debt securities
U.S. tax-exempt securities			$	522.0	$	522.0			$	327.1	$	327.1
U.S. taxable municipal / non-U.S. provincial bonds										220.5		220.5
U.S. corporate securities				58.9		58.9				299.1		299.1
U.S. government and agency securities	$	12.2				12.2	$	146.6				146.6
Non-U.S. corporate securities				397.9		397.9				483.9		483.9
Non-U.S. government securities				97.2		97.2				110.3		110.3
Other debt securities				127.8		127.8				100.1		100.1
Total marketable debt securities	$	12.2	$	1,203.8	$	1,216.0	$	146.6	$	1,541.0	$	1,687.6
Marketable equity securities							$	2.9			$	2.9
Total marketable securities							$	149.5	$	1,541.0	$	1,690.5
Derivatives
Cross currency swaps			$	43.2	$	43.2			$	25.0	$	25.0
Interest-rate swaps				4.6		4.6				12.3		12.3
Foreign-exchange contracts				3.9		3.9				9.9		9.9
Commodity contracts										.8		.8
Total derivative assets			$	51.7	$	51.7			$	48.0	$	48.0
Liabilities:
Derivatives
Cross currency swaps			$	84.1	$	84.1			$	117.1	$	117.1
Interest-rate swaps				7.2		7.2				14.5		14.5
Foreign-exchange contracts				5.8		5.8				55.5		55.5
Commodity contracts										2.7		2.7
Total derivative liabilities			$	97.1	$	97.1			$	189.8	$	189.8

At December 31, 2016

LEVEL 1

LEVEL 2

TOTAL

Assets:

Marketable debt securities

U.S. tax-exempt securities

$
595.0

$
595.0

U.S. corporate securities

47.8

47.8

U.S. government and agency securities

$
15.4

.6

16.0

Non-U.S. corporate securities

308.0

308.0

Non-U.S. government securities

98.2

98.2

Other debt securities

75.9

75.9

Total marketable debt securities

$
15.4

$
1,125.5

$
1,140.9

Derivatives

Cross currency swaps

$
102.7

$
102.7

Interest-rate swaps

7.0

7.0

Foreign-exchange contracts

8.7

8.7

Total derivative assets

$
118.4

$
118.4

Liabilities:

Derivatives

Cross currency swaps

$
37.1

$
37.1

Interest-rate swaps

9.3

9.3

Foreign-exchange contracts

2.9

2.9

Total derivative liabilities

$
49.3

$
49.3

- 2930 -

~~PACCAR Inc – Form 10-Q~~


Notes to Consolidated Financial Statements (Unaudited)	(Millions, Except Share Amounts)


At December 31, 2022	LEVEL 1		LEVEL 2		TOTAL
Assets:
Marketable debt securities
U.S. tax-exempt securities			$	445.1	$	445.1
U.S. taxable municipal / non-U.S. provincial bonds				180.8		180.8
U.S. corporate securities				251.0		251.0
U.S. government and agency securities	$	115.0				115.0
Non-U.S. corporate securities				450.0		450.0
Non-U.S. government securities				76.4		76.4
Other debt securities				94.7		94.7
Total marketable debt securities	$	115.0	$	1,498.0	$	1,613.0
Marketable equity securities	$	1.2			$	1.2
Total marketable securities	$	116.2	$	1,498.0	$	1,614.2
Derivatives
Cross currency swaps			$	49.1	$	49.1
Interest-rate swaps				8.9		8.9
Foreign-exchange contracts				59.9		59.9
Commodity contracts				1.5		1.5
Total derivative assets			$	119.4	$	119.4
Liabilities:
Derivatives
Cross currency swaps			$	52.0	$	52.0
Interest-rate swaps				30.6		30.6
Foreign-exchange contracts				14.8		14.8
Commodity contracts				.8		.8
Total derivative liabilities			$	98.2	$	98.2

Fair Value Disclosure of Other Financial Instruments

For financial instruments that are not recognized at fair value, the Company uses the following methods and assumptions to determine the fair value. These instruments are categorized as Level 2, except cash which is categorized as Level 1 and fixed rate loans which are categorized as Level 3.

Cash and Cash Equivalents: Carrying amounts approximate fair value.

Financial Services Net Receivables: For ~~floating-rate~~floating rate loans, wholesale ~~financings,~~financing and operating lease and other trade receivables, carrying values approximate fair values. For fixed rate loans, fair values are estimated using the income approach by discounting cash flows to their present value based on assumptions regarding the credit and market risks to approximate current rates for comparable loans. Finance lease receivables and related allowance for credit losses have been excluded from the accompanying table.

Debt: The carrying amounts of ~~financial services~~Financial Services commercial paper, variable rate bank loans and variable rate term notes approximate fair value. For fixed rate debt, fair values are estimated using the income approach by discounting cash flows to their present value based on current rates for comparable debt.

The Company’s estimate of fair value for fixed rate loans and debt that are not carried at fair value was as follows:


	June 30, 2023				December 31, 2022
	CARRYING		FAIR		CARRYING		FAIR
	AMOUNT		VALUE		AMOUNT		VALUE
Assets:
Financial Services fixed rate loans	$	7,451.1	$	7,251.6	$	6,859.1	$	6,582.0
Liabilities:
Financial Services fixed rate debt		8,270.7		7,936.5		8,070.5		7,715.9

- 31 -


Notes to Consolidated Financial Statements (Unaudited)	(Millions, Except Share Amounts)

September 30, 2017

December 31, 2016

CARRYING

FAIR

CARRYING

FAIR

AMOUNT

VALUE

AMOUNT

VALUE

Assets:

Financial Services fixed rate loans

$
3,612.6

$
3,622.4

$
3,607.4

$
3,638.4

Liabilities:

Financial Services fixed rate debt

5,372.5

5,378.6

4,915.2

4,929.3

NOTE KL - Employee Benefit Plans

The Company has several defined benefit pension plans, which cover a majority of its employees. The following information details the components of net pension (income) expense for the Company’s defined benefit plans:


	Three Months Ended						Six Months Ended
	June 30						June 30
	2023			2022			2023			2022
Service cost	$	21.9		$	43.3		$	46.9		$	75.8
Interest on projected benefit obligation		32.6			23.8			63.7			42.9
Expected return on assets		(57.6	)		(60.1	)		(115.1	)		(108.8	)
Amortization of prior service costs		.4			.2			.7			.3
Recognized actuarial loss		1.7			9.0			2.4			14.6
Net pension (income) expense	$	(1.0	)	$	16.2		$	(1.4	)	$	24.8

Three Months Ended

Nine Months Ended

September 30

September 30

2017

2016

2017

2016

Service cost

$
23.5

$
22.2

$
69.5

$
66.7

Interest on projected benefit obligation

20.5

23.4

60.9

71.1

Expected return on assets

(40.1
)

(35.2
)

(119.5
)

(106.9
)
Amortization of prior service costs

.3

.3

.9

.9

Recognized actuarial loss

6.3

6.9

18.9

20.8

Net pension expense

$
10.5

$
17.6

$
30.7

$
52.6

~~On January 1, 2017, the Company changed the method used to estimate service cost and interest cost~~The components of pension expense from a single weighted-average method, which is a single discount rate determined at the pension plans measurement date, to an individual spot rate approach, which applies specific spot rates along the yield curve to the relevant projected cash flows. This approach is a more precise measurement of net periodic benefit costs and does not impact the benefit obligation. The Company considers this a change in estimate inseparable from a change in accounting principle and is being accounted for prospectively. This change will lower net pension expense ~~by approximately $15.0~~other than service cost are included in ~~2017.~~Interest and other (income), net on the Consolidated Statements of Comprehensive Income.

During the three months and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2023, the Company contributed ~~$4.9~~$5.7 and $ ~~15.3~~11.5 to its pension plans,

respectively, and ~~$5.8~~$6.5 and ~~$65.1~~$13.2 for the three months and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2022, respectively.

~~- 30 -~~

~~PACCAR Inc – Form 10-Q~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~(Millions, Except Share Amounts)~~

NOTE LM – Commitments and Contingencies

~~In the first half of~~

On July 19, 2016, the ~~Company recorded a charge of €752.7 ($833.0) in connection with an~~European Commission (EC) concluded its investigation ~~by the EC~~ of all major European truck manufacturers ~~including DAF Trucks N.V., its subsidiary DAF Trucks Deutschland GmbH (collectively, “DAF”)~~ and ~~the Company as their parent. On July 19, 2016, the EC~~ reached a settlement with DAF Trucks N.V., DAF Trucks Deutschland GmbH and PACCAR Inc (collectively “the Company”). Following the settlement, certain EC-related claims and lawsuits have been filed in various jurisdictions primarily in Europe against all major European truck manufacturers including the Company ~~under which the EC imposed a fine of €752.7 ($833.0) for infringement of European Union competition rules. DAF paid the fine in August 2016. Following the EC settlement,~~and certain subsidiaries. These claims and lawsuits include a ~~petition to certify a claim as~~number of collective proceedings, including a class action ~~have been filed against DAF~~in the United Kingdom, alleging EC-related claims and ~~other truck manufacturers. Others~~seeking monetary damages. In certain jurisdictions, the limitations period has not yet expired and additional claimants may bring EC-related claims and lawsuits against the Company or its subsidiaries. ~~While~~

The legal proceedings are moving through the court systems. In 2023, several European courts issued judgments; some have been favorable while others have been unfavorable and are being appealed. The Company believes it has meritorious defenses ~~such claims will likely take~~to the legal claims. During the first quarter of 2023, the Company settled with several claimants. Based on these settlements and judgments, the Company recorded in the first quarter 2023, a ~~significant period~~non-recurring pre-tax charge of ~~time to resolve, and it is not possible to~~$600.0 million ($446.4 million after-tax) for the estimable total cost. The estimate ~~a range of potential loss. An adverse outcome of such proceedings~~may be adjusted as the legal process continues, which could have a material impact on the Company’s ~~results of operations.~~financial results.

~~The Company~~PACCAR is also a defendant in various other legal proceedings and, in addition, there are various other contingent liabilities arising in the normal course of business. After consultation with legal counsel, management does not anticipate that disposition of these various other proceedings and contingent liabilities will have a material effect on the consolidated financial statements.

- 3132 -

~~PACCAR Inc – Form 10-Q~~

~~ITEM 2.~~

~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF~~ ~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~OVERVIEW:~~

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW:

PACCAR is a global technology company whose Truck segment includes the design and manufacture of high-quality light-, medium- and heavy-duty commercial trucks. In North America, trucks are sold under the Kenworth and Peterbilt nameplates, in Europe, under the DAF nameplate and in Australia and South America, under the Kenworth and DAF nameplates. The Parts segment includes the distribution of aftermarket parts for trucks and related commercial vehicles. The Company’s Financial Services segment derives its earnings primarily from financing or leasing PACCAR products in North America, Europe, Australia and ~~Australia.~~South America. The Company’s Other business includes the manufacturing and marketing of industrial winches.

~~Third~~Second Quarter Financial Highlights:

•

Worldwide net sales and revenues were ~~$5.06~~$8.88 billion in ~~2017~~2023 compared to ~~$4.25~~$7.16 billion in ~~2016.~~

2022, primarily due to higher truck and parts revenues.

•

Truck ~~sales~~revenues were ~~$3.87~~$6.83 billion in ~~2017~~2023 compared to ~~$3.17~~$5.34 billion in ~~2016,~~2022, primarily due to higher truck deliveries and price realization in ~~the U.S. and Canada, Europe and Australia, and favorable currency translation effects.~~

all markets.

•

Parts sales were ~~a record $840.0 million~~$1.60 billion in ~~2017~~2023 compared to ~~$764.8 million~~$1.43 billion in ~~2016~~2022 reflecting higher ~~demand~~price realization in ~~all markets.~~

North America and Europe.

•

Financial Services revenues were ~~$328.2~~$439.8 million in ~~2017~~2023 compared to ~~$296.2~~$372.5 million in ~~2016. The increase was~~2022, primarily ~~the result of~~due to portfolio growth and higher ~~average operating lease assets.~~

portfolio yields.

•

Net income was ~~$402.7 million~~$1.22 billion ($~~1.14~~2.33 per diluted share) in ~~2017~~2023 compared to ~~$346.2~~$720.4 million ($~~.98~~1.37 per diluted share) in ~~2016. The~~2022 due to higher Truck, Parts and Financial Services operating ~~results reflect higher truck deliveries and record worldwide Parts segment sales and profit.~~

results.

•

Capital investments were ~~$115.3~~$179.1 million in ~~2017~~2023 compared to ~~$111.4~~$121.0 million in ~~2016.~~

2022.

•

Research and development (R&D) expenses were ~~$67.0~~$101.3 million in ~~2017~~2023 compared to ~~$59.2~~$80.4 million in ~~2016.~~

2022.

First ~~Nine~~Six Months Financial Highlights:

•

Worldwide net sales and revenues were ~~$14.00~~ $17.35billion in ~~2017~~2023 compared to ~~$12.96~~ $13.63billion in ~~2016.~~

2022, primarily due to higher truck and parts revenues.

•

Truck ~~sales~~revenues were ~~$10.55~~ $13.24billion in ~~2017~~2023 compared to ~~$9.78~~$10.03 billion in ~~2016,~~2022, primarily ~~reflecting~~due to higher truck deliveries and price realization in ~~the U.S. and Canada as well as Europe, partially offset by unfavorable currency translation effects.~~

all markets.

•

Parts sales were ~~a record $2.45~~ $3.22billion in ~~2017~~2023 compared to ~~$2.24~~ $2.82billion in ~~2016~~2022 reflecting higher ~~demand in all markets.~~

price realization.

•

Financial Services revenues were ~~$936.7~~ $863.0million in ~~2017~~2023 compared to ~~$883.0~~$738.7 million in ~~2016. The increase was~~2022, primarily ~~revenues from higher average operating lease earning assets~~due to portfolio growth and higher ~~used truck sales.~~

portfolio yields.

•

Net income was ~~$1.09~~$1.96 billion ($~~3.08~~ 3.73per diluted share) in ~~2017~~2023 compared to ~~$232.9 million~~$1.32 billion ($~~.66~~2.52 per diluted share) in ~~2016. Excluding the $833.0 million non-recurring EC charge, the Company earned adjusted~~2022 due to higher Truck, Parts and Financial Services operating results.

•

Adjusted net income (non-GAAP), excluding a $446.4 million after-tax non-recurring charge related to civil litigation in Europe in the first quarter of ~~$1.07~~this year, was $2.40 billion ($~~3.03~~ 4.58per diluted share) ~~in 2016.~~. See Reconciliation of GAAP to ~~non-GAAP~~Non-GAAP Financial Measures on page ~~49. The operating results reflect higher truck deliveries and record worldwide Parts segment sales and profit, partially offset by lower truck margins and lower Financial Services segment results.~~

47.

•

Capital investments were ~~$275.1~~$312.0 million in ~~2017~~2023 compared to ~~$265.8~~$234.5 million in ~~2016.~~

2022.

•

~~R&D~~Research and development (R&D) expenses were ~~$194.1~~ $198.5million in ~~2017~~2023 compared to ~~$179.6~~$158.4 million in ~~2016.~~

2022.

In the third quarter of 2017, the Company opened the PACCAR Innovation Center in Sunnyvale, California. The advanced technology research and development center coordinates next-generation product development and identifies emerging technologies to enhance future vehicle performance. Technology areas of focus include advanced driver assistance systems, artificial intelligence, vehicle connectivity and powertrain electrification.

In the third quarter of 2017, the Company launched a new proprietary 12-speed automated transmission in North America, the lightest transmission for Class 8 on-highway vehicles. The PACCAR automated transmission is designed to complement the superior performance of PACCAR MX engines and PACCAR axles. The transmission also reduces vehicle weight by up to 105 pounds, enhances low-speed maneuverability through excellent gear ratio coverage, and contributes to increased customer uptime with its industry-leading 750,000 mile oil change interval.

~~- 32 -~~

~~PACCAR Inc – Form 10-Q~~

The Company’s Kenworth division will collaborate with the PACCAR Technical Center and the Company’s DAF division to launch its U.S. Department of Energy (DOE) SuperTruck II program. The five-year project will utilize the Kenworth T680 with a 76-inch sleeper and the fuel-efficient PACCAR MX-13 engine with the goal to double Class 8 vehicle freight efficiency and achieve greenhouse gas emissions requirements for model years 2021, 2024 and 2027.

Beginning in the first quarter of 2018, the Company’s DAF division will participate in a two-year truck platooning trial organized by the United Kingdom Department for Transport. The trial is organized to demonstrate that wirelessly-linked truck combinations, or platoons, can deliver improved efficiency to the transportation industry by lowering fuel consumption, reducing CO2 emissions, improving traffic flow and contributing to increased road safety.

The PACCAR Financial Services (PFS) group of companies has operations covering four continents and 2426 countries. The global breadth of PFS and its rigorous credit application process support a portfolio of loans and leases with ~~record~~ total assets of ~~$13.06~~$19.04 billion. PFS issued ~~$1.33~~$1.48 billion in medium-term notes during the first ~~nine~~six months of ~~2017~~2023 to support ~~portfolio growth.~~new business volume and repay maturing debt.

