UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, ~~2017~~2022

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

For the transition period from to

Commission File No. 001-14817

PACCAR Inc

(Exact name of registrant as specified in its charter)

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)

(425) 468-7400

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

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

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 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.

Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

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~~347,767,575 shares as of October ~~31, 2017~~25, 2022

PACCAR Inc – Form 10-Q

INDEX

		Page
PART I.	FINANCIAL INFORMATION:

ITEM 1.	FINANCIAL STATEMENTS:
	Consolidated Statements of Comprehensive Income – Three and Nine Months Ended September 30, ~~2017~~2022 and ~~2016~~2021 (Unaudited)	3
	Consolidated Balance Sheets – September 30, ~~2017 (Unaudited)~~2022 and December 31, ~~2016~~2021 (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows – Nine Months Ended September 30, ~~2017~~2022 and ~~2016~~2021 (Unaudited)	6
	Consolidated Statements of Stockholders’ Equity – Three and Nine Months Ended September 30, 2022 and 2021 (Unaudited)	7
	Notes to Consolidated Financial Statements (Unaudited)	78
ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	3234
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	50
ITEM 4.	CONTROLS AND PROCEDURES	50

PART II.	OTHER INFORMATION:

ITEM 1.	LEGAL PROCEEDINGS	5051
ITEM 1A.	RISK FACTORS	5051
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	5051
ITEM 6.	EXHIBITS	5052

INDEX TO EXHIBITS		5152

SIGNATURE		5455

- 2 -

~~PACCAR Inc – Form 10-Q~~

PART I – ~~FINANCI~~ALFINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Consolidated Statements of Comprehensive Income (Unaudited)

(Millions, Except Per Share Amounts)

	Three Months Ended				Nine Months Ended				Three Months Ended						Nine Months Ended
	September 30				September 30				September 30						September 30
		2017		2016		2017		2016	2022			2021			2022			2021
TRUCK, PARTS AND OTHER:
Net sales and revenues									$	6,687.0		$	4,737.7		$	19,579.6		$	15,538.8

Net sales and revenues	$	4,731.5	$	3,953.2	$	13,065.1	$	12,079.6
Cost of sales and revenues		4,046.8		3,371.5		11,184.2		10,274.5		5,689.3			4,176.2			16,785.8			13,525.3
Research and development		67.0		59.2		194.1		179.6		82.9			72.5			241.3			237.0
Selling, general and administrative		112.9		105.5		332.0		326.0		137.7			134.7			430.6			396.8
European Commission charge								833.0
Interest and other expense, net		3.2		1.6		3.1		4.2
Interest and other (income), net										(35.0	)		(11.2	)		(89.4	)		(41.6	)
		4,229.9		3,537.8		11,713.4		11,617.3		5,874.9			4,372.2			17,368.3			14,117.5
Truck, Parts and Other Income Before Income Taxes		501.6		415.4		1,351.7		462.3		812.1			365.5			2,211.3			1,421.3

FINANCIAL SERVICES:
Interest and fees		111.2		105.9		317.6		320.4		160.4			131.5			443.6			393.8
Operating lease, rental and other revenues		217.0		190.3		619.1		562.6		211.5			277.6			667.0			903.6
Revenues		328.2		296.2		936.7		883.0		371.9			409.1			1,110.6			1,297.4

Interest and other borrowing expenses		38.3		32.2		109.8		95.1		55.8			35.3			142.0			114.9
Depreciation and other expenses		186.2		162.6		538.7		469.9		137.4			219.8			426.3			779.0
Selling, general and administrative		27.8		25.3		79.3		74.9		33.3			33.9			100.9			97.3
Provision for losses on receivables		4.7		5.1		17.4		14.5		(.8	)					3.8			3.2
		257.0		225.2		745.2		654.4		225.7			289.0			673.0			994.4
Financial Services Income Before Income Taxes		71.2		71.0		191.5		228.6		146.2			120.1			437.6			303.0
Investment income		9.0		8.5		25.8		20.6		21.4			1.6			24.3			11.5
Total Income Before Income Taxes		581.8		494.9		1,569.0		711.5		979.7			487.2			2,673.2			1,735.8
Income taxes		179.1		148.7		483.0		478.6		210.3			106.7			582.9			389.0
Net Income	$	402.7	$	346.2	$	1,086.0	$	232.9	$	769.4		$	380.5		$	2,090.3		$	1,346.8

Net Income Per Share
Basic	$	1.14	$	.99	$	3.09	$	.66	$	2.21		$	1.09		$	6.00		$	3.87
Diluted	$	1.14	$	.98	$	3.08	$	.66	$	2.21		$	1.09		$	5.99		$	3.87

Weighted Average Number of Common Shares Outstanding
Basic		351.9		351.0		351.7		351.1		348.4			347.8			348.4			347.7
Diluted		352.9		351.8		352.8		351.8		348.9			348.3			348.9			348.4
Dividends declared per share	$	.25	$	.24	$	.74	$	.72

Comprehensive Income	$	511.7	$	346.6	$	1,397.9	$	323.2	$	488.0		$	264.9		$	1,618.3		$	1,251.9

See Notes to Consolidated Financial Statements.

- 3 -

~~PACCAR Inc – Form 10-Q~~

Consolidated Balance Sheets (Unaudited)

(Millions)

	September 30		December 31
		2017	2016*		September 30		December 31
	(Unaudited)				2022		2021
ASSETS

TRUCK, PARTS AND OTHER:
Current Assets
Cash and cash equivalents	$	2,205.3	$	1,781.7	$	3,218.7	$	3,253.6
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: 2022 - $.5, 2021 - $.6)						2,018.5		1,575.1
Marketable securities						1,544.2		1,559.4
Inventories, net		983.0		727.8		2,382.1		1,976.0
Other current assets		252.4		225.6		719.7		732.9
Total Truck, Parts and Other Current Assets		5,980.5		4,738.2		9,883.2		9,097.0

Equipment on operating leases, net		1,248.8		1,013.9		208.6		302.4
Property, plant and equipment, net		2,389.1		2,260.0		3,299.4		3,398.1
Other noncurrent assets, net		423.8		432.0		1,307.6		1,293.0
Total Truck, Parts and Other Assets		10,042.2		8,444.1		14,698.8		14,090.5

FINANCIAL SERVICES:
Cash and cash equivalents		108.0		134.0		104.8		174.7
Finance and other receivables, net		9,548.7		8,837.4
Finance and other receivables, net (allowance for losses: 2022 - $117.9, 2021 - $116.9)						12,549.2		11,920.8
Equipment on operating leases, net		2,835.8		2,623.9		2,545.9		2,886.5
Other assets		569.2		599.5		724.9		436.9
Total Financial Services Assets		13,061.7		12,194.8		15,924.8		15,418.9
	$	23,103.9	$	20,638.9	$	30,623.6	$	29,509.4

*	~~The December 31, 2016 consolidated balance sheet has been derived from audited financial statements.~~

See Notes to Consolidated Financial Statements.

- 4 -

~~PACCAR Inc – Form 10-Q~~

Consolidated Balance Sheets (Unaudited)

(Millions)

September 30

December 31

2017

2016*

(Unaudited)

LIABILITIES AND STOCKHOLDERS' EQUITY

TRUCK, PARTS AND OTHER:

Current Liabilities

Accounts payable, accrued expenses and other
$
2,760.1

$
2,034.1

Dividend payable

210.4

Total Truck, Parts and Other Current Liabilities

2,760.1

2,244.5

Residual value guarantees and deferred revenues

1,319.3

1,072.6

Other liabilities

805.3

739.1

Total Truck, Parts and Other Liabilities

4,884.7

4,056.2

FINANCIAL SERVICES:

Accounts payable, accrued expenses and other

473.8

395.0

Commercial paper and bank loans

2,865.1

2,447.5

Term notes

5,966.9

6,027.7

Deferred taxes and other liabilities

977.8

934.9

Total Financial Services Liabilities

10,283.6

9,805.1

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

Additional paid-in capital

109.6

70.1

Retained earnings

8,290.7

7,484.9

Accumulated other comprehensive loss

(816.2
)

(1,128.1
)
Total Stockholders' Equity

7,935.6

6,777.6

$
23,103.9

$
20,638.9

*	~~The December 31, 2016 consolidated balance sheet has been derived from audited financial statements.~~

	September 30			December 31
	2022			2021
LIABILITIES AND STOCKHOLDERS' EQUITY

TRUCK, PARTS AND OTHER:
Current Liabilities
Accounts payable, accrued expenses and other	$	4,381.8		$	3,930.9
Dividend payable					521.1
Total Truck, Parts and Other Current Liabilities		4,381.8			4,452.0
Residual value guarantees and deferred revenues		227.0			329.1
Other liabilities		1,363.0			1,487.6
Total Truck, Parts and Other Liabilities		5,971.8			6,268.7

FINANCIAL SERVICES:
Accounts payable, accrued expenses and other		792.7			624.5
Commercial paper and bank loans		3,295.6			3,303.0
Term notes		7,082.3			7,128.8
Deferred taxes and other liabilities		587.7			590.4
Total Financial Services Liabilities		11,758.3			11,646.7

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 347.8 and 347.3 million shares		347.8			347.3
Additional paid-in capital		180.0			142.0
Treasury stock, at cost - .02 million and nil shares		(2.0	)
Retained earnings		13,760.8			12,025.8
Accumulated other comprehensive loss		(1,393.1	)		(921.1	)
Total Stockholders' Equity		12,893.5			11,594.0
	$	30,623.6		$	29,509.4

See Notes to Consolidated Financial Statements.

- 5 -

~~PACCAR Inc – Form 10-Q~~

Condensed Consolidated ~~Statements~~Statements of Cash Flows (Unaudited)

(Millions)

	Nine Months Ended						Nine Months Ended
	September 30						September 30
		2017			2016		2022			2021
OPERATING ACTIVITIES:
Net income	$	1,086.0		$	232.9
Net Income							$	2,090.3		$	1,346.8
Adjustments to reconcile net income to cash provided by operations:
Depreciation and amortization:
Property, plant and equipment		235.4			230.6			239.7			197.5
Equipment on operating leases and other		578.9			515.0			345.9			494.8
Provision for losses on financial services receivables		17.4			14.5			3.8			3.2
Other, net		(4.9	)		2.2			(187.2	)		(239.9	)
Pension contributions		(15.3	)		(65.1	)		(34.3	)		(19.2	)
Change in operating assets and liabilities:
Trade and other receivables		(461.6	)		(195.4	)		(561.5	)		(309.0	)
Wholesale receivables on new trucks		(316.3	)		211.8			(577.8	)		587.7
Sales-type finance leases and dealer direct loans on new trucks		98.1			105.7
Inventories		(207.8	)		(7.4	)		(523.5	)		(1,349.2	)
Accounts payable and accrued expenses		595.8			152.6			937.0			506.8
Income taxes, warranty and other		216.8			293.1			45.8			(69.3	)
Net Cash Provided by Operating Activities		1,822.5			1,490.5			1,778.2			1,150.2

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
Net increase in wholesale receivables on used equipment		16.3			5.4
Originations of retail loans and finance leases								(3,559.5	)		(3,379.3	)
Collections on retail loans and finance leases								2,932.3			2,991.0
Net (increase) decrease in wholesale receivables on used equipment								(15.2	)		12.5
Purchases of marketable debt securities		(613.6	)		(796.2	)		(723.8	)		(693.8	)
Proceeds from sales and maturities of marketable debt securities		578.8			1,166.9			591.5			542.7
Payments for property, plant and equipment		(295.9	)		(242.0	)		(393.7	)		(381.3	)
Acquisitions of equipment for operating leases		(1,047.8	)		(1,202.3	)		(688.1	)		(790.5	)
Proceeds from asset disposals		357.0			320.9			511.3			686.1
Other, net					(.5	)		26.7			(12.8	)
Net Cash Used in Investing Activities		(1,139.5	)		(921.4	)		(1,318.5	)		(1,025.4	)

FINANCING ACTIVITIES:
Payments of cash dividends		(470.4	)		(745.2	)		(875.9	)		(589.9	)
Purchases of treasury stock					(56.3	)		(2.0	)		(1.5	)
Proceeds from stock compensation transactions		28.2			11.3			21.7			30.1
Net increase (decrease) in commercial paper and short-term bank loans		261.9			(283.6	)
Net increase (decrease) in commercial paper, short-term bank loans and other								227.3			(303.5	)
Proceeds from term debt		1,371.0			1,864.4			2,302.7			1,802.1
Payments on term debt		(1,560.0	)		(1,622.6	)		(2,092.7	)		(2,327.2	)
Net Cash Used in Financing Activities		(369.3	)		(832.0	)		(418.9	)		(1,389.9	)
Effect of exchange rate changes on cash		83.9			34.4
Net Increase (Decrease) in Cash and Cash Equivalents		397.6			(228.5	)
Effect of exchange rate changes on cash and cash equivalents								(145.6	)		(46.7	)
Net Decrease in Cash and Cash Equivalents								(104.8	)		(1,311.8	)
Cash and cash equivalents at beginning of period		1,915.7			2,016.4			3,428.3			3,539.6
Cash and cash equivalents at end of period	$	2,313.3		$	1,787.9		$	3,323.5		$	2,227.8

See Notes to Consolidated Financial Statements.

- 6 -

Consolidated Statements of Stockholders’ Equity (Unaudited)

(Millions, Except Per Share Amounts)

	Three Months Ended						Nine Months Ended
	September 30						September 30
	2022			2021			2022			2021
COMMON STOCK, $1 PAR VALUE:
Balance at beginning of period	$	347.7		$	347.2		$	347.3		$	346.6
Stock compensation		.1						.5			.6
Balance at end of period		347.8			347.2			347.8			347.2

ADDITIONAL PAID-IN CAPITAL:
Balance at beginning of period		174.0			128.9			142.0			88.5
Stock compensation		6.0			2.9			38.0			43.3
Balance at end of period		180.0			131.8			180.0			131.8

TREASURY STOCK, AT COST:
Balance at beginning of period		(1.9	)		(1.4	)
Purchases		(.1	)		(.1	)		(2.0	)		(1.5	)
Balance at end of period		(2.0	)		(1.5	)		(2.0	)		(1.5	)

RETAINED EARNINGS:
Balance at beginning of period		13,109.9			11,885.2			12,025.8			11,148.5
Net income		769.4			380.5			2,090.3			1,346.8
Cash dividends declared on common stock		(118.5	)		(118.2	)		(355.3	)		(347.8	)
Balance at end of period		13,760.8			12,147.5			13,760.8			12,147.5

ACCUMULATED OTHER COMPREHENSIVE LOSS:
Balance at beginning of period		(1,111.7	)		(1,029.6	)		(921.1	)		(1,050.3	)
Other comprehensive loss		(281.4	)		(115.6	)		(472.0	)		(94.9	)
Balance at end of period		(1,393.1	)		(1,145.2	)		(1,393.1	)		(1,145.2	)
Total Stockholders’ Equity	$	12,893.5		$	11,479.8		$	12,893.5		$	11,479.8

Cash dividends declared on common stock, per share	$	.34		$	.34		$	1.02		$	1.00

See Notes to Consolidated Financial Statements.

- 67 -

~~PACCAR Inc – Form 10-Q~~

Notes to Consolidated Financial Statements (Unaudited)

(Millions, Except Share Amounts)

NOTE A - Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10‑Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring ~~accruals and the non-recurring European Commission charge)~~accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, ~~2017~~2022 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017.~~2022. For further information, refer to the consolidated financial statements and footnotes included in PACCAR Inc’s (PACCAR or the Company) Annual Report on Form 10‑K for the year ended December 31, ~~2016.~~2021.

Earnings per Share: Basic earnings per common share are computed by dividing earnings by the weighted average number of common shares outstanding, plus the effect of any participating securities. Diluted earnings per common share are computed assuming that all potentially dilutive securities are converted into common shares under the treasury stock method. The dilutive and antidilutive options are shown separately in the table below.

	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	September 30				September 30				September 30				September 30
	2017		2016		2017		2016		2022		2021		2022		2021
Additional shares		1,035,000		738,500		1,021,000		679,400		463,000		519,900		485,600		678,000
Antidilutive options		599,400		1,099,600		695,900		1,943,500		1,091,300		580,400		1,100,300		583,600

~~New Accounting Pronouncements:~~Change in Accounting: In ~~March 2017,~~ the ~~Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-07~~ ~~Compensation - Retirement Benefits (Topic 715): Improving~~first quarter of 2022, the ~~Presentation~~Company changed the method of ~~Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost~~accounting for its U.S. inventories from last-in-first-out (LIFO) to first-in-first-out (FIFO). ~~The amendment disaggregates~~Inventories valued using the ~~service cost component from non-service cost components~~LIFO method comprised 41% of ~~pension expense and prescribes where to present~~consolidated inventories before deducting the various components of pension cost on the income statement. This ASU also allows only the service cost component to be eligible for capitalization, when applicable (e.g. as a cost of manufactured inventory or self-constructed assets).LIFO reserve at December 31, 2021. The Company ~~will adopt this ASU~~believes the FIFO method is preferable because it better matches cost with revenues, it results in a more consistent method to value inventory with its foreign subsidiaries and it improves comparability with industry peers. This change increased Retained Earnings by $143.3 million to $11,148.5 million at January ~~2018 and accordingly will apply~~1, 2021. The effects of the ~~income statement presentation~~change in accounting principle have been retrospectively applied to all periods presented:

The effect of ~~service and non-service components of pension expense retrospectively and~~ the capitalization of service cost prospectively. Non-service components of pension expense (see Note K) are currently reported in Cost of sales and revenues and Selling, general and administrative expenses. Upon adoption of this ASU these costs will be reported in Interest and other expenses, net inchanges made to the Company’s Consolidated Statements of Comprehensive Income was as follows:

Three Months Ended September 30, 2021	AS ORIGINALLY REPORTED		EFFECT OF CHANGE			AS ADJUSTED
Truck, Parts and Other
Cost of sales and revenues	$	4,180.1	$	(3.9	)	$	4,176.2
Income Taxes		105.6		1.1			106.7
Net Income		377.7		2.8			380.5

Nine Months Ended September 30, 2021	AS ORIGINALLY REPORTED		EFFECT OF CHANGE			AS ADJUSTED
Truck, Parts and Other
Cost of sales and revenues	$	13,533.5	$	(8.2	)	$	13,525.3
Income Taxes		386.9		2.1			389.0
Net Income		1,340.7		6.1			1,346.8

The cumulative effect of the changes made to the Company’s Consolidated Balance Sheet was as follows:

December 31, 2021	AS ORIGINALLY REPORTED		EFFECT OF CHANGE		AS ADJUSTED
Truck, Parts and Other
Inventories, net	$	1,768.3	$	207.7	$	1,976.0
Other liabilities		1,436.5		51.1		1,487.6
Retained earnings		11,869.2		156.6		12,025.8

The change in accounting policy did not materially affect basic or diluted net income per share or income before income taxes within the Truck, Parts and Other ~~segments.~~

~~In October 2016,~~segments for the ~~FASB issued ASU 2016-16,~~ ~~Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. The amendment in this ASU requires recognition of income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Currently the recognition of current~~three and deferred income taxes for an intra-entity asset transfer is recognized when the asset has been sold to an outside party. This ASU is effective for annual reporting periods beginning after December 15, 2017 and interim periods within those annual periods, and early adoption is permitted. This amendment should be applied on a modified retrospective basis with a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. The Company adopted this ASU on January 1, 2017. The effect of the adoption reduced prepaid income taxes and retained earnings by $19.9. Because the corresponding deferred tax asset is not realizable, the Company recorded an offsetting valuation allowance.

~~In June 2016, the FASB issued ASU 2016-13,~~ ~~Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~. The amendment in this ASU requires entities having financial assets measured at amortized cost to estimate credit reserves under an expected credit loss model rather than the current incurred loss model. Under this new model, expected credit losses will be based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect collectability. The ASU is effective for annual periods beginning after December 15, 2019 and interim periods within those annual periods. Early adoption is permitted, but not earlier than annual and interim periods beginning after December 15, 2018. This amendment should be applied on a modified retrospective basis with a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. The Company is currently evaluating thenine months ended September 30, 2021. There was no impact on ~~its consolidated financial statements.~~total net cash provided by operating activities.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases (Topic 842)~~ which amends the existing accounting standards for leases. Under the new lease standard, lessees will recognize a right-of-use asset and a lease liability for virtually all leases (other than short-term leases). Lessor accounting is largely unchanged. The ASU is effective for annual periods beginning after December 15, 2018 and interim periods within those annual periods. Early adoption is permitted. This ASU requires leases to be recognized and measured at the beginning of the earliest period presented using a modified retrospective approach. The Company is currently evaluating the impact on its consolidated financial statements.

- 78 -

~~PACCAR Inc – Form 10-Q~~

Notes to Consolidated Financial Statements (Unaudited)

(Millions, Except Share Amounts)

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers~~. This ASU amends the existing accounting standards for revenue recognition. Under the new revenue recognition model, a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The FASB has subsequently issued several related ASUs to clarify the implementation guidance in ASU 2014-09. This standard may be applied retrospectively to each prior period presented or modified retrospectively with a cumulative effect recognized as of the date of initial application. The Company expects to adopt this ASU in January 2018 on a modified retrospective basis, with the cumulative effect adjustment recognized into retained earnings as of January 1, 2018.

The ~~Company’s evaluation~~following table compares the amounts currently reported to amounts that would have been reported under LIFO in the Consolidated Statements of ~~the new standard is substantially complete, and the Company does not expect adoption of the new standard to have a material impact on the income statement or retained earnings.~~ Comprehensive Income.

