UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the fiscal year ended
or
For the transition period from ____ to ____.
Commission File Number
(Exact name of Registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) |
(Zip Code) |
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 |
Securities registered pursuant to Section 12(g) of the Act: NONE
————————————————————————————————————————————————————
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.
☒ |
|
|
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of June 30, 2024, the aggregate market value of the voting stock held by non-affiliates of the registrant was $
As of January 31, 2025, there were
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual stockholders meeting to be held on April 29, 2025 are incorporated by reference into Part III of this Form 10-K.
PACCAR Inc – FORM 10-K
INDEX
|
|
Page |
|
|
|
|
3 |
|
|
|
|
ITEM 1. |
3 |
|
ITEM 1A. |
11 |
|
ITEM 1B. |
13 |
|
ITEM 1C. |
14 |
|
ITEM 2. |
14 |
|
ITEM 3. |
14 |
|
ITEM 4. |
14 |
|
|
|
|
|
15 |
|
|
|
|
ITEM 5. |
15 |
|
ITEM 6. |
17 |
|
ITEM 7. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
18 |
ITEM 7A. |
34 |
|
ITEM 8. |
35 |
|
ITEM 9. |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
83 |
ITEM 9A. |
83 |
|
ITEM 9B. |
83 |
|
ITEM 9C. |
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS |
83 |
|
|
|
|
84 |
|
|
|
|
ITEM 10. |
84 |
|
ITEM 11. |
84 |
|
ITEM 12. |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
85 |
ITEM 13. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
85 |
ITEM 14. |
85 |
|
|
|
|
|
86 |
|
|
|
|
ITEM 15. |
86 |
|
|
|
|
|
89 |
2
PART I
ITEM 1. BUSINESS.
PACCAR Inc (the Company or PACCAR), incorporated under the laws of Delaware in 1971, is the successor to Pacific Car and Foundry Company which was incorporated in Washington in 1924. The Company traces its predecessors to Seattle Car Manufacturing Company formed in 1905.
Description of Business
PACCAR is a multinational company operating in three principal industry segments:
PACCAR's Other business included the manufacturing and marketing of industrial winches through October 31, 2024, when PACCAR sold 100% of the capital stock of PACCAR Winch Inc.
TRUCKS
PACCAR’s trucks are marketed under the Kenworth, Peterbilt and DAF nameplates. These trucks, which are built in three plants in the United States, three in Europe and one each in Australia, Brasil, Canada and Mexico, are used worldwide for over-the-road and off-highway hauling of commercial and consumer goods. The Company also designs and manufactures diesel engines, primarily for use in the Company’s trucks, at its facilities in Columbus, Mississippi; Eindhoven, the Netherlands; and Ponta Grossa, Brasil. PACCAR competes in the North American Class 8 market, primarily with Kenworth and Peterbilt conventional models. These trucks are assembled at facilities in Chillicothe, Ohio; Denton, Texas; Renton, Washington and Mexicali, Mexico. PACCAR also competes in the North American Class 6 to 7 markets primarily with Kenworth and Peterbilt conventional models. These trucks are assembled at facilities in Ste. Therese, Canada; Denton, Texas, and Mexicali, Mexico. PACCAR competes in the European light/medium market with DAF COE trucks assembled in the United Kingdom (U.K.) by Leyland, one of PACCAR’s wholly owned subsidiaries, and participates in the European heavy market with DAF COE trucks assembled in the Netherlands and the U.K. PACCAR competes in the Brazilian heavy truck market with DAF COE models assembled in Ponta Grossa in the state of Paraná, Brasil. PACCAR competes in the Australian medium and heavy truck markets with Kenworth conventional and COE models and certain DAF COE models assembled at its facility at Bayswater in the state of Victoria, Australia, and DAF COE models primarily assembled in the U.K. Commercial truck manufacturing comprises the largest segment of PACCAR’s business and accounted for 74% of total 2024 net sales and revenues.
Substantially all trucks are sold to independent dealers. The Kenworth and Peterbilt nameplates are marketed and distributed by separate divisions in the U.S. and a foreign subsidiary in Canada. The Kenworth nameplate is also marketed and distributed by foreign subsidiaries in Mexico and Australia. The DAF nameplate is marketed and distributed worldwide by a foreign subsidiary headquartered in the Netherlands and is also marketed and distributed by foreign subsidiaries in Brasil, Australia and Mexico. The decision to operate as a subsidiary or as a division is incidental to PACCAR’s Truck segment operations and reflects legal, tax and regulatory requirements in the various countries where PACCAR operates.
The Truck segment utilizes centrally managed purchasing, information technology, technical research and testing, treasury and finance functions. Some manufacturing plants in North America produce trucks for more than one nameplate, while other plants produce trucks for only one nameplate, depending on various factors. Best manufacturing practices within the Company are shared on a routine basis reflecting the similarity of the business models employed by each nameplate.
3
The Company’s trucks have a reputation for high quality products, most of which are ordered by dealers according to customer specifications. Some units are ordered by dealers for stocking to meet the needs of certain customers who require immediate delivery or for customers that require the chassis to be fitted with specialized bodies. For a significant portion of the Company’s truck operations, major components, such as engines, transmissions and axles, as well as a substantial percentage of other components, are purchased from component manufacturers pursuant to PACCAR and customer specifications. DAF, which is more vertically integrated, manufactures PACCAR engines and axles and a higher percentage of other components for its heavy truck models. The Company also manufactures engines at its Columbus, Mississippi facility. In 2024, the Company installed PACCAR engines in approximately 33% of the Company’s Kenworth and Peterbilt heavy‑duty trucks in the U.S. and Canada and substantially all of the DAF heavy-duty trucks sold throughout the world. Engines not manufactured by the Company are purchased from Cummins Inc. (Cummins). The Company purchased a significant portion of its transmissions from Eaton Corporation Plc. (Eaton) and ZF Friedrichshafen AG (ZF). The Company also purchased a significant portion of North America stampings used for cabs from Magna International Inc. (Magna). The Company has long-term agreements with Cummins, Eaton, ZF and Magna to provide for continuity of supply. A loss of supply from Cummins, Eaton, ZF or Magna, and the resulting interruption in the production of trucks, would have a material effect on the Company’s results. Purchased materials and parts include raw materials, partially processed materials, such as castings, and finished components manufactured by independent suppliers. The Company and its suppliers rely on semiconductors as an essential component in the production of its trucks and aftermarket parts. The Company and its suppliers source semiconductors from various suppliers. Raw materials, partially processed materials and finished components typically make up approximately 85% of the cost of new trucks. The value of finished truck components manufactured by independent suppliers is lower in Europe due to a higher level of vertical integration as compared to North America. In addition to materials, the Company’s cost of sales includes labor and factory overhead, vehicle delivery and warranty. Accordingly, except for certain factory overhead costs such as facilities depreciation, property taxes and utilities, the Company’s cost of sales are highly correlated to sales.
The Company’s DAF subsidiary purchases fully assembled cabs from a competitor, Renault V.I., for its European light-, medium-duty product line pursuant to a joint product development and long-term supply contract. Sales of trucks manufactured with these cabs amounted to approximately 2% of consolidated revenues in 2024. A short-term loss of supply, and the resulting interruption in the production of these trucks, would not have a material effect on the Company’s results of operations. However, a loss of supply for an extended period of time would require the Company to either contract for an alternative source of supply or to manufacture cabs itself.
Other than these components, the Company is not limited to any single source for any significant component, although the sudden inability of a supplier to deliver components could have a temporary adverse effect on production of certain products. Manufacturing inventory levels are based upon production schedules and orders are placed with suppliers accordingly.
Key factors affecting Truck segment earnings include the number of new trucks sold in the markets served and the margins realized on the sales. The Company’s sales of new trucks are dependent on the size of the truck markets served and the Company’s share of those markets. Truck segment sales and margins tend to be cyclical based on the level of overall economic activity, the availability of capital and the amount of freight being transported. The Company’s costs for trucks consist primarily of material costs, which are influenced by the price of commodities such as steel, copper, aluminum and petroleum. The Company utilizes long-term supply agreements to reduce the variability of the unit cost of purchased materials and finished components and engages in hedging activities for some commodities in certain geographical markets. The Company’s spending on research and development varies based on product development cycles and government requirements such as changes to diesel engine emissions and vehicle fuel efficiency standards in the various markets served. The Company maintains rigorous control of selling, general and administrative (SG&A) expenses and seeks to minimize such costs.
There are four principal competitors in the U.S. and Canada commercial truck market. The Company’s share of the U.S. and Canadian Class 8 market was 30.7% of retail sales in 2024, and the Company’s medium-duty market share was 18.0%. In Europe, there are six principal competitors in the commercial truck market, including parent companies to the four competitors of the Company in the U.S. In 2024, DAF had a 14.4% share of the European heavy-duty market and a 9.5% share of the light/medium-duty market. These markets are highly competitive in price, quality and service. PACCAR is not dependent on any single customer for its sales. There are no significant seasonal variations in sales.