- 33 -

Truck Outlook

Truck industry heavy-duty retail sales in the U.S. and Canada in ~~2017~~2023 are expected to be ~~210,000~~290,000 to ~~220,000~~320,000 units compared to ~~215,700~~283,500 in ~~2016. Estimates for the U.S. and Canada truck industry retail sales in 2018 are in the range of 220,000 to 250,000 units.~~2022. In Europe, ~~the 2017~~2023 truck industry registrations for over 16-tonne vehicles are expected to be 300,000 to ~~310,000~~330,000 units compared to ~~302,500 truck registrations~~297,500 in ~~2016. In Europe, the 2018 truck industry registrations in the above 16-tonne truck market are projected to be in a range of 280,000 to 310,000 units.~~2022. In South America, heavy-duty truck industry ~~sales~~registrations in ~~2017 are estimated to be in a range of 55,000 to 60,000 units compared to 56,500 in 2016. In South America, the 2018 heavy-duty truck industry sales~~2023 are projected to be 105,000 to 115,000as compared to 137,100 in ~~a range~~2022.

The Company has been affected by an industry-wide undersupply of ~~65,000~~component parts and anticipates the shortages may continue to ~~70,000 units.~~affect deliveries in 2023.

Parts Outlook

In ~~2017,~~2023, PACCAR Parts sales in North America are expected to be 8-10% higher than 2016 sales. In 2018, North America parts sales are expected to grow 3-5%. In Europe, 2017 aftermarket parts sales are expected to be 3-4% higher than 2016 sales. In 2018, Europe aftermarket sales are expected to increase ~~2-4%.~~10-13% compared to 2022 levels reflecting good retail demand.

Financial Services Outlook

~~Based on the truck market outlook,~~In 2023, average earning assets ~~in 2017~~ are expected to ~~be comparable~~increase 7-10% compared to ~~2016. Current good levels of freight tonnage, freight rates and fleet utilization are contributing to customers’ profitability and cash flow.~~2022. If current freight transportation conditions decline due to weaker economic conditions, then past due accounts, truck repossessions and credit losses would likely increase from the current low levels and new business volume would likely decline. ~~In 2018, average earning assets are expected to increase 1-3%.~~

Capital ~~Spending~~Investments and R&D Outlook

Capital investments in ~~2017~~2023 are expected to be ~~$400~~$625 to ~~$450~~$675 million and R&D is expected to be ~~$260~~$400 to ~~$270 million. These expenditures are focused on manufacturing facilities, new product development and enhanced aftermarket support.~~

~~In 2018, capital investments are projected to be $425 to $475 million and R&D is expected to be $270 to $300~~$430 million. The Company is ~~investing~~increasing its investment in ~~new truck models, integrated~~fuel efficient diesel and electric powertrain ~~enhanced aerodynamic truck designs, advanced driver assistance and truck connectivity~~ technologies, ~~and expanded~~autonomous systems, connected vehicle services, the next-generation manufacturing and parts and distribution ~~facilities.~~capabilities.

See the Forward-Looking Statements section of Management’s Discussion and Analysis for factors that may affect these outlooks.

~~- 33 -~~

~~PACCAR Inc – Form 10-Q~~

RESULTS OF OPERATIONS:

The Company’s results of operations for the three and six months ended June 30, 2023 and 2022 are presented below.

Three Months Ended

Nine Months Ended

September 30

September 30

($ in millions, except per share amounts)

2017

2016

2017

2016

Net sales and revenues:

Truck

$
3,867.4

$
3,170.7

$
10,551.1

$
9,782.4

Parts

840.0

764.8

2,449.8

2,240.7

Other

24.1

17.7

64.2

56.5

Truck, Parts and Other

4,731.5

3,953.2

13,065.1

12,079.6

Financial Services

328.2

296.2

936.7

883.0

$
5,059.7

$
4,249.4

$
14,001.8

$
12,962.6

Income (loss) before income taxes:

Truck

$
357.4

$
284.9

$
922.8

$
918.4

Parts

152.9

138.3

457.0

406.3

Other*

(8.7
)

(7.8
)

(28.1
)

(862.4
)
Truck, Parts and Other

501.6

415.4

1,351.7

462.3

Financial Services

71.2

71.0

191.5

228.6

Investment income

9.0

8.5

25.8

20.6

Income taxes

(179.1
)

(148.7
)

(483.0
)

(478.6
)
Net income

$
402.7

$
346.2

$
1,086.0

$
232.9

Diluted earnings per share

$
1.14

$
.98

$
3.08

$
.66

After-tax return on revenues

8.0
%

8.1
%

7.8
%

1.8
%
After-tax adjusted return on revenues**

8.2
%

*	~~Other includes the EC charge of $833.0 for the first nine months of 2016.~~

**	~~See Reconciliation of GAAP to Non-GAAP Financial Measures for 2016 on page 49.~~


	Three Months Ended						Six Months Ended
	June 30						June 30
($ in millions, except per share amounts)	2023			2022			2023			2022
Net sales and revenues:
Truck	$	6,827.5		$	5,336.4		$	13,241.3		$	10,033.5
Parts		1,598.9			1,434.7			3,221.9			2,823.6
Other		14.9			15.1			28.2			35.5
Truck, Parts and Other		8,441.3			6,786.2			16,491.4			12,892.6
Financial Services		439.8			372.5			863.0			738.7
	$	8,881.1		$	7,158.7		$	17,354.4		$	13,631.3
Income before income taxes:
Truck	$	948.3		$	422.1		$	1,842.6		$	698.8
Parts		419.3			353.3			857.9			693.5
Other*		(6.5	)		(3.1	)		(618.2	)		6.9
Truck, Parts and Other		1,361.1			772.3			2,082.3			1,399.2
Financial Services		144.7			144.4			293.5			291.4
Investment income		62.7			5.4			111.7			2.9
Income taxes		(347.4	)		(201.7	)		(532.5	)		(372.6	)
Net income	$	1,221.1		$	720.4		$	1,955.0		$	1,320.9
Diluted earnings per share	$	2.33		$	1.37		$	3.73		$	2.52
After-tax return on revenues		13.7	%		10.1	%		11.3	%		9.7	%
After-tax adjusted return on revenues (non-GAAP)**								13.8	%

* In 2023, Other includes a $600.0 million non-recurring charge related to civil litigation in Europe (EC-related claims) in the first quarter 2023.

** See Reconciliation of GAAP to Non-GAAP Financial Measures for 2023 on page 47.

- 34 -

The following provides an analysis of the results of operations for the Company’s three reportable segments - Truck, Parts and Financial Services. Where possible, the Company has quantified the impact of factors identified in the following discussion and analysis. In cases where it is not possible to quantify the impact of factors, the Company lists them in estimated order of importance. Factors for which the Company is unable to specifically quantify the impact include market demand, fuel prices, freight tonnage and economic conditions affecting the Company’s results of operations.

~~- 34 -~~

~~PACCAR Inc – Form 10-Q~~

~~2017~~2023 Compared to ~~2016:~~2022:

Truck

The Company’s Truck segment accounted for ~~76%~~77% and ~~75%~~76% of revenues in the ~~third~~second quarter and first ~~nine~~six months of ~~2017,~~2023, respectively, compared to 75% and 74% in the ~~third~~second quarter and first ~~nine~~six months of ~~2016.~~ 2022, respectively.

The Company’s new truck deliveries are summarized below:


	Three Months Ended					Nine Months Ended					Three Months Ended					Six Months Ended
	September 30					September 30					June 30					June 30
		2017	2016	% CHANGE			2017	2016	% CHANGE			2023	2022	% CHANGE			2023	2022	% CHANGE
U.S. and Canada		23,300	18,800		24		61,500	57,100		8		27,500	24,400		13		53,500	45,100		19
Europe		12,400	11,600		7		40,500	38,200		6		16,400	15,400		6		33,800	31,500		7
Mexico, South America, Australia and other		4,500	4,500				12,600	11,700		8		8,000	7,100		13		15,700	13,300		18

Total units		40,200	34,900		15		114,600	107,000		7		51,900	46,900		11		103,000	89,900		15

The increase in new truck deliveries worldwide in the second quarter and first six months of 2023 compared to the same period of 2022 was driven by higher build rates and increased demand in all major markets. The industry-wide undersupply of component parts continues to impact deliveries.

Market share data discussed below is provided by third-party sources and is measured by either retail sales or registrations for the Company’s dealer network as a percentage of total registrations or retail sales depending on the geographic market. In the U.S. and Canada, market share is based on retail sales. In Europe, market share is based primarily on registrations.

In the first ~~nine~~six months of ~~2017,~~2023, industry retail sales in the heavy-duty market in the U.S. and Canada ~~decreased~~were 151,000units compared to ~~152,900 units from 166,700~~ 126,200units in the same period of ~~2016.~~2022. The Company’s heavy-duty truck retail market share was ~~30.1%~~27.7% in the first ~~nine~~six months of ~~2017~~2023 compared to ~~27.9%~~29.5% in the first ~~nine~~six months of ~~2016.~~2022. The medium-duty market was ~~64,900~~52,400 units in the first ~~nine~~six months of ~~2017~~2023 compared to ~~65,100~~42,800 units in the same period of ~~2016.~~2022. The Company’s medium-duty market share was ~~16.2%~~12.8% in the first ~~nine~~six months of ~~2017~~2023 compared to ~~15.9%~~9.7% in ~~2016.~~the first six months of 2022.

The over 16‑tonne truck market in Europe in the first ~~nine~~six months of ~~2017~~2023 was ~~226,300~~176,000 units compared to ~~224,500~~148,200 units in the first ~~nine~~six months of ~~2016.~~2022. DAF EUover 16‑tonne market share was ~~15.1%~~a 16.1% in the first ~~nine~~six months of ~~2017~~2023 compared to ~~15.6%~~17.5% in the same period of ~~2016.~~2022. The 6 to 16‑tonne market in the first ~~nine~~six months of ~~2017~~2023 was ~~38,500~~23,300 units compared to ~~38,400~~19,100 units in the ~~first nine months~~same period of ~~2016.~~2022. DAF market share in the 6 to 16-tonne market in the first ~~nine~~six months of ~~2017~~2023 was ~~10.5%~~9.1% compared to ~~9.7%~~10.2% in the same period of ~~2016. DAF deliveries in 2017 also reflect higher deliveries to Russia.~~2022.

~~Mexico, South America, Australia and other deliveries in the third quarter declined in Mexico but were offset by higher deliveries in Australia and South America.~~

The Company’s worldwide truck net sales and revenues are summarized below:


																	Three Months Ended								Six Months Ended
	Three Months Ended								Nine Months Ended								June 30								June 30
($ in millions)	September 30								September 30									2023			2022		% CHANGE			2023			2022		% CHANGE
		2017			2016		% CHANGE			2017			2016		% CHANGE
Truck net sales and revenues:
U.S. and Canada	$	2,444.6		$	1,901.5			29	$	6,430.9		$	5,855.7			10	$	4,014.2		$	3,157.0			27	$	7,708.2		$	5,747.6			34
Europe		958.7			843.2			14		2,893.5			2,821.9			3		1,793.4			1,390.1			29		3,596.9			2,841.0			27
Mexico, South America, Australia and other		464.1			426.0			9		1,226.7			1,104.8			11		1,019.9			789.3			29		1,936.2			1,444.9			34
	$	3,867.4		$	3,170.7			22	$	10,551.1		$	9,782.4			8	$	6,827.5		$	5,336.4			28	$	13,241.3		$	10,033.5			32
Truck income before income taxes	$	357.4		$	284.9			25	$	922.8		$	918.4				$	948.3		$	422.1			125	$	1,842.6		$	698.8			164
Pre-tax return on revenues		9.2	%		9.0	%				8.7	%		9.4	%				13.9	%		7.9	%				13.9	%		7.0	%

The Company’s worldwide truck net sales and revenues in the ~~third~~second quarter increased to ~~$3.87~~$6.83 billion in ~~2017~~2023 from ~~$3.17~~$5.34 billion in ~~2016,~~2022 primarily due to higher truck unit deliveries and improved price realization in ~~the U.S. and Canada, Europe and Australia, and favorable currency translation effects. In~~all markets. Revenues for the first ~~nine~~six months ~~of 2017, worldwide truck net sales and revenues were $10.55 billion compared~~increased to ~~$9.78~~$13.24 billion in ~~2016, reflecting~~2023 from $10.03 billion in 2022 primarily due to higher truck unit deliveries and improved price realization in ~~the U.S. and Canada, Europe, and Australia,~~all markets, partially offset by unfavorable currency translation effects.

~~For~~- 35 -

In the ~~third~~second quarter and first six months of ~~2017,~~2023, Truck segment income before taxes and pretax return on revenues increased to reflect the impact of higher truck unit ~~deliveries. For the first nine months, Truck segment income before taxes~~deliveries and ~~pretax return on revenues reflect higher truck deliveries, largely offset by lower gross margins and the effects of translating weaker foreign currencies into the U.S. dollar.~~improved margins.

~~- 35 -~~

~~PACCAR Inc – Form 10-Q~~

The major factors for the Truck segment changes in net sales and revenues, cost of sales and revenues and gross margin between the three months ended ~~September~~June 30, ~~2017~~2023 and ~~2016 for the Truck segment~~2022 are as follows:


	NET			COST OF
	SALES AND			SALES AND			GROSS
($ in millions)	REVENUES			REVENUES			MARGIN
Three Months Ended June 30, 2022	$	5,336.4		$	4,788.4		$	548.0
Increase (decrease)
Truck sales volume		660.2			524.8			135.4
Average truck sales prices		818.2						818.2
Average per truck material, labor and other direct costs					344.3			(344.3	)
Factory overhead and other indirect costs					40.1			(40.1	)
Extended warranties, operating leases and other		15.2			43.1			(27.9	)
Currency translation		(2.5	)		(3.9	)		1.4
Total increase		1,491.1			948.4			542.7
Three Months Ended June 30, 2023	$	6,827.5		$	5,736.8		$	1,090.7

NET

COST OF

SALES AND

SALES AND

GROSS

($ in millions)

REVENUES

REVENUES

MARGIN

Three Months Ended September 30, 2016

$
3,170.7

$
2,796.2

$
374.5

Increase (decrease)

Truck delivery volume

600.5

510.8

89.7

Average truck sales prices

34.0

34.0

Average per truck material, labor and other direct costs

21.2

(21.2
)
Factory overhead and other indirect costs

20.5

(20.5
)
Operating leases

1.1

.7

.4

Currency translation

61.1

59.8

1.3

Total increase

696.7

613.0

83.7

Three Months Ended September 30, 2017

$
3,867.4

$
3,409.2

$
458.2

•

Truck ~~delivery~~sales volume reflects higher truck deliveries ~~which resulted~~ in higher sales and cost of sales, primarily in the U.S. and Canada ($499.2 million sales and $423.2 million cost of sales), Europe ($74.1 million sales and $60.3 million cost of sales) and Australia ($68.8 million sales and $55.8 cost of sales), partially offset by lower truck deliveries in Mexico which resulted in lower sales ($53.8 million) and cost of sales ($43.7 million).

all major markets.

•

Average truck sales prices increased sales by ~~$34.0~~$818.2 million, primarily due to higher price realization inworldwide reflecting inflationary cost increases and the ~~U.S. and Canada ($24.2 million) and Europe ($7.5 million).~~

positive effect of new truck models.

•

Average cost per truck increased cost of sales by ~~$21.2~~$344.3 million, primarily reflecting higher raw material, labor and product support costs.

•

Factory overhead and other indirect costs increased ~~$20.5~~$40.1 million, primarily due to higher ~~salaries~~labor costs, maintenance, depreciation and ~~related expense ($11.4 million)~~utilities.

•

Extended warranties, operating leases and ~~higher maintenance costs ($8.9 million).~~

~~The currency translation effect on sales~~other increased revenues by $15.2 million and ~~cost of sales primarily reflects an increase in the value of the euro relative to the U.S. dollar.~~

~~Truck gross margin was 11.8% in the third quarter of 2017 and 2016.~~

~~- 36 -~~

~~PACCAR Inc – Form 10-Q~~

~~The major factors for the changes in net sales and revenues, cost of sales and revenues and gross margin between the nine months ended September 30, 2017 and 2016 for the Truck segment are as follows:~~

NET

COST OF

SALES AND

SALES AND

GROSS

($ in millions)

REVENUES

REVENUES

MARGIN

Nine Months Ended September 30, 2016

$
9,782.4

$
8,589.4

$
1,193.0

Increase (decrease)

Truck delivery volume

845.0

728.2

116.8

Average truck sales prices

36.6

36.6

Average per truck material, labor and other direct costs

47.8

(47.8
)
Factory overhead and other indirect costs

43.2

(43.2
)
Operating leases

(68.1
)

(66.1
)

(2.0
)
Currency translation

(44.8
)

(5.1
)

(39.7
)
Total increase

768.7

748.0

20.7

Nine Months Ended September 30, 2017

$
10,551.1

$
9,337.4

$
1,213.7

Truck delivery volume primarily reflects higher truck deliveries in the U.S. and Canada which resulted in higher sales and cost of sales ($526.1 million sales and $450.8 million cost of sales) and Europe ($209.3 million sales and $180.4 million cost of sales).