Three Months Ended September 30, 2022	AS REPORTED		PRO FORMA UNDER LIFO		EFFECT OF CHANGE
Truck, Parts and Other
Cost of sales and revenues	$	5,689.3	$	5,699.1	$	(9.8	)
Income Taxes		210.3		207.9		2.4
Net Income		769.4		762.0		7.4
Net Income Per Share
Basic	$	2.21	$	2.19	$	.02
Diluted	$	2.21	$	2.18	$	.03

Nine Months Ended September 30, 2022	AS REPORTED		PRO FORMA UNDER LIFO		EFFECT OF CHANGE
Truck, Parts and Other
Cost of sales and revenues	$	16,785.8	$	16,821.5	$	(35.7	)
Income Taxes		582.9		574.1		8.8
Net Income		2,090.3		2,063.4		26.9
Net Income Per Share
Basic	$	6.00	$	5.92	$	.08
Diluted	$	5.99	$	5.91	$	.08

The ~~Company currently expects the most significant~~ effect of the ~~standard relates~~change to ~~trucks sold in Europe that are subject to a residual value guarantee (RVG) and are currently accounted for as an operating lease in~~income before income taxes within the Truck, Parts and Other ~~section~~segments for the three months and nine months ended September 30, 2022 would not be material. In addition, there would be no material effect on the Consolidated Statements of Cash Flows.

The following table compares the ~~Company’s~~amounts currently reported to amounts that would have been reported under LIFO in the Consolidated Balance Sheets (see Note E in the 2016 Form 10-K). Under the new standard, based on the Company’s current assessment, revenues would be recognized immediately for certain of these RVG contracts that allow customers the option to return their truck and for which there is no economic incentive to do so. Based on the existing portfolio of RVG contracts, under the new standard, revenues are expected to be recognized immediately for approximately half of the RVG portfolio instead of being deferred and amortized over the life of the RVG contract.Sheet.

September 30, 2022	AS REPORTED		PRO FORMA UNDER LIFO		EFFECT OF CHANGE
Truck, Parts and Other
Inventories, net	$	2,382.1	$	2,138.7	$	243.4
Accounts payable, accrued expenses and other		4,381.8		4,321.9		59.9
Retained earnings		13,760.8		13,577.3		183.5

New Accounting Pronouncements: The ~~Company will continue to evaluate the new standard, including any new interpretive guidance, and any related impact to its consolidated financial statements.~~

~~In addition to ASU 2016-16 disclosed above, the~~ Company adopted the following standards ~~effective~~on January 1, ~~2017, none of~~2022, which had ano material impact on the Company’s consolidated financial statements.

STANDARD	DESCRIPTION
2021-05		Leases (Topic 842) - Lessors—Certain Leases with Variable Lease Payments
2017-04 *2021-10	~~Intangibles – Goodwill and Other~~Government Assistance (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.~~832) - Disclosures by Business Entities about Government Assistance

*	~~The Company early adopted in 2017.~~

**	~~The Company adopted on the effective date of January 1, 2017.~~

The ~~FASB~~Financial Accounting Standards Board (FASB) also issued the following standards, which isare not expected to have a material impact on the Company’s consolidated financial statements.

STANDARD		DESCRIPTION	EFFECTIVE DATE*DATE

2016-01 *	2022-02*	Financial ~~Instruments - Overall (Subtopic 825-10)~~Instruments—Credit Losses (Topic 326): ~~Recognition~~Troubled Debt Restructurings and ~~Measurement of Financial Assets and Financial Liabilities.~~Vintage Disclosures	January 1, ~~2018~~2023
2022-03*	Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to	Contractual Sale Restrictions
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~~2024

*	~~The Company expects to~~* The Company will adopt on the effective date.

**	~~The Company expects to early adopt on January 1, 2018.~~

- 89 -

~~PACCAR Inc – Form 10-Q~~

Notes to Consolidated Financial Statements (Unaudited)

(Millions, Except Share Amounts)

NOTE B ~~- Investments in Marketable Debt Securities~~– Sales and Revenues

The Company's investments in marketable debt securities are classified as available-for-sale. These investments are stated at fair value with any unrealized gains or losses, net of tax, included as a component of accumulated other comprehensive income (loss) (AOCI).

Truck, Parts and Other

The Company ~~utilizes third-party pricing~~enters into sales contracts with customers associated with purchases of the Company’s products and services including trucks, parts, product support, and other related services. Generally, the Company recognizes revenue for ~~all~~the amount of ~~its marketable debt security valuations.~~consideration it will receive for delivering a product or service to a customer. Revenue is recognized when the customer obtains control of the product or receives benefits of the service. The Company ~~reviews~~excludes sales taxes, value added taxes and other related taxes assessed by government agencies from revenue. There are no significant financing components included in product or services revenue since generally customers pay shortly after the ~~pricing methodology used by~~products or services are transferred. In the ~~third‑party pricing services, including the manner employed to collect market information. On a quarterly basis,~~Truck and Parts segment, when the Company ~~also performs review~~grants extended payment terms on selected receivables and ~~validation procedures on the pricing information received from the third‑party providers. These procedures help ensure that the fair value information used by the Company~~charges interest, interest income is ~~determined in accordance with applicable accounting guidance.~~recognized when earned.

The Company evaluates its investment in marketable debt securities at the end of each reporting period to determine if a decline in fair value is other-than-temporary. Realized losses are recognized upon management’s determination that a decline in fair value is other-than-temporary. The determination of other-than-temporary impairment is a subjective process, requiring the use of judgmentsfollowing table disaggregates Truck, Parts and assumptions regarding the amount and timing of recovery. The Company reviews and evaluates its investments at least quarterly to identify investments that have indications of other-than-temporary impairments. It is reasonably possible that a change in estimate could occur in the near term relating to other-than-temporary impairment. Accordingly, the Company considers several factors when evaluating debt securities for other-than-temporary impairment, including whether the decline in fair value of the security is due to increased default risk for the specific issuer or market interest-rate risk.

~~In assessing default risk, the Company considers the collectability of principal and interest payments~~Other revenues by monitoring changes to issuers’ credit ratings, specific credit events associated with individual issuers as well as the credit ratings of any financial guarantor, and the extent and duration to which amortized cost exceeds fair value.

In assessing market interest rate risk, including benchmark interest rates and credit spreads, the Company considers its intent for selling the securities and whether it is more likely than not the Company will be able to hold these securities until the recovery of any unrealized losses.

~~Marketable debt securities at September 30, 2017 and December 31, 2016 consisted of the following:~~major sources:

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

AMORTIZED

UNREALIZED

UNREALIZED

FAIR

At December 31, 2016
COST

GAINS

LOSSES

VALUE

U.S. tax-exempt securities
$
597.9

$
.2

$
3.1

$
595.0

U.S. corporate securities

47.6

.2

47.8

U.S. government and agency securities

16.0

16.0

Non-U.S. corporate securities

306.9

1.5

.4

308.0

Non-U.S. government securities

97.6

.6

98.2

Other debt securities

75.9

.2

.2

75.9

$
1,141.9

$
2.7

$
3.7

$
1,140.9

	Three Months Ended				Nine Months Ended
	September 30				September 30
	2022		2021		2022		2021
Truck
Truck sales	$	4,991.4	$	3,258.3	$	14,602.7	$	11,253.7
Revenues from extended warranties, operating leases and other		206.8		194.3		629.0		584.1
		5,198.2		3,452.6		15,231.7		11,837.8
Parts
Parts sales		1,429.3		1,226.1		4,171.9		3,528.1
Revenues from dealer services and other		42.2		34.1		123.2		104.1
		1,471.5		1,260.2		4,295.1		3,632.2
Winch sales and other		17.3		24.9		52.8		68.8
Truck, Parts and Other sales and revenues	$	6,687.0	$	4,737.7	$	19,579.6	$	15,538.8

The Company recognizes truck and parts sales as revenues when control of the products is transferred to customers which generally occurs upon shipment, except for certain truck sales which are subject to a residual value guarantee (RVG) by the Company. The standard payment term for trucks and aftermarket parts is typically within 30 days, but the Company may grant extended payment terms on selected receivables. The Company recognizes revenue for the invoice amount adjusted for estimated sales incentives and returns. Sales incentives and returns are estimated based on historical experience and are adjusted to current period revenue when the most likely amount of consideration the Company expects to receive changes or becomes fixed. Truck and parts sales include a standard product warranty which is included in cost of ~~marketable debt securities~~sales. The Company has elected to treat delivery services as a fulfillment activity with revenues recognized when the customer obtains control of the product. Delivery revenue is ~~adjusted for amortization of premiums~~included in revenues and ~~accretion of discounts to maturity. Amortization, accretion, interest and dividend income and realized gains and losses~~the related costs are included in ~~investment income. The~~ cost of ~~securities sold~~sales. As a practical expedient, the Company is not disclosing truck order backlog, as a significant majority of the backlog has a duration of less than one year.

Truck sales with RVGs that allow customers the option to return their truck are accounted for as a sale when the customer does not have an economic incentive to return the truck to the Company, or as an operating lease when the customer does have an economic incentive to return the truck. The estimate of customers’ economic incentive to return the trucks is based on an analysis of historical guaranteed buyback value and estimated market value. When truck sales with RVGs are accounted for as a sale, revenue is recognized when the ~~specific identification method. Gross realized gains were $1.3~~truck is transferred to the customer less an amount for expected returns. Expected return rates are estimated by using a historical weighted average return rate over an eight-year period.

Aftermarket parts sales allow for returns which are estimated at the time of sale based on historical data. Parts dealer services and ~~$4.2 and gross realized losses were $.4 and $.1 for the nine month periods ended September 30, 2017 and 2016, respectively.~~other revenues are recognized as services are performed.

- 910 -

~~PACCAR Inc – Form 10-Q~~

Notes to Consolidated Financial Statements (Unaudited)

(Millions, Except Share Amounts)

~~Marketable debt securities with continuous unrealized losses~~

The following table presents the balance sheet classification of the estimated value of the truck assets to be returned goods assets and ~~their~~the related ~~fair values were as follows:~~return liabilities:

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

	September 30, 2022				December 31, 2021
	ASSETS		LIABILITIES		ASSETS		LIABILITIES
Trucks
Other current assets	$	177.8			$	255.7
Accounts payable, accrued expenses and other			$	180.5			$	264.0
Other noncurrent assets, net		290.8				403.6
Other liabilities				304.9				423.9
	$	468.6	$	485.4	$	659.3	$	687.9
Parts
Other current assets	$	82.0			$	72.9
Accounts payable, accrued expenses and other			$	193.5			$	172.1
	$	82.0	$	193.5	$	72.9	$	172.1

For contracts accounted for as a sale, the ~~investment securities in gross unrealized loss positions identified above, the Company does not intend~~Company’s total commitment to sell the investment securities. It is more likely than not that the Company will not be required to sell the investment securities before recovery of the unrealized losses, and the Company expects that the contractual principal and interest will be received on the investment securities. Asacquire trucks at a ~~result, the Company recognized no other-than-temporary impairments during the periods presented.~~

~~Contractual maturities on marketable debt securities~~guaranteed value was $934.3 at September 30, ~~2017 were as follows:~~2022.

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

~~NOTE C - Inventories~~

~~Inventories are stated at~~Revenues from extended warranties, operating leases and other include optional extended warranty and repair and maintenance (R&M) service contracts which can be purchased for periods generally ranging up to five years. The Company defers revenue based on stand-alone observable selling prices when it receives payments in advance and generally recognizes the ~~lower of cost~~revenue on a straight-line basis over the warranty or ~~market. Cost of inventories~~R&M contract periods. See Note F, Product Support Liabilities, in the ~~U.S.~~Notes to the Consolidated Financial Statements for further information. Also included are truck sales with an RVG accounted for as an operating lease. A liability is ~~determined principally~~created for the residual value obligation with the remainder of the proceeds recorded as deferred revenue. The deferred revenue is recognized on a straight-line basis over the guarantee period, which typically ranges from three to five years. Deferred revenue related to trucks sold with an RVG was $52.7 at September 30, 2022. The Company expects to recognize approximately $7.6 of the remaining deferred revenue in 2022, $24.3 in 2023, $13.1 in 2024, $4.8 in 2025 and $2.9 in 2026. For the three and nine months ended September 30, 2022, total operating lease revenue from truck sales with RVGs was $29.3 and $79.2, respectively compared to $24.9 and $75.2 for the three and nine months ended September 30, 2021. The Company’s total commitment to acquire trucks at a guaranteed value for contracts accounted for as a lease was $174.3 at September 30, 2022.

Revenue from winch sales and other is primarily derived from the industrial winch business. Winch sales are recognized when the product is transferred to a customer, which generally occurs upon shipment. Also within this category are other revenues not attributable to a reportable segment.

Financial Services

The Company’s Financial Services segment products include loans to customers collateralized by the ~~last‑in, first-out (LIFO) method. Cost of all other inventories is determined principally by the first-in, first-out (FIFO) method.~~

~~Inventories~~vehicles being financed, finance leases for retail customers and dealers, dealer wholesale financing which includes floating-rate wholesale loans to PACCAR dealers for new and used trucks, and operating leases which include ~~the following:~~

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

~~Under the LIFO method of accounting (used for approximately 45% of September 30, 2017 inventories), an actual valuation can be made only at the end of each year based~~rentals on ~~year-end inventory levels and costs. Accordingly, interim valuations are based on management’s estimates of those year-end amounts.~~

~~- 10 -~~

~~PACCAR Inc – Form 10-Q~~

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

~~(Millions, Except Share Amounts)~~

~~NOTE D - Finance and Other Receivables~~

~~Finance~~Company owned equipment. Interest income from finance and other receivables is recognized using the interest method. Certain loan origination costs are deferred and amortized to interest income over the expected life of the contracts using the straight-line method which approximates the interest method.

Operating lease rental revenue is recognized on a straight-line basis over the term of the lease. Customer contracts may include additional services such as excess mileage, repair and maintenance and other services on which revenue is recognized when earned. The Company’s full-service lease arrangements bundle these additional services. Rents for full-service lease contracts are allocated between lease and non-lease components based on the ~~following:~~

September 30

December 31

2017

2016

Loans
$
4,024.3

$
3,948.6

Direct financing leases

3,142.1

2,798.0

Sales-type finance leases

761.3

867.3

Dealer wholesale financing

1,910.6

1,528.5

Operating lease receivables and other

192.1

150.9

Unearned interest: Finance leases

(362.0
)

(344.7
)

$
9,668.4

$
8,948.6

Less allowance for losses:

Loans and leases

(104.0
)

(97.1
)
Dealer wholesale financing

(6.5
)

(5.5
)
Operating lease receivables and other

(9.2
)

(8.6
)

$
9,548.7

$
8,837.4

relative stand-alone price of each component. Taxes, such as sales and use and value added, which are collected by the Company from a customer, are excluded from the measurement of lease income and expenses.

Recognition of interest income and rental revenue is suspended (put on non-accrual status) when the receivable becomes more than 90 days past the contractual due date or earlier if some other event causes the Company to determine that collection is not probable. Accordingly, no finance receivables more than 90 days past due were accruing interest at September 30, ~~2017~~2022 or December 31, ~~2016.~~2021. Recognition is resumed if the receivable becomes current by the payment of all amounts due under the terms of the existing contract and collection of remaining amounts is considered probable (if not contractually modified) or if the customer makes scheduled payments for three months and collection of remaining amounts is considered probable (if contractually modified). Payments received while the finance receivable is on non-accrual status are applied to interest and principal in accordance with the contractual terms.

- 11 -

Notes to Consolidated Financial Statements (Unaudited)

(Millions, Except Share Amounts)

Finance leases are secured by the trucks and related equipment being leased and the lease terms generally range from three to five years depending on the type and use of the equipment. The lessee is required to either purchase the equipment or guarantee to the Company a stated residual value upon the disposition of the equipment at the end of the finance lease term.

Operating lease terms generally range from three to five years. At the end of the operating lease term, the lessee has the option to return the equipment to the Company or purchase the equipment at its fair market value.

The Company determines its estimate of the residual value of leased vehicles by considering the length of the lease term, the truck model, the expected usage of the truck and anticipated market demand. If the sales price of the truck at the end of the agreement differs from the Company’s estimated residual value, a gain or loss will result. Future market conditions, changes in government regulations and other factors outside the Company’s control could impact the ultimate sales price of trucks returned under these contracts. Residual values are reviewed regularly and adjusted if market conditions warrant.

The following table summarizes Financial Services lease revenues by lease type:

	Three Months Ended				Nine Months Ended
	September 30				September 30
	2022		2021		2022		2021
Finance lease revenues	$	46.6	$	46.7	$	134.5	$	142.8
Operating lease revenues		192.4		206.4		595.7		627.9
Total lease revenues	$	239.0	$	253.1	$	730.2	$	770.7

NOTE C - Investments in Marketable Securities

Debt Securities

The Company's investments in marketable debt securities are classified as available-for-sale. These investments are stated at fair value and may include an allowance for credit losses. Changes in the allowance for credit losses are recognized in the current period earnings and any unrealized gains or losses, net of tax, are included as a component of accumulated other comprehensive income (loss) (AOCI).

The Company utilizes third-party pricing services for all of its marketable debt security valuations. The Company reviews the pricing methodology used by the third‑party pricing services, including the manner employed to collect market information. On a quarterly basis, the Company also performs review and validation procedures on the pricing information received from the third‑party providers. These procedures help ensure the fair value information used by the Company is determined in accordance with applicable accounting guidance.

The Company evaluates its investment in marketable debt securities at the end of each reporting period to determine if a decline in fair value is the result of credit losses or unrealized losses. In assessing credit losses, the Company considers the collectability of principal and interest payments by monitoring changes to issuers’ credit ratings, specific credit events associated with individual issuers as well as the credit ratings of any financial guarantor. The Company considers its intent for selling the security and whether it is more likely than not the Company will be able to hold the security until the recovery of any credit losses and unrealized losses. Charges against the allowance for credit losses occur when a security with credit losses is sold or the Company no longer intends to hold that security.

Equity Securities

Marketable equity securities are traded on active exchanges and are measured at fair value. The realized and unrealized gains (losses) are recognized in investment income.

- 12 -

Notes to Consolidated Financial Statements (Unaudited)

(Millions, Except Share Amounts)

Marketable securities at September 30, 2022 and December 31, 2021 consisted of the following:

			UNREALIZED	UNREALIZED		FAIR
At September 30, 2022	COST		GAINS	LOSSES		VALUE
Marketable debt securities
U.S. tax-exempt securities	$	455.5		$	12.6	$	442.9
U.S. taxable municipal / non-U.S. provincial bonds		187.5			11.4	��	176.1
U.S. corporate securities		249.3			13.8		235.5
U.S. government and agency securities		112.3			3.3		109.0
Non-U.S. corporate securities		428.0			19.7		408.3
Non-U.S. government securities		73.1			3.0		70.1
Other debt securities		104.8			5.0		99.8
Marketable equity securities		15.4			12.9		2.5
Total marketable securities	$	1,625.9		$	81.7	$	1,544.2

			UNREALIZED		UNREALIZED		FAIR
At December 31, 2021	COST		GAINS		LOSSES		VALUE
Marketable debt securities
U.S. tax-exempt securities	$	431.4	$	1.5	$	.4	$	432.5
U.S. taxable municipal / non-U.S. provincial bonds		192.2		.6		1.2		191.6
U.S. corporate securities		208.3		.6		1.5		207.4
U.S. government and agency securities		95.9		.6		.1		96.4
Non-U.S. corporate securities		443.9		1.4		2.5		442.8
Non-U.S. government securities		75.2		.1		.3		75.0
Other debt securities		100.4		.3		.7		100.0
Marketable equity securities		15.4		1.3		3.0		13.7
Total marketable securities	$	1,562.7	$	6.4	$	9.7	$	1,559.4

The cost of marketable debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Amortization, accretion, interest and dividend income and realized gains and losses are included in investment income. The cost of securities sold is based on the specific identification method. Gross realized gains were $.5 and $1.6 and gross realized losses were $1.5 and $.1 for the nine months periods ended September 30, 2022 and 2021, respectively.

Marketable debt securities with continuous unrealized losses and their related fair values were as follows:

	September 30, 2022				December 31, 2021
	LESS THAN		TWELVE MONTHS		LESS THAN		TWELVE MONTHS
	TWELVE MONTHS		OR GREATER		TWELVE MONTHS		OR GREATER
Fair value	$	1,231.6	$	281.0	$	911.2	$	1.3
Unrealized losses		47.4		21.4		6.7

The unrealized losses on marketable debt securities above were due to higher yields on certain securities. The Company did not identify any indicators of a credit loss in its assessments. Accordingly, no allowance for credit losses was recorded at September 30, 2022 and December 31, 2021. The Company does not currently intend, and it is more likely than not that it will not be required to sell the investment securities before recovery of the unrealized losses. The Company expects that the contractual principal and interest will be received on the investment securities.

Contractual maturities of marketable debt securities at September 30, 2022were as follows:

	AMORTIZED		FAIR
	COST		VALUE
Within one year	$	448.4	$	442.4
One to five years		1,139.6		1,078.6
Six to ten years		9.0		8.9
More than ten years		13.5		11.8
	$	1,610.5	$	1,541.7

- 13 -

Notes to Consolidated Financial Statements (Unaudited)

(Millions, Except Share Amounts)

NOTE D - Inventories

Inventories are stated at the lower of cost or market. Cost of inventories is determined principally by the first-in, first-out (FIFO) method.

Inventories include the following:

	September 30		December 31
	2022		2021
Finished products	$	826.5	$	676.0
Work in process and raw materials		1,555.6		1,300.0
	$	2,382.1	$	1,976.0

In the first quarter of 2022, the Company changed the method of accounting for its U.S. inventories from last-in-first-out (LIFO) to first-in-first-out (FIFO) and all prior periods have been retrospectively applied. See Note A - Basis of Presentation of this Quarterly Report on Form 10-Q.