The Peterbilt, Kenworth and DAF nameplates are recognized internationally and play an important role in the marketing of the Company’s truck products. The Company engages in a continuous program of trademark and trade name protection in all marketing areas of the world.
4
The Company’s truck products are subject to noise, emission and safety regulations. Competing manufacturers are subject to the same regulations. The Company believes the cost of complying with these regulations will not be detrimental to its business.
The Company had a total production backlog of $7.6 billion at the end of 2024. Within this backlog, orders scheduled for delivery within three months (90 days) are considered to be firm. The 90‑day backlog approximated $3.8 billion at December 31, 2024, $7.6 billion at December 31, 2023 and $8.0 billion at December 31, 2022. Production of the year-end 2024 backlog is expected to be substantially completed during 2025.
PARTS
The Parts segment includes the distribution of aftermarket parts for trucks and related commercial vehicles to over 2,000 Kenworth, Peterbilt and DAF dealers and more than 350 TRP, PACCAR's aftermarket parts brand, stores in 95 countries around the world. Aftermarket truck parts are sold and delivered to the Company’s independent dealers through the Company’s 20 strategically located parts distribution centers (PDCs) in the U.S., Canada, Europe, Australia, Mexico and Central and South America. Parts are primarily purchased from various suppliers and also manufactured by the Company. Aftermarket parts inventory levels are determined largely by anticipated customer demand and the need for timely delivery. The Parts segment accounted for 20% of total 2024 net sales and revenues.
Key factors affecting Parts segment earnings include the aftermarket parts sold in the markets served and the margins realized on the sales. Aftermarket parts sales are influenced by the total number of the Company’s trucks in service and the average age and mileage of those trucks. To reflect the benefit the Parts segment receives from costs incurred by the Truck segment, certain factory overhead, research and development, engineering and SG&A expenses are allocated from the Truck segment to the Parts segment. The Company’s cost for parts sold consists primarily of material costs, which are influenced by the price of commodities such as steel, copper, aluminum and petroleum. The Company utilizes long-term supply agreements to reduce the variability of the cost of parts sold. The Company maintains rigorous control of SG&A expenses and seeks to minimize such costs.
FINANCIAL SERVICES
PACCAR Financial Services (PFS) operates in 26 countries in North America, Europe, Australia and South America through wholly owned finance companies operating under the PACCAR Financial trade name. PFS also conducts full-service leasing operations through operating divisions or wholly owned subsidiaries in North America, Germany and Australia under the PacLease trade name. Selected dealers in North America and Australia are franchised to provide full-service leasing. PFS provides its franchisees with equipment financing and administrative support. PFS also operates its own full-service lease outlets. PFS’s retail loan and lease customers consist of small, medium and large commercial trucking companies, independent owner/operators and other businesses and acquire their PACCAR trucks principally from independent PACCAR dealers. PFS accounted for 6% of total net sales and revenues and 52% of total assets in 2024.
PFS is primarily responsible for managing the sales of the Company’s used trucks. The Company’s Financial Services segment sells used trucks returned from matured operating leases in the ordinary course of business and trucks acquired from repossessions. PFS also obtains used trucks from the Truck segment in trades related to new truck sales and trucks returned from residual value guarantees (RVGs). Certain gains and losses from the sale of used trucks are shared with the Truck segment. The Company’s Financial Services segment records revenue on the sale of used trucks received in trade and RVG returns.
The Company’s finance receivables are classified as dealer wholesale, dealer retail and customer retail segments. The dealer wholesale segment consists of truck inventory financing to independent PACCAR dealers. The dealer retail segment consists of loans and leases to participating dealers and franchises, which use the proceeds to fund their customers’ acquisition of trucks and related equipment. The customer retail segment consists of loans and leases directly to customers for their acquisition of trucks and related equipment. Customer retail receivables are further segregated by fleet and owner/operator classes. The fleet class consists of customers operating five or more trucks. All others are considered owner/operators. Similar methods are employed to assess and monitor credit risk for each class.
Finance receivables are secured by the trucks and related equipment being financed or leased. The terms of loan and lease contracts generally range from three to five years depending on the type and use of equipment. Payment is required on dealer inventory financing when the floored truck is sold to a customer or upon maturity of the flooring loan, whichever comes first. Dealer inventory loans generally mature within one year.
5
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 public and private offerings and, to a lesser extent, bank loans. An additional source of funds is loans from other PACCAR companies. PFS matches the maturity and interest rate characteristics of its debt with the maturity and interest rate characteristics of loans and leases.
Key factors affecting the earnings of the Financial Services segment include the volume of new loans and leases, the yield earned on the loans and leases, the costs of funding investments in loans and leases, the ability to collect the amounts owed to PFS, the volume of used truck sales and used truck prices. New loan and lease volume is dependent on the volume of new trucks sold by Kenworth, Peterbilt and DAF and the share of those truck sales that are financed by the Financial Services segment. The Company’s Financial Services market share is influenced by the extent of competition in the financing market. PFS’s primary competitors include commercial banks and independent finance and leasing companies.
The revenue earned on loans and leases depends on market interest and lease rates and the ability of PFS to differentiate itself from the competition by superior industry knowledge and customer service. Dealer inventory loans have variable rates with rates reset monthly based on an index pertaining to the applicable local market. Retail loan and lease contracts normally have fixed rates over the contract term. PFS obtains funds either through fixed rate borrowings or through variable rate borrowings, a portion of which have been effectively converted to fixed rate through the use of interest-rate contracts. This enables PFS to obtain a stable spread between the cost of borrowing and the yield on fixed rate contracts over the contract term. Included in Financial Services cost of revenues is depreciation on equipment on operating leases. The amount of depreciation on operating leases principally depends on the acquisition cost of leased equipment, the term of the leases, which generally ranges from three to five years, and the residual value of the leases, which generally ranges from 30% to 70%. The margin earned is the difference between the revenues on loan and lease contracts and the direct costs of operation, including interest and depreciation.
PFS incurs credit losses when customers are unable to pay the full amounts due under loan and finance lease contracts. PFS takes a conservative approach to underwriting new retail business in order to minimize credit losses.
The ability of customers to pay their obligations to PFS depends on the state of the general economy, the extent of freight demand, freight rates and the cost of fuel, among other factors. PFS limits its exposure to any one customer, with no one customer or dealer balance representing over 5% of the aggregate portfolio assets. PFS generally requires a down payment and secures its interest in the underlying truck collateral and may require other collateral or guarantees. In the event of default, PFS will repossess the truck and sell it in the open market primarily through its dealer network or PFS used truck centers. PFS will also seek to recover any shortfall between the amounts owed and the amounts recovered from sale of the collateral. The amount of credit losses depends on the rate of default on loans and finance leases and, in the event of repossession, the ability to recover the amount owed from sale of the collateral which is affected by used truck prices and other factors. For over sixty years, PFS’s experience has been that periods of economic weakness result in higher past dues and increased rates of repossession. Used truck prices also tend to fall during periods of economic weakness. As a result, credit losses tend to increase during periods of economic weakness. PFS provides an allowance for credit losses based on specifically identified customer risks and an analysis of estimated losses inherent in the portfolio, considering the amount of past due accounts, the trends of used truck prices and the current and forecasted economic conditions of its geographic markets.
Financial Services SG&A expenses consist primarily of personnel costs associated with originating and servicing the loan and lease portfolios. These costs vary somewhat depending on overall levels of business activity, but given the ongoing nature of servicing activities, tend to be relatively stable.
OTHER BUSINESSES
Other businesses included the manufacturing of industrial winches in two U.S. plants and marketing them under the BRADEN, CARCO and Gearmatic nameplates through October 31, 2024. Sales of industrial winches were less than 1% of total net sales and revenues in 2024, 2023 and 2022.
PATENTS
The Company owns numerous patents which relate to all product lines. Although these patents are considered important to the overall conduct of the Company’s business, no patent or group of patents is considered essential to a material part of the Company’s business.
6
REGULATION
As a manufacturer of highway trucks, the Company is subject to the National Traffic and Motor Vehicle Safety Act and Federal Motor Vehicle Safety Standards promulgated by the National Highway Traffic Safety Administration as well as environmental laws and regulations in the United States, and is subject to similar regulations in all countries where it has operations and where its trucks are distributed. In addition, the Company is subject to certain other licensing requirements to do business in the United States and Europe. The Company believes it is in compliance with laws and regulations applicable to safety standards, the environment and other licensing requirements in all countries where it has operations and where its trucks are distributed.