Average truck sales prices increased sales by $36.6 million, primarily due to higher price realization in Europe ($32.2 million) and the U.S. and Canada ($22.0 million), partially offset by lower price realization in Mexico ($14.0 million).

~~Average cost per truck~~ increased cost of sales by ~~$47.8 million, reflecting higher material costs.~~

~~Factory overhead and other indirect costs increased $43.2 million,~~$43.1 million. The increase in cost of sales was primarily due to higher ~~salaries~~warranty labor and ~~related expenses ($17.2 million), higher maintenance costs ($15.1 million) as well as higher depreciation expense ($7.5 million).~~

material costs.

•

~~Operating lease revenues decreased by $68.1 million and cost of sales decreased by $66.1 million, reflecting higher revenues deferred and lower revenues recognized.~~

The currency translation effect on sales and cost of sales primarily reflects a decline in the value of the ~~British pound~~Canadian dollar and Australian dollar relative to the U.S. ~~dollar.~~

dollar, partially offset by the euro.

•

Truck gross ~~margins~~margin was 16.0% in the ~~first nine months~~second quarter of ~~2017 of 11.5% decreased from 12.2%~~2023 compared to 10.3% in the same period ~~in 2016 primarily~~of 2022 due to the factors noted above.

The major factors for the Truck ~~SG&A~~segment changes in net sales and revenues, cost of sales and revenues and gross margin between the six months ended June 30, 2023 and 2022 are as follows:


	NET			COST OF
	SALES AND			SALES AND			GROSS
($ in millions)	REVENUES			REVENUES			MARGIN
Six Months Ended June 30, 2022	$	10,033.5		$	9,084.5		$	949.0
Increase (decrease)
Truck sales volume		1,707.5			1,359.5			348.0
Average truck sales prices		1,631.0						1,631.0
Average per truck material, labor and other direct costs					613.3			(613.3	)
Factory overhead and other indirect costs					98.8			(98.8	)
Extended warranties, operating leases and other		14.4			83.4			(69.0	)
Currency translation		(145.1	)		(130.6	)		(14.5	)
Total increase		3,207.8			2,024.4			1,183.4
Six Months Ended June 30, 2023	$	13,241.3		$	11,108.9		$	2,132.4

•

Truck sales volume reflects higher truck deliveries in all major markets.

•

Average truck sales prices increased sales by $1.63 billion, primarily due to higher price realization worldwide reflecting inflationary cost increases and the positive effect of new truck models.

- 36 -

•

Average cost per truck increased cost of sales by $613.3 million, primarily reflecting higher raw material, labor, freight and product support costs.

•

Factory overhead and other indirect costs increased $98.8 million, primarily due to higher labor costs, depreciation, maintenance and utilities.

•

Extended warranties, operating leases and other increased revenues by $14.4 million and increased cost of sales by $83.4 million. The increase in cost of sales was primarily due to higher warranty labor and material costs.

•

The currency translation effect on sales and cost of sales reflects a decline in the ~~third quarter~~value of ~~2017 increased~~foreign currencies relative to ~~$51.1 million from $47.8 million in~~ the ~~third quarter of 2016,~~U.S. dollar, primarily the euro, the Canadian dollar and Australian dollar.

•

Truck gross margin was 16.1% in the first ~~nine~~six months of ~~2017,~~ 2023 compared to 9.5% in the same period of 2022 due to the factors noted above.

Truck SG&A ~~increased~~expense decreased in the second quarter of 2023 to ~~$150.2~~$62.7 million from ~~$147.6~~$67.5 million in 2022, and for the first ~~nine~~six months of ~~2016.~~2023, Truck SG&A decreased to $135.1 million from $140.9 million in 2022. The ~~increase for~~decrease in both periods was primarily due to ~~higher~~lower professional fees, ~~and~~partially offset by higher salaries and related expenses ~~partially offset by lower sales~~ and ~~marketing expenses.~~higher travel costs.

As a percentage of sales, Truck SG&A decreased to ~~1.3%~~.9% and 1.0% in the ~~third~~second quarter and first six months of ~~2017 from 1.5%~~2023, respectively,

compared to 1.3% and 1.4% in the ~~third~~second quarter ~~of 2016. In the~~and first ~~nine~~six months of ~~2017, Truck SG&A as a percentage of sales decreased to 1.4% from 1.5% in the first nine months of 2016. The decrease for both periods was primarily due to higher net sales.~~2022, respectively.

Parts

~~- 37 -~~

~~PACCAR Inc – Form 10-Q~~

~~Parts~~

The Company’s Parts segment accounted for ~~17%~~18% and 19% of revenues in the ~~third~~second quarter and first ~~nine~~six months of ~~2017~~2023, respectively, compared to ~~18%~~20% and ~~17%~~21% in the ~~third~~second quarter and first ~~nine~~six months of ~~2016,~~2022, respectively.


	Three Months Ended								Nine Months Ended								Three Months Ended								Six Months Ended
	September 30								September 30								June 30								June 30
($ in millions)		2017			2016		% CHANGE			2017			2016		% CHANGE			2023			2022		% CHANGE			2023			2022		% CHANGE
Parts net sales and revenues:
U.S. and Canada	$	547.5		$	501.5			9	$	1,610.1		$	1,440.0			12	$	1,116.3		$	1,030.6			8	$	2,248.4		$	2,006.3			12
Europe		200.3			185.5			8		582.5			570.8			2		332.1			273.1			22		676.4			569.2			19
Mexico, South America, Australia and other		92.2			77.8			19		257.2			229.9			12		150.5			131.0			15		297.1			248.1			20
	$	840.0		$	764.8			10	$	2,449.8		$	2,240.7			9	$	1,598.9		$	1,434.7			11	$	3,221.9		$	2,823.6			14
Parts income before income taxes	$	152.9		$	138.3			11	$	457.0		$	406.3			12	$	419.3		$	353.3			19	$	857.9		$	693.5			24
Pre-tax return on revenues		18.2	%		18.1	%				18.7	%		18.1	%				26.2	%		24.6	%				26.6	%		24.6	%

The Company’s worldwide parts net sales and revenues for the ~~third~~second quarter increased to ~~a record $840.0 million~~$1.60 billion in ~~2017~~2023 from ~~$764.8 million~~$1.43billion in ~~2016, and for~~2022. For the first ~~nine~~six months, worldwide parts net sales and revenues increased to ~~a record $2.45~~ $3.22billion in ~~2017~~2023 from ~~$2.24~~$2.82 billion in ~~2016,~~2022.

The increase in both periods was primarily due to higher ~~aftermarket demand~~price realization in all markets.

For the ~~third~~second quarter and first ~~nine~~six months of ~~2017,~~2023, the increase in Parts segment income before income taxes and pre-tax return on revenues was primarily due to higher ~~sales volume.~~price realization.

The major factors for the changes in Parts segment net sales and revenues, cost of sales and revenues and gross margin between the three months ended ~~September~~June 30, ~~2017~~2023 and ~~2016 for the Parts segment~~2022 are as follows:


	NET			COST OF
	SALES AND			SALES AND			GROSS
($ in millions)	REVENUES			REVENUES			MARGIN
Three Months Ended June 30, 2022	$	1,434.7		$	1,003.7		$	431.0
(Decrease) increase
Aftermarket parts volume		(24.5	)		(11.1	)		(13.4	)
Average aftermarket parts sales prices		189.3						189.3
Average aftermarket parts direct costs					89.8			(89.8	)
Warehouse and other indirect costs					12.0			(12.0	)
Currency translation		(.6	)		(.1	)		(.5	)
Total increase		164.2			90.6			73.6
Three Months Ended June 30, 2023	$	1,598.9		$	1,094.3		$	504.6

- 37 -

NET

COST

GROSS

($ in millions)

SALES

OF SALES

MARGIN

Three Months Ended September 30, 2016

$
764.8

$
560.0

$
204.8

Increase (decrease)

Aftermarket parts volume

62.3

38.5

23.8

Average aftermarket parts sales prices

3.8

3.8

Average aftermarket parts direct costs

8.6

(8.6
)
Warehouse and other indirect costs

4.1

(4.1
)
Currency translation

9.1

7.3

1.8

Total increase

75.2

58.5

16.7

Three Months Ended September 30, 2017

$
840.0

$
618.5

$
221.5

•

Aftermarket parts sales volume ~~increased~~decreased by ~~$62.3~~$24.5 million and related cost of sales ~~increased~~decreased by ~~$38.5~~$11.1 million primarily due to lower sales volume in the U.S., partially offset by higher ~~demand~~sales volume in ~~all markets, primarily in North America~~Australia and ~~Europe.~~

Brasil.

•

Average aftermarket parts sales prices increased sales by ~~$3.8~~$189.3 million primarily due to higher price realization in ~~the U.S.~~North America and ~~Canada.~~

Europe.

•

Average aftermarket parts direct costs increased ~~$8.6~~$89.8 million due to higher material and freight costs.

•

Warehouse and other indirect costs increased ~~$4.1~~$12.0 million primarily due to higher salaries and related expenses ~~to support~~and higher ~~sales volume.~~

shipping costs.

•

~~The currency translation effect on sales and cost of sales reflects an increase in the value of the euro relative to the U.S. dollar.~~

~~Parts gross margins in the third quarter of 2017 decreased to 26.4% from 26.8% in the third quarter of 2016 due to the factors noted above.~~

~~- 38 -~~

~~PACCAR Inc – Form 10-Q~~

~~The major factors for the changes in net sales, cost of sales and gross margin between the nine months ended September 30, 2017 and 2016 for the Parts segment are as follows:~~

NET

COST

GROSS

($ in millions)

SALES

OF SALES

MARGIN

Nine Months Ended September 30, 2016

$
2,240.7

$
1,634.7

$
606.0

Increase (decrease)

Aftermarket parts volume

195.9

129.8

66.1

Average aftermarket parts sales prices

26.4

26.4

Average aftermarket parts direct costs

20.3

(20.3
)
Warehouse and other indirect costs

11.4

(11.4
)
Currency translation

(13.2
)

(2.8
)

(10.4
)
Total increase

209.1

158.7

50.4

Nine Months Ended September 30, 2017

$
2,449.8

$
1,793.4

$
656.4

~~Aftermarket parts sales volume increased by $195.9 million and related cost of sales increased by $129.8 million due to higher demand in all markets, primarily in the U.S. and Canada.~~

~~Average aftermarket parts sales prices increased sales by $26.4 million, reflecting higher price realization in the U.S. and Canada and Europe.~~

~~Average aftermarket parts direct costs increased $20.3 million due to higher material costs.~~

~~Warehouse and other indirect costs increased $11.4 million, primarily due to higher salaries and related expenses to support the higher sales volume.~~

The currency translation effect on sales and cost of sales primarily reflects a decline in the value of the ~~British pound~~Australian dollar and Canadian dollar relative to the U.S. ~~dollar.~~

dollar, partially offset by the euro.

•

Parts gross margins in the second quarter of 2023 increased to 31.6% from 30.0% in the second quarter of 2022 due to the factors noted above.

The major factors for the changes in Parts segment net sales and revenues, cost of sales and revenues and gross margin between the six months ended June 30, 2023 and 2022 are as follows:


	NET			COST OF
	SALES AND			SALES AND			GROSS
($ in millions)	REVENUES			REVENUES			MARGIN
Six Months Ended June 30, 2022	$	2,823.6		$	1,974.0		$	849.6
Increase (decrease)
Aftermarket parts volume		28.3			18.7			9.6
Average aftermarket parts sales prices		398.8						398.8
Average aftermarket parts direct costs					190.6			(190.6	)
Warehouse and other indirect costs					26.4			(26.4	)
Currency translation		(28.8	)		(14.4	)		(14.4	)
Total increase		398.3			221.3			177.0
Six Months Ended June 30, 2023	$	3,221.9		$	2,195.3		$	1,026.6

•

Aftermarket parts sales volume increased by $28.3 million and related cost of sales increased by $18.7 million primarily due to higher demand in Australia, Europe and Brasil.

•

Average aftermarket parts sales prices increased sales by $398.8 million primarily due to higher price realization in North America and Europe.

•

Average aftermarket parts direct costs increased $190.6 million due to higher material and freight costs.

•

Warehouse and other indirect costs increased $26.4 million primarily due to higher salaries and related expenses and higher shipping costs.

•

The currency translation effect on sales and cost of sales primarily reflects a decline in the value of foreign currencies relative to the U.S. dollar, primarily the euro, the Canadian dollar and the Australian dollar.

•

Parts gross margins in the first ~~nine~~six months of ~~2017 decreased~~2023 increased to ~~26.8%~~31.9% from ~~27.0%~~30.1% in the first ~~nine~~six months of ~~2016~~2022 due to the factors noted above.

Parts SG&A expense increased in the ~~third~~second quarter of 2023 to ~~$50.1~~$59.1 million from $54.6 million in ~~2017 from $48.1 million in 2016,~~2022, and for the first ~~nine~~six months, Parts SG&A increased to ~~$145.6~~$117.2 million in ~~2017~~2023 from ~~$144.3~~$109.5 million in ~~2016,~~2022. The increase in both periods was primarily due to higher salaries and related ~~expenses.~~expenses, partially offset by lower sales and marketing costs and currency translation effects.

As a percentage of sales, Parts SG&A ~~decreased to 6.0%~~was 3.7% and 3.6% in the ~~third~~second quarter and first six months of 2023, respectively, compared to 3.8% and 3.9% in the second quarter and first six months of 2022.

- 38 -

Financial Services

The Company’s Financial Services segment accounted for 5% of revenues in the second quarter and first six months of 2023, compared to 5% in the second quarter and first six months of 2022, respectively.


	Three Months Ended							Six Months Ended
	June 30							June 30
($ in millions)		2023		2022	% CHANGE				2023		2022	% CHANGE
New loan and lease volume:
U.S. and Canada	$	1,021.2	$	817.2		25		$	1,666.9	$	1,654.0		1
Europe		374.5		347.8		8			768.3		698.0		10
Mexico, Australia, Brasil and other		534.6		333.8		60			907.3		631.0		44
	$	1,930.3	$	1,498.8		29		$	3,342.5	$	2,983.0		12
New loan and lease volume by product:
Loans and finance leases	$	1,810.1	$	1,204.7		50		$	3,031.3	$	2,448.6		24
Equipment on operating lease		120.2		294.1		(59	)		311.2		534.4		(42	)
	$	1,930.3	$	1,498.8		29		$	3,342.5	$	2,983.0		12
New loan and lease unit volume:
Loans and finance leases		13,290		10,130		31			22,550		19,730		14
Equipment on operating lease		1,340		3,080		(56	)		3,530		5,960		(41	)
		14,630		13,210		11			26,080		25,690		2
Average earning assets:
U.S. and Canada	$	9,238.8	$	8,747.5		6		$	9,077.6	$	8,630.0		5
Europe		4,472.8		3,853.6		16			4,426.4		3,843.2		15
Mexico, Australia, Brasil and other		3,467.4		2,520.6		38			3,275.1		2,421.4		35
	$	17,179.0	$	15,121.7		14		$	16,779.1	$	14,894.6		13
Average earning assets by product:
Loans and finance leases	$	11,551.6	$	10,273.5		12		$	11,295.7	$	10,174.1		11
Dealer wholesale financing		3,011.7		2,023.0		49			2,827.8		1,848.3		53
Equipment on lease and other		2,615.7		2,825.2		(7	)		2,655.6		2,872.2		(8	)
	$	17,179.0	$	15,121.7		14		$	16,779.1	$	14,894.6		13
Revenues:
U.S. and Canada	$	185.3	$	168.3		10		$	369.3	$	336.9		10
Europe		137.0		124.9		10			275.0		254.4		8
Mexico, Australia, Brasil and other		117.5		79.3		48			218.7		147.4		48
	$	439.8	$	372.5		18		$	863.0	$	738.7		17
Revenues by product:
Loans and finance leases	$	180.4	$	128.8		40		$	342.0	$	247.2		38
Dealer wholesale financing		58.3		22.1		164			104.7		36.0		191
Equipment on lease and other		201.1		221.6		(9	)		416.3		455.5		(9	)
	$	439.8	$	372.5		18		$	863.0	$	738.7		17
Income before income taxes	$	144.7	$	144.4				$	293.5	$	291.4		1

New loan and lease unit volume was $1.93 billion in the second quarter of ~~2017 from 6.3%~~2023 compared to $1.50 billion in the ~~third~~second quarter of ~~2016. For~~2022, and for the first ~~nine~~half was $3.34 billion in 2023 and $2.98 billion in 2022. The increase in new loan and finance lease volume reflected higher retail sales of PACCAR trucks and a higher amount financed per truck in all major markets. The decrease in equipment on operating leases new business volume reflected lower market demand, partially offset by a higher amount financed per truck in all major markets.

In the second quarter of 2023, PFS finance market share of new PACCAR truck sales was 24.6% compared to 24.8% in the second quarter of 2022. In the first six months of ~~2017, Parts SG&A as a percentage~~2023, PFS finance market share of new PACCAR truck sales was ~~5.9%, down from 6.4%~~23.3% compared to 26.4% in the first ~~nine~~six months of ~~2016.~~2022.