NOTE E - Finance and Other Receivables

Finance and other receivables include the following:

	September 30			December 31
	2022			2021
Loans	$	6,750.4		$	6,424.7
Finance leases		3,472.4			3,620.6
Dealer wholesale financing		2,307.8			1,865.8
Operating lease receivables and other		136.5			126.6
		12,667.1			12,037.7
Less allowance for losses:
Loans and leases		(111.3	)		(111.5	)
Dealer wholesale financing		(3.5	)		(3.3	)
Operating lease receivables and other		(3.1	)		(2.1	)
	$	12,549.2		$	11,920.8

Included in Finance and other receivables, net on the Consolidated Balance Sheets is accrued interest receivable (net of allowance for credit losses) of $44.3 and $27.7 as of September 30, 2022 and December 31, 2021, respectively. The net activity of dealer direct loans and dealer wholesale financing on new trucks is shown in the operating section of the Condensed Consolidated Statements of Cash Flows since those receivables finance the sale of Company inventory.

Allowance for Credit Losses

The Company continuously monitors the payment performance of its finance receivables. For large retail finance customers and dealers with wholesale financing, the Company regularly reviews their financial statements and makes site visits and phone contact as appropriate. If the Company becomes aware of circumstances that could cause those customers or dealers to face financial difficulty, whether or not they are past due, the customers are placed on a watch list.

The Company modifies loans and finance leases in the normal course 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~~a loan or finance ~~leases~~lease for credit reasons and grants a concession, the ~~modifications are~~modification is classified as a troubled debt ~~restructurings~~restructuring (TDR). The Company does not typically grant credit modifications for customers that do not meet minimum underwriting standards since the Company normally repossesses the financed equipment in these circumstances. When such modifications do occur, they are considered TDRs.

- 14 -

Notes to Consolidated Financial Statements (Unaudited)

(Millions, Except Share Amounts)

On average, modifications extended contractual terms by approximately three months in 2022 and four months in ~~2017 and 2016~~2021, and did not have a significant effect on the weighted average term or interest rate of the total portfolio at September 30, ~~2017~~2022 and December 31, ~~2016.~~2021.

~~- 11 -~~

~~PACCAR Inc – Form 10-Q~~

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

~~(Millions, Except Share Amounts)~~

The Company has developed a systematic methodology for determining the allowance for credit losses for its two portfolio segments, retail and wholesale. The retail segment consists of retail loans ~~and direct~~ and sales-type finance leases, net of unearned interest. The wholesale segment consists of truck inventory financing loans to dealers that are collateralized by trucks and other collateral. The wholesale segment generally has less risk than the retail segment. Wholesale receivables generally are shorter in duration than retail receivables, and the Company requires periodic reporting of the wholesale dealer’s financial condition, conducts periodic audits of the trucks being financed and in many cases, obtains guarantees or other security such as dealership assets. In determining the allowance for credit losses, retail loans and finance leases are evaluated together since they relate to a similar customer base, their contractual terms require regular payment of principal and interest, generally over 36three to ~~60 months,~~five years, and they are secured by the same type of collateral. The allowance for credit losses consists of both specific and general reserves.

The Company individually evaluates certain finance receivables for impairment. Finance receivables that are evaluated individually for impairment consist of all wholesale accounts and certain large retail accounts with past due balances or otherwise determined to be at a higher risk of loss. A finance receivable is impaired if it is considered probable the Company will be unable to collect all contractual interest and principal payments as scheduled. In addition, all retail loans and leases which have been classified as TDRs and all customer accounts over 90 days past due are considered impaired. Generally, impaired accounts are on non-accrual status. Impaired accounts classified as TDRs which have been performing for 90 consecutive days are placed on accrual status if it is deemed probable that the Company will collect all principal and interest payments.

Impaired receivables are generally considered collateral dependent. Large balance retail and all wholesale impaired receivables are individually evaluated to determine the appropriate reserve for losses. The determination of reserves for large balance impaired receivables considers the fair value of the associated collateral. When the underlying collateral fair value exceeds the Company’s ~~recorded investment,~~amortized cost basis, no reserve is recorded. Small balance impaired receivables with similar risk characteristics are evaluated as a separate pool to determine the appropriate reserve for losses using the historical loss information discussed below.

The Company evaluates finance receivables that are not individually impaired and share similar risk characteristics on a collective basis and determines the general allowance for credit losses for both retail and wholesale receivables based on historical loss information, using past due account data, ~~and~~ current market ~~conditions. Information~~conditions, and expected changes in future macroeconomic conditions that affect collectability. Historical credit loss data provides relevant information of expected credit losses. The historical information used includes assumptions regarding the likelihood of collecting current and past due accounts, repossession rates, and the recovery rate on the underlying collateral based on used truck values and other pledged collateral or recourse.

The Company has developed a range of loss estimates for each of its country portfolios based on historical experience, taking into account loss frequency and severity in both strong and weak truck market conditions. A projection is made of the range of estimated credit losses inherent in the portfolio from which an amount is determined ~~as probable~~ based on current market conditions and other factors impacting the creditworthiness of the Company’s borrowers and their ability to repay. Adjustments to historical loss information are made for changes in forecasted economic conditions that are specific to the industry and markets in which the Company conducts business. The Company utilizes economic forecasts from third party sourcesand determines expected losses based on historical experience under similar market conditions. After determining the appropriate level of the allowance for credit losses, a provision for losses on finance receivables is charged to income as necessary to reflect management’s estimate of ~~incurred~~expected credit losses, net of recoveries, inherent in the portfolio.

In determining the fair value of the collateral, the Company uses a pricing matrix and categorizes the fair value as Level 2 in the hierarchy of fair value measurement. The pricing matrix is reviewed quarterly and updated as appropriate. The pricing matrix considers the make, model and year of the equipment as well as recent sales prices of comparable equipment sold individually, which is the lowest unit of account, through wholesale channels to the Company’s dealers (principal market). The fair value of the collateral also considers the overall condition of the equipment.

Accounts are ~~charged-off~~charged off against the allowance for credit losses when, in the judgment of management, they are considered uncollectible, which generally occurs upon repossession of the collateral. Typically the timing between the repossession and charge-off is not significant. In cases where repossession is delayed (e.g., for legal proceedings), the Company records a partial charge-off. The charge-off is determined by comparing the fair value of the collateral, less cost to sell, to the ~~recorded investment.~~amortized cost basis.

- 15 -

Notes to Consolidated Financial Statements (Unaudited)

(Millions, Except Share Amounts)

For the following credit quality disclosures, finance receivables are classified into two portfolio segments, wholesale and retail. The retail portfolio is further segmented into dealer retail and customer retail. The dealer wholesale segment consists of truck inventory financing to PACCAR dealers. The dealer retail segment consists of loans and leases to participating dealers and franchises that use the proceeds to fund customers’ acquisition of commercial vehicles and related equipment. The customer retail segment consists of loans and leases directly to customers for the acquisition of commercial vehicles and related equipment. Customer retail receivables are further segregated between fleet and owner/operator classes. The fleet class consists of customer retail accounts operating five or more ~~than five~~ trucks. All other customer retail accounts are considered owner/operator. These two classes have similar measurement attributes, risk characteristics and common methods to monitor and assess credit risk.

~~- 12 -~~

~~PACCAR Inc – Form 10-Q~~

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

~~(Millions, Except Share Amounts)~~

The allowance for credit losses is summarized as follows:

	2017														2022
	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		$	3.3		$	7.1		$	104.4		$	2.1		$	116.9
Provision for losses		.4		(.6	)		17.2			.4			17.4			.4			(3.3	)		8.1			(1.4	)		3.8
Charge-offs							(17.7	)		(.6	)		(18.3	)								(6.3	)		(.1	)		(6.4	)
Recoveries							3.3			.2			3.5			.1						5.2			1.8			7.1
Currency translation and other		.6		.2			4.5			.6			5.9			(.3	)					(3.9	)		.7			(3.5	)
Balance at September 30	$	6.5	$	9.2		$	94.8		$	9.2		$	119.7		$	3.5		$	3.8		$	107.5		$	3.1		$	117.9

	2016															2021
	DEALER						CUSTOMER									DEALER						CUSTOMER
	WHOLESALE			RETAIL			RETAIL			OTHER*			TOTAL			WHOLESALE			RETAIL			RETAIL			OTHER*			TOTAL
Balance at January 1	$	7.3		$	10.3		$	88.9		$	8.3		$	114.8		$	3.4		$	8.4		$	112.0		$	3.2		$	127.0
Provision for losses		(1.0	)		(.7	)		14.5			1.7			14.5			(1.0	)		(.7	)		3.5			1.4			3.2
Charge-offs								(17.0	)		(1.9	)		(18.9	)								(9.7	)		(1.3	)		(11.0	)
Recoveries								4.0			.1			4.1									4.1			.2			4.3
Currency translation and other		.2			.1			(.6	)		.2			(.1	)								(1.7	)		(.1	)		(1.8	)
Balance at September 30	$	6.5		$	9.7		$	89.8		$	8.4		$	114.4		$	2.4		$	7.7		$	108.2		$	3.4		$	121.7

*	Operating leases and other trade receivables.

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

DEALER

CUSTOMER

At September 30, 2017

WHOLESALE

RETAIL

RETAIL

TOTAL

Recorded investment for impaired finance  receivables
     evaluated individually

$
.1

$
4.1

$
49.4

$
53.6

Allowance for impaired finance receivables determined
     individually

.1

7.6

7.7

Recorded investment for finance receivables evaluated
     collectively

1,910.5

1,327.0

6,185.2

9,422.7

Allowance for finance receivables determined collectively

6.4

9.2

87.2

102.8

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

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

September 30

December 31

2017

2016

Dealer:

Wholesale
$
.1

$
.1

Customer retail:

Fleet

41.5

49.5

Owner/operator

7.3

6.9

$
48.9

$
56.5

~~- 13 -~~

~~PACCAR Inc – Form 10-Q~~

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

~~(Millions, Except Share Amounts)~~

~~Impaired Loans~~

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.

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

*	~~Represents the average during the 12 months ended September 30, 2017.~~

DEALER

CUSTOMER RETAIL

OWNER/

At December 31, 2016

WHOLESALE

RETAIL

FLEET

OPERATOR

TOTAL

Impaired loans with a specific reserve

$
.1

$
18.9

$
1.8

$
20.8

Associated allowance

(.1
)

(2.8
)

(.3
)

(3.2
)

$
16.1

$
1.5

$
17.6

Impaired loans with no specific reserve

10.8

.2

11.0

Net carrying amount of impaired loans

$
26.9

$
1.7

$
28.6

Average recorded investment*

$
3.7

$
27.8

$
2.4

$
33.9

*	~~Represents the average during the 12 months ended September 30, 2016.~~

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

Three Months Ended

Nine Months Ended

September 30

September 30

2017

2016

2017

2016

Interest income recognized:

Customer retail - fleet
$
.4

$
.2

$
1.0

$
.8

Customer retail - owner/operator

.1

.3

$
.4

$
.3

$
1.0

$
1.1

~~- 14 -~~

~~PACCAR Inc – Form 10-Q~~

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

~~(Millions, Except Share Amounts)~~

Credit Quality

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% 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. At-risk accounts are accounts that are impaired, including TDRs, accounts over 90 days past due and other accounts on non-accrual status.

- 16 -

Notes to Consolidated Financial Statements (Unaudited)

(Millions, Except Share Amounts)

The tables below summarize the amortized cost basis of the Company’s finance receivables bywithin each credit quality indicator by year of origination and portfolio class.

	DEALER				CUSTOMER RETAIL						REVOLVING
At September 30, 2022											LOANS		2022		2021		2020		2019		2018		PRIOR		TOTAL
Dealer:
Wholesale:
Performing											$	2,304.8													$	2,304.8
Watch												3.0														3.0
							OWNER/				$	2,307.8													$	2,307.8
At September 30, 2017	WHOLESALE		RETAIL		FLEET		OPERATOR		TOTAL
Retail:
Performing											$	197.0	$	374.2	$	371.3	$	239.7	$	263.3	$	133.1	$	140.3	$	1,718.9
At-risk																								.8		.8
											$	197.0	$	374.2	$	371.3	$	239.7	$	263.3	$	133.1	$	141.1	$	1,719.7
Total dealer											$	2,504.8	$	374.2	$	371.3	$	239.7	$	263.3	$	133.1	$	141.1	$	4,027.5

Customer retail:
Fleet:
Performing	$	1,905.6	$	1,327.0	$	4,916.7	$	1,197.5	$	9,346.8			$	2,468.8	$	2,121.2	$	1,404.3	$	702.3	$	264.2	$	135.4	$	7,096.2
Watch		4.9				64.8		6.2		75.9				2.4		6.1		4.5		4.1		2.5		.6		20.2
At-risk		.1		4.1		42.1		7.3		53.6				6.4		16.5		13.0		19.7		7.1		1.2		63.9
	$	1,910.6	$	1,331.1	$	5,023.6	$	1,211.0	$	9,476.3			$	2,477.6	$	2,143.8	$	1,421.8	$	726.1	$	273.8	$	137.2	$	7,180.3
Owner/operator:
Performing													$	386.3	$	451.4	$	273.3	$	135.7	$	56.0	$	13.6	$	1,316.3
Watch														.9		.6		.8		.4		.2				2.9
At-risk														.1		.6		.9		1.1		.8		.1		3.6
													$	387.3	$	452.6	$	275.0	$	137.2	$	57.0	$	13.7	$	1,322.8
Total customer retail													$	2,864.9	$	2,596.4	$	1,696.8	$	863.3	$	330.8	$	150.9	$	8,503.1

Total											$	2,504.8	$	3,239.1	$	2,967.7	$	1,936.5	$	1,126.6	$	463.9	$	292.0	$	12,530.6

- 17 -

Notes to Consolidated Financial Statements (Unaudited)

(Millions, Except Share Amounts)

	DEALER				CUSTOMER RETAIL						REVOLVING
At December 31, 2021											LOANS		2021		2020		2019		2018		2017		PRIOR		TOTAL
Dealer:
Wholesale:
Performing											$	1,859.7													$	1,859.7
Watch												6.1														6.1
							OWNER/				$	1,865.8													$	1,865.8
At December 31, 2016	WHOLESALE		RETAIL		FLEET		OPERATOR		TOTAL
Retail:
Performing	$	1,519.3	$	1,406.0	$	4,863.4	$	922.1	$	8,710.8	$	201.9	$	434.4	$	315.4	$	311.7	$	176.0	$	118.2	$	96.9	$	1,654.5
Watch		9.1				14.9		5.5		29.5				7.0		3.6		9.1		4.6		1.1				25.4
At-risk		.1				50.4		6.9		57.4														1.1		1.1
	$	1,528.5	$	1,406.0	$	4,928.7	$	934.5	$	8,797.7	$	201.9	$	441.4	$	319.0	$	320.8	$	180.6	$	119.3	$	98.0	$	1,681.0
Total dealer											$	2,067.7	$	441.4	$	319.0	$	320.8	$	180.6	$	119.3	$	98.0	$	3,546.8

Customer retail:
Fleet:
Performing													$	2,851.7	$	1,913.3	$	1,227.0	$	608.4	$	220.4	$	66.5	$	6,887.3
Watch														2.6		6.5		4.3		5.3		.6		.2		19.5
At-risk														6.0		8.5		26.0		10.6		3.3		.4		54.8
													$	2,860.3	$	1,928.3	$	1,257.3	$	624.3	$	224.3	$	67.1	$	6,961.6
Owner/operator:
Performing													$	611.9	$	389.9	$	228.1	$	116.0	$	38.6	$	10.1	$	1,394.6
Watch														.7		.5		.7		.4		.1				2.4
At-risk														.2		1.3		1.5		2.0		.5		.2		5.7
													$	612.8	$	391.7	$	230.3	$	118.4	$	39.2	$	10.3	$	1,402.7
Total customer retail													$	3,473.1	$	2,320.0	$	1,487.6	$	742.7	$	263.5	$	77.4	$	8,364.3

Total											$	2,067.7	$	3,914.5	$	2,639.0	$	1,808.4	$	923.3	$	382.8	$	175.4	$	11,911.1

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.

	DEALER				CUSTOMER RETAIL						DEALER				CUSTOMER RETAIL
							OWNER/										OWNER/
At September 30, 2017	WHOLESALE		RETAIL		FLEET		OPERATOR		TOTAL
At September 30, 2022											WHOLESALE		RETAIL		FLEET		OPERATOR		TOTAL
Current and up to 30 days past due	$	1,910.3	$	1,331.1	$	4,987.0	$	1,199.6	$	9,428.0	$	2,307.3	$	1,719.7	$	7,142.0	$	1,317.6	$	12,486.6
31 – 60 days past due		.2				15.7		5.6		21.5		.5				8.8		2.2		11.5
Greater than 60 days past due		.1				20.9		5.8		26.8						29.5		3.0		32.5
	$	1,910.6	$	1,331.1	$	5,023.6	$	1,211.0	$	9,476.3	$	2,307.8	$	1,719.7	$	7,180.3	$	1,322.8	$	12,530.6

	DEALER				CUSTOMER RETAIL						DEALER				CUSTOMER RETAIL
							OWNER/										OWNER/
At December 31, 2016	WHOLESALE		RETAIL		FLEET		OPERATOR		TOTAL
At December 31, 2021											WHOLESALE		RETAIL		FLEET		OPERATOR		TOTAL
Current and up to 30 days past due	$	1,528.4	$	1,406.0	$	4,898.4	$	926.4	$	8,759.2	$	1,865.4	$	1,681.0	$	6,939.7	$	1,396.4	$	11,882.5
31 – 60 days past due						12.6		3.9		16.5		.4				9.3		1.8		11.5
Greater than 60 days past due		.1				17.7		4.2		22.0						12.6		4.5		17.1
	$	1,528.5	$	1,406.0	$	4,928.7	$	934.5	$	8,797.7	$	1,865.8	$	1,681.0	$	6,961.6	$	1,402.7	$	11,911.1

- 1518 -

~~PACCAR Inc – Form 10-Q~~

Notes to Consolidated Financial Statements (Unaudited)

(Millions, Except Share Amounts)

The amortized cost basis of finance receivables that are on non-accrual status was as follows:

	DEALER			CUSTOMER RETAIL
						OWNER/
At September 30, 2022	WHOLESALE	RETAIL		FLEET		OPERATOR		TOTAL
Amortized cost basis with a specific reserve				$	36.5	$	3.4	$	39.9
Amortized cost basis with no specific reserve		$	.8		8.3				9.1
Total		$	.8	$	44.8	$	3.4	$	49.0

	DEALER			CUSTOMER RETAIL
						OWNER/
At December 31, 2021	WHOLESALE	RETAIL		FLEET		OPERATOR		TOTAL
Amortized cost basis with a specific reserve				$	40.3	$	5.7	$	46.0
Amortized cost basis with no specific reserve		$	1.1		4.7				5.8
Total		$	1.1	$	45.0	$	5.7	$	51.8

Interest income recognized on a cash basis for finance receivables that are on non-accrual status was as follows:

	Three Months Ended				Nine Months Ended
	September 30				September 30
	2022		2021		2022		2021
Dealer:
Retail					$	.1	$	.1
Customer retail:
Fleet	$	.6	$	.7		2.0		2.4
Owner/operator		.1		.2		.2		.4
	$	.7	$	.9	$	2.3	$	2.9

Troubled Debt Restructurings

The balance of TDRs was ~~$40.6~~$34.2 and ~~$43.1~~$41.6 at September 30, ~~2017~~2022 and December 31, ~~2016,~~2021, respectively. At modification date, the pre-modification and post-modification ~~recorded investment~~amortized cost basis balances for finance receivables modified during the period by portfolio class are as follows:

Three Months Ended

Nine Months Ended

September 30, 2017

September 30, 2017

RECORDED INVESTMENT

RECORDED INVESTMENT

PRE-MODIFICATION

POST-MODIFICATION

PRE-MODIFICATION

POST-MODIFICATION

Fleet

$
.9

$
.9

$
17.5

$
17.5

Owner/operator

.1

.1

.5

.5

$
1.0

$
1.0

$
18.0

$
18.0

	Three Months Ended				Nine Months Ended
	September 30, 2022				September 30, 2022
	AMORTIZED COST BASIS				AMORTIZED COST BASIS
	PRE- MODIFICATION		POST- MODIFICATION		PRE- MODIFICATION		POST- MODIFICATION
Fleet	$	1.6	$	1.6	$	9.7	$	9.7

	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	September 30, 2016				September 30, 2016				September 30, 2021				September 30, 2021
	RECORDED INVESTMENT				RECORDED INVESTMENT				AMORTIZED COST BASIS				AMORTIZED COST BASIS
	PRE-MODIFICATION		POST-MODIFICATION		PRE-MODIFICATION		POST-MODIFICATION		PRE- MODIFICATION		POST- MODIFICATION		PRE- MODIFICATION		POST- MODIFICATION
Fleet	$	9.1	$	9.1	$	23.1	$	23.0	$	1.0	$	1.0	$	5.8	$	5.7
Owner/operator		.4		.4		3.7		3.7						1.0		1.0
	$	9.5	$	9.5	$	26.8	$	26.7	$	1.0	$	1.0	$	6.8	$	6.7

The effect on the allowance for credit losses from such modifications was not significant at September 30, ~~2017~~2022 and ~~2016.~~2021.

TDRs modified during the previous twelve months that subsequently defaulted (i.e., became more than 30 days past due) ~~during~~in the ~~period by portfolio class are as follows:~~nine months ended September 30, 2022 and 2021 were $.8 and nil, respectively.

- 19 -

Nine Months Ended September 30,

2017

2016

Fleet

$
5.1

$
.1

Owner/operator

.3

.4

$
5.4

$
.5

Notes to Consolidated Financial Statements (Unaudited)

(Millions, Except Share Amounts)

There were ~~$1.5 and $5.1 of~~no finance receivables modified as TDRs during the previous twelve months that subsequently defaulted and were charged off in the nine months ended September 30, ~~2017~~2022 and ~~2016,~~2021, respectively.