The Company designs and manufactures engines for use in PACCAR vehicles worldwide. The Company’s operations and products are subject to extensive statutory and regulatory requirements governing greenhouse gas and non-greenhouse gas emissions. These include standards imposed by the U.S. Environmental Protection Agency (EPA), the European Union, U.S. state regulatory agencies (such as the California Air Resources Board), regulatory agencies in other international markets where the Company operates, and international accords related to climate change including the Paris Agreement. The primary laws and regulations are the EPA’s Greenhouse Gas Emissions Standards and Fuel Efficiency Standards for Medium and Heavy-Duty Engines and Vehicles, EPA’s Clean Truck Initiative, the Regulation of the European Parliament and of the Council on the Monitoring and Reporting of CO2 Emissions from Fuel Consumption of New Heavy-Duty Vehicles, and the Heavy-Duty Omnibus Regulation and Advanced Clean Truck (ACT) regulation of the California Air Resources Board. The ACT regulation, which has been adopted by several other states, requires an increasing percentage of medium- and heavy-duty trucks sold into the state to be zero emissions.
The Company continually monitors developments in emissions and climate change-related laws and regulations in the markets in which the Company conducts business. The Company will continue to fund capital and R&D projects to meet future emissions and certification requirements through the introduction of new technologies into our products, engines and exhaust after-treatment systems.
The Company’s manufacturing and assembly plants are subject to environmental laws and regulations such as regulating air emissions, water discharges and the handling and disposal of hazardous substances. Failure to comply with these regulations could lead to fines and other penalties. The Company believes in all material respects it is in compliance with the laws and regulations applicable to our plants and operations.
Information regarding the effects that compliance with international, federal, state and local environmental regulations have on the Company’s capital and operating expenditures and the Company’s involvement in environmental matters is included in Item 1A, “Risk Factors” and in Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Company’s Consolidated Financial Statements in Items 7 and 8, respectively.
HUMAN CAPITAL MANAGEMENT
PACCAR is committed to a strong, inclusive and collaborative culture and the Company’s excellent financial results reflect its outstanding workforce. The Company provides its employees with robust benefit packages, comprehensive training programs, tuition assistance and a work environment that promotes safety, respect and belonging.
The Company’s benefit packages support employee physical, emotional and financial well-being. Employee satisfaction and engagement are measured through periodic surveys. Employee training and development programs are extensive and comprehensive, including professional and technical skills training, compliance training, leadership development and management training. The Company is proud to have been honored for the past several years as a Top Company for Women to Work for in Transportation by the Women in Trucking Association. PACCAR has a proud tradition of making grants around the world for education, social services and the arts to enrich the communities in which its employees live and work.
Safety is a key priority and the Company’s major manufacturing facilities are equipped with safety and health departments staffed with trained medical personnel. The Company’s managers continuously address safety enhancements; provide regular and ongoing safety training; and use displays located in the Factories, Parts Distribution Centers and Offices to provide all employees with safety-related information. PACCAR’s consistent focus on workplace safety has resulted in a recordable injury rate lower than the U.S. industry average.
On December 31, 2024, the Company had approximately 30,100 employees. Approximately 38% were U.S. employees.
7
ENVIRONMENTAL AND SUSTAINABILITY LEADERSHIP
Reducing the environmental impact of the Company’s activities and products is an integral part of the Company’s process of continuous improvement. PACCAR’s commitment to the environment is demonstrated in the Company’s energy efficient operations and technologically advanced products. The Company’s environmental management system and policy are designed to focus on the reduction of the environmental impacts of the Company’s activities, products and services.
PACCAR has publicly disclosed greenhouse gas emissions on its website and through CDP (formerly Carbon Disclosure Project) since 2014 and has established greenhouse gas emission reduction targets approved by the Science Based Targets Initiative (SBTi). PACCAR expects to continue to significantly invest in technologies to improve fuel efficiency for its customers, which would also reduce greenhouse gas emissions.
Operations - PACCAR is committed to environmental responsibility in the vehicle production process. PACCAR is continuously looking for ways to reduce waste, reuse materials, conserve energy in its facilities and reduce the environmental impact of our activities. PACCAR’s factories are ISO 14001 certified and more than 80% are zero waste-to-landfill.
Innovative Products - A key element of PACCAR’s environmental strategy is to offer our customers commercial vehicles that reduce environmental impacts. The Company invests in technologies that reduce greenhouse gas emissions such as highly fuel-efficient diesel engines, natural gas and biofuel engines, as well as next generation electric, hybrid, and hydrogen powertrains. To develop these industry-leading products and technologies, PACCAR makes significant research and development and capital investments every year.
PACCAR’s Zero Emissions Trucks - PACCAR’s research and development efforts include demonstration and development projects for Kenworth, Peterbilt and DAF vehicles, including battery-electric, hydrogen fuel cell, hydrogen combustion and hybrid technologies. PACCAR is currently producing battery-electric Kenworth, Peterbilt and DAF trucks.
Low Carbon and Renewable Fuels – All truck sales and diesel engine unit sales are certified to use biofuels. PACCAR’s MX-13 and MX-11 engines are certified to use B10/B20/B30 and XTL biofuels in Europe and B20 biofuel in the U.S. Engines used in PACCAR trucks not manufactured by the Company are certified to use up to B20 biofuels.
Advanced Vehicles - PACCAR continued its SuperTruck 3 program to develop and deploy next generation Class 8 Kenworth and Peterbilt battery-electric vehicles, along with its vehicle charging infrastructure. SuperTruck 3 is a U.S. Department of Energy (DOE) initiative to develop state-of-the-art zero emissions medium- and heavy-duty trucks. The SuperTruck initiative was launched in 2009 by the DOE to improve heavy-duty truck freight efficiency. Kenworth and Peterbilt successfully developed state-of-the-art vehicles in the prior SuperTruck and SuperTruck 2 programs. Many of the technologies developed in the earlier SuperTruck programs were deployed in production vehicles, benefiting the environment and PACCAR’s customers.
Remanufacturing - Remanufacturing is the industrial process of returning a previously used component to “like-new” condition. Remanufacturing helps the environment by reducing waste. PACCAR’s aftermarket parts division sells remanufactured engines and many other remanufactured components. PACCAR is investing in additional global engine manufacturing capacity, and in the construction of a new engine remanufacturing facility in Columbus, Mississippi. The Company also has engine remanufacturing capacity on its Eindhoven Campus in the Netherlands.
8
Connected Trucks and Driver Training - PACCAR Connect fleet management system gives fleet customers real-time information on vehicle and driver performance including fuel consumption, fleet utilization, idle time and route optimization. This information enables customers to improve fleet operating efficiency and reduce fuel consumption and CO2 emissions. PACCAR has introduced technologies that train drivers to operate vehicles more efficiently.
Battery Manufacturing - PACCAR, Cummins, Daimler Trucks and EVE Energy have partnered to produce state-of-the-art commercial vehicle batteries in a 21-gigawatt hour (GWh) factory in Marshall County, Mississippi. The factory is expected to start production in the next few years.
OTHER DISCLOSURES
The Company’s filings on Forms 10‑K, 10‑Q and 8‑K and any amendments to those reports can be found on the Company’s website www.paccar.com free of charge as soon as practicable after the report is electronically filed with, or furnished to, the Securities and Exchange Commission (SEC). The information on the Company’s website is not incorporated by reference into this report. In addition, the Company’s reports filed with the SEC can be found at www.sec.gov.