In the second quarter of 2023, PFS revenues increased to $439.8 million from $372.5 million in 2022. In the first six months of 2023, PFS revenues increased to $863.0 million from $738.7 million in 2022. The ~~decrease~~increase for both periods were primarily due to higher interest income driven by higher portfolio yields and portfolio growth.

- 39 -

PFS income before income taxes increased to $144.7 million in the second quarter of 2023 from $144.4 million in the second quarter of 2022. In the first six months of 2023, PFS income before income taxes increased to $293.5 million from $291.4 million in 2022. The increase in both periods was primarily due to higher ~~net sales.~~

~~- 39 -~~

~~PACCAR Inc – Form 10-Q~~

~~Financial Services~~

The Company’s Financial Services segment accounted for 6% of revenues in the third quarter and 7% of revenues for the first nine months of 2017 compared to 7% in the third quarter and first nine months of 2016.

Three Months Ended

Nine Months Ended

($ in millions)

September 30

September 30

2017

2016

% CHANGE

2017

2016

% CHANGE

New loan and lease volume:

U.S. and Canada

$
646.4

$
654.4

(1
)

$
1,667.2

$
1,849.2

(10
)
Europe

248.9

248.6

753.0

795.8

(5
)
Mexico, Australia and other

190.7

155.4

23

522.2

423.9

23

$
1,086.0

$
1,058.4

3

$
2,942.4

$
3,068.9

(4
)
New loan and lease volume by product:

Loans and finance leases

$
850.7

$
710.4

20

$
2,239.5

$
2,144.3

4

Equipment on operating lease

235.3

348.0

(32
)

702.9

924.6

(24
)

$
1,086.0

$
1,058.4

3

$
2,942.4

$
3,068.9

(4
)
New loan and lease unit volume:

Loans and finance leases

8,120

7,210

13

23,000

21,880

5

Equipment on operating lease

2,200

3,290

(33
)

6,930

9,040

(23
)

10,320

10,500

(2
)

29,930

30,920

(3
)
Average earning assets:

U.S. and Canada

$
7,395.4

$
7,505.4

(1
)

$
7,287.4

$
7,464.2

(2
)
Europe

2,936.4

2,616.3

12

2,816.7

2,682.2

5

Mexico, Australia and other

1,682.4

1,463.6

15

1,584.5

1,463.8

8

$
12,014.2

$
11,585.3

4

$
11,688.6

$
11,610.2

1

Average earning assets by product:

Loans and finance leases

$
7,455.2

$
7,286.8

2

$
7,342.4

$
7,303.8

1

Dealer wholesale financing

1,580.6

1,592.3

(1
)

1,489.6

1,680.7

(11
)
Equipment on lease and other

2,978.4

2,706.2

10

2,856.6

2,625.7

9

$
12,014.2

$
11,585.3

4

$
11,688.6

$
11,610.2

1

Revenues:

U.S. and Canada

$
188.9

$
173.6

9

$
545.7

$
512.4

6

Europe

79.6

71.8

11

223.1

214.8

4

Mexico, Australia and other

59.7

50.8

18

167.9

155.8

8

$
328.2

$
296.2

11

$
936.7

$
883.0

6

Revenue by product:

Loans and finance leases

$
96.8

$
92.1

5

$
278.3

$
278.0

Dealer wholesale financing

14.4

13.8

4

39.3

42.4

(7
)
Equipment on lease and other

217.0

190.3

14

619.1

562.6

10

$
328.2

$
296.2

11

$
936.7

$
883.0

6

Income before income taxes

$
71.2

$
71.0

$
191.5

$
228.6

(16
)

For the third quarter, new loan and lease volume was $1,086.0 million in 2017 compared to $1,058.4 million in 2016 and for the first nine months was $2,942.4 million in 2017 compared to $3,068.9 million in 2016.

~~In the third quarter of 2017, PFS~~ finance market share on new PACCAR truck sales was 24.7% compared to 27.2% in the third quarter of 2016. In the first nine months of 2017, PFS finance market share on new PACCAR truck sales was 24.5% compared to 25.7% in the first nine months of 2016.

In the third quarter, PFS revenue increased to $328.2 million in 2017 from $296.2 million in 2016, primarily due to higher average operating lease earning assets and effects of currency translation, which increased third quarter 2017 PFS revenues by $5.3 million. In the first nine months, PFS revenue increased to $936.7 million in 2017 from $883.0 million in 2016, primarily due to higher average operating lease earning assets and higher used truck sales,margins, partially offset by ~~the effects of currency translation, which lowered PFS revenues by $7.2 million for the first nine months of 2017.~~lower operating lease margins.

~~- 40 -~~

~~PACCAR Inc – Form 10-Q~~

PFS income before income taxes of $71.2 million in the third quarter of 2017 was comparable to the $71.0 million earned in the third quarter of 2016, reflecting higher average earning asset balances and the effects of currency translation, largely offset by lower results on returned lease assets and higher borrowing rates. For the first nine months, PFS income before income taxes decreased to $191.5 million in 2017 from $228.6 million in 2016, primarily due to lower results on returned lease assets, higher borrowing rates, a higher provision for losses on receivables and the effects of translating weaker foreign currencies to the U.S. dollar, partially offset by higher average earning assets. The currency exchange impact increased PFS income before income taxes by $1.4 million for the third quarter of 2017 and lowered PFS income before income taxes by $1.7 million for the first nine months of 2017.

Included in Financial Services “Other ~~Assets”~~assets” on the Company’s Consolidated Balance Sheets are used trucks held for sale, net of impairments, of ~~$203.2~~$226.4 million at ~~September~~June 30, ~~2017~~2023 and ~~$267.2~~$141.7 million at December 31, ~~2016.~~2022. These trucks are primarily units returned from matured operating leases in the ordinary course of business, and also ~~includes~~include trucks acquired from repossessions or through acquisitions of used trucks in trades related to new truck ~~sales.~~sales and trucks returned from residual value guarantees (RVGs).

The Company recognized ~~losses~~gains on used trucks, excluding repossessions, of ~~$8.6~~$19.1 million in the ~~third~~second quarter of ~~2017~~2023 compared to ~~$6.3~~gains of $34.7 million in the ~~third~~second quarter of ~~2016,~~2022, including $.4 million of losses on multiple unit transactions ~~of $6.3 million~~ in the ~~third~~second quarter of ~~2017~~2023 compared to ~~$2.0 million~~nil in the ~~third~~second quarter of ~~2016.~~2022. Used truck losses related to repossessions, which are recognized as credit losses, and used truck gains, which are recognized as credit recoveries, were ~~$.7 million and $.9 million in~~not significant for either the ~~third~~second quarter of ~~2017 and 2016, respectively.~~2023 or 2022.

The Company recognized ~~losses~~gains on used trucks, excluding repossessions, of ~~$31.6~~$46.9 million in the first ~~nine~~six months of ~~2017~~2023 compared to ~~$10.8~~gains of $69.9 million in the ~~same period~~first six months of ~~2016,~~2022, including losses on multiple unit transactions of ~~$21.9~~$1.0 million in the first ~~nine~~six months of ~~2017~~2023 compared to ~~$5.4~~$.3 million in the first ~~nine~~six months of ~~2016.~~2022. Used truck losses related to repossessions, which are recognized as credit losses, and used truck gains, which are recognized as credit recoveries, were ~~$3.8 million and $2.7 million in~~not significant for either the first ~~nine~~six months of ~~2017 and 2016, respectively.~~2023 or 2022.

The major factors for the changes in interest and fees, interest and other borrowing expenses and finance margin ~~between~~for the three months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 are outlined below:



($ in millions)	INTEREST AND FEES		INTEREST AND OTHER BORROWING EXPENSES		FINANCE MARGIN
Three Months Ended June 30, 2022	$	150.9	$	46.4	$	104.5
Increase (decrease)
Average finance receivables		37.6				37.6
Average debt balances				14.4		(14.4	)
Yields		47.9				47.9
Borrowing rates				54.3		(54.3	)
Currency translation and other		2.3		.4		1.9
Total increase		87.8		69.1		18.7
Three Months Ended June 30, 2023	$	238.7	$	115.5	$	123.2

($ in millions)

INTEREST
AND FEES

INTEREST
AND OTHER
BORROWING
EXPENSES

FINANCE
MARGIN

Three Months Ended September 30, 2016

$
105.9

$
32.2

$
73.7

Increase (decrease)

Average finance receivables

.9

.9

Average debt balances

.5

(.5
)
Yields

2.6

2.6

Borrowing rates

5.0

(5.0
)
Currency translation

1.8

.6

1.2

Total increase (decrease)

5.3

6.1

(.8
)
Three Months Ended September 30, 2017

$
111.2

$
38.3

$
72.9

•

Average finance receivables increased ~~$72.1 million~~$2.33 billion (excluding foreign exchange effects) in the ~~third~~second quarter of ~~2017 as a result of retail portfolio new business volume exceeding collections and~~2023 primarily due to higher average loan, finance lease and dealer wholesale ~~financing.~~

balances.

•

Average debt balances increased ~~$125.9 million~~$1.53 billion (excluding foreign exchange effects) in the ~~third~~second quarter of ~~2017. The~~2023, reflecting higher ~~average debt balances reflect~~ funding requirements for ~~a higher average earnings asset~~the portfolio, which includes loans, finance leases, dealer wholesale and equipment on operating lease.

•

Higher portfolio yields ~~(4.8%~~(6.6% in ~~2017~~2023 compared to ~~4.7%~~4.9% in ~~2016)~~2022) increased interest and fees by ~~$2.6~~$47.9 million. The higher portfolio yields ~~reflect higher lending volumes in North America which have~~were primarily due to higher market rates ~~than Europe.~~

in all markets.

•

Higher borrowing rates ~~(1.7%~~(3.7% in ~~2017~~2023 compared to ~~1.5%~~1.7% in ~~2016)~~2022) increased interest and other borrowing expenses by $54.3 million and were primarily due to higher debt market rates in Europe and North ~~America, partially offset by lower debt market rates in Europe.~~

America.

•

The currency translation effects reflect an increase in the value of foreign currencies relative to the U.S. dollar, primarily the Mexican peso and euro, partially offset by the Australian dollar and Canadian dollar.

- 4140 -

~~PACCAR Inc – Form 10-Q~~

The major factors for the changes in interest and fees, interest and other borrowing expenses and finance margin ~~between~~for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 are outlined below:



($ in millions)	INTEREST AND FEES		INTEREST AND OTHER BORROWING EXPENSES			FINANCE MARGIN
Six Months Ended June 30, 2022	$	283.2	$	86.2		$	197.0
Increase (decrease)
Average finance receivables		70.4					70.4
Average debt balances				25.3			(25.3	)
Yields		92.7					92.7
Borrowing rates				98.7			(98.7	)
Currency translation and other		.4		(.9	)		1.3
Total increase		163.5		123.1			40.4
Six Months Ended June 30, 2023	$	446.7	$	209.3		$	237.4

($ in millions)

INTEREST
AND FEES

INTEREST
AND OTHER
BORROWING
EXPENSES

FINANCE
MARGIN

Nine Months Ended September 30, 2016

$
320.4

$
95.1

$
225.3

(Decrease) increase

Average finance receivables

(2.4
)

(2.4
)
Average debt balances

1.1

(1.1
)
Yields

2.6

2.6

Borrowing rates

14.5

(14.5
)
Currency translation

(3.0
)

(.9
)

(2.1
)
Total (decrease) increase

(2.8
)

14.7

(17.5
)
Nine Months Ended September 30, 2017

$
317.6

$
109.8

$
207.8

•

Average finance receivables ~~decreased $72.7 million~~increased $2.26 billion (excluding foreign exchange effects) in the first ~~nine~~six months of ~~2017 as a result of lower~~2023 primarily due to higher average loan, finance lease and dealer wholesale ~~financing.~~

balances.

•

Average debt balances increased ~~$85.3 million~~$1.45billion (excluding foreign exchange effects) in the first ~~nine~~six months of ~~2017. The~~2023, reflecting higher ~~average debt balances reflect~~ funding requirements for ~~a higher average earnings asset~~the portfolio, which includes loans, finance leases, dealer wholesale and equipment on operating lease.

•

Higher portfolio yields ~~(4.82%~~(6.4% in ~~2017~~2023 compared to ~~4.77%~~4.8% in ~~2016)~~2022) increased interest and fees by ~~$2.6~~ $92.7million. The higher portfolio yields ~~reflect higher lending volumes in North America which have~~were primarily due to higher market rates ~~than Europe.~~

in Europe and North America.

•

Higher borrowing rates ~~(1.7%~~(3.5% in ~~2017~~2023 compared to ~~1.5%~~1.6% in ~~2016)~~2022) were primarily due to higher debt market rates in Europe and North ~~America, partially offset by lower debt market rates in Europe.~~

~~The currency translation effects reflect a decline in the value of foreign currencies relative to the U.S. dollar.~~

America.

The following table summarizes operating lease, rental and other revenues and depreciation and other expenses:


									Three Months Ended				Six Months Ended
	Three Months Ended				Nine Months Ended				June 30				June 30
($ in millions)	September 30				September 30					2023		2022		2023		2022
Operating lease and rental revenues									$	190.0	$	204.5	$	390.8	$	413.1
Used truck sales										3.7		12.8		12.4		33.4
Insurance, franchise and other revenues										7.4		4.3		13.1		9.0
Operating lease, rental and other revenues									$	201.1	$	221.6	$	416.3	$	455.5
		2017		2016		2017		2016
Operating lease and rental revenues	$	202.4	$	180.2	$	578.8	$	534.9
Used truck sales and other		14.6		10.1		40.3		27.7
Operating lease, rental and other revenues	$	217.0	$	190.3	$	619.1	$	562.6
Depreciation of operating lease equipment	$	149.3	$	130.4	$	434.4	$	378.1	$	117.4	$	124.0	$	240.8	$	236.5
Vehicle operating expenses		24.9		22.2		71.6		67.2		15.1		9.0		24.2		19.4
Cost of used truck sales and other		12.0		10.0		32.7		24.6
Cost of used truck sales										4.0		12.2		12.9		31.9
Insurance, franchise and other expenses										1.3		.2		2.2		1.1
Depreciation and other expenses	$	186.2	$	162.6	$	538.7	$	469.9	$	137.8	$	145.4	$	280.1	$	288.9

- 4241 -

~~PACCAR Inc – Form 10-Q~~

The major factors for the changes in operating lease, rental and other revenues, depreciation and other expenses and lease margin between the three months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 are outlined below:



($ in millions)	OPERATING LEASE, RENTAL AND OTHER REVENUES			DEPRECIATION AND OTHER EXPENSES			LEASE MARGIN
Three Months Ended June 30, 2022	$	221.6		$	145.4		$	76.2
(Decrease) increase
Used truck sales		(9.2	)		(8.4	)		(.8	)
Results on returned lease assets					17.9			(17.9	)
Average operating lease assets		(30.1	)		(24.3	)		(5.8	)
Revenue and cost per asset		11.0			3.3			7.7
Currency translation and other		7.8			3.9			3.9
Total decrease		(20.5	)		(7.6	)		(12.9	)
Three Months Ended June 30, 2023	$	201.1		$	137.8		$	63.3

($ in millions)

OPERATING
LEASE, RENTAL
AND OTHER
REVENUES

DEPRECIATION
AND OTHER
EXPENSES

LEASE
MARGIN

Three Months Ended September 30, 2016

$
190.3

$
162.6

$
27.7

Increase (decrease)

Used truck sales

3.5

4.0

(.5
)
Results on returned lease assets

2.6

(2.6
)
Average operating lease assets

16.4

14.1

2.3

Revenue and cost per asset

2.2

2.5

(.3
)
Currency translation and other

4.6

.4

4.2

Total increase (decrease)

26.7

23.6

3.1

Three Months Ended September 30, 2017

$
217.0

$
186.2

$
30.8

•

~~A higher~~Lower sales volume and lower market prices of used ~~truck sales increased operating lease, rental and other~~trucks on trade, primarily in Europe, decreased revenues by ~~$3.5 million. Depreciation~~$9.2 million and related depreciation and other expenses ~~increased~~ by ~~$4.0 million due to higher volume of truck sales and losses on multiple unit transactions.~~

$8.4 million.

•

Results on returned lease assets increased depreciation and other expenses by ~~$2.6~~$17.9 million, primarily due to ~~higher losses~~lower gains on sales of returned ~~lease units.~~

units as a result of lower used truck market values.

•

Average operating lease assets ~~increased $235.5~~decreased $234.6 million (excluding foreign exchange effects), which ~~increased~~decreased revenues by ~~$16.4~~$30.1 million and related depreciation and other expenses by ~~$14.1~~$24.3 million.

•

Revenue per asset increased ~~$2.2~~$11.0 million primarily due to higher ~~rental income.~~lease rates, reflecting higher average truck value financed and higher market rates. Cost per asset increased ~~$2.5~~$3.3 million due to higher depreciation ~~expense, partially offset by lower vehicle~~and operating expenses.

•

The currency translation effects reflect an increase in the value of foreign currencies relative to the U.S. ~~dollar.~~

dollar, primarily the Mexican peso and the euro.