Repossessions

When the Company determines a customer is not likely to meet its contractual commitments, the Company repossesses the vehicles which serve as collateral for the loans, finance leases and equipment under operating leases. The Company records the vehicles as used truck inventory included in Financial Services Other assets on the Consolidated Balance Sheets. The balance of repossessed inventory at September 30, ~~2017~~2022 and December 31, ~~2016~~2021 was ~~$20.4~~$6.1 and ~~$25.4,~~$4.7, respectively. Proceeds from the sales of repossessed assets were ~~$44.7~~$16.1 and ~~$34.2~~$33.9 for the nine months ended September 30, ~~2017~~2022 and ~~2016,~~2021, respectively. These amounts are included in Proceeds from asset disposals in the Condensed Consolidated Statements of Cash Flows. Write-downs of repossessed equipment on operating leases are recorded as impairments and included in Financial Services ~~depreciation~~Depreciation and other expenses on the Consolidated Statements of Comprehensive Income.

~~- 16 -~~

~~PACCAR Inc – Form 10-Q~~

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

~~(Millions, Except Share Amounts)~~

NOTE EF - Product Support Liabilities

Product support liabilities include estimated future payments related to product warranties and deferred revenues on optional extended warranties and ~~repair and maintenance (R&M) contracts.~~R&M. The Company generally offers one year warranties covering most of its vehicles and related aftermarket parts. For vehicles equipped with engines manufactured by PACCAR, the Company generally offers two year warranties on the engine. Specific terms and conditions vary depending on the product and the country of sale. Optional extended warranty and R&M contracts can be purchased for periods which generally range up to five years. Warranty expenses and reserves are estimated and recorded at the time products or contracts are sold based on historical and current data and reasonable expectations for the future regarding the ~~source,~~ frequency and cost of warranty claims, net of any recoveries. The Company periodically assesses the adequacy of its recorded liabilities and adjusts them as appropriate to reflect actual experience. Revenue from extended warranty and R&M contracts is deferred and recognized to income generally on a straight-line basis over the contract period. Warranty and R&M costs on these contracts are recognized as incurred.

Changes in product support liabilities are summarized as follows:

WARRANTY RESERVES		2017			2016		2022			2021
Balance at January 1	$	282.1		$	346.2		$	344.3		$	389.7
Cost accruals		168.7			159.7			269.4			218.9
Payments		(177.6	)		(194.9	)		(302.9	)		(309.7	)
Change in estimates for pre-existing warranties		.1			(2.5	)		80.6			43.4
Currency translation		12.6			(6.7	)
Currency translation and other								(23.2	)		(5.0	)
Balance at September 30	$	285.9		$	301.8		$	368.2		$	337.3

DEFERRED REVENUES ON EXTENDED WARRANTIES AND R&M CONTRACTS		2022			2021
Balance at January 1	$	775.2		$	795.8
Deferred revenues		439.7			350.7
Revenues recognized		(352.7	)		(363.8	)
Currency translation		(56.7	)		(15.5	)
Balance at September 30	$	805.5		$	767.2

DEFERRED REVENUES ON EXTENDED WARRANTIES AND R&M CONTRACTS

2017

2016

Balance at January 1
$
573.5

$
524.8

Deferred revenues

272.3

276.5

Revenues recognized

(239.6
)

(205.6
)
Currency translation

32.8

(7.2
)
Balance at September 30
$
639.0

$
588.5

~~NOTE F - Stockholders’ Equity~~

~~Comprehensive Income~~

The ~~components~~Company expects to recognize approximately $70.7 of ~~comprehensive income are as follows:~~

Three Months Ended

Nine Months Ended

September 30

September 30

2017

2016

2017

2016

Net income

$
402.7

$
346.2

$
1,086.0

$
232.9

Other comprehensive income (loss) (OCI):

Unrealized gains (losses) on derivative
contracts

1.9

5.1

(.1
)

8.0

Tax effect

(.7
)

(2.2
)

.2

(2.7
)

1.2

2.9

.1

5.3

Unrealized (losses) gains on marketable debt
securities

(.4
)

(3.7
)

2.5

2.1

Tax effect

.1

1.2

(1.1
)

(.6
)

(.3
)

(2.5
)

1.4

1.5

Pension plans

.6

10.3

3.1

32.7

Tax effect

(.6
)

(3.4
)

(1.9
)

(10.6
)

6.9

1.2

22.1

Foreign currency translation gains (losses)

108.1

(6.9
)

309.2

61.4

Net other comprehensive income

109.0

.4

311.9

90.3

Comprehensive income

$
511.7

$
346.6

$
1,397.9

$
323.2

the remaining deferred revenue on extended warranties and R&M contracts in 2022, $245.3 in 2023, $232.4 in 2024, $142.0 in 2025, $78.1 in 2026 and $37.0 thereafter.

- 1720 -

~~PACCAR Inc – Form 10-Q~~

Notes to Consolidated Financial Statements (Unaudited)

(Millions, Except Share Amounts)

NOTE G - Stockholders’ Equity

Comprehensive Income

The components of comprehensive income are as follow:

	Three Months Ended						Nine Months Ended
	September 30						September 30
	2022			2021			2022			2021
Net income	$	769.4		$	380.5		$	2,090.3		$	1,346.8
Other comprehensive income (loss) (OCI):
Unrealized gains on derivative contracts		24.3			8.2			61.4			29.4
Tax effect		(6.3	)		(1.6	)		(17.2	)		(7.6	)
		18.0			6.6			44.2			21.8
Unrealized losses on marketable debt securities		(22.7	)		(3.4	)		(67.2	)		(12.2	)
Tax effect		5.5			.7			16.6			2.9
		(17.2	)		(2.7	)		(50.6	)		(9.3	)
Pension plans		20.2			22.7			50.4			49.0
Tax effect		(5.1	)		(5.4	)		(12.6	)		(11.6	)
		15.1			17.3			37.8			37.4
Foreign currency translation losses		(297.3	)		(136.8	)		(503.4	)		(144.8	)
Net other comprehensive loss		(281.4	)		(115.6	)		(472.0	)		(94.9	)
Comprehensive income	$	488.0		$	264.9		$	1,618.3		$	1,251.9

Accumulated Other Comprehensive Income (Loss)

The components of AOCI and the changes in AOCI, net of tax, included in the Consolidated Balance Sheets and the Consolidated Statements of Stockholders’ Equity consisted of the following:

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	)
Three Months Ended September 30, 2022																DERIVATIVE CONTRACTS			MARKETABLE DEBT SECURITIES			PENSION PLANS			FOREIGN CURRENCY TRANSLATION			TOTAL
Balance at July 1, 2022																$	12.7		$	(34.5	)	$	(247.1	)	$	(842.8	)	$	(1,111.7	)
Recorded into AOCI		(19.8	)		(.2	)		(4.5	)		108.1			83.6			56.2			(16.9	)		9.5			(297.3	)		(248.5	)
Reclassified out of AOCI		21.0			(.1	)		4.5						25.4			(38.2	)		(.3	)		5.6						(32.9	)
Net other comprehensive income (loss)		1.2			(.3	)					108.1			109.0			18.0			(17.2	)		15.1			(297.3	)		(281.4	)
Balance at September 30, 2017	$	(4.2	)	$	1.1		$	(412.9	)	$	(400.2	)	$	(816.2	)
Balance at September 30, 2022																$	30.7		$	(51.7	)	$	(232.0	)	$	(1,140.1	)	$	(1,393.1	)

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	)
Three Months Ended September 30, 2021																DERIVATIVE CONTRACTS			MARKETABLE DEBT SECURITIES			PENSION PLANS			FOREIGN CURRENCY TRANSLATION			TOTAL
Balance at July 1, 2021																$	(14.0	)	$	8.0		$	(558.0	)	$	(465.6	)	$	(1,029.6	)
Recorded into AOCI		(7.9	)		(.7	)		2.1			(6.9	)		(13.4	)		35.3			(2.5	)		6.1			(136.8	)		(97.9	)
Reclassified out of AOCI		10.8			(1.8	)		4.8						13.8			(28.7	)		(.2	)		11.2						(17.7	)
Net other comprehensive income (loss)		2.9			(2.5	)		6.9			(6.9	)		.4			6.6			(2.7	)		17.3			(136.8	)		(115.6	)
Balance at September 30, 2016	$	(1.1	)	$	3.6		$	(368.3	)	$	(560.9	)	$	(926.7	)
Balance at September 30, 2021																$	(7.4	)	$	5.3		$	(540.7	)	$	(602.4	)	$	(1,145.2	)

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, 2022	DERIVATIVE CONTRACTS			MARKETABLE DEBT SECURITIES			PENSION PLANS			FOREIGN CURRENCY TRANSLATION			TOTAL
Balance at January 1, 2022	$	(13.5	)	$	(1.1	)	$	(269.8	)	$	(636.7	)	$	(921.1	)
Recorded into AOCI		90.7			(50.0	)		20.9			(503.4	)		(441.8	)
Reclassified out of AOCI		(46.5	)		(.6	)		16.9						(30.2	)
Net other comprehensive income (loss)		44.2			(50.6	)		37.8			(503.4	)		(472.0	)
Balance at September 30, 2022	$	30.7		$	(51.7	)	$	(232.0	)	$	(1,140.1	)	$	(1,393.1	)

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
)

- 1821 -

~~PACCAR Inc – Form 10-Q~~

Notes to Consolidated Financial Statements (Unaudited)

(Millions, Except Share Amounts)

Nine Months Ended September 30, 2021	DERIVATIVE CONTRACTS			MARKETABLE DEBT SECURITIES			PENSION PLANS			FOREIGN CURRENCY TRANSLATION			TOTAL
Balance at January 1, 2021	$	(29.2	)	$	14.6		$	(578.1	)	$	(457.6	)	$	(1,050.3	)
Recorded into AOCI		42.8			(8.2	)		3.3			(144.8	)		(106.9	)
Reclassified out of AOCI		(21.0	)		(1.1	)		34.1						12.0
Net other comprehensive income (loss)		21.8			(9.3	)		37.4			(144.8	)		(94.9	)
Balance at September 30, 2021	$	(7.4	)	$	5.3		$	(540.7	)	$	(602.4	)	$	(1,145.2	)

Reclassifications out of AOCI ~~during the three months ended September 30, 2017 and 2016 are~~were as follows:

		Three Months Ended							Three Months Ended
	LINE ITEM IN THE CONSOLIDATED STATEMENTS OF	September 30						LINE ITEM IN THE CONSOLIDATED STATEMENTS OF	September 30
AOCI COMPONENTS	COMPREHENSIVE INCOME (LOSS)		2017			2016		COMPREHENSIVE INCOME		2022			2021
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	$	2.0		$	1.3
	Cost of sales and revenues		5.5					Cost of sales and revenues		(6.2	)		(3.5	)
	Interest and other expense, net		1.0			(.3	)	Interest and other (income), net		3.9			(.5	)

Commodity contracts								Cost of sales and revenues		7.0
Financial Services
Foreign-exchange contracts								Interest and other borrowing expenses		(3.0	)
Interest-rate contracts	Interest and other borrowing expenses		24.6			28.2		Interest and other borrowing expenses		(56.2	)		(35.4	)
	Pre-tax expense increase		28.1			16.8		Pre-tax expense reduction		(52.5	)		(38.1	)
	Tax benefit		(7.1	)		(6.0	)	Tax expense		14.3			9.4
	After-tax expense increase		21.0			10.8		After-tax expense reduction		(38.2	)		(28.7	)
Unrealized gains on marketable debt securities:
Marketable debt securities	Investment income		(.2	)		(2.4	)	Investment income		(.4	)		(.3	)
	Tax expense		.1			.6		Tax expense		.1			.1
	After-tax income increase		(.1	)		(1.8	)	After-tax income increase		(.3	)		(.2	)
Pension plans:
Truck, Parts and Other
Actuarial loss	Cost of sales and revenues		3.1			3.4		Interest and other (income), net		7.1			14.7
	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), net		.2			.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		7.3			14.9
	Tax benefit		(2.1	)		(2.4	)	Tax benefit		(1.7	)		(3.7	)
	After-tax expense increase		4.5			4.8		After-tax expense increase		5.6			11.2
Total reclassifications out of AOCI		$	25.4		$	13.8			$	(32.9	)	$	(17.7	)

- 1922 -

~~PACCAR Inc – Form 10-Q~~

Notes to Consolidated Financial Statements (Unaudited)

(Millions, Except Share Amounts)

~~Reclassifications out of AOCI during the nine months ended September 30, 2017 and 2016 are as follows:~~

		Nine Months Ended							Nine Months Ended
	LINE ITEM IN THE CONSOLIDATED STATEMENTS OF	September 30						LINE ITEM IN THE CONSOLIDATED STATEMENTS OF	September 30
AOCI COMPONENTS	COMPREHENSIVE INCOME (LOSS)		2017			2016		COMPREHENSIVE INCOME		2022			2021
Unrealized losses and (gains) on derivative contracts:
Unrealized losses (gains) on derivative contracts:
Truck, Parts and Other
Foreign-exchange contracts	Net sales and revenues	$	13.3		$	(17.6	)	Net sales and revenues	$	17.1		$	14.9
	Cost of sales and revenues		4.3			.6		Cost of sales and revenues		(3.5	)		2.5
	Interest and other expense, net		1.6			1.6		Interest and other (income), net		8.8			(.2	)

Commodity contracts								Cost of sales and revenues		17.4

Financial Services
Foreign-exchange contracts								Interest and other borrowing expenses		(7.6	)
Interest-rate contracts	Interest and other borrowing expenses		110.4			78.5		Interest and other borrowing expenses		(99.3	)		(45.9	)
	Pre-tax expense increase		129.6			63.1		Pre-tax expense reduction		(67.1	)		(28.7	)
	Tax benefit		(35.6	)		(23.9	)	Tax expense		20.6			7.7
	After-tax expense increase		94.0			39.2		After-tax expense reduction		(46.5	)		(21.0	)
Unrealized gains on marketable debt securities:
Marketable debt securities	Investment income		(.6	)		(3.5	)	Investment income		(.8	)		(1.5	)
	Tax expense		.2			.9		Tax expense		.2			.4
	After-tax income increase		(.4	)		(2.6	)	After-tax income increase		(.6	)		(1.1	)
Pension plans:
Truck, Parts and Other
Actuarial loss	Cost of sales and revenues		9.2			10.3		Interest and other (income), net		21.7			44.2
	Selling, general and administrative		9.1			9.7
			18.3			20.0
Prior service costs	Cost of sales and revenues		.7			.7		Interest and other (income), net		.5			.6
	Selling, general and administrative		.2			.2
			.9			.9
Financial Services
Actuarial loss	Selling, general and administrative		.6			.8
	Pre-tax expense increase		19.8			21.7		Pre-tax expense increase		22.2			44.8
	Tax benefit		(6.3	)		(7.4	)	Tax benefit		(5.3	)		(10.7	)
	After-tax expense increase		13.5			14.3		After-tax expense increase		16.9			34.1
Total reclassifications out of AOCI		$	107.1		$	50.9			$	(30.2	)	$	12.0

Stock Compensation Plans

Stock-based compensation expense was ~~$1.9~~$2.6 and ~~$10.9~~$15.1 for the three months and nine months ended September 30, ~~2017,~~2022, respectively and ~~$2.0~~$2.6 and ~~$11.1~~$12.0 for the three months and nine months ended September 30, 2016, respectively. Realized tax benefits related to the excess of deductible amounts over expense recognized was nil for the three and nine months ended September 30, 2017 and $.1 and $.3 for the three and nine months ended September 30, 2016,2021, respectively.

During the first nine months of ~~2017,~~2022, the Company issued ~~777,808~~437,947 common shares under deferred and stock compensation arrangements.

Other Capital Stock Changes

During the first nine months of 2022, the Company acquired no treasury shares under the Company’s common stock repurchase plans. The Company acquired 21,853 shares under the Company’s Long-Term Incentive Plan. Stock repurchases of $390.0 million remain authorized under the current $500.0 million program approved by the PACCAR Board of Directors on December 4, 2018.

NOTE H - 20Income Taxes

The effective tax rate for the third quarter of 2022 was 21.5% compared to 21.9% for the third quarter of 2021. The effective tax rate for the first nine months of 2022 was 21.8% compared to 22.4% for the same period of 2021. The lower effective tax rate in the third quarter and first nine months of 2022 was primarily due to the change in mix of income generated in jurisdictions with lower tax rates in 2022 as compared to 2021.

- 23 -

~~PACCAR Inc – Form 10-Q~~

Notes to Consolidated Financial Statements (Unaudited)

(Millions, Except Share Amounts)

NOTE ~~G - Income Taxes~~

The effective tax rate for the third quarter of 2017 was 30.8% compared to 30.0% in the third 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 effective tax rate was 30.8% in 2017 compared to 67.3% in 2016. Substantially all of the difference in tax rate was due to the non-deductible expense of $833.0 for the European Commission charge (EC charge) in 2016.

~~NOTE H~~I - Segment Information

PACCAR operates in three principal segments: Truck, Parts and Financial Services. The Company evaluates the performance of its Truck and Parts segments based on operating profits, which excludes investment income, other income and expense ~~the EC charge~~ and income taxes. The Financial Services segment’s performance is evaluated based on income before income taxes. The accounting policies of the reportable segments are the same as those applied in the consolidated financial statements as described in Note A of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2021.

Truck and Parts

The Truck segment includes the design and manufacture of high-quality, light-, medium- and heavy-duty commercial trucks and the Parts segment includes the distribution of aftermarket parts for trucks and related commercial vehicles, both of which are sold through the same network of independent dealers. These segments derive a large proportion of their revenues and operating profits from operations in North America and Europe. The Truck segment incurs substantial costs to design, manufacture and sell trucks to its customers. The sale of new trucks provides the Parts segment with the basis for parts sales that may continue over the life of the truck, but are generally concentrated in the first five years after truck delivery. To reflect the benefit the Parts segment receives from costs incurred by the Truck segment, certain expenses are allocated from the Truck segment to the Parts segment. The expenses allocated are based on a percentage of the average annual expenses for factory overhead, engineering, research and development and ~~selling, general and administrative (SG&A)~~SG&A expenses for the preceding five years. The allocation is based on the ratio of the average parts direct margin dollars (net sales less material and labor costs) to the total truck and parts direct margin dollars for the previous five years. The Company believes such expenses have been allocated on a reasonable basis. Truck segment assets related to the indirect expense allocation are not allocated to the Parts segment.

Financial Services

The Financial Services segment derives its earnings primarily from financing or leasing of PACCAR products and services provided to truck customers and dealers. Revenues are primarily generated from operations in North America and Europe.

In Europe, the Financial Services and Truck segments centralized the marketing of used trucks, including those units sold by the Truck segment subject to an RVG. When a customer returns the truck at the end of the RVG contract, the Company’s Truck segment records a reduction in an RVG liability and the Company’s Financial Services segment records a used truck asset and revenue from the subsequent sale. Certain gains and losses from the sale of these used trucks are shared with the Truck segment.

- 2124 -

~~PACCAR Inc – Form 10-Q~~

Notes to Consolidated Financial Statements (Unaudited)

(Millions, Except Share Amounts)

Other

Included in Other is the Company’s industrial winch manufacturing ~~business. Also within this category are other~~business as well as sales, income and ~~expense~~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 expenses.

Three Months Ended

Nine Months Ended

September 30

September 30

2017

2016

2017

2016

Net sales and revenues:

Truck

$
4,065.6

$
3,429.0

$
11,131.8

$
10,499.4

Less intersegment

(198.2
)

(258.3
)

(580.7
)

(717.0
)
External customers

3,867.4

3,170.7

10,551.1

9,782.4

Parts

854.4

777.2

2,488.7

2,276.0

Less intersegment

(14.4
)

(12.4
)

(38.9
)

(35.3
)
External customers

840.0

764.8

2,449.8

2,240.7

Other

24.1

17.7

64.2

56.5

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
)

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

$
581.8

$
494.9

$
1,569.0

$
711.5

Depreciation and amortization:

Truck

$
122.4

$
107.6

$
340.5

$
329.5

Parts

2.4

1.9

6.3

5.4

Other

5.7

3.9

13.7

11.7

130.5

113.4

360.5

346.6

Financial Services

155.6

136.8

453.8

399.0

$
286.1

$
250.2

$
814.3

$
745.6

*	~~Other includes the $833.0 European Commission charge in the first half of 2016 (see Note L).~~

~~- 22 -~~

~~PACCAR Inc – Form 10-Q~~

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

~~(Millions, Except Share Amounts)~~

	Three Months Ended						Nine Months Ended
	September 30						September 30
		2022			2021			2022			2021
Net sales and revenues:
Truck	$	5,389.8		$	3,583.2		$	15,724.8		$	12,277.6
Less intersegment		(191.6	)		(130.6	)		(493.1	)		(439.8	)
External customers		5,198.2			3,452.6			15,231.7			11,837.8
Parts		1,487.3			1,275.2			4,343.2			3,677.8
Less intersegment		(15.8	)		(15.0	)		(48.1	)		(45.6	)
External customers		1,471.5			1,260.2			4,295.1			3,632.2
Other		17.3			24.9			52.8			68.8
		6,687.0			4,737.7			19,579.6			15,538.8
Financial Services		371.9			409.1			1,110.6			1,297.4
	$	7,058.9		$	5,146.8		$	20,690.2		$	16,836.2
Income before income taxes:
Truck	$	430.5		$	80.4		$	1,129.3		$	606.9
Parts		373.6			282.1			1,067.1			800.5
Other		8.0			3.0			14.9			13.9
		812.1			365.5			2,211.3			1,421.3
Financial Services		146.2			120.1			437.6			303.0
Investment (loss) income		21.4			1.6			24.3			11.5
	$	979.7		$	487.2		$	2,673.2		$	1,735.8
Depreciation and amortization:
Truck	$	86.3		$	63.5		$	235.6		$	204.2
Parts		3.5			2.8			10.0			8.6
Other		6.0			5.3			17.9			16.0
		95.8			71.6			263.5			228.8
Financial Services		107.2			138.3			322.1			463.5
	$	203.0		$	209.9		$	585.6		$	692.3

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 hedging 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 $238.0 at September 30, ~~2017.~~2022.