9
INFORMATION ABOUT THE COMPANY’S EXECUTIVE OFFICERS
Item 401(b) of Regulation S-K:
Information about the Company’s Executive Officers as of February 19, 2025 is as follows:
Name and Age |
|
Present Position and Other Position(s) Held During Last Five Years |
|
|
|
Mark C. Pigott (71) |
|
Executive Chairman of the Board of Directors since April 2014; Chairman and Chief Executive Officer from 1997 to April 2014. Mr. Pigott is the brother of John M. Pigott, a director of the Company. |
|
|
|
R. Preston Feight (57) |
|
Chief Executive Officer since July 2019. |
|
|
|
Harrie C.A.M. Schippers (62) |
|
President and Chief Financial Officer since January 2018. |
|
|
|
Kevin D. Baney (54) |
|
Executive Vice President since January 2025; Senior Vice President from January 2024 to December 2024; Vice President of PACCAR and General Manager of Kenworth Truck Company from August 2019 to December 2023. |
|
|
|
C. Michael Dozier (59) |
|
Executive Vice President since January 2023; Senior Vice President from January 2020 to December 2022. |
|
|
|
Darrin C. Siver (58) |
|
Executive Vice President since January 2023; Senior Vice President from January 2017 to December 2022. |
|
|
|
Laura J. Bloch (48) |
|
Senior Vice President since January 2025; Vice President of PACCAR and General Manager of PACCAR Parts from March 2022 to December 2024; Senior Assistant General Manager of Sales and Marketing, PACCAR Parts from August 2021 to February 2022; Assistant General Manager of Sales and Marketing, Kenworth from February 2019 to July 2021. |
|
|
|
John N. Rich (56) |
|
Senior Vice President and Chief Technology Officer since January 2024; Vice President and Chief Technology Officer from March 2021 to December 2023; Prior to that, he worked for 30 years at Ford Motor Company in positions of increasing responsibility including Director of Autonomous Vehicles and Technology; Chief Operating Officer of AV LLC and Executive Director of Global Strategy. |
|
|
|
Paulo H. Bolgar (56) |
|
Vice President and Chief Human Resources Officer since June 2022; Served as Human Resources Vice President of Americas and Global Business Units and Global R&D for Baxter International, Inc. from January 2020 to May 2022. |
|
|
|
Craig R. Gryniewicz (57) |
|
Vice President, Global Financial Services since February 2025; Vice President of PACCAR and President of PACCAR Financial Corp. from February 2019 to January 2024. |
|
|
|
A. Lily Ley (59) |
|
Vice President and Chief Information Officer since January 2017. |
|
|
|
Jacob J. Montero (41) |
|
Vice President of PACCAR and General Manager of Peterbilt since January 2025; Assistant General Manager of Sales and Marketing, Peterbilt from July 2023 to December 2024; General Sales Manager, Peterbilt from August 2019 to June 2023. |
|
|
|
Brice J. Poplawski (60) |
|
Vice President and Controller since May 2023; Senior Operations Controller from July 2020 to April 2023; Corporate Operations Controller from January 2007 to June 2020. |
|
|
|
Harald P. Seidel (57) |
|
Vice President of PACCAR and President of DAF Trucks N.V. since August 2022; Director of Finance of DAF Trucks N.V. from October 2017 to July 2022. |
|
|
|
Bryan M. Sitko (48) |
|
Vice President and General Manager of PACCAR Parts since January 2025; Assistant General Manager of Operations, Kenworth from June 2022 to December 2024; Assistant General Manager of Sales and Marketing, PACCAR Financial Corp from January 2019 to May 2022. |
|
|
|
James W. Walenczak (50) |
|
Vice President of PACCAR and General Manager of Kenworth since January 2024; Assistant General Manager – Sales and Marketing, Kenworth from August 2021 to December 2023; Assistant General Manager – Operations, PACCAR Parts from February 2019 to July 2021. |
|
|
|
Michael K. Walton (60) |
|
Vice President and General Counsel since August 2020; Senior Counsel from August 2007 to July 2020. |
|
|
|
Harry M.B. Wolters (54) |
|
Vice President of PACCAR and General Manager Global Powertrain & Electrification since August 2022; Vice President of PACCAR and President of DAF Trucks N.V. from September 2018 to July 2022. |
Officers are appointed by the Board of Directors annually but may be appointed or removed on interim dates.
10
ITEM 1A. RISK FACTORS.
The following are significant risks which could have a material negative impact on the Company’s financial condition or results of operations.
Business and Industry Risks
Commercial Truck Market Demand is Variable. The Company’s business is highly sensitive to global and national economic conditions as well as economic conditions in the industries and markets it serves. Negative economic conditions and outlook can materially weaken demand for the Company’s equipment and services. The yearly demand for commercial vehicles may increase or decrease more than overall gross domestic product in markets the Company serves, which are principally North America and Europe. Demand for commercial vehicles may also be affected by the introduction of new vehicles and technologies by the Company or its competitors.
Competition and Prices. The Company operates in a highly competitive environment, which could adversely affect the Company’s sales and pricing. Financial results depend largely on the ability to develop, manufacture and market competitive products that profitably meet customer demand.
Production Costs, Capacity and Inflation. The Company’s products are exposed to variability in material and commodity costs. Commodity or component price increases, cost pressures due to inflation, significant shortages of component products and labor availability may adversely impact the Company’s financial results or use of its production capacity. Many of the Company’s suppliers also supply automotive manufacturers, and factors that adversely affect the automotive industry can also have adverse effects on these suppliers and the Company. Supplier delivery performance can be adversely affected if increased demand for these suppliers’ products exceeds their production capacity.
Unexpected events, including natural disasters, extreme weather events, or pandemics, may increase the Company’s cost of doing business or disrupt the Company’s or its suppliers’ operations. The likelihood or severity of these unexpected events may increase due to the effects of climate change.
Transition Risks Related to Climate Change. The Company has ongoing product development programs intended to address changing customer demand in the context of climate change and achieve its targeted reductions in emissions. These involve the continuing development of compliant clean diesel powertrains and the design, manufacture, and sale of alternative powertrain commercial vehicles (e.g., battery-electric, hybrid, hydrogen fuel cell, and hydrogen combustion). The pace of transition from diesel combustion to alternative powertrain commercial vehicles is highly uncertain and will be influenced by:
The Company believes its current strategies, programs and resources are sufficient to address changes in customer demand in the context of climate change and to meet its emissions reduction targets. If the Company is not successful in addressing the risks noted above, there may be a material adverse impact on its business, operations, and financial condition.
11
Liquidity Risks, Credit Ratings and Costs of Funds. Disruptions or volatility in global financial markets could limit the Company’s sources of liquidity, or the liquidity of customers, dealers and suppliers. A lowering of the Company’s credit ratings could increase the cost of borrowing and adversely affect access to capital markets. The Company’s Financial Services segment obtains funds for its operations from commercial paper, medium-term notes and bank debt. If the markets for commercial paper, medium-term notes and bank debt do not provide the necessary liquidity in the future, the Financial Services segment may experience increased costs or may have to limit its financing of retail and wholesale assets. This could result in a reduction of the number of vehicles the Company is able to produce and sell to customers.
The Financial Services Industry is Highly Competitive. The Company’s Financial Services segment competes with banks, other commercial finance companies and financial services firms which may have lower costs of borrowing, higher leverage or market share goals that result in a willingness to offer lower interest rates, which may lead to decreased margins, lower market share or both. A decline in the Company’s truck unit sales or a decrease in used truck prices are also factors which may affect the Company’s Financial Services segment.
The Financial Services Segment is Subject to Credit Risk. The Financial Services segment is exposed to the risk of loss arising from the failure of a customer, dealer or counterparty to meet the terms of the loans, leases and derivative contracts with the Company. Although the financial assets of the Financial Services segment are secured by the underlying equipment and sometimes other collateral, in the event a customer cannot meet its obligations to the Company, there is a risk the value of the underlying collateral will not be sufficient to recover the amounts owed to the Company, resulting in credit losses.
Interest-Rate Risks. The Financial Services segment is subject to interest-rate risks, because increases in interest rates can reduce demand for its products, increase borrowing costs and potentially reduce interest margins. PFS uses derivative contracts to match the interest-rate characteristics of its debt to the interest-rate characteristics of its finance receivables in order to mitigate the risk of changing interest rates.
Information Technology and Cybersecurity. The Company relies on information technology systems and networks, some of which are managed by third parties, to process, transmit and store electronic information, and to manage or support a variety of its business processes and activities. Some of the Company’s products include telematics which provide over-the-air software updates, advanced fleet management tools and real-time data analytics on driver and vehicle performance. These computer systems and networks may be subject to disruptions during the process of upgrading or replacing software, databases or components; power outages; hardware failures; computer viruses/malware; or outside parties attempting to disrupt the Company’s business or gain unauthorized access to the Company’s electronic data. The Company maintains a cybersecurity insurance policy and continues to invest in protections to guard against such events. Despite these safeguards, there remains a risk of system disruptions, unauthorized access and data loss.
If the Company’s computer systems were to be damaged, disrupted or breached, it could impact data availability and integrity, result in a theft of the Company’s intellectual property or lead to unauthorized disclosure of confidential information of the Company’s customers, suppliers and employees. Security breaches could also result in a violation of U.S. and international privacy and other laws and subject the Company to various litigations and governmental proceedings. These events could have an adverse impact on the Company’s results of operations and financial condition, damage its reputation, disrupt operations and negatively impact competitiveness in the marketplace.
Political, Regulatory and Economic Risks
Multinational Operations. The Company’s global operations are exposed to political, economic and other risks and events beyond its control in the countries in which the Company operates. The Company may be adversely affected by political instabilities, fuel shortages or interruptions in utility or transportation systems, natural calamities, recessions or slower economic growth, inflation, epidemics and pandemics, wars, geopolitical tensions and conflicts, terrorism and labor strikes. Changes in government monetary or fiscal policies and international trade policies may impact demand for the Company’s products, financial results and competitive position. PACCAR’s global operations are subject to extensive trade, competition and anti-corruption laws and regulations that could impose significant compliance costs.