The major factors for the changes in operating lease, rental and other revenues, depreciation and other expenses and lease margin between the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 are outlined below:



($ in millions)	OPERATING LEASE, RENTAL AND OTHER REVENUES			DEPRECIATION AND OTHER EXPENSES			LEASE MARGIN
Six Months Ended June 30, 2022	$	455.5		$	288.9		$	166.6
(Decrease) increase
Used truck sales		(21.0	)		(19.0	)		(2.0	)
Results on returned lease assets					35.8			(35.8	)
Average operating lease assets		(50.3	)		(41.2	)		(9.1	)
Revenue and cost per asset		26.1			14.2			11.9
Currency translation and other		6.0			1.4			4.6
Total decrease		(39.2	)		(8.8	)		(30.4	)
Six Months Ended June 30, 2023	$	416.3		$	280.1		$	136.2

($ in millions)

OPERATING
LEASE, RENTAL
AND OTHER
REVENUES

DEPRECIATION
AND OTHER EXPENSES

LEASE
MARGIN

Nine Months Ended September 30, 2016

$
562.6

$
469.9

$
92.7

Increase (decrease)

Used truck sales

10.9

10.1

.8

Results on returned lease assets

21.6

(21.6
)
Average operating lease assets

45.7

38.5

7.2

Revenue and cost per asset

2.3

4.4

(2.1
)
Currency translation and other

(2.4
)

(5.8
)

3.4

Total increase (decrease)

56.5

68.8

(12.3
)
Nine Months Ended September 30, 2017

$
619.1

$
538.7

$
80.4

•

~~A higher~~Lower sales volume and lower market prices of used ~~truck sales increased operating lease, rental and other~~trucks on trade, primarily in Europe, decreased revenues by ~~$10.9~~$21.0 million and ~~increased~~related depreciation and other expenses by ~~$10.1~~$19.0 million.

•

Results on returned lease assets increased depreciation and other expenses by ~~$21.6~~$35.8 million, primarily due to ~~higher losses~~lower gains on sales of returned ~~lease units.~~

units as a result of lower used truck market values.

•

Average operating lease assets ~~increased $240.8~~decreased $196.2 million (excluding foreign exchange effects), which ~~increased~~decreased revenues by ~~$45.7~~$50.3 million and related depreciation and other expenses by ~~$38.5~~$41.2 million.

•

Revenue per asset increased ~~$2.3~~$26.1 million primarily due to higher ~~rental income.~~lease rates, reflecting higher average truck value financed and higher market rates. Cost per asset increased ~~$4.4~~$14.2 million due to higher depreciation ~~expense, partially offset by lower vehicle~~and operating expenses.

•

The currency translation effects reflect ~~a decline~~an increase in the value of foreign currencies relative to the U.S. ~~dollar.~~

dollar, primarily the Mexican peso.

- 4342 -

~~PACCAR Inc – Form 10-Q~~

Financial Services SG&A for the second quarter of 2023 increased to $37.0million from $31.9million in the second quarter of 2022 primarily due to higher salaries and related expenses, increases in the value of foreign currencies relative to the U.S. dollar, primarily the Mexican peso, and higher travel costs. For the first six months, Financial Services SG&A increased to $72.2 million in 2023 from $67.6 million in 2022 primarily due to higher salaries and related expenses, higher travel costs, and partially offset by decreases in the value of foreign currencies relative to the U.S. dollar.

As an annualized percentage of average earnings assets, Financial Services SG&A was .9% in the second quarter of 2023 and .8% in the same period of 2022. For the first six months of 2023 and 2022, Financial Services SG&A as an annualized percentage of average earnings assets was .9%.

The following table summarizes the provision for losses on receivables and net charge-offs:


	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30, 2017				September 30, 2017				June 30, 2023				June 30, 2023
($ in millions)	PROVISION FOR LOSSES ON RECEIVABLES		NET CHARGE-OFFS		PROVISION FOR LOSSES ON RECEIVABLES		NET CHARGE-OFFS		PROVISION FOR LOSSES ON RECEIVABLES		NET CHARGE- OFFS		PROVISION FOR LOSSES ON RECEIVABLES		NET CHARGE- OFFS
U.S. and Canada	$	3.2	$	3.9	$	11.5	$	12.0	$	.6	$	1.1	$	1.1	$	1.9
Europe		.2		.4		1.6		1.1		.8		.8		1.0		1.0
Mexico, Australia and other		1.3		.8		4.3		1.7
Mexico, Australia, Brasil and other										3.4		2.4		5.8		3.3
	$	4.7	$	5.1	$	17.4	$	14.8	$	4.8	$	4.3	$	7.9	$	6.2


	Three Months Ended				Nine Months Ended				Three Months Ended						Six Months Ended
	September 30, 2016				September 30, 2016				June 30, 2022						June 30, 2022
($ in millions)	PROVISION FOR LOSSES ON RECEIVABLES		NET CHARGE-OFFS		PROVISION FOR LOSSES ON RECEIVABLES		NET CHARGE-OFFS		PROVISION FOR LOSSES ON RECEIVABLES			NET CHARGE- OFFS			PROVISION FOR LOSSES ON RECEIVABLES			NET CHARGE- OFFS
U.S. and Canada	$	3.9	$	3.8	$	10.2	$	11.2	$	(.4	)	$	(.1	)	$	(2.9	)	$	(.7	)
Europe		.2		.4		1.0		.9		.3			.3			.3			.5
Mexico, Australia and other		1.0		.7		3.3		2.7
Mexico, Australia, Brasil and other										4.5			.2			7.2			1.3
	$	5.1	$	4.9	$	14.5	$	14.8	$	4.4		$	.4		$	4.6		$	1.1

The provision for losses on receivables was ~~$4.7~~$4.8 million ~~for~~in the ~~third~~second quarter of ~~2017~~2023 compared to ~~$5.1~~$4.4 million in ~~2016. For~~2022, and in the first ~~nine~~six months, ~~of 2017,~~ the provision for losses on receivables was ~~$17.4~~$7.9 million in 2023 compared to ~~$14.5~~$4.6 million in ~~2016, reflecting continued good~~2022. The increase in provision for losses for the second quarter and first half of 2023 compared to 2022 was mainly driven by portfolio ~~performance.~~growth and slight increase in net charge-offs in all regions.

The Company modifies loans and finance leases as a normal part of its Financial Services operations. The Company may modify loans and finance leases for commercial reasons or for credit reasons. Modifications for commercial reasons are changes to contract terms for customers that are not considered to be in financial difficulty. Insignificant delays are modifications extending terms up to three months for customers experiencing some short-term financial stress, but not considered to be in financial difficulty. Modifications for credit reasons are changes to contract terms for customers considered to be in financial difficulty. The Company’s modifications typically result in granting more time to pay the contractual amounts owed and charging a fee and interest for the term of the modification. When considering whether to modify customer accounts for credit reasons, the Company evaluates the creditworthiness of the customers and modifies those accounts that the Company considers likely to perform under the modified terms. ~~When the Company modifies loans and finance leases for credit reasons and grants a concession, the modifications are classified as troubled debt restructurings (TDR).~~

~~- 44 -~~

~~PACCAR Inc – Form 10-Q~~

The post-modification ~~balance~~balances of accounts modified during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 are summarized below:



											2023					2022
($ in millions)											AMORTIZED COST BASIS		% OF TOTAL PORTFOLIO*			AMORTIZED COST BASIS		% OF TOTAL PORTFOLIO*
Nine Months Ended September 30,	2017					2016
	RECORDED INVESTMENT		% OF TOTAL PORTFOLIO*			RECORDED INVESTMENT		% OF TOTAL PORTFOLIO*
Commercial	$	138.0		2.4	%	$	186.8		3.4	%	$	87.9		1.5	%	$	111.2		2.1	%
Insignificant delay		67.1		1.2	%		80.1		1.5	%		50.1		.8	%		41.0		.8	%
Credit – no concession		48.2		.9	%		45.9		.8	%
Credit – TDR		18.0		.3	%		26.7		.5	%
Credit												19.0		.3	%		49.1		1.0	%
	$	271.3		4.8	%	$	339.5		6.2	%	$	157.0		2.6	%	$	201.3		3.9	%

*	~~Recorded investment immediately after modification as a percentage of ending retail portfolio, on an annualized basis.~~

* Amortized cost basis immediately after modification as a percentage of ending retail portfolio, on an annualized basis.

- 43 -

Modification activity decreased to $157.0 million in the ~~first nine~~six months of ~~2017 compared to~~2023 from $201.3 million in the ~~first nine months~~same period of ~~2016.~~2022. The decrease in modifications for ~~commercial~~Commercial reasons primarily reflects lower volumes of ~~refinancing, primarily in the U.S. The decrease in modifications for insignificant~~refinancing. Insignificant delay ~~reflects fewer fleet~~which customers requesting payment relief for up to three ~~months. Credit-TDR modifications decreased to $18.0 in 2017 from $26.7 in 2016 mainly due~~months were a comparable percentage of the total portfolio to the same period in the prior year. The decrease in Credit reflects lower volumes of contract modifications ~~for two fleet customers~~primarily in ~~2016.~~Brasil.

The following table summarizes the Company’s 30+ days past due accounts:


	September 30 2017			December 31 2016			September 30 2016			June 30 2023			December 31 2022			June 30 2022
Percentage of retail loan and lease accounts 30+ days past due:
U.S. and Canada		.3	%		.3	%		.3	%		.2	%		.1	%
Europe		.6	%		.5	%		.6	%		.4	%		.2	%		.5	%
Mexico, Australia and other		2.0	%		1.8	%		2.2	%
Mexico, Australia, Brasil and other											1.7	%		1.6	%		1.7	%
Worldwide		.6	%		.5	%		.6	%		.6	%		.4	%		.4	%

Accounts 30+ days past due was .6% at ~~September~~June 30, ~~2017~~2023 compared to ~~.5%~~.4% at December 31, ~~2016, primarily due to higher past due accounts in Europe~~2022 and ~~Mexico.~~.4% at June 30, 2022. The Company continues to focus on maintaining low past due balances.

When the Company modifies a 30+ days past due account, the customer is then generally considered current under the revised contractual terms. The Company modified ~~$2.2~~$16.8 million of accounts worldwide during the ~~third~~second quarter of ~~2017, $2.6~~2023, $8.9 million during the fourth quarter of ~~2016~~2022 and ~~$2.8~~$24.7 million during the ~~third~~second quarter of ~~2016~~2022 that were 30+ days past due and became current at the time of modification. Had these accounts not been modified and continued to not make payments, the pro forma percentage of retail loan and lease accounts 30+ days past due would have been as follows:


	September 30 2017			December 31 2016			September 30 2016			June 30 2023			December 31 2022			June 30 2022
Pro forma percentage of retail loan and lease accounts 30+ days past due:
U.S. and Canada		.3	%		.3	%		.3	%		.2	%		.1	%
Europe		.6	%		.5	%		.6	%		.4	%		.2	%		.5	%
Mexico, Australia and other		2.2	%		2.0	%		2.5	%
Mexico, Australia, Brasil and other											2.2	%		2.0	%		2.9	%
Worldwide		.7	%		.6	%		.6	%		.7	%		.5	%		.6	%

Modifications of accounts in prior quarters that were more than 30 days past due at the time of modification are included in past dues if they were not performing under the modified terms at ~~September~~June 30, ~~2017,~~2023, December 31, ~~2016~~2022 and ~~September~~June 30, ~~2016.~~2022. The effect on the allowance for credit losses from such modifications was not significant at ~~September~~June 30, ~~2017,~~2023, December 31, ~~2016~~2022 and ~~September~~June 30, ~~2016.~~2022.

The Company’s annualized pre-tax return on average ~~earning~~ assets for Financial Services was ~~2.4% and 2.2%~~3.2% in the second quarter of 2023 compared to 3.6% in the same period of 2022, was 3.3% for the ~~third quarter and the~~ first ~~nine~~six months ~~of 2017, respectively,~~in 2023 compared to ~~2.4% and 2.6% for~~3.7% in the same ~~periods in 2016.~~period of 2022.

~~- 45 -~~

~~PACCAR Inc – Form 10-Q~~Other

~~Other~~

Other includes the winch business as well as sales, income and expenses not attributable to a reportable ~~segment, including the EC charge~~segment. Other also includes non-service cost components of pension expense and a portion of corporate expense. Other sales represent less than 1% of consolidated net sales and revenues for both the ~~third~~second quarter and first ~~nine months~~half of ~~2017~~2023 and ~~2016.~~2022. Other SG&A increased to ~~$11.7~~$23.1 million for the ~~third~~second quarter of ~~2017~~2023 from ~~$9.6~~$22.9 million for the ~~third~~second quarter of ~~2016,~~2022 and increased to $52.4 million for the first ~~nine months, other SG&A increased~~half of 2023 compared to ~~$36.2~~$42.5 million ~~in 2017 from $34.0 million in 2016.~~for the same period of 2022. The increase in ~~other SG&A for~~ both periods was primarily due to higher ~~labor~~salaries and related ~~costs.~~expenses and higher professional fees.

For the ~~third~~second quarter, ~~other~~Other (loss) income before income taxes was ($6.5) million compared to ($3.1) million in 2022 primarily due to higher salaries and related expenses and professional fees. For the first six months, Other (loss) income before tax was ~~a loss of $8.7~~($618.2) million compared to $6.9 million in ~~2017 compared~~2022, primarily due to ~~a loss of $7.8 million~~the EC-related charge in ~~2016. For~~ the first ~~nine months, other income (loss) before tax was a loss~~quarter of ~~$28.1 million~~2023 which is discussed in ~~2017 compared to a loss of $862.4 million in 2016, which included the impact~~Note M of the ~~$833.0 million EC charge.~~consolidated financial statements.

Investment income for the ~~third~~second quarter increased to ~~$9.0~~ $62.7million in ~~2017 from $8.5~~ 2023 compared to an investment income of $5.4million in ~~2016, and for~~2022. For the first ~~nine~~six months, investment income increased to ~~$25.8~~$111.7 million in ~~2017~~2023 from ~~$20.6~~$2.9 million in ~~2016.~~2022. The ~~higher investment income~~increase in ~~the third quarter and first nine months of 2017 was~~both periods is primarily ~~due to higher average U.S. portfolio balances and~~driven by higher yields on ~~U.S. investments~~investment due to higher market interest ~~rates.~~rates in all regions, as well as higher investment balances.

- 44 -

Income Taxes

The effective tax rate for the ~~third~~second quarter of ~~2017~~2023 was ~~30.8%~~22.1% compared to ~~30.0%~~21.9% for the ~~third~~second quarter of ~~2016, primarily due to the increase in mix of income generated in jurisdictions with higher tax rates in 2017 as compared to 2016. For the first nine months, the~~2022. The effective tax rate for the first six months of 2023 was ~~30.8% in 2017~~21.4% compared to ~~67.3% in 2016. Substantially all~~22.0% for the first six months of ~~the difference in~~2022. The higher effective tax rate ~~was due to~~in the ~~non-deductible expense of $833.0 million for the EC charge in 2016.~~

Three Months Ended

Nine Months Ended

($ in millions)

September 30

September 30

2017

2016

2017

2016

Domestic income before taxes

$
385.6

$
318.5

$
996.5

$
959.6

Foreign income (loss) before taxes

196.2

176.4

572.5

(248.1
)
Total income before taxes

$
581.8

$
494.9

$
1,569.0

$
711.5

Domestic pre-tax return on revenues

13.5
%

13.2
%

12.8
%

13.2
%
Foreign pre-tax return on revenues

8.9
%

9.6
%

9.2
%

(4.4
)%
Total pre-tax return on revenues

11.5
%

11.6
%

11.2
%

5.5
%

~~For the third~~second quarter of 2017, the increase in domestic income before income taxes and return on revenues was primarily due to higher revenues from truck and parts operations. The increase in income before income taxes for foreign operations was primarily due to higher revenues from truck and parts operations. The decline in foreign return on revenues2023 was primarily due to a higher mix of ~~truck results and currency impacts.~~pre-tax income in jurisdictions with higher tax rates. The lower effective tax rate in the first half of 2023 reflect a lower mix of foreign pre-tax income.


	Three Months Ended						Six Months Ended
	June 30						June 30
($ in millions)		2023			2022			2023			2022
Domestic income before taxes	$	942.2		$	568.4		$	1,831.5		$	1,042.4
Foreign income before taxes		626.3			353.7			656.0			651.1
Total income before taxes	$	1,568.5		$	922.1		$	2,487.5		$	1,693.5
Domestic pre-tax return on revenues		19.5	%		14.3	%		19.5	%		14.2	%
Foreign pre-tax return on revenues		15.5	%		11.2	%		8.2	%		10.4	%
Total pre-tax return on revenues		17.7	%		12.9	%		14.3	%		12.4	%

For the second quarter and first ~~nine months~~half of ~~2017, the increase in income before income taxes for~~2023, domestic ~~operations was primarily due to higher revenues from truck~~ and parts operations, partially offset by lower financial services results. The decline in domestic return on revenues was primarily due to lower margins from finance operations. In the first nine months of 2016, the EC charge of $833.0 million resulted in a loss before income taxes and a negative return on revenues for foreign ~~operations. Excluding the 2016 EC charge, foreign operations~~ income before income taxes and pre-tax return on revenues ~~decreased slightly~~increased primarily due to the improved results from Truck and Parts operations. In the first half of 2023, foreign income before income taxes and pre-tax return on revenues includes a one-time unfavorable adjustment for the EC-related charge of $600.0 million in the first ~~nine months of 2017 primarily due to lower truck margins in Europe and Mexico.~~quarter 2023.