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 that 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.

- 25 -

Notes to Consolidated Financial Statements (Unaudited)

(Millions, Except Share Amounts)

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 30, ~~2017,~~2022, the notional amount of the Company’s interest-rate contracts was ~~$2,879.5.~~$2,710.0. Notional maturities for all interest-rate contracts are ~~$129.5~~$184.5 for the remainder of ~~2017, $985.8~~2022, $631.4 for ~~2018, $918.2~~2023, $572.1 for ~~2019, $383.4~~2024, $912.1 for ~~2020, $279.7~~2025, $244.0 for ~~2021, $150.3~~2026, $155.1 for ~~2022~~2027 and ~~$32.6~~$10.8 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 30, ~~2017,~~2022, the notional amount of the outstanding foreign-exchange contracts was ~~$411.9.~~$2,142.2. Foreign-exchange contracts mature within two years.

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 movement in commodity prices. At September 30, 2022, the notional amount of the outstanding commodity contracts was $40.7. Commodity contracts mature within one year.

- 2326 -

~~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			September 30, 2022						December 31, 2021
													ASSETS			LIABILITIES			ASSETS			LIABILITIES
Derivatives designated under hedge accounting:
Interest-rate contracts:
Financial Services:
Other assets	$	47.8					$	109.7					$	131.1					$	30.8
Deferred taxes and other liabilities				$	91.3					$	46.3					$	62.6					$	54.4
Foreign-exchange contracts:
Truck, Parts and Other:
Other current assets		1.6						3.9						101.0						25.3
Accounts payable, accrued expenses and other					4.4						1.9						5.2						15.8
Financial Services:
Other current assets														3.9						2.5
Deferred taxes and other liabilities																	3.9						.1
Commodity contracts:
Truck, Parts and Other:
Accounts payable, accrued expenses and other																	11.2						16.9
	$	49.4		$	95.7		$	113.6		$	48.2		$	236.0		$	82.9		$	58.6		$	87.2
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					$	1.8					$	1.0
Accounts payable, accrued expenses and other				$	.8						.3					$	1.1					$	1.1
Financial Services:
Other assets		2.0						4.0						.2						.1
Deferred taxes and other liabilities					.6						.7						.2						.2
	$	2.3		$	1.4		$	4.8		$	1.1		$	2.0		$	1.3		$	1.1		$	1.3
Gross amounts recognized in Balance Sheets	$	51.7		$	97.1		$	118.4		$	49.3		$	238.0		$	84.2		$	59.7		$	88.5
Less amounts not offset in financial instruments:
Truck, Parts and Other:
Foreign-exchange contracts		(1.1	)		(1.1	)		(1.0	)		(1.0	)	$	(3.5	)	$	(3.5	)	$	(2.7	)	$	(2.7	)
Financial Services:
Foreign-exchange contracts																				(.2	)		(.2	)
Interest-rate contracts		(9.6	)		(9.6	)		(15.4	)		(15.4	)		(17.7	)		(17.7	)		(12.8	)		(12.8	)
Foreign-exchange contracts								(.1	)		(.1	)
Pro forma net amount	$	41.0		$	86.4		$	101.9		$	32.8		$	216.8		$	63.0		$	44.0		$	72.8

- 2427 -

~~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						Nine Months Ended
	September 30, 2022						September 30, 2022
	INTEREST-			FOREIGN-			INTEREST-			FOREIGN-
	RATE			EXCHANGE			RATE			EXCHANGE
Truck, Parts and Other:
Net sales and revenues
Cash flow hedges				$	2.0					$	17.1
Cost of sales and revenues
Cash flow hedges					(6.2	)					(3.5	)
Derivatives not designated as hedging instruments					.4						.3
Interest and other (income), net
Cash flow hedges					3.9						8.8
Net investment hedges					(1.4	)					(4.2	)
Derivatives not designated as hedging instruments					(5.8	)					(4.5	)
				$	(7.1	)				$	14.0
Financial Services:
Interest and other borrowing expenses
Cash flow hedges	$	(56.2	)	$	(3.0	)	$	(99.3	)	$	(7.6	)
Fair value hedges		(.2	)					(.1	)
Derivatives not designated as hedging instruments					2.9						3.1
	$	(56.4	)	$	(.1	)	$	(99.4	)	$	(4.5	)
Total	$	(56.4	)	$	(7.2	)	$	(99.4	)	$	9.5

	Three Months Ended						Nine Months Ended
	September 30, 2021						September 30, 2021
	INTEREST-			FOREIGN-			INTEREST-			FOREIGN-
	RATE			EXCHANGE			RATE			EXCHANGE
Truck, Parts and Other:
Net sales and revenues
Cash flow hedges				$	1.3					$	14.9
Cost of sales and revenues
Cash flow hedges					(3.5	)					2.5
Derivatives not designated as hedging instruments					17.8						8.8
Interest and other (income), net
Cash flow hedges					(.5	)					(.2	)
Net investment hedges					(.7	)					(2.4	)
Derivatives not designated as hedging instruments					(.6	)					1.0
				$	13.8					$	24.6
Financial Services:
Interest and other borrowing expenses
Cash flow hedges	$	(35.4	)				$	(45.9	)
Fair value hedges								.1
Derivatives not designated as hedging instruments				$	(.3	)				$	(.7	)
	$	(35.4	)	$	(.3	)	$	(45.8	)	$	(.7	)
Total	$	(35.4	)	$	13.5		$	(45.8	)	$	23.9

Utilization of commodity hedging was initiated in Q3 2021. The loss from commodity contracts recorded in Cost of sales and revenue was $7.0 and $17.4 for the three months and nine months ended September 30, 2022.

- 28 -

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 and other borrowing expenses in the Financial Services segment of the Consolidated Statements of Comprehensive Income as follows:~~hedges:

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

	September 30		December 31
	2022		2021
Financial Services
Term notes:
Carrying amount of the hedged liabilities	$	329.3	$	472.0
Cumulative basis adjustment included in the carrying amount		28.6		8.7

The above table excludes the cumulative basis adjustments on discontinued hedge relationships of $7.0 and $(.1) as of September 30, 2022 and December 31, 2021, respectively.

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 maximum length of time over which the Company is hedging its exposure to the variability in future cash flows is ~~9.8~~5.8 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

INTEREST-

FOREIGN-

INTEREST-

FOREIGN-

RATE

EXCHANGE

RATE

EXCHANGE

CONTRACTS

CONTRACTS

CONTRACTS

CONTRACTS

Loss recognized in OCI:

Truck, Parts and Other

$
(3.0
)

$
(23.4
)
Financial Services

$
(23.2
)

$
(106.3
)

$
(23.2
)

$
(3.0
)

$
(106.3
)

$
(23.4
)

~~- 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
)

	Three Months Ended								Nine Months Ended
	September 30, 2022								September 30, 2022
	INTEREST-		FOREIGN-						INTEREST-		FOREIGN-
	RATE		EXCHANGE			COMMODITY			RATE		EXCHANGE			COMMODITY
Gain (loss) recognized in OCI:
Truck, Parts and Other			$	35.4		$	(7.9	)			$	35.5		$	(15.7	)
Financial Services	$	49.4		(.1	)				$	109.1		(.4	)
	$	49.4	$	35.3		$	(7.9	)	$	109.1	$	35.1		$	(15.7	)


	Three Months Ended								Nine Months Ended
	September 30, 2021								September 30, 2021
	INTEREST-		FOREIGN-						INTEREST-		FOREIGN-
	RATE		EXCHANGE			COMMODITY			RATE		EXCHANGE			COMMODITY
Gain (loss) recognized in OCI:
Truck, Parts and Other			$	2.3		$	(9.8	)			$	(6.7	)	$	(9.8	)
Financial Services	$	43.4		.6					$	67.1		(2.3	)
	$	43.4	$	2.9		$	(9.8	)	$	67.1	$	(9.0	)	$	(9.8	)

The amount of loss recorded in AOCI at September 30, ~~2017~~2022 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,~~$25.1, 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 $.1 for the three months and nine months ended September 30, 2022, respectively and nil for both the three and nine months ended September 30, ~~2017, respectively, and nil and $.3 for~~2021.

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 September 30, 2022, the notional amount of the outstanding net investment hedges was $347.0. For the three and nine ~~month periods~~months ended September 30, ~~2016,~~2022, the pre-tax gain recognized in OCI for the net investment hedges were $22.8 and $58.8, respectively.

- 2629 -

~~PACCAR Inc – Form 10-Q~~

Notes to Consolidated Financial Statements (Unaudited)

(Millions, Except Share Amounts)

~~Economic Hedges~~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.

- 2830 -

~~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 September 30, 2022							LEVEL 1		LEVEL 2		TOTAL
Assets:
Marketable debt securities
U.S. tax-exempt securities			$	522.0	$	522.0			$	442.9	$	442.9
U.S. taxable municipal / non-U.S. provincial bonds										176.1		176.1
U.S. corporate securities				58.9		58.9				235.5		235.5
U.S. government and agency securities	$	12.2				12.2	$	109.0				109.0
Non-U.S. corporate securities				397.9		397.9				408.3		408.3
Non-U.S. government securities				97.2		97.2				70.1		70.1
Other debt securities				127.8		127.8				99.8		99.8
Total marketable debt securities	$	12.2	$	1,203.8	$	1,216.0	$	109.0	$	1,432.7	$	1,541.7
Marketable equity securities							$	2.5			$	2.5
Total marketable securities							$	111.5	$	1,432.7	$	1,544.2
Derivatives
Cross currency swaps			$	43.2	$	43.2			$	119.1	$	119.1
Interest-rate swaps				4.6		4.6				12.0		12.0
Foreign-exchange contracts				3.9		3.9				106.9		106.9
Total derivative assets			$	51.7	$	51.7			$	238.0	$	238.0
Liabilities:
Derivatives
Cross currency swaps			$	84.1	$	84.1			$	34.1	$	34.1
Interest-rate swaps				7.2		7.2				28.5		28.5
Foreign-exchange contracts				5.8		5.8				10.4		10.4
Commodity contracts										11.2		11.2
Total derivative liabilities			$	97.1	$	97.1			$	84.2	$	84.2

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

- 2931 -

~~PACCAR Inc – Form 10-Q~~

Notes to Consolidated Financial Statements (Unaudited)

(Millions, Except Share Amounts)

At December 31, 2021	LEVEL 1		LEVEL 2		TOTAL
Assets:
Marketable debt securities
U.S. tax-exempt securities			$	432.5	$	432.5
U.S. taxable municipal / non-U.S. provincial bonds				191.6		191.6
U.S. corporate securities				207.4		207.4
U.S. government and agency securities	$	96.4				96.4
Non-U.S. corporate securities				442.8		442.8
Non-U.S. government securities				75.0		75.0
Other debt securities				100.0		100.0
Total marketable debt securities	$	96.4	$	1,449.3	$	1,545.7
Marketable equity securities	$	13.7			$	13.7
Total marketable securities	$	110.1	$	1,449.3	$	1,559.4
Derivatives
Cross currency swaps			$	18.2	$	18.2
Interest-rate swaps				12.6		12.6
Foreign-exchange contracts				28.9		28.9
Total derivative assets			$	59.7	$	59.7
Liabilities:
Derivatives
Cross currency swaps			$	33.1	$	33.1
Interest-rate swaps				21.3		21.3
Foreign-exchange contracts				17.2		17.2
Commodity contracts				16.9		16.9
Total derivative liabilities			$	88.5	$	88.5

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:

	September 30, 2017				December 31, 2016				September 30, 2022				December 31, 2021
	CARRYING		FAIR		CARRYING		FAIR		CARRYING		FAIR		CARRYING		FAIR
	AMOUNT		VALUE		AMOUNT		VALUE		AMOUNT		VALUE		AMOUNT		VALUE
Assets:
Financial Services fixed rate loans	$	3,612.6	$	3,622.4	$	3,607.4	$	3,638.4	$	6,399.8	$	6,115.0	$	6,011.7	$	6,018.2
Liabilities:
Financial Services fixed rate debt		5,372.5		5,378.6		4,915.2		4,929.3		7,046.1		6,681.2		6,905.7		6,935.1

- 32 -

Notes to Consolidated Financial Statements (Unaudited)

(Millions, Except Share Amounts)

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 expense for the Company’s defined benefit plans:

	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	September 30						September 30						September 30						September 30
		2017			2016			2017			2016		2022			2021			2022			2021
Service cost	$	23.5		$	22.2		$	69.5		$	66.7		$	37.7		$	37.6		$	113.5		$	113.0
Interest on projected benefit obligation		20.5			23.4			60.9			71.1			21.0			16.7			63.9			50.0
Expected return on assets		(40.1	)		(35.2	)		(119.5	)		(106.9	)		(53.2	)		(51.1	)		(162.0	)		(153.4	)
Amortization of prior service costs		.3			.3			.9			.9			.2			.2			.5			.6
Recognized actuarial loss		6.3			6.9			18.9			20.8			7.1			14.7			21.7			44.2
Net pension expense	$	10.5		$	17.6		$	30.7		$	52.6		$	12.8		$	18.1		$	37.6		$	54.4

~~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 months ended September 30, ~~2017,~~2022, the Company contributed ~~$4.9~~$21.1 and ~~$ 15.3~~$34.3 to its pension plans, respectively, and ~~$5.8~~$6.3 and ~~$65.1~~$19.2 for the three and nine months ended September 30, ~~2016,~~2021, 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 European jurisdictions 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 alleged 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.

The legal proceedings are continuing to move through the court systems in the various jurisdictions with some larger cases awaiting judgment in 2022 and others scheduled for trial in upcoming years. While the Company believes it has meritorious defenses to all EC-related claims and lawsuits, the final disposition of all such claims and lawsuits will likely take a significant period of time to resolve and ~~it is not possible to~~the final outcomes are highly uncertain. The Company cannot at this time reasonably estimate a range of ~~potential loss. An adverse outcome~~loss, if any, that may result. Adverse final decisions involving significant numbers of ~~such proceedings~~DAF truck sales could have a material impact on the Company’s results of ~~operations.~~operations and cash flows.

~~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.

- 33 -

~~- 31 -~~

~~PACCAR Inc – Form 10-Q~~

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 Quarter Financial Highlights:

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

•	Worldwide net sales and revenues were $7.06 billion in 2022 compared to $5.15 billion in 2021, primarily due to higher truck and parts revenues.

Truck sales were $3.87 billion in 2017 compared to $3.17 billion in 2016, primarily due to higher truck deliveries in the U.S. and Canada, Europe and Australia, and favorable currency translation effects.

•	Truck revenues were $5.20 billion in 2022 compared to $3.45 billion in 2021, primarily due to higher truck deliveries and price realization in all markets.

~~Parts sales were a record $840.0 million in 2017 compared to $764.8 million in 2016 reflecting higher demand in all markets.~~

•	Parts sales were $1.47 billion in 2022 compared to $1.26 billion in 2021 reflecting higher demand and price realization in all markets.

~~Financial Services revenues were $328.2 million in 2017 compared to $296.2 million in 2016. The increase was primarily the result of higher average operating lease assets.~~

•	Financial Services revenues were $371.9 million in 2022 compared to $409.1 million in 2021, primarily due to lower used truck sales.

Net income was $402.7 million ($1.14 per diluted share) in 2017 compared to $346.2 million ($.98 per diluted share) in 2016. The operating results reflect higher truck deliveries and record worldwide Parts segment sales and profit.

•	Net income was $769.4 million ($2.21 per diluted share) in 2022 compared to $380.5 million ($1.09 per diluted share) in 2021 due to higher Truck, Parts and Financial Services operating results.

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

•	Capital investments were $115.0 million in 2022 compared to $133.0 million in 2021.

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

•	Research and development (R&D) expenses were $82.9 million in 2022 compared to $72.5 million in 2021.

First Nine Months Financial Highlights:

•	Worldwide net sales and revenues were $20.69 billion in 2022 compared to $16.84 billion in 2021, primarily due to higher truck and parts revenues.

•	Truck revenues were $15.23 billion in 2022 compared to $11.84 billion in 2021, primarily due to higher truck deliveries and price realization in all markets.

•	Parts sales were $4.30 billion in 2022 compared to $3.63 billion in 2021 reflecting higher demand and price realization in all markets.

•	Financial Services revenues were $1.11 billion in 2022 compared to $1.30 billion in 2021, primarily due to lower used truck sales.

•	Net income was $2.09 billion ($5.99 per diluted share) in 2022 compared to $1.35 billion ($3.87 per diluted share) in 2021 due to higher Truck, Parts and Financial Services operating results.

•	Capital investments were $349.5 million in 2022 compared to $347.4 million in 2021.

•	Research and development (R&D) expenses were $241.3 million in 2022 compared to $237.0 million in 2021.

~~Worldwide net sales and revenues were $14.00 billion~~The new DAF XD truck was named International Truck of the Year 2023 at the IAA truck show in ~~2017 compared to $12.96 billion in 2016.~~

~~Truck sales were $10.55 billion in 2017 compared to $9.78 billion in 2016, primarily reflecting higher deliveries~~Hannover, Germany in the ~~U.S. and Canada as well as Europe, partially offset by unfavorable currency translation effects.~~

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

~~Financial Services revenues were $936.7 million in 2017 compared to $883.0 million in 2016.~~third quarter. The ~~increase was primarily revenues from higher average operating lease earning assets and higher used~~DAF XD truck ~~sales.~~

Net income was $1.09 billion ($3.08 per diluted share) in 2017 compared to $232.9 million ($.66 per diluted share) in 2016. Excluding the $833.0 million non-recurring EC charge, the Company earned adjusted net income (non-GAAP) of $1.07 billion ($3.03 per diluted share) in 2016. See Reconciliation of GAAP to 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.

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

~~R&D expenses were $194.1 million in 2017 compared to $179.6 million in 2016.~~

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~~represents a new ~~proprietary 12-speed automated transmission in North America, the lightest transmission for Class 8 on-highway~~generation of distribution and vocational vehicles. The ~~PACCAR automated transmission is designed to complement the superior performance of PACCAR MX engines~~DAF XD shares many features 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~~design elements with the ~~PACCAR Technical Center~~new DAF XF, XG, and XG+ trucks, which were named International Truck of the ~~Company’s~~Year 2022. The new DAF ~~division to launch its U.S. Department of Energy (DOE) SuperTruck II program.~~XD sets an industry benchmark in vocational performance and driver comfort. The ~~five-year project will utilize the Kenworth T680~~versatile DAF XD is available as a tractor or rigid truck with a ~~76-inch sleeper and the fuel-efficient~~high performance 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.engine.

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~~$15.92 billion. PFS issued ~~$1.33~~$2.23 billion in medium-term notes during the first nine months of ~~2017~~2022 to support ~~portfolio growth.~~new business volume and repay maturing debt.

- 34 -

Conflict in Ukraine

In accordance with international sanctions, the Company has suspended truck and parts sales to Russia and Belarus. The Company has no factories in Russia and has managed export sales to Russia through independent dealers. In 2021, 2,500 trucks were sold into Russia and Belarus. The Company also sold parts in these markets through a third-party owned warehouse. The trucks were sold on a fully paid-up basis; accordingly, the Company does not have significant receivables exposure. Inventory balances are not significant. The conflict has affected energy supplies in Europe. If the availability of energy in Europe is severely constrained, truck delivery volumes could be impacted. The Company continues to monitor the situation closely. The conflict has not yet had a significant impact on the results of operations or cash flows of the Company.

Truck Outlook

Truck industry heavy-duty retail sales in the U.S. and Canada in ~~2017~~2022 are expected to be ~~210,000~~ 265,000 to ~~220,000~~285,000 units compared to ~~215,700~~250,000 in ~~2016.~~ 2021. Estimates for the U.S. and Canada truck industry retail sales in ~~2018~~2023 are in the range of ~~220,000~~260,000 to ~~250,000~~300,000 units. In Europe, ~~the 2017~~2022 truck industry registrations for over 16-tonne vehicles are expected to be ~~300,000~~275,000 to ~~310,000~~295,000 units compared to ~~302,500 truck registrations~~278,000 in ~~2016. In Europe, the 2018~~2021. The European truck industry registrations in the above 16-tonne truck market in 2023 are projected to be in a range 260,000 to 300,000 units. In South America, heavy-duty truck industry registrations in 2022 are projected to be 125,000 to 135,000 as compared to 127,000 in 2021. Heavy-duty truck industry sales in South America in 2023 are projected to be in a range of ~~280,000~~125,000 to ~~310,000~~135,000 units. ~~In South America, heavy-duty truck industry sales~~

The Company has been affected by an industry-wide undersupply of component parts, and anticipates the shortages will continue to affect deliveries in ~~2017 are estimated to be in a range~~the fourth quarter of ~~55,000 to 60,000 units compared to 56,500 in 2016. In South America,~~ the ~~2018 heavy-duty truck industry sales are projected to be in a range of 65,000 to 70,000 units.~~year and into 2023.

Parts Outlook

In ~~2017,~~2022, 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%.~~14-16% compared to 2021 levels reflecting strong freight demand. In 2023, PACCAR Parts sales are expected to increase 5-8% from 2022 levels.

Financial Services Outlook

Based on the truck market outlook, average earning assets in ~~2017~~2022 are expected to ~~be comparable~~increase 1-3% including unfavorable foreign exchange impacts compared to ~~2016.~~2021. Current ~~good~~high levels of freight tonnage, freight rates and fleet utilization are contributing to customers’ profitability and cash flow. 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,~~2023, average earning assets are expected to increase ~~1-3%.~~3-5% compared to 2022.

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

Capital investments in ~~2017~~2022 are expected to be ~~$400~~$475 to ~~$450~~$500 million and R&D is expected to be ~~$260~~$330 to ~~$270~~$340 million. ~~These expenditures are focused on manufacturing facilities, new product development and enhanced aftermarket support.~~

In ~~2018,~~2023, capital investments are projected to be ~~$425~~$525 to ~~$475~~$575 million and R&D is expected to be ~~$270~~$350 to ~~$300~~$400 million. The Company is investing in ~~new truck models, integrated~~clean diesel and zero emissions powertrain ~~enhanced aerodynamic truck designs, advanced driver assistance~~technologies, autonomous driving systems, connected vehicle services, and ~~truck connectivity technologies, and expanded~~next-generation manufacturing and ~~parts~~ distribution ~~facilities.~~capabilities.