Environmental Regulations. The Company’s operations are subject to environmental laws and regulations that impose significant compliance costs. The Company could experience higher research and development and manufacturing costs due to changes in government requirements for its products, including changes in emissions, fuel, greenhouse gas or other regulations.
12
Emissions Requirements and Reduction Targets. PACCAR’s operations and products are subject to extensive statutory and regulatory requirements governing greenhouse gas and non-greenhouse gas emissions. These include standards imposed by the U.S. Environmental Protection Agency (EPA), the European Union, U.S. state regulatory agencies (such as the California Air Resources Board), regulatory agencies in other international markets where the Company operates, and international accords related to climate change including the Paris Agreement. The primary laws and regulations are the EPA’s Greenhouse Gas Emissions Standards and Fuel Efficiency Standards for Medium and Heavy-Duty Engines and Vehicles, EPA’s Clean Truck Initiative, the Regulation of the European Parliament and of the Council on the Monitoring and Reporting of CO2 Emissions from Fuel Consumption of New Heavy-Duty Vehicles, and the Heavy-Duty Omnibus Regulation and Advanced Clean Truck (ACT) regulation of the California Air Resources Board. The EU regulations have set CO2 emission reduction targets and require a significant portion of vehicles sold to be zero or near zero emission. Not meeting these targets would result in significant fines by the EU commission. The ACT regulation, which has been adopted by several states, requires an increasing percentage of medium- and heavy-duty trucks sold into the state to be zero emission.
The Company’s product planning is aligned with these statutory and regulatory requirements, and uses a climate change scenario analysis to limit global warming to below 2°C. Even without legislation to reduce greenhouse gas emissions, PACCAR expects to continue to significantly invest in technologies to improve fuel efficiency for its customers, which would also reduce greenhouse gas emissions.
The Company continually monitors developments in emissions and climate change-related laws and regulations in the markets in which the Company conducts business, and expects that climate change-related laws, regulations, and international accords will continue to evolve. PACCAR cannot reasonably predict whether future laws, regulations, and international accords could materially increase its environmental compliance costs, alter its product development strategy, or impact its business, financial condition, or results of operations.
Recalls, Litigation, Product Liability and Regulatory. The Company’s products are subject to recall for environmental, performance and safety-related issues. Product recalls, lawsuits, regulatory actions or increases in the reserves the Company establishes for contingencies may increase the Company’s costs and lower profits. Due to the international nature of the Company’s business, some products are also subject to international trade regulations, including customs and import/export related laws and regulations, government embargoes and sanctions prohibiting sales to specific persons or countries, as well as anti-corruption laws. The Company’s telematics depend on cellular frequency allocations regulated by government agencies and collected data is subject to various privacy laws and government regulations. The Company’s reputation and its brand names are valuable assets, and claims or regulatory actions, even if unsuccessful or without merit, could adversely affect the Company’s reputation and brand images because of adverse publicity.
Currency Exchange and Translation. The Company’s consolidated financial results are reported in U.S. dollars, while significant operations are denominated in the currencies of other countries. Currency exchange rate fluctuations can affect the Company’s assets, liabilities and results of operations through both translation and transaction risk, as reported in the Company’s financial statements. The Company uses certain derivative financial instruments and localized production of its products to reduce, but not eliminate, the effects of foreign currency exchange rate fluctuations.
Accounting Estimates. In the preparation of the Company’s financial statements in accordance with U.S. generally accepted accounting principles, management uses estimates and makes judgments and assumptions that affect asset and liability values and the amounts reported as income and expense during the periods presented. Certain of these estimates, judgments and assumptions, such as residual values on operating leases, the allowance for credit losses and product warranty are particularly sensitive. If actual results are different from estimates used by management, they may have a material impact on the financial statements. For additional disclosures regarding accounting estimates, see “Critical Accounting Policies” under Item 7 of this Form 10-K.
Taxes. Changes in statutory income tax rates in the countries in which the Company operates impact the Company’s effective tax rate. Changes to other taxes or the adoption of other new tax legislation could affect the Company’s provision for income taxes and related tax assets and liabilities.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
13
ITEM 1C. CYBERSECURITY.
The Company maintains a comprehensive cybersecurity management and governance program. The Company’s information security management system is based upon the National Institute of Standards and Technology Cybersecurity Framework (NIST CSF).
ITEM 2. PROPERTIES.
The Company and its subsidiaries own and operate manufacturing plants in four U.S. states, three countries in Europe, and in Australia, Brasil, Canada and Mexico. The Company also has 20 parts distribution centers, many sales and service offices, and finance and administrative offices which are operated in owned or leased premises in these and other locations, including a service office in India. Facilities for product testing and research and development are located in the state of Washington and the Netherlands. The Company also has an innovation center in Sunnyvale, California. The Company’s corporate headquarters is located in owned premises in Bellevue, Washington. The Company considers all of the properties used by its businesses to be suitable for their intended purposes.
The Company invests in facilities, equipment and processes to provide manufacturing and warehouse capacity to meet its customers’ needs and improve operating performance.
The following summarizes the number of the Company’s manufacturing plants and parts distribution centers by geographical location within indicated industry segments:
|
|
U.S. |
|
|
Canada |
|
|
Australia |
|
|
Mexico |
|
|
Europe |
|
|
Central and |
|
||||||
Truck |
|
|
4 |
|
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
|
|
3 |
|
|
|
1 |
|
Parts |
|
|
7 |
|
|
|
2 |
|
|
|
2 |
|
|
|
1 |
|
|
|
5 |
|
|
|
3 |
|
ITEM 3. LEGAL PROCEEDINGS.
Refer to Note L – “Commitments and Contingencies” in the Notes to Consolidated Financial Statements (Part II, Item 8) for discussion on litigation matters, which is incorporated by reference herein.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
14
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information and Holders.
Common stock of the Company is traded on the Nasdaq Stock Market under the symbol PCAR. There were 1,392 record holders of the common stock at December 31, 2024. The Company expects to continue paying regular cash dividends, although there is no assurance as to future dividends because they are dependent upon future earnings, capital requirements and financial conditions.
Securities Authorized for Issuance Under Equity Compensation Plans.
The following table provides information as of December 31, 2024 regarding compensation plans under which PACCAR equity securities are authorized for issuance.
|
|
Number of Securities |
|
|
Weighted-average |
|
|
Securities Available |
|
|||
Stock compensation plans approved by stockholders |
|
|
4,564,123 |
|
|
$ |
68.77 |
|
|
|
14,247,054 |
|
All stock compensation plans have been approved by the stockholders.
The number of securities to be issued includes those issuable under the PACCAR Inc Long Term Incentive Plan (LTI Plan) and the Restricted Stock and Deferred Compensation Plan for Non-Employee Directors (RSDC Plan). Securities to be issued include 682,514 shares that represent deferred cash awards payable in stock.
Securities available for future grant are authorized under the following two plans: (i) 13,321,465 shares under the LTI Plan, and (ii) 925,589 shares under the RSDC Plan.
15
Stockholder Return Performance Graph.
The following line graph compares the yearly percentage change in the cumulative total stockholder return on the Company’s common stock, to the cumulative total return of the Standard & Poor’s Composite 500 Stock Index and the return of the industry peer group of companies identified below (the “Peer Group Index”) for the last five fiscal years ended December 31, 2024. The Peer Group Index includes AGCO Corporation, Caterpillar Inc., Cummins Inc., Daimler Truck Holdings AG (effective January 1, 2022), Deere & Company, Eaton Corporation, Iveco Group N.V. (effective January 1, 2022), Oshkosh Corporation, TRATON SE (effective January 1, 2021), Navistar International Corporation (from 2019 through 2020), Terex Corporation and AB Volvo. Standard & Poor’s has calculated a return for each company in the Peer Group Index weighted according to its respective capitalization at the beginning of each period with dividends reinvested on a monthly basis. Management believes that the identified companies and methodology used in the graph for the Peer Group Index provide a better comparison than other indices available. The comparison assumes that $100 was invested December 31, 2019, in the Company’s common stock and in the stated indices and assumes reinvestment of dividends.
|
|
2019 |
|
|
2020 |
|
|
2021 |
|
|
2022 |
|
|
2023 |
|
|
2024 |
|
||||||
PACCAR Inc |
|
|
100 |
|
|
|
111.74 |
|
|
|
118.03 |
|
|
|
138.09 |
|
|
|
214.05 |
|
|
|
237.19 |
|
S&P 500 Index |
|
|
100 |
|
|
|
118.40 |
|
|
|
152.39 |
|
|
|
124.79 |
|
|
|
157.59 |
|
|
|
197.02 |
|
Peer Group Index |
|
|
100 |
|
|
|
133.64 |
|
|
|
162.88 |
|
|
|
177.56 |
|
|
|
214.49 |
|
|
|
260.91 |
|
16
Not applicable.