~~- 46 -~~

~~PACCAR Inc – Form 10-Q~~

LIQUIDITY AND CAPITAL RESOURCES:


	September 30		December 31		June 30		December 31
($ in millions)		2017		2016		2023		2022
Cash and cash equivalents	$	2,313.3	$	1,915.7	$	5,145.9	$	4,690.9
Marketable debt securities		1,216.0		1,140.9
Marketable securities						1,690.5		1,614.2
	$	3,529.3	$	3,056.6	$	6,836.4	$	6,305.1

The Company’s total cash and marketable ~~debt~~ securities at ~~September~~June 30, ~~2017~~2023 increased ~~$472.7~~$531.3 million from the balances at December 31, ~~2016, primarily due to an increase in~~2022. Total cash and ~~cash equivalents.~~marketable securities are primarily intended to provide liquidity while preserving capital.

The change in cash and cash equivalents is summarized below:


($ in millions)
Nine Months Ended September 30,		2017			2016
Six Months Ended June 30,								2023		2022
Operating activities:
Net income	$	1,086.0		$	232.9		$	1,955.0		$	1,320.9
Net income items not affecting cash		826.8			762.3			342.2			229.2
Changes in operating assets and liabilities, net		(90.3	)		495.3			(636.9	)		(452.6	)
Net cash provided by operating activities		1,822.5			1,490.5			1,660.3			1,097.5
Net cash used in investing activities		(1,139.5	)		(921.4	)		(1,044.7	)		(879.0	)
Net cash used in financing activities		(369.3	)		(832.0	)		(198.6	)		(346.0	)
Effect of exchange rate changes on cash		83.9			34.4
Effect of exchange rate changes on cash and cash equivalents								38.0			(69.5	)
Net increase (decrease) in cash and cash equivalents		397.6			(228.5	)		455.0			(197.0	)
Cash and cash equivalents at beginning of period		1,915.7			2,016.4			4,690.9			3,428.3
Cash and cash equivalents at end of period	$	2,313.3		$	1,787.9		$	5,145.9		$	3,231.3

Operating activities: Cash provided by operations increased by ~~$332.0~~$562.8 million to ~~$1,822.5~~$1,660.3 million in the first ~~nine~~six months of ~~2017~~2023 from ~~$1,490.5~~$1,097.5 million in ~~2016.~~2022. Higher operating cash flows ~~reflect~~reflects higher net income of ~~$1,086.0~~$634.1 million ~~in 2017, compared to net income~~and higher accruals of ~~$232.9~~$675.8 million, ~~in 2016, which includes payment of the $833.0 million EC charge. In addition, there~~including EC-related charge and product support liabilities. The higher operating cash flows were partially offset by higher cash ~~inflows~~outflows for income taxes of ~~$443.2~~$261.3 million, from accounts payable and accrued expenses as purchases of goods and services exceeded payments. The higher cash inflows were offset by Financial Services segment wholesale receivables of $528.1 million as originations exceeded cash receipts in the first nine months of 2017 ($316.3 million) compared to cash receipts exceeding originations in 2016 ($211.8 million). In addition, there was a higher cash usage of ~~$266.2~~$244.7 million ~~from accounts receivable as sales~~for wholesale receivables and ~~services exceeded cash receipts, and higher net purchases of inventory of $200.4 million.~~$186.4 million for inventories.

Investing activities: Cash used in investing activities increased by ~~$218.1~~$165.7 million to ~~$1,139.5~~$1,044.7 million in the first ~~nine~~six months of ~~2017~~2023 from ~~$921.4~~$879.0 million in ~~2016.~~2022. Higher net cash used in investing activities reflects ~~$405.5~~higher net originations for retails loans and financing

- 45 -

leases of $323.7 million and higher cash used in ~~marketable debt securities as there~~the acquisition of property, plant and equipment of $40.2 million. This was ~~$34.8 million in net purchases of marketable debt securities in 2017 compared to $370.7 million in net proceeds from sales of marketable debt securities in 2016. The outflows were~~ partially offset by lower ~~cash used in the~~ acquisitions of equipment for operating leases of ~~$154.5 million, less net originations of $39.3 million from retail loans and direct financing leases, and higher proceeds from assets disposals of $36.1~~$216.1 million.

Financing activities: Cash used in financing activities decreased by ~~$462.7~~$147.4 to $198.6 million ~~to $369.3 million for~~in the first ~~nine~~six months of ~~2017~~2023 from ~~$832.0 million~~$346.0 in ~~2016. The Company~~2022.In the first six months of 2023, the company paid ~~$470.4~~$1,236.0 million in dividends in ~~the first nine months of 2017~~2023 compared to ~~$745.2~~$757.6 million in ~~2016; the decrease of $274.8 million was~~2022, primarily due to a ~~lower special~~higher year-end dividend paid in January ~~2017~~2023.Cash provided from borrowing activities was $1,011.6 million, $616.5 higher than the special dividend paid in January 2016. In the first nine months of 2016, the Company repurchased 1.1 million shares of common stock for $56.3 million, and there were no stock repurchases in 2017. In the first nine months of 2017, the Company issued $1,371.0 million of term debt, increased its outstanding commercial paper and short-term bank loans by $261.9 million and repaid term debt of $1,560.0 million. In the nine months of 2016, the Company issued $1,864.4 million of term debt, repaid term debt of $1,622.6 million and reduced its outstanding commercial paper and short-term bank loans by $283.6 million. This resulted in cash provided by borrowing activities of ~~$72.9 million~~$395.1 in ~~the first nine months of 2017, $114.7 million higher than the cash used in borrowing activities of $41.8 million in 2016.~~2022.

~~- 47 -~~

~~PACCAR Inc – Form 10-Q~~

Credit Lines and Other

The Company has line of credit arrangements of ~~$3.55~~$3.94 billion, of which ~~$3.32~~$3.43 billion were unused at ~~September~~June 30, ~~2017.~~2023. Included in these arrangements are ~~$3.0~~$3.00 billion of ~~syndicated~~committed bank facilities, of which ~~$1.0~~ $1.00billion expires in June ~~2018, $1.0~~2024, $1.00 billion expires in June ~~2021~~2026 and ~~$1.0~~$1.00 billion expires in June ~~2022.~~2028. The Company intends to extend or replace these credit facilities on or before expiration ~~with~~to maintain facilities of similar amounts and duration. These credit facilities are maintained primarily to provide backup liquidity for commercial paper borrowings and maturing medium-term notes. There were no borrowings under the ~~syndicated~~committed bank facilities for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2023.

On ~~September 23, 2015,~~December 4, 2018, PACCAR’s Board of Directors approved the repurchase of up to ~~$300.0~~$500.0 million of the Company’s outstanding common ~~stock, and as~~stock. As of ~~September~~June 30, ~~2017, $206.7~~2023, the Company has repurchased $110.0 million of shares ~~have been repurchased pursuant to~~under this plan. There were no repurchases made under this plan during the ~~2015 authorization.~~first half of 2023.

Truck, Parts and Other

The Company provides funding for working capital, capital expenditures, R&D, dividends, stock repurchases and other business initiatives and commitments primarily from cash provided by operations. Management expects this method of funding to continue in the future.

Investments for manufacturing property, plant and equipment in the first ~~nine~~six months of ~~2017 increased~~2023 were $303.6 million compared to ~~$270.2 million from $260.0~~$227.4 million for the same period of ~~2016.~~2022. Over the past decade, the Company’s combined investments in worldwide capital projects and R&D totaled ~~$6.17~~$7.41 billion and have significantly increased the operating capacity and efficiency of its facilities and enhanced the quality and operating efficiency of the Company’s premium products.

In ~~2017,~~2023, total capital investments for PACCAR are expected to be ~~$400~~$625 to ~~$450~~$675 million and R&D is expected to be ~~$260~~$400 to ~~$270 million. These expenditures are focused on manufacturing facilities, new product development and enhanced aftermarket support.~~ ~~In 2018, capital investments are projected to be $425 to $475 million, and R&D is expected to be $270 to $300~~$430 million. The Company is ~~investing~~increasing its investment in ~~PACCAR’s new truck models, integrated~~clean diesel and electric powertrain ~~enhanced aerodynamic truck designs, advanced driver assistance and truck connectivity~~ technologies, ~~and expanded~~autonomous systems, connected vehicle services, next-generation manufacturing and parts distribution ~~facilities.~~capabilities.

The Company conducts business in certain countries which have been experiencing or may experience significant financial stress, fiscal or political strain and are subject to the corresponding potential for default. The Company routinely monitors its financial exposure to global financial conditions, global counterparties and operating environments. As of September 30, 2017, the Company’s exposures in such countries were insignificant.

Financial Services

The Company funds its financial services activities primarily from collections on existing finance receivables and borrowings in the capital markets. The primary sources of borrowings in the capital markets are commercial paper and medium-term notes issued in the public markets and, to a lesser extent, bank loans. ~~An additional source of funds is loans from other PACCAR companies.~~

The Company issues commercial paper for a portion of its funding in its Financial Services segment. Some of this commercial paper is converted to fixed interest rate debt through the use of interest-rate swaps, which are used to manage interest-rate risk.

In November ~~2015,~~2021, the Company’s U.S. finance subsidiary, PACCAR Financial Corp. (PFC), filed a shelf registration under the Securities Act of 1933. The total amount of medium-term notes outstanding for PFC as of ~~September~~June 30, ~~2017~~2023 was ~~$4.45~~ $5.65billion. The registration expires in November ~~2018~~2024 and does not limit the principal amount of debt securities that may be issued during that period. ~~PFC intends to renew the registration in 2018.~~

As of ~~September~~June 30, ~~2017,~~2023, the Company’s European finance subsidiary, PACCAR Financial Europe, had ~~€1.32~~€909.1 billion available for issuance under a €2.50 billion medium-term note program listed on the ~~Professional Securities~~Euro MTF Market of the ~~London~~Luxembourg Stock Exchange. ~~This program replaced an expiring~~The Company intends to renew this medium-term note program in the ~~second~~third quarter of ~~2017 and is renewable annually through the filing of new listing particulars.~~2023.

In ~~April 2016,~~August 2021, PACCAR Financial Mexico registered a 10.00 billion Mexican peso ~~medium-term note and commercial paper~~ program with the Comision Nacional Bancaria y de ~~Valores.~~Valores to issue medium-term notes and commercial paper. The registration expires in ~~April 2021~~August 2026 and limits the amount of commercial paper (up to one year) to 5.00 billion Mexican pesos. At ~~September~~June 30, ~~2017, 6.90~~2023, 8.91 billion Mexican pesos were available for issuance.

In August 2018, the Company’s Australian subsidiary, PACCAR Financial Pty. Ltd. (PFPL Australia), established a medium-term note program. The program does not limit the principal amount of debt securities that may be issued under the program. The total amount of medium-term notes outstanding for PFPL Australia as of June 30, 2023 was 750.0 million Australian dollars.

- 4846 -

In May 2021, the Company’s Canadian subsidiary, PACCAR ~~Inc – Form 10-Q~~Financial Ltd. (PFL Canada), established a medium-term note program. The program does not limit the principal amount of debt securities that may be issued under the program. The total amount of medium-term notes outstanding for PFL Canada as of June 30, 2023 was 150.0million Canadian dollars.

In the event of a future significant disruption in the financial markets, the Company may not be able to issue replacement commercial paper. As a result, the Company is exposed to liquidity risk from the shorter maturity of short-term borrowings paid to lenders compared to the longer timing of receivable collections from customers. The Company believes its cash balances and investments, collections on existing finance receivables, ~~syndicated~~committed bank ~~lines~~facilities and current investment-grade credit ratings of A+/A1 will continue to provide it with sufficient resources and access to capital markets at competitive interest rates and therefore contribute to the Company maintaining its liquidity and financial stability. AIn the event of a decrease in ~~these~~the Company’s credit ratings ~~could negatively impact~~or a disruption in the ~~Company’s ability to access capital~~financial markets, ~~at competitive interest rates and~~ the ~~Company’s ability to maintain liquidity and financial stability. PACCAR believes its Financial Services companies will~~Company may not be able to refinance its maturing debt in the financial markets. In such circumstances, the Company would be exposed to liquidity risk to the degree that the timing of debt maturities differs from the timing of receivable collections from customers. The Company believes its various sources of liquidity, including committed bank facilities, would continue to provide it with sufficient funding ~~receivables, servicing~~resources to service its maturing debt ~~and paying dividends through internally generated funds, access to public and private debt markets and lines of credit.~~obligations.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES:

This Form 10-Q includes “adjusted net income (non-GAAP)” and “adjusted net income per diluted share (non-GAAP)”, which are financial measures that are not in accordance with U.S. generally accepted accounting principles (“GAAP”), since they exclude ~~the non-recurring EC~~a charge ~~in 2016.~~for EC-related claims. These measures differ from the most directly comparable measures calculated in accordance with GAAP and may not be comparable to similarly titled non-GAAP financial measures used by other companies. ~~In addition, this Form 10-Q includes~~

Adjustment for the ~~financial ratios noted below calculated based on non-GAAP measures.~~EC-related claims relates to a pre-tax charge of $600.0 million ($446.4 million after-tax) for estimable total costs recorded in Interest and other (income) expense, net in the six months ended June 30, 2023 (recorded in the first quarter 2023).

Management utilizes these non-GAAP measures to evaluate the Company’s performance and believes these measures allow investors and management to evaluate operating trends by excluding a significant non-recurring charge that is not representative of underlying operating trends.

Reconciliations from the most directly comparable GAAP measures to adjusted ~~non-GAAP measures~~net income (non-GAAP) and adjusted net income per diluted shares (non-GAAP) are as follows:


	Nine Months Ended			Six Months Ended
($ in millions, except per share amounts)	September 30, 2016			June 30, 2023
Net income	$	232.9		$	1,955.0
Non-recurring European Commission charge		833.0
EC-related claims, net of taxes					446.4
Adjusted net income (non-GAAP)	$	1,065.9		$	2,401.4
Per diluted share
Net income	$	.66		$	3.73
Non-recurring European Commission charge		2.37
EC-related claims, net of taxes					.85
Adjusted net income (non-GAAP)	$	3.03		$	4.58
After-tax return on revenues		1.8	%		11.3	%
Non-recurring European Commission charge		6.4	%
EC-related claims, net of taxes					2.5	%
After-tax adjusted return on revenues (non-GAAP) *		8.2	%		13.8	%
* Calculated using adjusted net income.

*	~~Calculated using adjusted net income.~~

- 47 -

FORWARD-LOOKING STATEMENTS:

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements relating to future results of operations or financial position and any other statement that does not relate to any historical or current fact. Such statements are based on currently available operating, financial and other information and are subject to risks and uncertainties that may affect actual results. Risks and uncertainties include, but are not limited to: a significant decline in industry sales; competitive pressures; reduced market share; reduced availability of or higher prices for fuel; increased safety, emissions, or other regulations or tariffs resulting in higher costs and/or sales restrictions; currency or commodity price fluctuations; lower used truck prices; insufficient or under-utilization of manufacturing capacity; supplier interruptions; insufficient liquidity in the capital markets; fluctuations in interest rates; changes in the levels of the Financial Services segment new business volume due to unit fluctuations in new PACCAR truck sales or reduced market shares; changes affecting the profitability of truck owners and operators; price changes impacting truck sales prices and residual values; insufficient supplier capacity or access to raw ~~materials;~~materials and components, including semiconductors; labor disruptions; shortages of commercial truck drivers; increased warranty costs; pandemics; climate-related risks; global conflicts; litigation, including ~~EC-related~~European Commission (EC) settlement-related claims; or legislative and governmental regulations. A more detailed description of these and other risks is included under the ~~heading~~headings Part 1,I, Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10‑K for the year ended December 31, ~~2016.~~2022 and in Part II, Item 1, “Legal Proceedings” and Part II, Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q.

- 4948 -

~~PACCAR Inc – Form 10-Q~~

~~ITEM 3.~~

~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There were no material changes in the Company’s market risk during the ~~nine~~three months ended ~~September~~June 30, ~~2017.~~2023. For additional information, refer to Item 7A as presented in the ~~2016~~2022 Annual Report on Form 10‑K.

~~ITEM 4.~~

~~CONTROLS AND PROCEDURES~~

ITEM 4. CONTROLS AND PROCEDURES

The Company’s management, with the participation of the Principal Executive Officer and Principal Financial Officer, conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the period covered by this report. Based on that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.

There have been no ~~significant~~ changes in the Company’s internal controls over financial reporting that occurred during the fiscal quarter covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 5. OTHER INFORMATION

None of the Company’s directors or officers adopted, modified or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company’s quarter ended June 30, 2023, as such terms are defined under Item 408(a) of Regulation S-K.

- 49 -

PART II – OTHER INFORMATION

For Items 3, 4 and 5, there was no reportable information for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2023.