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

- 3335 -

~~PACCAR Inc – Form 10-Q~~

RESULTS OF OPERATIONS:

The Company’s results of operations for the three and nine months ended September 30, 2022 and 2021 are presented below.

	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	September 30						September 30						September 30						September 30
($ in millions, except per share amounts)		2017			2016			2017			2016		2022			2021			2022			2021
Net sales and revenues:
Truck	$	3,867.4		$	3,170.7		$	10,551.1		$	9,782.4		$	5,198.2		$	3,452.6		$	15,231.7		$	11,837.8
Parts		840.0			764.8			2,449.8			2,240.7			1,471.5			1,260.2			4,295.1			3,632.2
Other		24.1			17.7			64.2			56.5			17.3			24.9			52.8			68.8
Truck, Parts and Other		4,731.5			3,953.2			13,065.1			12,079.6			6,687.0			4,737.7			19,579.6			15,538.8
Financial Services		328.2			296.2			936.7			883.0			371.9			409.1			1,110.6			1,297.4
	$	5,059.7		$	4,249.4		$	14,001.8		$	12,962.6		$	7,058.9		$	5,146.8		$	20,690.2		$	16,836.2
Income (loss) before income taxes:
Income before income taxes:
Truck	$	357.4		$	284.9		$	922.8		$	918.4		$	430.5		$	80.4		$	1,129.3		$	606.9
Parts		152.9			138.3			457.0			406.3			373.6			282.1			1,067.1			800.5
Other*		(8.7	)		(7.8	)		(28.1	)		(862.4	)
Other														8.0			3.0			14.9			13.9
Truck, Parts and Other		501.6			415.4			1,351.7			462.3			812.1			365.5			2,211.3			1,421.3
Financial Services		71.2			71.0			191.5			228.6			146.2			120.1			437.6			303.0
Investment income		9.0			8.5			25.8			20.6			21.4			1.6			24.3			11.5
Income taxes		(179.1	)		(148.7	)		(483.0	)		(478.6	)		(210.3	)		(106.7	)		(582.9	)		(389.0	)
Net income	$	402.7		$	346.2		$	1,086.0		$	232.9		$	769.4		$	380.5		$	2,090.3		$	1,346.8
Diluted earnings per share	$	1.14		$	.98		$	3.08		$	.66		$	2.21		$	1.09		$	5.99		$	3.87
After-tax return on revenues		8.0	%		8.1	%		7.8	%		1.8	%		10.9	%		7.4	%		10.1	%		8.0	%
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.~~

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 and COVID-19 related factors affecting the Company’s results of operations.

~~- 34 -~~

~~PACCAR Inc – Form 10-Q~~

~~2017~~2022 Compared to ~~2016:~~2021:

Truck

The Company’s Truck segment accounted for ~~76% and 75%~~74% of revenues in the third quarter and first nine months of ~~2017, respectively,~~ 2022 compared to ~~75%~~67% and 70% in the third quarter and first nine months of ~~2016.~~ 2021, respectively.

The Company’s new truck deliveries are summarized below:

	Three Months Ended					Nine Months Ended					Three Months Ended					Nine Months Ended
	September 30					September 30					September 30					September 30
		2017	2016	% CHANGE			2017	2016	% CHANGE			2022	2021	% CHANGE			2022	2021	% CHANGE
U.S. and Canada		23,300	18,800		24		61,500	57,100		8		24,400	17,200		42		69,500	62,800		11
Europe		12,400	11,600		7		40,500	38,200		6		13,300	9,700		37		44,800	35,200		27
Mexico, South America, Australia and other		4,500	4,500				12,600	11,700		8		6,700	5,900		14		20,000	17,100		17

Total units		40,200	34,900		15		114,600	107,000		7		44,400	32,800		35		134,300	115,100		17

The increase in new truck deliveries worldwide in the third quarter and first nine months of 2022 compared to the same period of 2021 was driven by higher deliveries in all markets. The industry-wide undersupply of component products continues to impact deliveries.

- 36 -

Market share data discussed below is provided by third-party sources and is measured by either registrations or retail sales 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 months of ~~2017,~~2022, industry retail sales in the heavy-duty market in the U.S. and Canada ~~decreased~~were 201,000 units compared to ~~152,900 units from 166,700~~185,000 units in the same period of ~~2016.~~2021. The Company’s heavy-duty truck retail market share was ~~30.1%~~29.4% in the first nine months of ~~2017~~2022 compared to ~~27.9%~~29.6% in the first nine months of ~~2016.~~2021. The medium-duty market was ~~64,900~~64,200 units in the first nine months of ~~2017~~2022 compared to ~~65,100~~62,200 units in the same period of ~~2016.~~2021. The Company’s medium-duty market share was ~~16.2%~~10.0% in the first nine months of ~~2017~~2022 compared to ~~15.9%~~20.6% in ~~2016.~~the first nine months of 2021.

The over 16‑tonne truck market in Europe in the first nine months of ~~2017~~2022 was ~~226,300~~218,000 units compared to ~~224,500~~207,000 units in the first nine months of ~~2016.~~2021. DAF EUover 16‑tonne market share was ~~15.1%~~a 17.4% in the first nine months of ~~2017~~2022 compared to ~~15.6%~~15.8% in the same period of ~~2016.~~2021. The 6 to 16‑tonne market in the first nine months of ~~2017~~2022 was ~~38,500~~28,700 units compared to ~~38,400~~31,700 units in the ~~first nine months~~same period of ~~2016.~~2021. DAF market share in the 6 to 16-tonne market in the first nine months of ~~2017~~2022 was ~~10.5%~~10.1% compared to ~~9.7%~~10.2% in the same period of ~~2016. DAF deliveries in 2017 also reflect higher deliveries to Russia.~~

~~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.~~2021.

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

																	Three Months Ended								Nine Months Ended
	Three Months Ended								Nine Months Ended								September 30								September 30
($ in millions)	September 30								September 30									2022			2021		% CHANGE			2022			2021		% 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	$	3,200.8		$	1,996.1			60	$	8,948.4		$	7,094.3			26
Europe		958.7			843.2			14		2,893.5			2,821.9			3		1,239.0			829.5			49		4,080.0			2,948.6			38
Mexico, South America, Australia and other		464.1			426.0			9		1,226.7			1,104.8			11		758.4			627.0			21		2,203.3			1,794.9			23
	$	3,867.4		$	3,170.7			22	$	10,551.1		$	9,782.4			8	$	5,198.2		$	3,452.6			51	$	15,231.7		$	11,837.8			29
Truck income before income taxes	$	357.4		$	284.9			25	$	922.8		$	918.4				$	430.5		$	80.4			435	$	1,129.3		$	606.9			86
Pre-tax return on revenues		9.2	%		9.0	%				8.7	%		9.4	%				8.3	%		2.3	%				7.4	%		5.1	%

The Company’s worldwide truck net sales and revenues in the third quarter increased to ~~$3.87~~$5.20 billion in ~~2017~~2022 from ~~$3.17~~$3.45 billion in ~~2016,~~2021. Revenues for the first nine months increased to $15.23 billion in 2022 from $11.84 billion in 2021. The increase in both periods was 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 the first nine months of 2017, worldwide truck net sales and revenues were $10.55 billion compared to $9.78 billion in 2016, reflecting higher truck deliveries in the U.S. and Canada, Europe, and Australia,all markets, partially offset by unfavorable currency translation effects.

~~For~~

In the third quarter and first nine months of ~~2017,~~2022, Truck segment income before taxes and pretax return on revenues ~~reflect~~increased compared to the ~~impact of~~same periods in 2021 reflecting 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.~~

~~- 35 -~~

~~PACCAR Inc – Form 10-Q~~improved margins.

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 30, ~~2017~~2022 and ~~2016 for the Truck segment~~2021 are as follows:

	NET		COST OF					NET			COST OF
	SALES AND		SALES AND		GROSS			SALES AND			SALES AND			GROSS
($ in millions)	REVENUES		REVENUES		MARGIN			REVENUES			REVENUES			MARGIN
Three Months Ended September 30, 2016	$	3,170.7	$	2,796.2	$	374.5
Three Months Ended September 30, 2021								$	3,452.6		$	3,253.7		$	198.9
Increase (decrease)
Truck delivery volume		600.5		510.8		89.7
Truck sales volume									1,444.9			1,204.3			240.6
Average truck sales prices		34.0				34.0			515.5						515.5
Average per truck material, labor and other direct costs				21.2		(21.2	)					349.0			(349.0	)
Factory overhead and other indirect costs				20.5		(20.5	)					36.2			(36.2	)
Operating leases		1.1		.7		.4
Extended warranties, operating leases and other									37.7			41.0			(3.3	)
Currency translation		61.1		59.8		1.3			(252.5	)		(238.0	)		(14.5	)
Total increase		696.7		613.0		83.7			1,745.6			1,392.5			353.1
Three Months Ended September 30, 2017	$	3,867.4	$	3,409.2	$	458.2
Three Months Ended September 30, 2022								$	5,198.2		$	4,646.2		$	552.0

Truck delivery 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).

•	Truck sales volume reflects higher unit deliveries in all major markets due to increased demand.

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

•	Average truck sales prices increased sales by $515.5 million, primarily due to higher price realization worldwide.

~~Average cost per truck increased cost of sales by $21.2 million, reflecting higher material costs.~~

•	Average cost per truck increased cost of sales by $349.0 million, primarily reflecting higher raw material, freight, labor and product support costs.

~~Factory overhead and other indirect costs increased $20.5 million, primarily due to higher salaries and related expense ($11.4 million) and higher maintenance costs ($8.9 million).~~

~~The currency translation effect on sales 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.~~

•	Factory overhead and other indirect costs increased $36.2 million, primarily due to higher labor costs, utilities and depreciation.

- 3637 -

~~PACCAR Inc – Form 10-Q~~

•	Extended warranties, operating leases and other increased revenues by $37.7 million and cost of sales by $41.0 million primarily due to higher revenues and associated costs from repair and maintenance, service contracts and operating leases.

•	The currency translation effect on sales and cost of sales primarily reflects a decline in the value of the euro relative to the U.S. dollar.

•	Truck gross margin was 10.6% in the third quarter of 2022 compared to 5.8% in the same period of 2021 due to the factors noted above.

The major factors for the Truck segment changes in net sales and revenues, cost of sales and revenues and gross margin between the nine months ended September 30, ~~2017~~2022 and ~~2016 for the Truck segment~~2021 are as follows:

	NET			COST OF						NET			COST OF
	SALES AND			SALES AND			GROSS			SALES AND			SALES AND			GROSS
($ in millions)	REVENUES			REVENUES			MARGIN			REVENUES			REVENUES			MARGIN
Nine Months Ended September 30, 2016	$	9,782.4		$	8,589.4		$	1,193.0
Nine Months Ended September 30, 2021										$	11,837.8		$	10,865.9		$	971.9
Increase (decrease)
Truck delivery volume		845.0			728.2			116.8
Truck sales volume											2,322.9			1,968.0			354.9
Average truck sales prices		36.6						36.6			1,546.9						1,546.9
Average per truck material, labor and other direct costs					47.8			(47.8	)					1,251.9			(1,251.9	)
Factory overhead and other indirect costs					43.2			(43.2	)					119.6			(119.6	)
Operating leases		(68.1	)		(66.1	)		(2.0	)
Extended warranties, operating leases and other											99.3			63.8			35.5
Currency translation		(44.8	)		(5.1	)		(39.7	)		(575.2	)		(538.5	)		(36.7	)
Total increase		768.7			748.0			20.7			3,393.9			2,864.8			529.1
Nine Months Ended September 30, 2017	$	10,551.1		$	9,337.4		$	1,213.7
Nine Months Ended September 30, 2022										$	15,231.7		$	13,730.7		$	1,501.0

•	Truck sales volume reflects higher heavy-duty truck deliveries in all major markets, partially offset by lower medium-duty truck deliveries in the U.S. and Canada.

•	Average truck sales prices increased sales by $1.55 billion, primarily due to higher price realization worldwide.

•	Average cost per truck increased cost of sales by $1.25 billion, primarily reflecting higher raw material, freight, labor and product support costs.

•	Factory overhead and other indirect costs increased $119.6 million, primarily due to higher labor costs, utilities and depreciation.

•

Extended warranties, operating leases and other increased revenues by $99.3 million and cost of sales by $63.8 million, primarily due to higher revenues and associated costs from repair and maintenance, service contracts and operating leases. In addition, cost of sales and revenues was partially offset by gains on sales of used trucks and lower impairments in Europe due to an improved used truck market.

•	The currency translation effect on sales and cost of sales primarily reflects a decline in the value of the euro relative to the U.S. dollar.

•	Truck gross margin was 9.9% in the first nine months of 2022 compared to 8.2% in the same period of 2021 due to the factors noted above.

Truck ~~delivery volume primarily reflects higher truck deliveries~~SG&A expense decreased in the ~~U.S. and Canada which resulted~~third quarter of 2022 to $60.7 million from $66.4 million in ~~higher~~2021. The decrease was primarily due to lower sales and ~~cost~~marketing costs and currency translation effects, partially offset by increased salaries and related expenses and higher travel costs. For the first nine months of ~~sales ($526.1~~2022, Truck SG&A increased to $201.6 million ~~sales and $450.8~~from $191.4 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,~~in 2021, 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, primarily due to~~professional expenses, higher salaries and related expenses ~~($17.2 million), higher maintenance~~and travel costs, ~~($15.1 million) as well as higher depreciation expense ($7.5 million).~~

~~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 relative to the U.S. dollar.~~

~~Truck gross margins in the first nine months of 2017 of 11.5% decreased from 12.2% in the same period in 2016 primarily due to the factors noted above.~~

Truck SG&A in the third quarter of 2017 increased to $51.1 million from $47.8 million in the third quarter of 2016, and in the first nine months of 2017, Truck SG&A increased to $150.2 million from $147.6 million in the first nine months of 2016. The increase for both periods was primarily due to higher professional fees and salaries and related expenses, partially offset by ~~lower sales and marketing expenses.~~currency translation effects.

As a percentage of sales, Truck SG&A decreased to 1.2% and 1.3% in the third quarter and first nine months of ~~2017 from 1.5%~~2022, respectively, compared to 1.9% and 1.6% in the third quarter ~~of 2016. In the~~and first nine 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.~~2021.

- 3738 -

~~PACCAR Inc – Form 10-Q~~

Parts

The Company’s Parts segment accounted for ~~17%~~21% of revenues in the third quarter and first nine months of ~~2017~~2022 compared to ~~18%~~24% and ~~17%~~22% in the third quarter and first nine months of ~~2016,~~2021, respectively.

	Three Months Ended								Nine Months Ended								Three Months Ended									Nine Months Ended
	September 30								September 30								September 30									September 30
($ in millions)		2017			2016		% CHANGE			2017			2016		% CHANGE			2022			2021		% CHANGE				2022			2021		% CHANGE
Parts net sales and revenues:
U.S. and Canada	$	547.5		$	501.5			9	$	1,610.1		$	1,440.0			12	$	1,065.2		$	850.9			25		$	3,071.5		$	2,427.4			27
Europe		200.3			185.5			8		582.5			570.8			2		263.3			287.3			(8	)		832.5			861.5			(3	)
Mexico, South America, Australia and other		92.2			77.8			19		257.2			229.9			12		143.0			122.0			17			391.1			343.3			14
	$	840.0		$	764.8			10	$	2,449.8		$	2,240.7			9	$	1,471.5		$	1,260.2			17		$	4,295.1		$	3,632.2			18
Parts income before income taxes	$	152.9		$	138.3			11	$	457.0		$	406.3			12	$	373.6		$	282.1			32		$	1,067.1		$	800.5			33
Pre-tax return on revenues		18.2	%		18.1	%				18.7	%		18.1	%				25.4	%		22.4	%					24.8	%		22.0	%

The Company’s worldwide parts net sales and revenues for the third quarter increased to ~~a record $840.0 million~~$1.47 billion in ~~2017~~2022 from ~~$764.8 million~~$1.26 billion in ~~2016, and for~~2021. For the first nine months, worldwide parts net sales and revenues increased to ~~a record $2.45~~$4.30 billion in ~~2017~~2022 from ~~$2.24~~$3.63 billion in ~~2016,~~2021. The increase in both periods was primarily due to higher ~~aftermarket~~ demand in all ~~markets.~~markets, partially offset by unfavorable currency translation effects.

For the third quarter and first nine months of ~~2017,~~2022, the increase in Parts segment income before income taxes and pre-tax return on revenues was primarily due to higher sales ~~volume.~~volume and higher margins, partially offset by unfavorable currency translation effects.

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 30, ~~2017~~2022 and ~~2016 for the Parts segment~~2021 are as follows:

								NET			COST OF
	NET		COST		GROSS			SALES AND			SALES AND			GROSS
($ in millions)	SALES		OF SALES		MARGIN			REVENUES			REVENUES			MARGIN
Three Months Ended September 30, 2016	$	764.8	$	560.0	$	204.8
Three Months Ended September 30, 2021								$	1,260.2		$	901.7		$	358.5
Increase (decrease)
Aftermarket parts volume		62.3		38.5		23.8			104.9			73.4			31.5
Average aftermarket parts sales prices		3.8				3.8			159.9						159.9
Average aftermarket parts direct costs				8.6		(8.6	)					67.4			(67.4	)
Warehouse and other indirect costs				4.1		(4.1	)					12.9			(12.9	)
Currency translation		9.1		7.3		1.8			(53.5	)		(31.9	)		(21.6	)
Total increase		75.2		58.5		16.7			211.3			121.8			89.5
Three Months Ended September 30, 2017	$	840.0	$	618.5	$	221.5
Three Months Ended September 30, 2022								$	1,471.5		$	1,023.5		$	448.0

~~Aftermarket parts sales volume increased by $62.3 million and related cost of sales increased by $38.5 million due to higher demand in all markets, primarily in North America and Europe.~~

•	Aftermarket parts sales volume increased by $104.9 million and related cost of sales increased by $73.4 million due to higher demand in all markets.

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

•	Average aftermarket parts sales prices increased sales by $159.9 million primarily due to higher price realization in North America and Europe.

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

•	Average aftermarket parts direct costs increased $67.4 million due to higher material and freight costs.

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

•	Warehouse and other indirect costs increased $12.9 million primarily due to higher salaries and related expenses and costs for supplies.

~~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.~~

•	The currency translation effect on sales and cost of sales primarily reflects a decline 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.~~

•	Parts gross margins in the third quarter of 2022 increased to 30.4% from 28.4% in the third quarter of 2021 due to the factors noted above.

- 3839 -

~~PACCAR Inc – Form 10-Q~~

The major factors for the changes in Parts segment net sales and revenues, cost of sales and revenues and gross margin between the nine months ended September 30, ~~2017~~2022 and ~~2016 for the Parts segment~~2021 are as follows:

										NET			COST OF
	NET			COST			GROSS			SALES AND			SALES AND			GROSS
($ in millions)	SALES			OF SALES			MARGIN			REVENUES			REVENUES			MARGIN
Nine Months Ended September 30, 2016	$	2,240.7		$	1,634.7		$	606.0
Nine Months Ended September 30, 2021										$	3,632.2		$	2,603.1		$	1,029.1
Increase (decrease)
Aftermarket parts volume		195.9			129.8			66.1			360.0			236.2			123.8
Average aftermarket parts sales prices		26.4						26.4			419.6						419.6
Average aftermarket parts direct costs					20.3			(20.3	)					189.7			(189.7	)
Warehouse and other indirect costs					11.4			(11.4	)					39.3			(39.3	)
Currency translation		(13.2	)		(2.8	)		(10.4	)		(116.7	)		(70.8	)		(45.9	)
Total increase		209.1			158.7			50.4			662.9			394.4			268.5
Nine Months Ended September 30, 2017	$	2,449.8		$	1,793.4		$	656.4
Nine Months Ended September 30, 2022										$	4,295.1		$	2,997.5		$	1,297.6

•	Aftermarket parts sales volume increased by $360.0 million and related cost of sales increased by $236.2 million due to higher demand in all markets.

•	Average aftermarket parts sales prices increased sales by $419.6 million primarily due to higher price realization in North America and Europe.

•	Average aftermarket parts direct costs increased $189.7 million due to higher material and freight costs.

•	Warehouse and other indirect costs increased $39.3 million primarily due to higher salaries and related expenses and costs for supplies.

•	The currency translation effect on sales and cost of sales primarily reflects a decline in the value of the euro relative to the U.S. dollar.

•	Parts gross margins in the first nine months of 2022 increased to 30.2% from 28.3% in the first nine months of 2021 due to the factors noted above.

Parts SG&A expense decreased in the third quarter of 2022 to $52.9 million from $53.4 million in 2021. The decrease was primarily due to lower sales ~~volume increased~~and marketing costs and currency translation effects largely offset by ~~$195.9 million~~higher salaries and related ~~cost of sales~~expenses. For the first nine months, Parts SG&A increased ~~by $129.8~~to $162.4 million ~~due to higher demand~~ in ~~all markets, primarily~~2022 from $158.1 million 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,~~2021 primarily due to higher salaries and related expenses, ~~to support the higher~~partially offset by lower sales ~~volume.~~

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

~~Parts gross margins in the first nine months of 2017 decreased to 26.8% from 27.0% in the first nine months of 2016 due to the factors noted above.~~

Parts SG&A expense increased in the third quarter to $50.1 million in 2017 from $48.1 million in 2016, and for the first nine months to $145.6 million in 2017 from $144.3 million in 2016, due to higher salaries and related expenses.