On December 4, 2018, PACCAR’s Board of Directors approved the repurchase of up to $500.0 million of the Company’s outstanding common stock. As of December 31, 2024, the Company has repurchased $110.0 million of shares under this plan. There were no repurchases made during the fourth quarter of 2024.
ITEM 6. [Reserved]
17
ITEM 7. 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 the U.S. and Canada, trucks are sold under the Kenworth and Peterbilt nameplates, in Europe, under the DAF nameplate and in Mexico, 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 South America. The Company’s Other business included the manufacturing and marketing of industrial winches through October 31, 2024, when PACCAR sold its industrial winch business.
2024 Financial Highlights
PACCAR opened its new, 240,000 square-foot Parts Distribution Center (PDC) in Massbach, Germany, in November 2024. This PDC supports DAF’s growth in Germany, Europe’s largest truck market, by enhancing parts delivery to dealers and customers.
The PACCAR Financial Services (PFS) group of companies has operations covering four continents and 26 countries. The global breadth of PFS and its rigorous credit application process support a portfolio of loans and leases with total assets of $22.41 billion. PFS issued $3.65 billion in medium-term notes during 2024 to support new business volume and repay maturing debt.
Truck Outlook
Truck industry heavy-duty retail sales in the U.S. and Canada in 2025 are expected to be 250,000 to 280,000 units compared to 268,100 in 2024. In Europe, the 2025 truck industry registrations for over 16-tonne vehicles are expected to be 270,000 to 300,000 units compared to 316,100 in 2024. In South America, heavy-duty truck industry registrations in 2025 are projected to be 115,000 to 125,000 compared to 119,000 in 2024.
Parts Outlook
In 2025, PACCAR Parts sales are expected to increase 2-4% compared to 2024, depending on the economic conditions.
18
Financial Services Outlook
In 2025, average earning assets are expected to be comparable to 2024. The used truck market has normalized in North America, but remains soft in Europe. If freight transportation conditions decline due to a weaker economy, then past due accounts, truck repossessions and credit losses would likely increase from the current levels and new business volume would likely decline.
Capital Investments and R&D Outlook
PACCAR's excellent long-term profits, strong balance sheet and consistent focus on quality have enabled the Company to invest $8.6 billion in new and expanded facilities, innovative products and new technologies during the past decade. Capital investments in 2025 are expected to be $700 to $800 million, and R&D is expected to be $460 to $500 million. PACCAR is investing in its truck factories, including expansions at Kenworth Chillicothe, Ohio, PACCAR Mexico, and the DAF truck assembly plant in Eindhoven, Netherlands. Investments in PACCAR's global engine business include additional manufacturing and remanufacturing capacity. In addition to the capital and R&D investments, the Company expects to invest another $400 to $700 million in its battery joint venture, Amplify Cell Technologies.
See the Forward-Looking Statements section of Management’s Discussion and Analysis for factors that may affect these outlooks.
RESULTS OF OPERATIONS:
The Company’s results of operations for the years ended December 31, 2024 and 2023 are presented below. For information on the year ended December 31, 2022, refer to Part II, Item 7 in the 2023 Annual Report on Form 10-K.
($ in millions, except per share amounts) |
|
|
|
|
|
|
||
Year Ended December 31, |
|
2024 |
|
|
2023 |
|
||
Net sales and revenues: |
|
|
|
|
|
|
||
Truck |
|
$ |
24,838.4 |
|
|
$ |
26,846.4 |
|
Parts |
|
|
6,666.4 |
|
|
|
6,414.4 |
|
Other |
|
|
59.5 |
|
|
|
54.7 |
|
Truck, Parts and Other |
|
|
31,564.3 |
|
|
|
33,315.5 |
|
Financial Services |
|
|
2,099.5 |
|
|
|
1,811.9 |
|
|
|
$ |
33,663.8 |
|
|
$ |
35,127.4 |
|
Income before income taxes: |
|
|
|
|
|
|
||
Truck |
|
$ |
2,852.6 |
|
|
$ |
3,799.9 |
|
Parts |
|
|
1,704.5 |
|
|
|
1,702.6 |
|
Other* |
|
|
13.5 |
|
|
|
(616.8 |
) |
Truck, Parts and Other |
|
|
4,570.6 |
|
|
|
4,885.7 |
|
Financial Services |
|
|
435.6 |
|
|
|
540.3 |
|
Investment income |
|
|
394.7 |
|
|
|
292.2 |
|
Income taxes |
|
|
(1,238.9 |
) |
|
|
(1,117.4 |
) |
Net income |
|
$ |
4,162.0 |
|
|
$ |
4,600.8 |
|
Diluted earnings per share |
|
$ |
7.90 |
|
|
$ |
8.76 |
|
After-tax return on revenues |
|
|
12.4 |
% |
|
|
13.1 |
% |
* In 2023, Other includes a $600.0 million non-recurring charge related to civil litigation in Europe (EC-related claims) in the first quarter 2023. In 2024, Other includes a $14.0 million gain on sale of the winch business.
The following provides an analysis of the results of operations for the Company’s three reportable segments - Truck, Parts and Financial Services. Where possible, the Company has quantified the impact of factors identified in the following discussion and analysis. In cases where it is not possible to quantify the impact of factors, the Company lists them in estimated order of importance. Factors for which the Company is unable to specifically quantify the impact include market demand, fuel prices, freight tonnage and economic conditions affecting the Company’s results of operations.
19
2024 Compared to 2023:
Truck
The Company’s Truck segment accounted for 74% of revenues in 2024 compared to 77% in 2023.
The Company’s new truck deliveries are summarized below:
Year Ended December 31, |
|
|
2024 |
|
|
|
2023 |
|
|
% CHANGE |
|
|
U.S. and Canada |
|
|
106,400 |
|
|
|
109,100 |
|
|
|
(2 |
) |
Europe |
|
|
45,400 |
|
|
|
63,200 |
|
|
|
(28 |
) |
Mexico, South America, Australia and other |
|
|
33,500 |
|
|
|
31,900 |
|
|
|
5 |
|
Total units |
|
|
185,300 |
|
|
|
204,200 |
|
|
|
(9 |
) |
Worldwide new truck deliveries decreased in 2024 compared to 2023, primarily due to lower deliveries in Europe.
Market share data discussed below is provided by third-party sources and is measured by either retail sales or registrations for the Company’s dealer network as a percentage of total retail sales or registrations 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 2024, industry retail sales in the heavy-duty market in the U.S. and Canada decreased to 268,100 units from 297,000 units in 2023. The Company’s heavy-duty truck retail market share was 30.7% in 2024 compared to 29.5% in 2023. The medium-duty market was 110,400 units in 2024 compared to 105,300 units in 2023. The Company’s medium-duty market share was 18.0% in 2024 compared to 14.5% in 2023.
The over 16‑tonne truck market in Europe in 2024 decreased to 316,100 units from 343,300 units in 2023, and DAF’s market share was 14.4% in 2024 compared to 15.6% in 2023. The 6 to 16‑tonne market was 50,900 units in 2024 and 46,800 units in 2023. DAF’s market share in the 6 to 16-tonne market in 2024 was 9.5% compared to 9.1% in 2023.
The over 16‑tonne truck market in Brasil in 2024 increased to 97,700 units from 82,100 units in 2023, and DAF Brasil's market share was 9.9% in 2024 compared to 10.2% in 2023.
The Company’s worldwide truck net sales and revenues are summarized below:
($ in millions) |
|
|
|
|
|
|
|
|
|
|||
Year Ended December 31, |
|
|
2024 |
|
|
|
2023 |
|
|
% CHANGE |
|
|
Truck net sales and revenues: |
|
|
|
|
|
|
|
|
|
|||
U.S. and Canada |
|
$ |
15,386.1 |
|
|
$ |
15,898.5 |
|
|
|
(3 |
) |
Europe |
|
|
4,998.2 |
|
|
|
6,871.3 |
|
|
|
(27 |
) |
Mexico, South America, Australia and other |
|
|
4,454.1 |
|
|
|
4,076.6 |
|
|
|
9 |
|
|
|
$ |
24,838.4 |
|
|
$ |
26,846.4 |
|
|
|
(7 |
) |
Truck income before income taxes |
|
$ |
2,852.6 |
|
|
$ |
3,799.9 |
|
|
|
(25 |
) |
Pre-tax return on revenues |
|
|
11.5 |
% |
|
|
14.2 |
% |
|
|
|
|
The Company’s worldwide truck net sales and revenues decreased to $24.84 billion in 2024 from $26.85 billion in 2023 primarily due to lower truck deliveries in Europe. Truck segment income before income taxes and pre-tax return on revenues decreased primarily due to lower truck unit deliveries in Europe and the U.S. and Canada, partially offset by higher truck unit deliveries in Mexico and South America.