~~ITEM 1.~~

~~LEGAL PROCEEDINGS~~

~~The Company~~ITEM 1. LEGAL PROCEEDINGS

Refer to Note M – “Commitments and ~~its subsidiaries are parties~~Contingencies” in the Notes to ~~various lawsuits incidental to the ordinary course of business. Management believes that the disposition of such lawsuits will not materially affect the Company’s business or financial condition.~~Consolidated Financial Statements (Part I, Item 1) for discussion on litigation matters, which is incorporated by reference herein.

~~ITEM 1A.~~

~~RISK FACTORS~~

ITEM 1A. RISK FACTORS

For information regarding risk factors, refer to Part I, Item 1A as presented in the ~~2016~~2022 Annual Report on Form 10-K. There have been no material changes in the Company’s risk factors during the ~~nine~~three months ended ~~September~~June 30, ~~2017.~~2023.

~~ITEM 2.~~

~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

For Items 2(a) and (b), there was no reportable information for the ~~nine~~three months ended ~~September~~June 30, ~~2017.~~2023.

~~(c)~~

~~Issuer purchases of equity securities.~~

(c)

Issuer purchases of equity securities.

On ~~September 23, 2015, the Company’s~~December 4, 2018, PACCAR’s Board of Directors approved ~~a plan to~~the repurchase of up to ~~$300~~$500.0 million of the Company’s outstanding common stock. As of ~~September~~June 30, ~~2017,~~2023, the Company has repurchased ~~4.1~~$110.0 million of shares ~~for $206.7 million~~ under this plan. There were no repurchases made under this plan during the ~~third quarter~~first half of ~~2017.~~2023.

~~ITEM 6.~~

~~EXHIBITS~~

- 50 -

ITEM 6. EXHIBITS

Any exhibits filed herewith are listed in the accompanying index to exhibits.

~~- 50 -~~

~~PACCAR Inc – Form 10-Q~~

INDEX TO EXHIBITS

~~Exhibit (in order of assigned index numbers)~~

Exhibit

Number

Exhibit Description

Form

Date of First

Filing

Exhibit

Number

File Number

~~Exhibit Description~~

~~Form~~

(3) (i)

Articles of Incorporation:

~~(3)~~

~~(i)~~

~~Articles of Incorporation:~~

Amended and Restated Certificate of Incorporation of PACCAR Inc

~~10-Q~~8-K

May 4, ~~2016~~2018

3(i)

001-14817

~~(ii)~~

~~Bylaws:~~

Certificate of Amendment of the Amended and Restated Certificate of Incorporation of PACCAR Inc

8-K

April 24, 2020

3(i)

001-14817

~~(a)~~

~~Fourth~~Certificate of Amendment of the Amended and Restated Certificate of Incorporation of PACCAR Inc

8-K

April 29, 2022

3(i)

001-14817

(ii)

Bylaws:

Seventh Amended and Restated Bylaws of PACCAR Inc

8-K

~~April 29, 2016~~July 26, 2022

3(ii)

001-14817

(4)

Instruments defining the rights of security holders, including indentures**:

(a)

~~(a)~~

Indenture for Senior Debt Securities dated as of November 20, 2009 between PACCAR Financial Corp. and The Bank of New York Mellon Trust Company, N.A.

S-3

November 20, 2009

4.1

333-163273

(b)

~~(b)~~

~~Forms of Medium-Term Note, Series N (PACCAR Financial Corp.)~~

~~S-3~~

~~November 7, 2012~~

~~4.2~~ ~~and~~ ~~4.3~~

~~333-184808~~

~~(c)~~

Forms of Medium-Term Note, Series O (PACCAR Financial Corp.)

S-3

November 5, 2015

4.2 and 4.3

333-207838

(c)

~~(d)~~

~~Form~~Forms of ~~InterNotes,~~Medium-Term Note, Series CP (PACCAR Financial Corp.)

S-3

November 2, 2018

4.2 and 4.3

~~S-3~~

~~November 5, 2015~~

~~4.4~~

~~333-207838~~333-228141

(d)

~~(e)~~

Forms of Medium-Term Note, Series Q (PACCAR Financial Corp.)

S-3

November 1, 2021

~~Terms~~4.3 and ~~Conditions of the Notes applicable to the €1,500,000,000 Medium Term Note Programme of PACCAR Financial Europe B.V. set forth in the Base Prospectus dated May 9, 2014~~4.4

~~10-Q~~

~~November 6, 2014~~

~~4(h)~~

~~001-14817~~333-260663

(e)

~~(f)~~

~~Terms and Conditions of the Notes applicable to the €1,500,000,000 Medium Term Note Programme of PACCAR Financial Europe B.V. set forth in the Listing Particulars dated May 11, 2015~~

~~10-Q~~

~~August 6, 2015~~

~~4(g)~~

~~001-14817~~

~~(g)~~

Terms and Conditions of the Notes applicable to the €2,500,000,000 Medium Term Note Programme of PACCAR Financial Europe B.V. set forth in the ~~Listing Particulars~~Information Memorandum dated May ~~9, 2016~~29, 2020

~~10-K~~10-Q

~~February 21, 2017~~August 3, 2020

~~4(i)~~4(h)

001-14817

(f)

~~(h)~~

10-Q

August ~~4, 2017~~2, 2021

~~4(h)~~4(g)

001-14817

(g)

Terms and Conditions of the Notes applicable to the €2,500,000,000 Medium Term Note Programme of PACCAR Financial Europe B.V. set forth in the Information Memorandum dated July 13, 2022

10-Q

August 2, 2022

4(h)

001-14817

(h)

Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934

10-K

February 19, 2020

4(j)

001-14817

Pursuant to the Instructions to Exhibits, certain instruments defining the rights of holders of long-term debt securities of the Company and its wholly owned subsidiaries are not filed because the total amount of securities authorized under any such instrument does not exceed 10 percent of the Company’s total assets. The Company will file copies of such instruments upon request of the Commission.

- 51 -

Exhibit Number

Exhibit Description

Form

Date of First Filing

Exhibit

Number

File Number

(10)

Material Contracts:

(a)

~~(a)~~

PACCAR Inc Amended and Restated Supplemental Retirement Plan

10-K

February 27, 2009

10(a)

001-14817

(b)

~~(b)~~

Amended and Restated Deferred Compensation Plan

10-Q

May 5,10, 2012

10(b)

001-14817

(c)

~~(c)~~

Deferred Incentive Compensation Plan (Amended and Restated as of December 31, 2004)

10-K

February 27, 2006

10(b)

001-14817

~~- 51 -~~

~~PACCAR Inc – Form 10-Q~~

~~Exhibit~~

~~Number~~

~~Date of First~~

~~Filing~~

~~Exhibit~~

~~Number~~

~~File Number~~

~~Exhibit Description~~

~~Form~~

(d)

~~(d)~~

Second Amended and Restated PACCAR Inc Restricted Stock and Deferred Compensation Plan for Non-Employee Directors

~~DEF14A~~10-K

~~March 14, 2014~~February 22, 2023

~~Appendix A~~10(d)

001-14817

(e)

~~(e)~~

PACCAR Inc Restricted Stock and Deferred Compensation Plan for Non-Employee Directors, Form of Deferred Restricted Stock Unit Agreement for Non-Employee Directors

~~10-K~~8-K

~~February 27, 2009~~December 10, 2007

~~10(e)~~99.3

001-14817

(f)

~~(f)~~

Amendment to Compensatory Arrangement with Non-Employee Directors

10-K

February 26, 2015

10(g)

001-14817

(g)

~~(g)~~

PACCAR Inc Senior Executive Yearly Incentive Compensation Plan ~~(effective 01/01/16)~~

~~10-Q~~10-K

~~August 6, 2015~~February 19, 2020

~~10(i)~~10(g)

001-14817

(h)

~~(h)~~

PACCAR Inc Long Term Incentive Plan

~~8-K~~10-K

~~September 19, 2016~~February 22, 2023

~~10(j)~~10(h)

001-14817

(i)

~~(i)~~

~~PACCAR Inc Long Term Incentive Plan, Nonstatutory Stock Option Agreement and Form of Option Grant Agreement~~

~~8-K~~

~~January 25, 2005~~

~~99.1~~

~~001-14817~~

~~(j)~~

Amendment One to PACCAR Inc Long Term Incentive Plan, Nonstatutory Stock Option Agreement and Form of Option Grant Agreement

10-Q

August 7, 2013

10(k)

001-14817

(j)

~~(k)~~

PACCAR Inc Long Term Incentive Plan, ~~2014~~2018 Form of ~~Nonstatutory~~Restricted Stock ~~Option~~Award Agreement

~~10-Q~~10-K

~~August 7, 2013~~February 21, 2019

~~10(l)~~10(m)

001-14817

(k)

~~(l)~~

PACCAR Inc Long Term Incentive Plan, Form of Restricted Stock ~~Award~~Unit Agreement

~~8-K~~10-K

February ~~5, 2007~~21, 2019

~~99.1~~10(n)

001-14817

(l)

~~(m)~~

~~PACCAR Inc Long Term Incentive Plan, 2010 Form of Restricted Stock Award Agreement~~

~~10-K~~

~~February 26, 2010~~

~~10(m)~~

~~001-14817~~

~~(n)~~

~~PACCAR Inc Long Term Incentive Plan, Alternate Form of Restricted Stock Award Agreement~~

~~10-K~~

~~March 1, 2011~~

~~10(n)~~

~~001-14817~~

~~(o)~~

~~PACCAR Inc Long Term Incentive Plan, 2016 Restricted Stock Award Agreement~~

~~10-Q~~

~~August 6, 2015~~

~~10(q)~~

~~001-14817~~

~~(p)~~

PACCAR Inc Savings Investment Plan, Amendment and Restatement effective September 1, 2016

10-Q

November 4, 2016

10(q)

001-14817

(m)

~~(q)~~

Memorandum of Understanding, dated as of May 11, 2007, by and among PACCAR Engine Company, the State of Mississippi and certain state and local supporting governmental entities

8-K

May 16, 2007

10.1

001-14817

(n)

~~(r)~~

Letter Waiver ~~dated~~Dated as of July 22, 2008 amending the Memorandum of Understanding, dated as of May 11, 2007, by and among PACCAR Engine Company, the State of Mississippi and certain state and local supporting governmental entities

10-Q

October 27, 2008

10(o)

001-14817

(o)

~~(s)~~

Second Amendment to Memorandum of Understanding dated as of September 26, 2013, by and among PACCAR Engine Company, the Mississippi Development Authority and the Mississippi Major Economic Impact Authority

10-Q

November 7, 2013

10(u)

001-14817

(p)

~~(t)~~

Third Amendment to Memorandum of Understanding dated as of November 12, 2019, by and among PACCAR Engine Company, the Mississippi Development Authority and the Mississippi Major Economic Impact Authority

10-K

February 19, 2020

10(r)

001-14817

- 52 -

Exhibit Number

Exhibit Description

Form

Date of First Filing

Exhibit

Number

File Number

(q)

Second Amended and Restated PACCAR Inc Restricted Stock and Deferred Compensation Plan for Non-Employee Directors, Form of Amended Deferred Restricted Stock Unit Grant Agreement

10-K

February 26, 2015

10(t)

001-14817

~~- 52 -~~

~~PACCAR Inc – Form 10-Q~~

~~Exhibit~~

~~Number~~

~~Date of First~~

~~Filing~~

~~Exhibit~~

~~Number~~

~~File Number~~

~~Exhibit Description~~

(r)

~~Form~~

~~(u)~~

Second Amended and Restated PACCAR Inc Restricted Stock and Deferred Compensation Plan for Non-Employee Directors, Form of Amended Restricted Stock Grant Agreement

10-K

February 26, 2015

10(u)

001-14817

(31)

Rule 13a-14(a)/15d-14(a) Certifications:

(a)

~~(a)~~

Certification of Principal Executive Officer*

(b)

~~(b)~~

Certification of Principal Financial Officer*

(32)

Section 1350 Certifications:

Certification pursuant to rule 13a-14(b) and section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. section 1350)*

(101.INS)

Inline XBRL Instance Document*Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

(101.SCH)

Inline XBRL Taxonomy Extension Schema Document*

(101.CAL)

Inline XBRL Taxonomy Extension Calculation Linkbase Document*

(101.DEF)

Inline XBRL Taxonomy Extension Definition Linkbase Document*

(101.LAB)

Inline XBRL Taxonomy Extension Label Linkbase Document*

(101.PRE)

Inline XBRL Taxonomy Extension Presentation Linkbase Document*

(104)

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)*

*	~~filed herewith~~

* filed herewith

- 53 -

~~PACCAR Inc – Form 10-Q~~

~~SIGNATURE~~SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			PACCAR Inc
			(Registrant)

Date	~~November 3, 2017~~August 2, 2023	By	/s/ ~~M. T. Barkley~~B. J. Poplawski
			~~M. T. Barkley~~B. J. Poplawski
			~~Senior~~ Vice President and Controller
			(Authorized Officer and Chief Accounting Officer)

- 54 -


Delaware	91-0351110
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

777 - 106th Ave. N.E., Bellevue, WA	98004
(Address of principal executive offices)	(Zip Code)


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common stock, $1 par value	PCAR	The Nasdaq Stock Market


	September 30		December 31		June 30		December 31
		2017	2016*		2023		2022 *
	(Unaudited)				(Unaudited)
ASSETS

TRUCK, PARTS AND OTHER:
Current Assets
Cash and cash equivalents	$	2,205.3	$	1,781.7	$	4,927.9	$	4,544.7
Trade and other receivables, net		1,323.8		862.2
Marketable debt securities		1,216.0		1,140.9
Trade and other receivables, net (allowance for losses: 2023 - $.7, 2022 - $.6)						2,350.9		1,919.8
Marketable securities						1,690.5		1,614.2
Inventories, net		983.0		727.8		2,712.9		2,198.8
Other current assets		252.4		225.6		709.3		682.0
Total Truck, Parts and Other Current Assets		5,980.5		4,738.2		12,391.5		10,959.5

Equipment on operating leases, net		1,248.8		1,013.9		163.2		190.8
Property, plant and equipment, net		2,389.1		2,260.0		3,601.8		3,468.4
Other noncurrent assets, net		423.8		432.0		1,670.6		1,477.2
Total Truck, Parts and Other Assets		10,042.2		8,444.1		17,827.1		16,095.9

FINANCIAL SERVICES:
Cash and cash equivalents		108.0		134.0		218.0		146.2
Finance and other receivables, net		9,548.7		8,837.4
Finance and other receivables, net (allowance for losses: 2023 - $126.2, 2022 - $121.1)						15,664.3		13,791.9
Equipment on operating leases, net		2,835.8		2,623.9		2,351.2		2,612.5
Other assets		569.2		599.5		807.1		629.0
Total Financial Services Assets		13,061.7		12,194.8		19,040.6		17,179.6
	$	23,103.9	$	20,638.9	$	36,867.7	$	33,275.5


	September 30			December 31			June 30			December 31
		2017		2016*			2023			2022 *
	(Unaudited)						(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY

TRUCK, PARTS AND OTHER:
Current Liabilities
Accounts payable, accrued expenses and other	$	2,760.1		$	2,034.1		$	5,333.5		$	4,511.7
Dividend payable					210.4						974.6
Total Truck, Parts and Other Current Liabilities		2,760.1			2,244.5			5,333.5			5,486.3
Residual value guarantees and deferred revenues		1,319.3			1,072.6			179.9			209.2
Other liabilities		805.3			739.1			1,970.8			1,490.1
Total Truck, Parts and Other Liabilities		4,884.7			4,056.2			7,484.2			7,185.6

FINANCIAL SERVICES:
Accounts payable, accrued expenses and other		473.8			395.0			1,028.0			826.8
Commercial paper and bank loans		2,865.1			2,447.5			4,637.0			3,604.9
Term notes		5,966.9			6,027.7			7,953.1			7,866.7
Deferred taxes and other liabilities		977.8			934.9			686.1			624.4
Total Financial Services Liabilities		10,283.6			9,805.1			14,304.2			12,922.8

STOCKHOLDERS' EQUITY:
Preferred stock, no par value - authorized 1.0 million shares, none issued
Common stock, $1 par value - authorized 1.2 billion shares, issued 351.5 and 350.7 million shares		351.5			350.7
Common stock, $1 par value - authorized 1.2 billion shares, issued 522.8 and 522.0 million shares								522.8			522.0
Additional paid-in capital		109.6			70.1			241.8			196.1
Treasury stock, at cost - .04 million and nil shares								(3.0	)
Retained earnings		8,290.7			7,484.9			15,095.5			13,402.4
Accumulated other comprehensive loss		(816.2	)		(1,128.1	)		(777.8	)		(953.4	)
Total Stockholders' Equity		7,935.6			6,777.6			15,079.3			13,167.1
	$	23,103.9		$	20,638.9		$	36,867.7		$	33,275.5