As a percentage of sales, Parts SG&A ~~decreased to 6.0%~~was 3.6% and 3.8% in the third quarter and first nine months of ~~2017 from 6.3%~~2022, respectively, compared to 4.2% and 4.4% in the third quarter ~~of 2016. For the~~and first nine months of ~~2017, Parts SG&A as a percentage of sales was 5.9%, down from 6.4% in the first nine months of 2016. The decrease for both periods was primarily due to higher net sales.~~2021.

- 3940 -

~~PACCAR Inc – Form 10-Q~~

Financial Services

The Company’s Financial Services segment accounted for 6%5% 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.~~ 2022, compared to 8% in the third quarter and first nine months of 2021.

															Three Months Ended							Nine Months Ended
	Three Months Ended							Nine Months Ended							September 30							September 30
($ in millions)	September 30							September 30								2022		2021	% CHANGE				2022		2021	% CHANGE
		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	)	$	758.0	$	834.6		(9	)	$	2,412.0	$	2,533.6		(5	)
Europe		248.9		248.6					753.0		795.8		(5	)		345.7		278.4		24			1,043.7		945.9		10
Mexico, Australia and other		190.7		155.4		23			522.2		423.9		23			333.4		252.5		32			964.4		717.9		34
	$	1,086.0	$	1,058.4		3		$	2,942.4	$	3,068.9		(4	)	$	1,437.1	$	1,365.5		5		$	4,420.1	$	4,197.4		5
New loan and lease volume by product:
Loans and finance leases	$	850.7	$	710.4		20		$	2,239.5	$	2,144.3		4		$	1,190.8	$	1,128.1		6		$	3,639.4	$	3,460.9		5
Equipment on operating lease		235.3		348.0		(32	)		702.9		924.6		(24	)		246.3		237.4		4			780.7		736.5		6
	$	1,086.0	$	1,058.4		3		$	2,942.4	$	3,068.9		(4	)	$	1,437.1	$	1,365.5		5		$	4,420.1	$	4,197.4		5
New loan and lease unit volume:
Loans and finance leases		8,120		7,210		13			23,000		21,880		5			10,000		9,040		11			29,730		28,890		3
Equipment on operating lease		2,200		3,290		(33	)		6,930		9,040		(23	)		2,800		2,680		4			8,760		8,040		9
		10,320		10,500		(2	)		29,930		30,920		(3	)		12,800		11,720		9			38,490		36,930		4
Average earning assets:
U.S. and Canada	$	7,395.4	$	7,505.4		(1	)	$	7,287.4	$	7,464.2		(2	)	$	8,608.7	$	8,634.6				$	8,622.6	$	8,726.9		(1	)
Europe		2,936.4		2,616.3		12			2,816.7		2,682.2		5			3,628.2		3,707.8		(2	)		3,773.0		3,821.8		(1	)
Mexico, Australia and other		1,682.4		1,463.6		15			1,584.5		1,463.8		8			2,579.6		2,120.7		22			2,475.0		2,077.2		19
	$	12,014.2	$	11,585.3		4		$	11,688.6	$	11,610.2		1		$	14,816.5	$	14,463.1		2		$	14,870.6	$	14,625.9		2
Average earning assets by product:
Loans and finance leases	$	7,455.2	$	7,286.8		2		$	7,342.4	$	7,303.8		1		$	10,228.8	$	10,041.6		2		$	10,194.7	$	9,950.8		2
Dealer wholesale financing		1,580.6		1,592.3		(1	)		1,489.6		1,680.7		(11	)		1,870.7		1,343.0		39			1,855.9		1,521.9		22
Equipment on lease and other		2,978.4		2,706.2		10			2,856.6		2,625.7		9			2,717.0		3,078.5		(12	)		2,820.0		3,153.2		(11	)
	$	12,014.2	$	11,585.3		4		$	11,688.6	$	11,610.2		1		$	14,816.5	$	14,463.1		2		$	14,870.6	$	14,625.9		2
Revenues:
U.S. and Canada	$	188.9	$	173.6		9		$	545.7	$	512.4		6		$	170.5	$	183.7		(7	)	$	507.4	$	591.2		(14	)
Europe		79.6		71.8		11			223.1		214.8		4			118.1		161.7		(27	)		372.5		519.8		(28	)
Mexico, Australia and other		59.7		50.8		18			167.9		155.8		8			83.3		63.7		31			230.7		186.4		24
	$	328.2	$	296.2		11		$	936.7	$	883.0		6		$	371.9	$	409.1		(9	)	$	1,110.6	$	1,297.4		(14	)
Revenue by product:
Loans and finance leases	$	96.8	$	92.1		5		$	278.3	$	278.0				$	135.2	$	122.1		11		$	382.4	$	362.3		6
Dealer wholesale financing		14.4		13.8		4			39.3		42.4		(7	)		25.2		9.4		168			61.2		31.5		94
Equipment on lease and other		217.0		190.3		14			619.1		562.6		10			211.5		277.6		(24	)		667.0		903.6		(26	)
	$	328.2	$	296.2		11		$	936.7	$	883.0		6		$	371.9	$	409.1		(9	)	$	1,110.6	$	1,297.4		(14	)
Income before income taxes	$	71.2	$	71.0				$	191.5	$	228.6		(16	)	$	146.2	$	120.1		22		$	437.6	$	303.0		44

For the third quarter, new loan and lease volume ~~was $1,086.0~~increased to $1,437.1 million in ~~2017 compared to $1,058.4~~2022 from $1,365.5 million in ~~2016 and for~~2021. For the first nine months ~~was $2,942.4~~of 2022, new loan and lease unit volume increased to $4,420.1 million from $4,197.4 million in ~~2017 compared to $3,068.9~~2021. The volume increase for both periods reflects higher new loan and lease volume in Brasil, Europe and Mexico, partially offset by lower new loan and lease volume in the U.S. and Canada. The effect of currency translation decreased new loan and lease volume by $70.9 million and $151.6 million in ~~2016.~~the third quarter and first nine months of 2022, primarily due to the lower euro and Australian dollar relative to the U.S. dollar.

In the third quarter of ~~2017,~~2022, PFS finance market share onof new PACCAR truck sales was ~~24.7%~~24.4% compared to ~~27.2%~~26.7% in the third quarter of ~~2016.~~2021. In the first nine months of ~~2017,~~ 2022, PFS finance market share onof new PACCAR truck sales was ~~24.5%~~25.7% compared to ~~25.7%~~26.5% in the first nine months of ~~2016.~~2021.

In the third quarter of 2022, PFS ~~revenue increased~~revenues decreased to ~~$328.2~~$371.9 million from $409.1 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.~~2021. In the first nine months of 2022, PFS ~~revenue increased~~revenues decreased to ~~$936.7~~$1,110.6 million from $1,297.4 million in ~~2017 from $883.0 million in 2016,~~2021. The decreases for both periods were primarily due to ~~higher average operating lease earning assets and higher~~lower used truck sales ~~partially offset by~~in Europe and the U.S. The effects of currency translation ~~which lowered~~decreased PFS revenues by ~~$7.2~~$22.4 million ~~for~~and $48.4 million in the third quarter and first nine months of ~~2017.~~2022, respectively, primarily due to a lower euro relative to the U.S. dollar.

- 4041 -

~~PACCAR Inc – Form 10-Q~~

PFS income before income taxes ~~of $71.2~~increased to $146.2 million in the third quarter of ~~2017 was comparable to the $71.0~~2022 from $120.1 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~~2021. In the first nine months of 2022, PFS income before income taxes ~~decreased~~ increasedto ~~$191.5~~$437.6 million from $303.0 million in ~~2017 from $228.6 million~~2021. The increase in ~~2016,~~both periods was primarily due to ~~lower~~improved used truck results ~~on returned~~and higher finance and lease ~~assets, higher borrowing rates, a higher provision for losses on receivables and~~margins driven by portfolio growth, partially offset by the translation of weaker foreign currencies. The effects of translating weaker foreign currencies to the U.S. dollar ~~partially offset by higher average earning assets. The currency exchange impact increased~~decreased PFS income before income taxes by ~~$1.4~~$7.6 million and $16.0 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.~~2022, respectively, primarily due to a lower euro relative to the U.S. dollar.

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~~$133.9 million at September 30, ~~2017~~2022 and ~~$267.2~~$92.1 million at December 31, ~~2016.~~2021. 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~~$34.8 million in the third quarter of ~~2017~~2022 compared to ~~$6.3~~gains of $15.8 million in the third quarter of ~~2016, including losses~~2021. Losses on multiple unit transactions ~~of $6.3 million in~~for the third quarter of ~~2017~~2022 were $.1 compared to ~~$2.0 million~~$.6 in ~~the third quarter of 2016.~~2021. 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 quarter of ~~2017 and 2016, respectively.~~2022 or 2021.

The Company recognized ~~losses~~gains on used trucks, excluding repossessions, of ~~$31.6~~$104.7 million in the first nine months of ~~2017~~2022 compared to ~~$10.8~~$4.7 million of gains in the ~~same period~~first nine months of ~~2016, including losses~~2021. Losses on multiple unit transactions included in the first nine months of ~~$21.9~~2022 were $.2 million compared to $17.5 million in the first nine months of ~~2017 compared to $5.4 million in the first nine months of 2016.~~2021. 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 the first nine months of ~~2017 and 2016, respectively.~~2022 or 2021.

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 30, ~~2017~~2022 and ~~2016~~2021 are outlined below:


($ in millions)	INTEREST AND FEES		INTEREST AND OTHER BORROWING EXPENSES		FINANCE MARGIN			INTEREST AND FEES			INTEREST AND OTHER BORROWING EXPENSES			FINANCE MARGIN
Three Months Ended September 30, 2016	$	105.9	$	32.2	$	73.7
Three Months Ended September 30, 2021								$	131.5		$	35.3		$	96.2
Increase (decrease)
Average finance receivables		.9				.9			15.9						15.9
Average debt balances				.5		(.5	)					3.7			(3.7	)
Yields		2.6				2.6			18.6						18.6
Borrowing rates				5.0		(5.0	)					18.2			(18.2	)
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
Currency translation and other									(5.6	)		(1.4	)		(4.2	)
Total increase									28.9			20.5			8.4
Three Months Ended September 30, 2022								$	160.4		$	55.8		$	104.6

Average finance receivables increased $72.1 million (excluding foreign exchange effects) in the third quarter of 2017 as a result of retail portfolio new business volume exceeding collections and higher average dealer wholesale financing.

•	Average finance receivables increased $1,204.3 million (excluding foreign exchange effects) in the third quarter of 2022 primarily due to higher average loan and dealer wholesale balances.

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

•	Average debt balances increased $706.9 million (excluding foreign exchange effects) in the third quarter of 2022, reflecting higher funding requirements for the portfolio, which includes loans, finance leases, dealer wholesale and equipment on operating lease, mainly in Brasil, Europe and U.S.

Higher portfolio yields (4.8% in 2017 compared to 4.7% in 2016) increased interest and fees by $2.6 million. The higher portfolio yields reflect higher lending volumes in North America which have higher market rates than Europe.

•	Higher portfolio yields (5.3% in 2022 compared to 4.6% in 2021) increased interest and fees by $18.6 million. The higher portfolio yields were primarily due to higher market rates in Europe, North America and Brasil.

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

•	Higher borrowing rates (2.1% in 2022 compared to 1.4% in 2021) were primarily due to higher debt market rates in Europe, North America and Brasil.

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

•	The currency translation effects reflect a decrease in the value of foreign currencies relative to the U.S. dollar, primarily the euro.

- 4142 -

~~PACCAR Inc – Form 10-Q~~

The major factors for the changes in interest and fees, interest and other borrowing expenses and finance margin between the nine months ended September 30, ~~2017~~2022 and ~~2016~~2021 are outlined below:


($ in millions)	INTEREST AND FEES			INTEREST AND OTHER BORROWING EXPENSES			FINANCE MARGIN			INTEREST AND FEES			INTEREST AND OTHER BORROWING EXPENSES			FINANCE MARGIN
Nine Months Ended September 30, 2016	$	320.4		$	95.1		$	225.3
(Decrease) increase
Nine Months Ended September 30, 2021										$	393.8		$	114.9		$	278.9
Increase (decrease)
Average finance receivables		(2.4	)					(2.4	)		34.9						34.9
Average debt balances					1.1			(1.1	)					5.5			(5.5	)
Yields		2.6						2.6			24.5						24.5
Borrowing rates					14.5			(14.5	)					22.9			(22.9	)
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
Currency translation and other											(9.6	)		(1.3	)		(8.3	)
Total increase											49.8			27.1			22.7
Nine Months Ended September 30, 2022										$	443.6		$	142.0		$	301.6

~~Average finance receivables decreased $72.7 million (excluding foreign exchange effects) in the first nine months of 2017 as a result of lower average dealer wholesale financing.~~

•	Average finance receivables increased $936.4 million (excluding foreign exchange effects) in the first nine months of 2022 primarily due to higher average loan and dealer wholesale balances.

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

•	Average debt balances increased by $384.8 million (excluding foreign exchange effects) in the first nine months of 2022, reflecting higher funding requirements for the portfolio, which includes loans, finance leases, dealer wholesale and equipment on operating lease.

Higher portfolio yields (4.82% in 2017 compared to 4.77% in 2016) increased interest and fees by $2.6 million. The higher portfolio yields reflect higher lending volumes in North America which have higher market rates than Europe.

•	Higher portfolio yields (4.9% in 2022 compared to 4.6% in 2021) increased interest and fees by $24.5 million. The higher portfolio yields were primarily due to higher market rates in Europe and Brasil.

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

•	Higher borrowing rates (1.8% in 2022 compared to 1.4% in 2021) were primarily due to higher debt market rates in Europe and Brasil and Canada.

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

•	The currency translation effects reflect a decrease in the value of foreign currencies relative to the U.S. dollar, primarily the euro.

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

									Three Months Ended				Nine Months Ended
	Three Months Ended				Nine Months Ended				September 30				September 30
($ in millions)	September 30				September 30					2022		2021		2022		2021
Operating lease and rental revenues									$	197.3	$	214.3	$	610.4	$	649.7
Used truck sales										8.9		58.8		42.3		240.0
Insurance, franchise and other revenues										5.3		4.5		14.3		13.9
Operating lease, rental and other revenues									$	211.5	$	277.6	$	667.0	$	903.6
		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	$	122.7	$	143.5	$	359.2	$	462.3
Vehicle operating expenses		24.9		22.2		71.6		67.2		4.6		19.4		24.0		76.6
Cost of used truck sales and other		12.0		10.0		32.7		24.6
Cost of used truck sales										9.3		56.1		41.2		237.3
Insurance, franchise and other expenses										.8		.8		1.9		2.8
Depreciation and other expenses	$	186.2	$	162.6	$	538.7	$	469.9	$	137.4	$	219.8	$	426.3	$	779.0

- 4243 -

~~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 30, ~~2017~~2022 and ~~2016~~2021 are outlined below:


($ in millions)	OPERATING LEASE, RENTAL AND OTHER REVENUES		DEPRECIATION AND OTHER EXPENSES		LEASE MARGIN			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)
Three Months Ended September 30, 2021								$	277.6		$	219.8		$	57.8
(Decrease) increase
Used truck sales		3.5		4.0		(.5	)		(48.5	)		(45.4	)		(3.1	)
Results on returned lease assets				2.6		(2.6	)					(22.2	)		22.2
Average operating lease assets		16.4		14.1		2.3			(10.5	)		(8.4	)		(2.1	)
Revenue and cost per asset		2.2		2.5		(.3	)		8.9			5.1			3.8
Currency translation and other		4.6		.4		4.2			(16.0	)		(11.5	)		(4.5	)
Total increase (decrease)		26.7		23.6		3.1
Three Months Ended September 30, 2017	$	217.0	$	186.2	$	30.8
Total (decrease) increase									(66.1	)		(82.4	)		16.3
Three Months Ended September 30, 2022								$	211.5		$	137.4		$	74.1

A higher volume of used truck sales increased operating lease, rental and other revenues by $3.5 million. Depreciation and other expenses increased by $4.0 million due to higher volume of truck sales and losses on multiple unit transactions.

•	Lower sales volume of used trucks in Europe and the U.S. decreased revenues by $48.5 million and related depreciation and other expenses by $45.4 million.

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

•	Results on returned lease assets decreased depreciation and other expenses by $22.2 million primarily due to higher gains on sales on returned lease units as a result of higher used truck market values.

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

•	Average operating lease assets decreased $125.5 million (excluding foreign exchange effects), which decreased revenues by $10.5 million and related depreciation and other expenses by $8.4 million.

Revenue per asset increased $2.2 million primarily due to higher rental income. Cost per asset increased $2.5 million due to higher depreciation expense, partially offset by lower vehicle operating expenses.

•	Revenue per asset increased $8.9 million primarily due to higher rental utilization in North America and Europe. Cost per asset increased $5.1 million due to higher operating expenses.

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

•	The currency translation effects reflect a decrease in the value of foreign currencies relative to the U.S. dollar, primarily 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 months ended September 30, ~~2017~~2022 and ~~2016~~2021 are outlined below:


($ in millions)	OPERATING LEASE, RENTAL AND OTHER REVENUES			DEPRECIATION AND OTHER EXPENSES			LEASE MARGIN			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)
Nine Months Ended September 30, 2021										$	903.6		$	779.0		$	124.6
(Decrease) increase
Used truck sales		10.9			10.1			.8			(193.6	)		(192.0	)		(1.6	)
Results on returned lease assets					21.6			(21.6	)					(119.4	)		119.4
Average operating lease assets		45.7			38.5			7.2			(26.6	)		(21.2	)		(5.4	)
Revenue and cost per asset		2.3			4.4			(2.1	)		21.7			8.2			13.5
Currency translation and other		(2.4	)		(5.8	)		3.4			(38.1	)		(28.3	)		(9.8	)
Total increase (decrease)		56.5			68.8			(12.3	)
Nine Months Ended September 30, 2017	$	619.1		$	538.7		$	80.4
Total (decrease) increase											(236.6	)		(352.7	)		116.1
Nine Months Ended September 30, 2022										$	667.0		$	426.3		$	240.7

•	Lower sales volume of used trucks in Europe and the U.S. decreased revenues by $193.6 million and related depreciation and other expenses by $192.0 million.

•	Results on returned lease assets decreased depreciation and other expenses by $119.4 million primarily due to higher gains on sales on returned lease units as a result of higher used truck market values.

•	Average operating lease assets decreased $150.6 million (excluding foreign exchange effects), which decreased revenues by $26.6 million and related depreciation and other expenses by $21.2 million.

•	Revenue per asset increased $21.7 million primarily due to higher rental utilization. Cost per asset increased $8.2 million due to higher operating expenses.

•	The currency translation effects reflect a reflect a decrease in the value of foreign currencies relative to the U.S. dollar, primarily the euro.

~~A higher volume~~- 44 -

Financial Services SG&A for the third quarter of ~~used truck sales increased operating lease, rental and other revenues by $10.9~~2022 decreased to $33.3 million ~~and increased depreciation and other expenses by $10.1 million.~~

~~Results on returned lease assets increased depreciation and other expenses by $21.6~~from $33.9 million in the third quarter of 2021 primarily due to ~~higher losses on sales of returned lease units.~~

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

Revenue per asset increased $2.3 million primarily due to higher rental income. Cost per asset increased $4.4 million due to higher depreciation expense, partially offset by lower vehicle operating expenses.

~~The currency translation effects reflect a decline~~decreases in the value of foreign currencies relative to the U.S. dollar, partially offset by higher salaries and related expenses. For the first nine months, Financial Services SG&A increased to $100.9 million in 2022 from $97.3 million in 2021 primarily due to higher salaries and related expenses, partially offset by decreases in the value of foreign currencies relative to the U.S. dollar.

~~- 43 -~~

~~PACCAR Inc – Form 10-Q~~

As an annualized percentage of average earnings assets, Financial Services SG&A was .9% in the third quarter and first nine months of 2022 and 2021.

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

	Three Months Ended				Nine Months Ended				Three Months Ended						Nine Months Ended
	September 30, 2017				September 30, 2017				September 30, 2022						September 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	$	3.2	$	3.9	$	11.5	$	12.0	$	(1.1	)	$	(.1	)	$	(4.0	)	$	(.8	)
Europe		.2		.4		1.6		1.1		(.2	)		(.3	)		.1			.2
Mexico, Australia and other		1.3		.8		4.3		1.7		.5			(1.4	)		7.7			(.1	)
	$	4.7	$	5.1	$	17.4	$	14.8	$	(.8	)	$	(1.8	)	$	3.8		$	(.7	)

	Three Months Ended				Nine Months Ended				Three Months Ended					Nine Months Ended
	September 30, 2016				September 30, 2016				September 30, 2021					September 30, 2021
($ 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	$	(.6	)	$	.9	$	(.2	)	$	1.5
Europe		.2		.4		1.0		.9		(.8	)		.2		(.6	)		1.3
Mexico, Australia and other		1.0		.7		3.3		2.7		1.4			1.1		4.0			3.9
	$	5.1	$	4.9	$	14.5	$	14.8				$	2.2	$	3.2		$	6.7

The provision for losses on receivables was ~~$4.7~~$(.8) million ~~for~~in the third quarter of ~~2017~~2022 compared to ~~$5.1 million~~nil in ~~2016. For~~2021, and in the first nine months, ~~of 2017,~~ the provision for losses on receivables was ~~$17.4~~$3.8 million in 2022 compared to ~~$14.5~~$3.2 million in ~~2016, reflecting continued good~~2021. The decrease in provision for losses in the third quarter of 2022 reflects improved portfolio ~~performance.~~performance in North America and Europe. The increase in provision for losses in the first nine months was mainly driven by portfolio growth and higher past due balances in Brasil, partially offset by improved portfolio performance in North America and Europe.

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~~a loan or finance ~~leases~~lease for credit reasons and grants a concession, the ~~modifications are~~modification is classified as a troubled debt ~~restructurings~~restructuring (TDR).