20
The major factors for the Truck segment changes in net sales and revenues, cost of sales and revenues and gross margin between 2024 and 2023 are as follows:
|
|
NET |
|
|
COST OF |
|
|
|
|
|||
|
|
SALES AND |
|
|
SALES AND |
|
|
GROSS |
|
|||
($ in millions) |
|
REVENUES |
|
|
REVENUES |
|
|
MARGIN |
|
|||
2023 |
|
$ |
26,846.4 |
|
|
$ |
22,440.6 |
|
|
$ |
4,405.8 |
|
(Decrease) increase |
|
|
|
|
|
|
|
|
|
|||
Truck sales volume |
|
|
(2,107.6 |
) |
|
|
(1,650.0 |
) |
|
|
(457.6 |
) |
Average truck sales prices |
|
|
155.6 |
|
|
|
|
|
|
155.6 |
|
|
Average material, labor and other direct costs |
|
|
|
|
|
557.1 |
|
|
|
(557.1 |
) |
|
Factory overhead and other indirect costs |
|
|
|
|
|
18.6 |
|
|
|
(18.6 |
) |
|
Extended warranties, operating leases and other |
|
|
61.5 |
|
|
|
106.3 |
|
|
|
(44.8 |
) |
Currency translation |
|
|
(117.5 |
) |
|
|
(82.8 |
) |
|
|
(34.7 |
) |
Total decrease |
|
|
(2,008.0 |
) |
|
|
(1,050.8 |
) |
|
|
(957.2 |
) |
2024 |
|
$ |
24,838.4 |
|
|
$ |
21,389.8 |
|
|
$ |
3,448.6 |
|
Truck selling, general and administrative (SG&A) expenses in 2024 decreased to $254.2 million from $278.5 million in 2023. The decrease was primarily due to lower sales and marketing expenses and professional expenses. As a percentage of sales, Truck SG&A was 1.0% in 2024 and 1.0% in 2023.
21
Parts
The Company’s Parts segment accounted for 20% of revenues in 2024 compared to 18% in 2023.
($ in millions) |
|
|
|
|
|
|
|
|
|
|||
Year Ended December 31, |
|
|
2024 |
|
|
|
2023 |
|
|
% CHANGE |
|
|
Parts net sales and revenues: |
|
|
|
|
|
|
|
|
|
|||
U.S. and Canada |
|
$ |
4,547.5 |
|
|
$ |
4,441.7 |
|
|
|
2 |
|
Europe |
|
|
1,424.3 |
|
|
|
1,357.0 |
|
|
|
5 |
|
Mexico, South America, Australia and other |
|
|
694.6 |
|
|
|
615.7 |
|
|
|
13 |
|
|
|
$ |
6,666.4 |
|
|
$ |
6,414.4 |
|
|
|
4 |
|
Parts income before income taxes |
|
$ |
1,704.5 |
|
|
$ |
1,702.6 |
|
|
|
|
|
Pre-tax return on revenues |
|
|
25.6 |
% |
|
|
26.5 |
% |
|
|
|
|
The Company’s worldwide parts net sales and revenues increased to $6.67 billion in 2024 from $6.41 billion in 2023 primarily due to higher sales in all markets.
The major factors for the Parts segment changes in net sales and revenues, cost of sales and revenues and gross margin between 2024 and 2023 are as follows:
|
|
NET |
|
|
COST OF |
|
|
|
|
|||
|
|
SALES AND |
|
|
SALES AND |
|
|
GROSS |
|
|||
($ in millions) |
|
REVENUES |
|
|
REVENUES |
|
|
MARGIN |
|
|||
2023 |
|
$ |
6,414.4 |
|
|
$ |
4,369.6 |
|
|
$ |
2,044.8 |
|
Increase (decrease) |
|
|
|
|
|
|
|
|
|
|||
Aftermarket parts volume |
|
|
89.8 |
|
|
|
81.2 |
|
|
|
8.6 |
|
Average aftermarket parts sales prices |
|
|
161.6 |
|
|
|
|
|
|
161.6 |
|
|
Average aftermarket parts direct costs |
|
|
|
|
|
143.9 |
|
|
|
(143.9 |
) |
|
Warehouse and other indirect costs |
|
|
|
|
|
14.2 |
|
|
|
(14.2 |
) |
|
Currency translation |
|
|
.6 |
|
|
|
(4.5 |
) |
|
|
5.1 |
|
Total increase |
|
|
252.0 |
|
|
|
234.8 |
|
|
|
17.2 |
|
2024 |
|
$ |
6,666.4 |
|
|
$ |
4,604.4 |
|
|
$ |
2,062.0 |
|
Parts SG&A expense in 2024 increased to $246.4 million from $238.0 million in 2023. The increase was primarily due to higher salaries and related expenses, partially offset by lower sales and marketing costs. As a percentage of sales, Parts SG&A was 3.7% in 2024 and 3.7% in 2023.
22
Financial Services
The Company’s Financial Services segment accounted for 6% of revenues in 2024 compared to 5% in 2023.
($ in millions) |
|
|
|
|
|
|
|
|
|
|||
Year Ended December 31, |
|
|
2024 |
|
|
|
2023 |
|
|
% CHANGE |
|
|
New loan and lease volume: |
|
|
|
|
|
|
|
|
|
|||
U.S. and Canada |
|
$ |
3,961.4 |
|
|
$ |
3,662.3 |
|
|
|
8 |
|
Europe |
|
|
1,325.1 |
|
|
|
1,586.6 |
|
|
|
(16 |
) |
Mexico, Australia, Brasil and other |
|
|
2,213.3 |
|
|
|
1,956.4 |
|
|
|
13 |
|
|
|
$ |
7,499.8 |
|
|
$ |
7,205.3 |
|
|
|
4 |
|
New loan and lease volume by product: |
|
|
|
|
|
|
|
|
|
|||
Loans and finance leases |
|
$ |
6,585.2 |
|
|
$ |
6,538.6 |
|
|
|
1 |
|
Equipment on operating lease |
|
|
914.6 |
|
|
|
666.7 |
|
|
|
37 |
|
|
|
$ |
7,499.8 |
|
|
$ |
7,205.3 |
|
|
|
4 |
|
New loan and lease unit volume: |
|
|
|
|
|
|
|
|
|
|||
Loans and finance leases |
|
|
46,600 |
|
|
|
47,200 |
|
|
|
(1 |
) |
Equipment on operating lease |
|
|
7,750 |
|
|
|
7,200 |
|
|
|
8 |
|
|
|
|
54,350 |
|
|
|
54,400 |
|
|
|
|
|
Average earning assets: |
|
|
|
|
|
|
|
|
|
|||
U.S. and Canada |
|
$ |
11,196.9 |
|
|
$ |
9,478.5 |
|
|
|
18 |
|
Europe |
|
|
4,182.9 |
|
|
|
4,465.9 |
|
|
|
(6 |
) |
Mexico, Australia, Brasil and other |
|
|
4,514.9 |
|
|
|
3,596.5 |
|
|
|
26 |
|
|
|
$ |
19,894.7 |
|
|
$ |
17,540.9 |
|
|
|
13 |
|
Average earning assets by product: |
|
|
|
|
|
|
|
|
|
|||
Loans and finance leases |
|
$ |
13,735.6 |
|
|
$ |
11,903.3 |
|
|
|
15 |
|
Dealer wholesale financing |
|
|
3,988.2 |
|
|
|
3,100.2 |
|
|
|
29 |
|
Equipment on lease and other |
|
|
2,170.9 |
|
|
|
2,537.4 |
|
|
|
(14 |
) |
|
|
$ |
19,894.7 |
|
|
$ |
17,540.9 |
|
|
|
13 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|||
U.S. and Canada |
|
$ |
894.2 |
|
|
$ |
759.7 |
|
|
|
18 |
|
Europe |
|
|
577.9 |
|
|
|
555.7 |
|
|
|
4 |
|
Mexico, Australia, Brasil and other |
|
|
627.4 |
|
|
|
496.5 |
|
|
|
26 |
|
|
|
$ |
2,099.5 |
|
|
$ |
1,811.9 |
|
|
|
16 |
|
Revenues by product: |
|
|
|
|
|
|
|
|
|
|||
Loans and finance leases |
|
$ |
981.3 |
|
|
$ |
766.3 |
|
|
|
28 |
|
Dealer wholesale financing |
|
|
314.6 |
|
|
|
243.0 |
|
|
|
29 |
|
Equipment on lease and other |
|
|
803.6 |
|
|
|
802.6 |
|
|
|
|
|
|
|
$ |
2,099.5 |
|
|
$ |
1,811.9 |
|
|
|
16 |
|
Income before income taxes |
|
$ |
435.6 |
|
|
$ |
540.3 |
|
|
|
(19 |
) |
New loan and lease volume increased to a record $7.50 billion in 2024 from $7.21 billion in 2023. The increase in new loan and finance lease volume reflected higher finance market share of new PACCAR truck sales, primarily in the U.S. and Canada and Brasil. The increase in equipment on operating lease volume reflected higher market demand and a higher amount financed per truck in all major markets. The effect of currency translation decreased new loan and lease volume by $85.7 million, primarily due to a decrease in the value of the Brazilian real and Mexican peso relative to the U.S. dollar. PFS finance market share of new PACCAR truck sales was 25.0% in 2024 compared to 24.0% in 2023.