	Nine Months Ended						Six Months Ended
	September 30						June 30
		2017			2016		2023			2022
OPERATING ACTIVITIES:
Net income	$	1,086.0		$	232.9
Net Income							$	1,955.0		$	1,320.9
Adjustments to reconcile net income to cash provided by operations:
Depreciation and amortization:
Property, plant and equipment		235.4			230.6			205.2			155.3
Equipment on operating leases and other		578.9			515.0			239.3			227.3
Provision for losses on financial services receivables		17.4			14.5			7.9			4.6
Other, net		(4.9	)		2.2			(110.2	)		(158.0	)
Pension contributions		(15.3	)		(65.1	)		(11.5	)		(13.2	)
Change in operating assets and liabilities:
Trade and other receivables		(461.6	)		(195.4	)		(479.9	)		(440.1	)
Wholesale receivables on new trucks		(316.3	)		211.8			(815.1	)		(570.4	)
Sales-type finance leases and dealer direct loans on new trucks		98.1			105.7
Inventories		(207.8	)		(7.4	)		(494.3	)		(307.9	)
Accounts payable and accrued expenses		595.8			152.6			779.5			810.3
Income taxes, warranty and other		216.8			293.1			384.4			68.7
Net Cash Provided by Operating Activities		1,822.5			1,490.5			1,660.3			1,097.5

INVESTING ACTIVITIES:
Originations of retail loans and direct financing leases		(2,132.0	)		(2,026.4	)
Collections on retail loans and direct financing leases		1,997.7			1,852.8
Originations of retail loans and finance leases								(2,910.4	)		(2,407.0	)
Collections on retail loans and finance leases								2,180.3			2,000.6
Net increase in wholesale receivables on used equipment		16.3			5.4			(16.5	)		(18.7	)
Purchases of marketable debt securities		(613.6	)		(796.2	)		(560.2	)		(515.9	)
Proceeds from sales and maturities of marketable debt securities		578.8			1,166.9			491.1			426.3
Payments for property, plant and equipment		(295.9	)		(242.0	)		(307.1	)		(266.9	)
Acquisitions of equipment for operating leases		(1,047.8	)		(1,202.3	)		(256.3	)		(472.4	)
Proceeds from asset disposals		357.0			320.9			316.9			348.3
Other, net					(.5	)		17.5			26.7
Net Cash Used in Investing Activities		(1,139.5	)		(921.4	)		(1,044.7	)		(879.0	)

FINANCING ACTIVITIES:
Payments of cash dividends		(470.4	)		(745.2	)		(1,236.0	)		(757.6	)
Purchases of treasury stock					(56.3	)		(3.0	)		(1.9	)
Proceeds from stock compensation transactions		28.2			11.3			28.8			18.4
Net increase (decrease) in commercial paper and short-term bank loans		261.9			(283.6	)
Net increase in commercial paper, short-term bank loans and other								890.6			116.5
Proceeds from term debt		1,371.0			1,864.4			1,581.5			1,648.3
Payments on term debt		(1,560.0	)		(1,622.6	)		(1,460.5	)		(1,369.7	)
Net Cash Used in Financing Activities		(369.3	)		(832.0	)		(198.6	)		(346.0	)
Effect of exchange rate changes on cash		83.9			34.4
Effect of exchange rate changes on cash and cash equivalents								38.0			(69.5	)
Net Increase (Decrease) in Cash and Cash Equivalents		397.6			(228.5	)		455.0			(197.0	)
Cash and cash equivalents at beginning of period		1,915.7			2,016.4			4,690.9			3,428.3
Cash and cash equivalents at end of period	$	2,313.3		$	1,787.9		$	5,145.9		$	3,231.3


☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


☐	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐


		Page
PART I.	FINANCIAL INFORMATION:

ITEM 1.	FINANCIAL STATEMENTS:
	Consolidated Statements of Comprehensive Income – Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 (Unaudited)	3
	Consolidated Balance Sheets – ~~September~~ June 30, ~~2017~~2023 (Unaudited) and December 31, ~~2016~~2022	4
	Condensed Consolidated Statements of Cash Flows – ~~Nine~~ Six Months Ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 (Unaudited)	6
	Consolidated Statements of Stockholders’ Equity – Three and Six Months Ended June 30, 2023 and 2022 (Unaudited)	7
	Notes to Consolidated Financial Statements (Unaudited)	78
ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	3233
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	5049
ITEM 4.	CONTROLS AND PROCEDURES	5049
ITEM 5.	OTHER INFORMATION	49
~~PART II.~~	~~OTHER INFORMATION:~~
PART II.	OTHER INFORMATION:
~~ITEM 1.~~	~~LEGAL PROCEEDINGS~~	50
ITEM ~~1A.~~1.	~~RISK FACTORS~~LEGAL PROCEEDINGS	50
ITEM 2.1A.	RISK FACTORS	50
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	50
ITEM 6.	EXHIBITS	5051

INDEX TO EXHIBITS		51

SIGNATURE		54

~~STANDARD~~		~~DESCRIPTION~~

2017-04 *		~~Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.~~

2016-09 **		~~Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.~~

2015-11 **		~~Inventory (Topic 330): Simplifying the Measurement of Inventory.~~

~~STANDARD~~	~~DESCRIPTION~~	EFFECTIVE DATE*

2016-01 *	~~Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.~~	~~January 1, 2018~~

2016-15 *	~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~	~~January 1, 2018~~

2017-12 **	~~Derivative and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.~~	~~January 1, 2019~~

	AMORTIZED		UNREALIZED		UNREALIZED		FAIR
At September 30, 2017	COST		GAINS		LOSSES		VALUE
U.S. tax-exempt securities	$	520.8	$	1.3	$	.1	$	522.0
U.S. corporate securities		58.6		.3				58.9
U.S. government and agency securities		12.2						12.2
Non-U.S. corporate securities		397.7		1.4		1.2		397.9
Non-U.S. government securities		97.0		.3		.1		97.2
Other debt securities		128.1		.1		.4		127.8
	$	1,214.4	$	3.4	$	1.8	$	1,216.0

	September 30, 2017				December 31, 2016
	LESS THAN		TWELVE MONTHS		LESS THAN		TWELVE MONTHS
	TWELVE MONTHS		OR GREATER		TWELVE MONTHS		OR GREATER
Fair value	$	409.8	$	11.3	$	615.5
Unrealized losses		1.7		.1		3.7

	AMORTIZED		FAIR
Maturities:	COST		VALUE
Within one year	$	404.4	$	404.6
One to five years		800.9		802.3
More than ten years		9.1		9.1
	$	1,214.4	$	1,216.0


	2017														2023
	DEALER					CUSTOMER									DEALER					CUSTOMER
	WHOLESALE		RETAIL			RETAIL			OTHER*			TOTAL			WHOLESALE		RETAIL			RETAIL			OTHER*			TOTAL
Balance at January 1	$	5.5	$	9.6		$	87.5		$	8.6		$	111.2		$	3.4	$	2.2		$	112.6		$	2.9		$	121.1
Provision for losses		.4		(.6	)		17.2			.4			17.4			.3		(.3	)		8.4			(.5	)		7.9
Charge-offs							(17.7	)		(.6	)		(18.3	)							(9.4	)					(9.4	)
Recoveries							3.3			.2			3.5								3.1			.1			3.2
Currency translation and other		.6		.2			4.5			.6			5.9			.1					3.0			.3			3.4
Balance at September 30	$	6.5	$	9.2		$	94.8		$	9.2		$	119.7
Balance at June 30															$	3.8	$	1.9		$	117.7		$	2.8		$	126.2

	September 30			December 31
		2017			2016
Finished products	$	574.1		$	452.3
Work in process and raw materials		581.6			444.7
		1,155.7			897.0
Less LIFO reserve		(172.7	)		(169.2	)
	$	983.0		$	727.8

	DEALER				CUSTOMER
At December 31, 2016	WHOLESALE		RETAIL		RETAIL		TOTAL
Recorded investment for impaired finance receivables evaluated individually	$	.1			$	57.3	$	57.4
Allowance for impaired finance receivables determined individually		.1				4.9		5.0
Recorded investment for finance receivables evaluated collectively		1,528.4	$	1,406.0		5,805.9		8,740.3
Allowance for finance receivables determined collectively		5.4		9.6		82.6		97.6

	DEALER					CUSTOMER RETAIL
									OWNER/
At September 30, 2017	WHOLESALE			RETAIL		FLEET			OPERATOR			TOTAL
Impaired loans with a specific reserve	$	.1				$	20.0		$	1.2		$	21.3
Associated allowance		(.1	)				(3.8	)		(.3	)		(4.2	)
						$	16.2		$	.9		$	17.1
Impaired loans with no specific reserve				$	4.1		8.5						12.6
Net carrying amount of impaired loans				$	4.1	$	24.7		$	.9		$	29.7
Average recorded investment*	$	.4		$	4.0	$	30.3		$	2.0		$	36.7


	REVOLVING
At June 30, 2023	LOANS		2023		2022		2021		2020		2019		PRIOR		TOTAL
Amortized cost:
Dealer:
Wholesale:
Performing	$	3,649.4													$	3,649.4
Watch		1.5														1.5
	$	3,650.9													$	3,650.9
Retail:
Performing	$	165.2	$	345.0	$	565.8	$	312.4	$	194.5	$	201.4	$	177.5	$	1,961.8
	$	165.2	$	345.0	$	565.8	$	312.4	$	194.5	$	201.4	$	177.5	$	1,961.8
Total dealer	$	3,816.1	$	345.0	$	565.8	$	312.4	$	194.5	$	201.4	$	177.5	$	5,612.7

Customer retail:
Fleet:
Performing			$	2,287.0	$	3,182.6	$	1,653.5	$	1,007.4	$	429.6	$	143.6	$	8,703.7
Watch				3.5		9.8		5.1		2.0		1.1		1.5		23.0
At-risk				6.4		20.8		13.6		5.5		6.8		2.6		55.7
			$	2,296.9	$	3,213.2	$	1,672.2	$	1,014.9	$	437.5	$	147.7	$	8,782.4
Owner/operator:
Performing			$	240.4	$	393.6	$	327.4	$	181.7	$	79.5	$	21.3	$	1,243.9
Watch				.3		2.1		1.6		.8		.2		.1		5.1
At-risk				.3		2.0		1.3		1.4		.5		.2		5.7
			$	241.0	$	397.7	$	330.3	$	183.9	$	80.2	$	21.6	$	1,254.7
Total customer retail			$	2,537.9	$	3,610.9	$	2,002.5	$	1,198.8	$	517.7	$	169.3	$	10,037.1

Total	$	3,816.1	$	2,882.9	$	4,176.7	$	2,314.9	$	1,393.3	$	719.1	$	346.8	$	15,649.8


WARRANTY RESERVES		2017			2016		2023			2022
Balance at January 1	$	282.1		$	346.2		$	437.7		$	344.3
Cost accruals		168.7			159.7			360.7			159.8
Payments		(177.6	)		(194.9	)		(299.7	)		(187.8	)
Change in estimates for pre-existing warranties		.1			(2.5	)		132.2			49.9
Currency translation		12.6			(6.7	)
Balance at September 30	$	285.9		$	301.8
Currency translation and other								7.1			(12.2	)
Balance at June 30							$	638.0		$	354.0


DEFERRED REVENUES ON EXTENDED WARRANTIES AND R&M CONTRACTS		2023			2022
Balance at January 1	$	904.9		$	775.2
Deferred revenues		416.8			303.6
Revenues recognized		(230.4	)		(239.2	)
Currency translation		13.2			(31.1	)
Balance at June 30	$	1,104.5		$	808.5


Three Months Ended June 30, 2023	DERIVATIVE CONTRACTS			MARKETABLE DEBT SECURITIES			PENSION PLANS			FOREIGN CURRENCY TRANSLATION			TOTAL
Balance at April 1, 2023	$	11.9		$	(33.1	)	$	(110.0	)	$	(742.0	)	$	(873.2	)
Recorded into AOCI		(66.9	)		(6.8	)		.4			126.5			53.2
Reclassified out of AOCI		41.5			(.9	)		1.6						42.2
Net other comprehensive (loss) income		(25.4	)		(7.7	)		2.0			126.5			95.4
Balance at June 30, 2023	$	(13.5	)	$	(40.8	)	$	(108.0	)	$	(615.5	)	$	(777.8	)

Three Months Ended September 30, 2017	DERIVATIVE CONTRACTS			MARKETABLE DEBT SECURITIES			PENSION PLANS			FOREIGN CURRENCY TRANSLATION			TOTAL
Balance at July 1, 2017	$	(5.4	)	$	1.4		$	(412.9	)	$	(508.3	)	$	(925.2	)
Recorded into AOCI		(19.8	)		(.2	)		(4.5	)		108.1			83.6
Reclassified out of AOCI		21.0			(.1	)		4.5						25.4
Net other comprehensive income (loss)		1.2			(.3	)					108.1			109.0
Balance at September 30, 2017	$	(4.2	)	$	1.1		$	(412.9	)	$	(400.2	)	$	(816.2	)

Three Months Ended September 30, 2016	DERIVATIVE CONTRACTS			MARKETABLE DEBT SECURITIES			PENSION PLANS			FOREIGN CURRENCY TRANSLATION			TOTAL
Balance at July 1, 2016	$	(4.0	)	$	6.1		$	(375.2	)	$	(554.0	)	$	(927.1	)
Recorded into AOCI		(7.9	)		(.7	)		2.1			(6.9	)		(13.4	)
Reclassified out of AOCI		10.8			(1.8	)		4.8						13.8
Net other comprehensive income (loss)		2.9			(2.5	)		6.9			(6.9	)		.4
Balance at September 30, 2016	$	(1.1	)	$	3.6		$	(368.3	)	$	(560.9	)	$	(926.7	)

Nine Months Ended September 30, 2017	DERIVATIVE CONTRACTS			MARKETABLE DEBT SECURITIES			PENSION PLANS			FOREIGN CURRENCY TRANSLATION			TOTAL
Balance at January 1, 2017	$	(4.3	)	$	(.3	)	$	(414.1	)	$	(709.4	)	$	(1,128.1	)
Recorded into AOCI		(93.9	)		1.8			(12.3	)		309.2			204.8
Reclassified out of AOCI		94.0			(.4	)		13.5						107.1
Net other comprehensive income		.1			1.4			1.2			309.2			311.9
Balance at September 30, 2017	$	(4.2	)	$	1.1		$	(412.9	)	$	(400.2	)	$	(816.2	)

Nine Months Ended September 30, 2016	DERIVATIVE CONTRACTS			MARKETABLE DEBT SECURITIES			PENSION PLANS			FOREIGN CURRENCY TRANSLATION			TOTAL
Balance at January 1, 2016	$	(6.4	)	$	2.1		$	(390.4	)	$	(622.3	)	$	(1,017.0	)
Recorded into AOCI		(33.9	)		4.1			7.8			61.4			39.4
Reclassified out of AOCI		39.2			(2.6	)		14.3						50.9
Net other comprehensive income		5.3			1.5			22.1			61.4			90.3
Balance at September 30, 2016	$	(1.1	)	$	3.6		$	(368.3	)	$	(560.9	)	$	(926.7	)


		Three Months Ended							Three Months Ended
	LINE ITEM IN THE CONSOLIDATED STATEMENTS OF	September 30						LINE ITEM IN THE CONSOLIDATED STATEMENTS OF	June 30
AOCI COMPONENTS	COMPREHENSIVE INCOME (LOSS)		2017			2016		COMPREHENSIVE INCOME		2023			2022
Unrealized (gains) and losses on derivative contracts:
Unrealized losses (gains) on derivative contracts:
Truck, Parts and Other
Foreign-exchange contracts	Net sales and revenues	$	(3.0	)	$	(11.1	)	Net sales and revenues	$	11.8		$	8.2
	Cost of sales and revenues		5.5					Cost of sales and revenues		11.4			(1.0	)
	Interest and other expense, net		1.0			(.3	)	Interest and other (income) expense, net		.7

Commodity contracts								Cost of sales and revenues		(4.6	)		5.5
Financial Services
Foreign-exchange contracts								Interest and other borrowing expenses		(2.8	)
Interest-rate contracts	Interest and other borrowing expenses		24.6			28.2		Interest and other borrowing expenses		32.6			(36.5	)
	Pre-tax expense increase		28.1			16.8		Pre-tax expense increase (reduction)		49.1			(23.8	)
	Tax benefit		(7.1	)		(6.0	)	Tax (benefit) expense		(7.6	)		7.2
	After-tax expense increase		21.0			10.8		After-tax expense increase		41.5			(16.6	)
Unrealized gains on marketable debt securities:
Marketable debt securities	Investment income		(.2	)		(2.4	)	Investment income		(1.2	)		(.3	)
	Tax expense		.1			.6		Tax expense		.3			.1
	After-tax income increase		(.1	)		(1.8	)	After-tax income increase		(.9	)		(.2	)
Pension plans:
Truck, Parts and Other
Actuarial loss	Cost of sales and revenues		3.1			3.4		Interest and other (income) expense, net		1.7			9.0
	Selling, general and administrative		3.0			3.2
			6.1			6.6
Prior service costs	Cost of sales and revenues		.2			.2		Interest and other (income) expense, net		.4			.2
	Selling, general and administrative		.1			.1
			.3			.3
Financial Services
Actuarial loss	Selling, general and administrative		.2			.3
	Pre-tax expense increase		6.6			7.2		Pre-tax expense increase		2.1			9.2
	Tax benefit		(2.1	)		(2.4	)	Tax benefit		(.5	)		(2.3	)
	After-tax expense increase		4.5			4.8		After-tax expense increase		1.6			6.9
Total reclassifications out of AOCI		$	25.4		$	13.8			$	42.2		$	(9.9	)