~~- 44 -~~

~~PACCAR Inc – Form 10-Q~~

The post-modification ~~balance~~balances of accounts modified during the nine months ended September 30, ~~2017~~2022 and ~~2016~~2021 are summarized below:

											2022					2021
($ 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	%	$	158.3		2.1	%	$	161.4		2.1	%
Insignificant delay		67.1		1.2	%		80.1		1.5	%		60.8		.8	%		53.1		.7	%
Credit – no concession		48.2		.9	%		45.9		.8	%		46.3		.6	%		51.5		.7	%
Credit – TDR		18.0		.3	%		26.7		.5	%		9.7		.1	%		6.7		.1	%
	$	271.3		4.8	%	$	339.5		6.2	%	$	275.1		3.6	%	$	272.7		3.6	%

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

~~Modification activity decreased in~~During the first nine months of ~~2017 compared~~2022, total modification activity of $275.1 million was comparable to $272.7 million for the first nine months of 2016. The decrease in modifications for commercial reasons reflects lower volumes of refinancing, primarily in the U.S. The decrease in modifications for insignificant delay reflects fewer fleet 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 to the contract modifications for two fleet customers in 2016.same period last year.

- 45 -

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

	September 30 2017			December 31 2016			September 30 2016			September 30 2022			December 31 2021			September 30 2021
Percentage of retail loan and lease accounts 30+ days past due:
U.S. and Canada		.3	%		.3	%		.3	%		.1	%
Europe		.6	%		.5	%		.6	%		.4	%		.4	%		.5	%
Mexico, Australia and other		2.0	%		1.8	%		2.2	%		1.7	%		1.2	%		1.2	%
Worldwide		.6	%		.5	%		.6	%		.4	%		.3	%		.3	%

Accounts 30+ days past due was ~~.6%~~.4% at September 30, ~~2017~~2022 compared to ~~.5%~~.3% at December 31, ~~2016, primarily due to higher past due accounts in Europe and Mexico.~~2021. 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~~$16.2 million of accounts worldwide during the third quarter of ~~2017, $2.6~~2022, $.4 million during the fourth quarter of ~~2016~~2021 and ~~$2.8~~$.2 million during the third quarter of ~~2016~~2021 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			September 30 2022			December 31 2021			September 30 2021
Pro forma percentage of retail loan and lease accounts 30+ days past due:
U.S. and Canada		.3	%		.3	%		.3	%		.1	%
Europe		.6	%		.5	%		.6	%		.4	%		.4	%		.5	%
Mexico, Australia and other		2.2	%		2.0	%		2.5	%		1.9	%		1.2	%		1.2	%
Worldwide		.7	%		.6	%		.6	%		.5	%		.3	%		.3	%

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 30, ~~2017,~~2022, December 31, ~~2016~~2021 and September 30, ~~2016.~~2021. The effect on the allowance for credit losses from such modifications was not significant at September 30, ~~2017,~~2022, December 31, ~~2016~~2021 and September 30, ~~2016.~~2021.

The Company’s annualized pre-tax return on average ~~earning~~ assets for Financial Services ~~was 2.4% and 2.2% for~~increased to 3.6% in the third quarter of 2022 from 3.1% in the same period of 2021, and in the first nine months, ~~of 2017, respectively, compared~~increased to ~~2.4%~~3.7% in 2022 from 2.6% in 2021. The increase in both periods was primarily driven by improved used truck results and ~~2.6% for the same periods in 2016.~~

~~- 45 -~~

~~PACCAR Inc – Form 10-Q~~

higher finance and lease margins.

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 quarter and first nine months of ~~2017~~2022 and ~~2016.~~2021. Other SG&A increased to ~~$11.7~~$24.1 million for the third quarter of ~~2017~~2022 from ~~$9.6~~$14.9 million for the third quarter of ~~2016,~~2021 and increased to $66.6 million for the first nine months ~~other SG&A increased to $36.2~~of 2022 from $47.3 million ~~in 2017 from $34.0 million in 2016.~~for the first nine months of 2021. The increase in ~~other SG&A for~~ both periods was primarily due to higher ~~labor~~salaries and related ~~costs.~~expenses.

For the third quarter, ~~other~~Other income ~~(loss)~~ before ~~tax was a loss of $8.7~~income taxes increased to $8.0 million from $3.0 million in ~~2017 compared~~2021 primarily due to ~~a loss~~lower professional fees and lower non-service components of ~~$7.8 million in 2016.~~pension expenses, partially offset by higher salaries and related expenses. For the first nine months, ~~other~~Other income ~~(loss)~~ before ~~tax was a loss of $28.1~~taxes increased to $14.9 million from $13.9 million in ~~2017 compared~~2021 primarily due to ~~a loss~~lower non-service components of ~~$862.4 million in 2016, which included the impact of the $833.0 million EC charge.~~pension expenses, partially offset by higher salaries and related expenses.

Investment income for the third quarter increased to ~~$9.0~~$21.4 million in ~~2017~~2022 from ~~$8.5~~$1.6 million in ~~2016, and for~~2021. For the first nine months, investment income increased to ~~$25.8~~$24.3 million in ~~2017~~2022 from ~~$20.6~~$11.5 million in ~~2016. The higher investment income in~~2021. For the third quarter and first nine months of ~~2017~~2022 investment income from marketable debt securities was ~~primarily~~higher compared to the same periods in 2021 due to higher average ~~U.S. portfolio~~cash balances in North America and South America and higher investment yields ~~on U.S. investments due to higher market interest rates.~~in all regions.

- 46 -

Income Taxes

The effective tax rate for the third quarter of ~~2017~~2022 was ~~30.8%~~21.5% compared to ~~30.0%~~21.9% for the third quarter of ~~2016,~~2021. The effective tax rate for the first nine months of 2022 was 21.8% compared to 22.4% for the first nine months of 2021. The lower effective tax rate in the third quarter and first nine months of 2022 was primarily due to the ~~increase~~change in mix of income generated in jurisdictions with ~~higher~~lower tax rates in ~~2017~~2022 as compared to 2016. For the first nine months, the effective tax rate was 30.8% in 2017 compared to 67.3% in 2016. Substantially all of the difference in tax rate was due to the non-deductible expense of $833.0 million for the EC charge in 2016.2021.

													Three Months Ended						Nine Months Ended
	Three Months Ended						Nine Months Ended						September 30						September 30
($ in millions)	September 30						September 30							2022			2021			2022			2021
		2017			2016			2017			2016
Domestic income before taxes	$	385.6		$	318.5		$	996.5		$	959.6		$	623.7		$	252.7		$	1,666.1		$	1,032.3
Foreign income (loss) before taxes		196.2			176.4			572.5			(248.1	)
Foreign income before taxes														356.0			234.5			1,007.1			703.5
Total income before taxes	$	581.8		$	494.9		$	1,569.0		$	711.5		$	979.7		$	487.2		$	2,673.2		$	1,735.8
Domestic pre-tax return on revenues		13.5	%		13.2	%		12.8	%		13.2	%		15.3	%		9.1	%		14.6	%		11.4	%
Foreign pre-tax return on revenues		8.9	%		9.6	%		9.2	%		(4.4	)%		11.9	%		9.9	%		10.9	%		9.0	%
Total pre-tax return on revenues		11.5	%		11.6	%		11.2	%		5.5	%		13.9	%		9.5	%		12.9	%		10.3	%

For the third quarter and first nine months of ~~2017, the increase in~~2022, both domestic and foreign income before income taxes and pre-tax return on revenues ~~was~~increased primarily due to ~~higher revenues~~the improved results from ~~truck~~Truck, Parts and ~~parts~~Financial Services 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 revenues was primarily due to a higher mix of truck results and currency impacts.

For the first nine months of 2017, the increase in income before income taxes for 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 return on revenues decreased slightly in the first nine months of 2017 primarily due to lower truck margins in Europe and Mexico.

~~- 46 -~~

~~PACCAR Inc – Form 10-Q~~

LIQUIDITY AND CAPITAL RESOURCES:

	September 30		December 31		September 30		December 31
($ in millions)		2017		2016		2022		2021
Cash and cash equivalents	$	2,313.3	$	1,915.7	$	3,323.5	$	3,428.3
Marketable debt securities		1,216.0		1,140.9
Marketable securities						1,544.2		1,559.4
	$	3,529.3	$	3,056.6	$	4,867.7	$	4,987.7

The Company’s total cash and marketable ~~debt~~ securities at September 30, ~~2017 increased $472.7~~2022 decreased $120.0 million from the balances at December 31, ~~2016, primarily due to an increase in~~2021. 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			2022		2021
Operating activities:
Net income	$	1,086.0		$	232.9		$	2,090.3		$	1,346.8
Net income items not affecting cash		826.8			762.3			402.2			455.6
Changes in operating assets and liabilities, net		(90.3	)		495.3			(714.3	)		(652.2	)
Net cash provided by operating activities		1,822.5			1,490.5			1,778.2			1,150.2
Net cash used in investing activities		(1,139.5	)		(921.4	)		(1,318.5	)		(1,025.4	)
Net cash used in financing activities		(369.3	)		(832.0	)		(418.9	)		(1,389.9	)
Effect of exchange rate changes on cash		83.9			34.4
Net increase (decrease) in cash and cash equivalents		397.6			(228.5	)
Effect of exchange rate changes on cash and cash equivalents								(145.6	)		(46.7	)
Net decrease in cash and cash equivalents								(104.8	)		(1,311.8	)
Cash and cash equivalents at beginning of period		1,915.7			2,016.4			3,428.3			3,539.6
Cash and cash equivalents at end of period	$	2,313.3		$	1,787.9		$	3,323.5		$	2,227.8

Operating activities: Cash provided by operations increased by ~~$332.0~~$628.0 million to ~~$1,822.5~~$1,778.2 million in the first nine months of ~~2017~~2022 from ~~$1,490.5~~$1,150.2 million in ~~2016.~~2021. Higher operating cash flows reflect lower cash usage of $825.7 million for inventories, higher net income of ~~$1,086.0~~$743.5 million ~~in 2017, compared to net income~~and lower cash outflow of ~~$232.9~~$430.2 million ~~in 2016, which includes payment of the $833.0 million EC charge. In addition, there were higher cash inflows of $443.2 million from~~for accounts payable and accrued expenses as purchases of goods and services exceeded payments. The higher operating cash ~~inflows~~flows were partially offset by $1,165.5 million in wholesale receivables in the Financial Services segment primarily due to increasing wholesale receivables, ~~of $528.1 million as originations exceeded~~and lower cash receipts ~~in the first nine months~~from trade and other receivables 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 million from accounts receivable as sales and services exceeded cash receipts, and higher net purchases of inventory of $200.4$252.5 million.

- 47 -

Investing activities:Cash used in investing activities increased by ~~$218.1~~$293.1 million to ~~$1,139.5~~$1,318.5 million in the first nine months of ~~2017~~2022 from ~~$921.4~~$1,025.4 million in ~~2016.~~2021. Higher net cash used in investing activities reflects ~~$405.5~~higher net originations of loans and financing leases of $238.9 million ~~in marketable debt securities as there was $34.8 million in net purchases of marketable debt securities in 2017 compared to $370.7 million in net~~and lower proceeds from ~~sales~~asset disposals of ~~marketable debt securities in 2016.~~$174.8 million. The ~~outflows were~~higher net cash usage was partially offset by ~~lower cash used in the~~fewer 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~~$102.4 million.

Financing activities: Cash used in financing activities decreased by ~~$462.7 million~~$971.0 to $369.3 million for the first nine months of 2017 from $832.0 million in 2016. The Company paid $470.4 million in dividends in the first nine months of 2017 compared to $745.2 million in 2016; the decrease of $274.8 million was primarily due to a lower special dividend paid in January 2017 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$418.9 million in the first nine months of ~~2017, $114.7~~2022 from $1,389.9 in 2021. In the first nine months of 2022, cash provided by net borrowing activities in 2022 was $437.3 million, $1,265.9 million higher than the cash used inby net borrowing activities of ~~$41.8~~$828.6 million in ~~2016.~~2021. The Company paid $875.9 million in dividends in 2022 compared to $589.9 million in 2021 due to a higher extra dividend paid in January 2022.

~~- 47 -~~

~~PACCAR Inc – Form 10-Q~~

Credit Lines and Other

The Company has line of credit arrangements of ~~$3.55~~$3.66 billion, of which ~~$3.32~~$3.36 billion were unused at September 30, ~~2017.~~2022. Included in these arrangements are ~~$3.0~~$3.00 billion of ~~syndicated~~committed bank facilities, of which ~~$1.0~~$1.00 billion expires in June ~~2018, $1.0~~2023, $1.00 billion expires in June ~~2021~~2025 and ~~$1.0~~$1.00 billion expires in June ~~2022.~~2027. 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 months ended September 30, ~~2017.~~2022.

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 30, ~~2017, $206.7~~2022, 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.~~third quarter of 2022.

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 months of ~~2017 increased~~2022 were $339.4 million compared to ~~$270.2 million from $260.0~~$336.5 million for the same period of ~~2016.~~2021. Over the past decade, the Company’s combined investments in worldwide capital projects and R&D totaled ~~$6.17~~$7.22 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,~~2022, total capital investments for PACCAR are expected to be ~~$400~~$475 to ~~$450~~$500 million and R&D is expected to be ~~$260~~$330 to ~~$270~~$340 million. ~~These expenditures are focused on manufacturing facilities, new product development and enhanced aftermarket support.~~ In ~~2018,~~2023, capital investments are projected to be ~~$425~~$525 to ~~$475~~$575 million and R&D is expected to be ~~$270~~$350 to ~~$300~~$400 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.~~

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.capabilities.

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 30, ~~2017~~2022 was ~~$4.45~~$5.70 billion. In October 2022 PFC issued $300.0 million of medium-term notes under this registration. 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 30, ~~2017,~~2022, the Company’s European finance subsidiary, PACCAR Financial Europe, had ~~€1.32~~€1.62 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 program in the second quarter of 2017 and is renewable annually~~has been renewed through the filing of a new listing, ~~particulars.~~which expires in July 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 30, ~~2017, 6.90~~2022, 9.07 billion Mexican pesos were available for issuance.

In August 2018, the Company’s Australian subsidiary, PACCAR Financial Pty. Ltd. (PFPL), 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 as of September 30, 2022 was 700.0 million Australian dollars.

- 48 -

~~PACCAR Inc – Form 10-Q~~

In May 2021, the ~~event~~Company’s Canadian subsidiary, PACCAR Financial Ltd. (PFL Canada), established a medium-term note program. The program does not limit the principal amount of ~~a future significant disruption in~~debt securities that may be issued under 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~~program. The total amount of ~~short-term borrowings paid to lenders compared to the longer timing~~medium-term notes outstanding for PFL Canada as of ~~receivable collections from customers.~~ September 30, 2022 was 150.0 million Canadian dollars.

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 ~~continue funding receivables, servicing~~refinance its maturing debt ~~and paying dividends through internally generated funds, access~~in the financial markets. In such circumstances, the Company would be exposed to ~~public and private~~liquidity risk to the degree that the timing of debt ~~markets and lines of credit.~~

~~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 charge in 2016. These measures differmaturities differs from the ~~most directly comparable measures calculated in accordance~~timing of receivable collections from customers. The Company believes its various sources of liquidity, including committed bank facilities, would continue to provide it with ~~GAAP and may not be comparable~~sufficient funding resources to ~~similarly titled non-GAAP financial measures used by other companies. In addition, this Form 10-Q includes the financial ratios noted below calculated based on non-GAAP measures.~~service its maturing debt obligations.

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 are as follows:

Nine Months Ended

($ in millions, except per share amounts)

September 30, 2016

Net income

$
232.9

Non-recurring European Commission charge

833.0

Adjusted net income (non-GAAP)

$
1,065.9

Per diluted share

Net income

$
.66

Non-recurring European Commission charge

2.37

Adjusted net income (non-GAAP)

$
3.03

After-tax return on revenues

1.8
%
Non-recurring European Commission charge

6.4
%
After-tax adjusted return on revenues (non-GAAP) *

8.2
%

*	~~Calculated using adjusted net income.~~

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~~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.~~2021 and in Part II, Item 1, “Legal Proceedings” and Part II, Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q.

- 49 -

~~PACCAR Inc – Form 10-Q~~

ITEM 3.

QUANTITATIVE AND ~~QUALITATI~~VEQUALITATIVE DISCLOSURES ABOUT MARKET RISK

There were no material changes in the Company’s market risk during the nine months ended September 30, ~~2017.~~2022. For additional information, refer to Item 7A as presented in the ~~2016~~2021 Annual Report on Form 10‑K.

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.

- 50 -

PART II – OTHER INFORMATION

For Items 3, 4 and 5, there was no reportable information for the nine months ended September 30, ~~2017.~~2022.

~~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~~

ITEM 1A.RISK FACTORS

For information regarding risk factors, refer to Part I, Item 1A as presented in the ~~2016~~2021 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 30, ~~2017.~~2022, except for the following:

~~ITEM 2.~~

Conflict in Ukraine

In accordance with international sanctions, the Company has suspended truck and parts sales to Russia and Belarus. The conflict has affected energy supplies in Europe. If the availability of energy in Europe is severely constrained, truck delivery volumes could be impacted. The Company continues to monitor the situation closely. The conflict has not yet had a significant impact on the results of operations or cash flows of the Company. The potential impact on the Company’s business will depend on future developments, including the severity and duration of the conflict and its effect on European and global economic conditions.

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 30, ~~2017.~~2022.

(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 30, ~~2017,~~2022, 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 of ~~2017.~~2022.

- 51 -

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

~~Date of First~~

~~Filing~~

~~Exhibit~~

~~Number~~

~~File Number~~

Exhibit Description

Form

Date of First Filing

Exhibit

Number

File Number

(3) (i)

~~(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

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

8-K

April 24, 2020

3(i)

001-14817

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:

~~(a)~~

~~Fourth~~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)

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)

~~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 ~~5, 2015~~2, 2018

~~4.4~~4.2 and 4.3

~~333-207838~~333-228141

(d)

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

S-3

November 1, 2021

4.3 and 4.4

333-260663

(e)

Terms and Conditions of the Notes applicable to the ~~€1,500,000,000~~€2,500,000,000 Medium Term Note Programme of PACCAR Financial Europe B.V. set forth in the ~~Base Prospectus~~Listing Particulars dated ~~May 9, 2014~~July 4, 2019

10-Q

~~November 6, 2014~~October 30, 2019

4(i)

001-14817

(f)

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 May 29, 2020

10-Q

August 3, 2020

4(h)

001-14817

(g)

~~(f)~~

Terms and Conditions of the Notes applicable to the ~~€1,500,000,000~~€2,500,000,000 Medium Term Note Programme of PACCAR Financial Europe B.V. set forth in the ~~Listing Particulars~~Information Memorandum dated ~~May 11, 2015~~July 15, 2021

10-Q

August ~~6, 2015~~2, 2021

4(g)

001-14817

(h)

~~(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~~July 13, 2022

~~10-K~~10-Q

~~February 21, 2017~~August 2, 2022

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

001-14817

(i)

~~(h)~~

~~Terms and Conditions~~Description of the ~~Notes applicable~~Registrant’s Securities Registered Pursuant to Section 12 of the ~~€2,500,000,000 Medium Term Note Programme~~Securities Exchange Act of ~~PACCAR Financial Europe B.V. set forth in the Listing Particulars dated May 10, 2017~~1934

~~10-Q~~10-K

~~August 4, 2017~~February 19, 2020

~~4(h)~~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.

- 52 -

Exhibit Number

Exhibit Description

Form

Date of First Filing

Exhibit

Number

File Number

(10)

Material Contracts:

(a)

PACCAR Inc Amended and Restated Supplemental Retirement Plan

10-K

February 27, 2009

10(a)

001-14817

(b)

Amended and Restated Deferred Compensation Plan

10-Q

May 5,10, 2012

10(b)

001-14817

(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)

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

DEF14A

March 14, 2014

Appendix A

001-14817

(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)

Amendment to Compensatory Arrangement with Non-Employee Directors

10-K

February 26, 2015

10(g)

001-14817

(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)

PACCAR Inc Long Term Incentive Plan

~~8-K~~10-K

~~September~~February 19, ~~2016~~2020

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

001-14817

(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 Form of Nonstatutory Stock Option Agreement~~

~~10-Q~~

~~August 7, 2013~~

~~10(l)~~

~~001-14817~~

~~(l)~~

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

~~8-K~~

~~February 5, 2007~~

~~99.1~~

~~001-14817~~

~~(m)~~

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

10-K

February ~~26, 2010~~21, 2019

10(m)

001-14817

(k)

~~(n)~~

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

10-K

~~March 1, 2011~~February 21, 2019

10(n)

001-14817

~~(o)~~

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

~~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)~~

~~Second Amended~~Third Amendment to Memorandum of Understanding dated as of November 12, 2019, by and ~~Restated~~among PACCAR ~~Inc Restricted Stock~~Engine Company, the Mississippi Development Authority and ~~Deferred Compensation Plan for Non-Employee Directors, Form of Amended Deferred Restricted Stock Unit Grant Agreement~~the Mississippi Major Economic Impact Authority

10-K

February ~~26, 2015~~19, 2020

~~10(t)~~10(r)

001-14817

~~- 52 -~~

~~PACCAR Inc – Form 10-Q~~

~~Exhibit~~

~~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

- 53 -

Exhibit Number

Exhibit Description

Form

Date of First

Filing

Exhibit

Number

File Number

~~Exhibit Description~~

~~Form~~

(r)

~~(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)~~

Certification of Principal Executive Officer*

(31)

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

~~(b)~~

Certification of Principal Financial Officer*

~~(32)~~

~~Section 1350 Certifications:~~

(a)

Certification of Principal Executive Officer*

(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

- 5354 -

~~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~~October 28, 2022	By	/s/ M. T. Barkley
			M. T. Barkley
			Senior Vice President and Controller
			(Authorized Officer and Chief Accounting Officer)

- 5455 -

	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