23
PFS revenues increased to $2.10 billion in 2024 from $1.81 billion in 2023. The increase was primarily driven by portfolio growth in all markets except Europe. The effects of currency translation decreased PFS revenues by $23.5 million in 2024, primarily due to a decrease in the value of foreign currencies relative to the U.S. dollar, primarily the Brazilian real and Mexican peso.
PFS income before income taxes decreased to $435.6 million in 2024 from $540.3 million in 2023, primarily due to lower operating lease margins, reflecting lower results on returned lease assets, partially offset by higher finance margins from a higher asset portfolio and higher portfolio yields. The effect of currency translation decreased PFS income before income taxes by $8.7 million in 2024, primarily due to a decrease in the value of the Brazilian real and Mexican peso relative to the U.S. dollar.
Included in Financial Services, Other assets on the Company’s Consolidated Balance Sheets are used trucks held for sale, net of impairments, of $396.5 million at December 31, 2024 and $309.8 million at December 31, 2023. These trucks are primarily units returned from matured operating leases in the ordinary course of business, and also include trucks acquired from repossessions, through acquisitions of used trucks in trades related to new truck sales and trucks returned from residual value guarantees (RVGs).
The Company recognized losses on used trucks, excluding repossessions, of $59.0 million in 2024 compared to gains of $43.5 million in 2023, including $40.3 million of losses on multiple unit transactions in 2024 compared to $12.3 million in 2023. Used truck losses related to repossessions, which are recognized as credit losses, were $9.8 million in 2024 and $4.6 million in 2023.
The major factors for the changes in interest and fees, interest and other borrowing expenses and finance margin between 2024 and 2023 are outlined below:
($ in millions) |
|
INTEREST |
|
|
INTEREST |
|
|
FINANCE |
|
|||
2023 |
|
$ |
1,009.3 |
|
|
$ |
500.6 |
|
|
$ |
508.7 |
|
Increase (decrease) |
|
|
|
|
|
|
|
|
|
|||
Average finance receivables |
|
|
208.9 |
|
|
|
|
|
|
208.9 |
|
|
Average debt balances |
|
|
|
|
|
107.9 |
|
|
|
(107.9 |
) |
|
Yields |
|
|
96.7 |
|
|
|
|
|
|
96.7 |
|
|
Borrowing rates |
|
|
|
|
|
113.1 |
|
|
|
(113.1 |
) |
|
Currency translation and other |
|
|
(19.0 |
) |
|
|
(10.8 |
) |
|
|
(8.2 |
) |
Total increase |
|
|
286.6 |
|
|
|
210.2 |
|
|
|
76.4 |
|
2024 |
|
$ |
1,295.9 |
|
|
$ |
710.8 |
|
|
$ |
585.1 |
|
24
The following table summarizes operating lease, rental and other revenues and depreciation and other expenses:
($ in millions) |
|
|
|
|
|
|
||
Year Ended December 31, |
|
|
2024 |
|
|
|
2023 |
|
Operating lease and rental revenues |
|
$ |
677.4 |
|
|
$ |
751.8 |
|
Used truck sales |
|
|
95.1 |
|
|
|
23.0 |
|
Insurance, franchise and other revenues |
|
|
31.1 |
|
|
|
27.8 |
|
Operating lease, rental and other revenues |
|
$ |
803.6 |
|
|
$ |
802.6 |
|
|
|
|
|
|
|
|
||
Depreciation of operating lease equipment |
|
$ |
544.7 |
|
|
$ |
488.6 |
|
Vehicle operating expenses |
|
|
67.8 |
|
|
|
73.1 |
|
Cost of used truck sales |
|
|
98.1 |
|
|
|
24.1 |
|
Insurance, franchise and other expenses |
|
|
7.9 |
|
|
|
4.9 |
|
Depreciation and other expenses |
|
$ |
718.5 |
|
|
$ |
590.7 |
|
The major factors for the changes in operating lease, rental and other revenues, depreciation and other expenses and lease margin between 2024 and 2023 are outlined below:
($ in millions) |
|
OPERATING LEASE, |
|
|
DEPRECIATION |
|
|
LEASE |
|
|||
2023 |
|
$ |
802.6 |
|
|
$ |
590.7 |
|
|
$ |
211.9 |
|
Increase (decrease) |
|
|
|
|
|
|
|
|
|
|||
Used truck sales |
|
|
72.2 |
|
|
|
74.0 |
|
|
|
(1.8 |
) |
Results on returned lease assets |
|
|
|
|
|
99.7 |
|
|
|
(99.7 |
) |
|
Average operating lease assets |
|
|
(148.2 |
) |
|
|
(132.1 |
) |
|
|
(16.1 |
) |
Revenue and cost per asset |
|
|
78.2 |
|
|
|
85.1 |
|
|
|
(6.9 |
) |
Currency translation and other |
|
|
(1.2 |
) |
|
|
1.1 |
|
|
|
(2.3 |
) |
Total increase (decrease) |
|
|
1.0 |
|
|
|
127.8 |
|
|
|
(126.8 |
) |
2024 |
|
$ |
803.6 |
|
|
$ |
718.5 |
|
|
$ |
85.1 |
|
Financial Services SG&A expense increased to $159.0 million in 2024 from $149.0 million in 2023. The increase was primarily due to higher salaries and related expenses and higher depreciation. As a percentage of average earning assets, Financial Services SG&A was .8% in 2024 and .8% in 2023.
The following table summarizes the provision for losses on receivables and net charge-offs:
|
|
2024 |
|
|
2023 |
|
||||||||||
($ in millions) |
|
PROVISION FOR |
|
|
NET |
|
|
PROVISION FOR |
|
|
NET |
|
||||
U.S. and Canada |
|
$ |
42.5 |
|
|
$ |
29.4 |
|
|
$ |
7.9 |
|
|
$ |
8.6 |
|
Europe |
|
|
16.8 |
|
|
|
15.8 |
|
|
|
4.4 |
|
|
|
2.9 |
|
Mexico, Australia, Brasil and other |
|
|
16.3 |
|
|
|
8.3 |
|
|
|
19.0 |
|
|
|
11.8 |
|
|
|
$ |
75.6 |
|
|
$ |
53.5 |
|
|
$ |
31.3 |
|
|
$ |
23.3 |
|
25
The provision for losses on receivables increased to $75.6 million in 2024 from $31.3 million in 2023, primarily driven by portfolio growth, an increase in the Company’s 30+ past due accounts and higher charge-offs in the U.S. and Canada and Europe. The increased charge-offs in 2024 included three large fleet customers in the U.S. and Canada and two large fleet customers in Europe. The higher charge-offs in 2024 also reflected higher average loss severity in all markets from lower used truck market values.
The Company modifies loans and finance leases as a normal part of its Financial Services operations. The Company may modify loans and finance leases for commercial reasons or for credit reasons. Modifications for commercial reasons are changes to contract terms for customers that are not considered to be in financial difficulty. Insignificant delays are modifications extending terms up to three months for customers experiencing some short-term financial stress, but not considered to be in financial difficulty. Modifications for credit reasons are changes to contract terms for customers considered to be in financial difficulty. The Company’s modifications typically result in granting more time to pay the contractual amounts owed and charging a fee and interest for the term of the modification. When considering whether to modify customer accounts for credit reasons, the Company evaluates the creditworthiness of the customers and modifies those accounts that the Company considers likely to perform under the modified terms.
The post-modification balances of accounts modified during the years ended December 31, 2024 and 2023 are summarized below:
|
|
2024 |
|
|
2023 |
|
||||||||||
($ in millions) |
|
AMORTIZED |
|
|
% OF TOTAL |
|
|
AMORTIZED |
|
|
% OF TOTAL |
|
||||
Commercial |
|
$ |
441.3 |
|
|
|
3.1 |
% |
|
$ |
200.1 |
|
|
|
1.5 |
% |
Insignificant delay |
|
|
223.0 |
|
|
|
1.5 |
% |
|
|
232.5 |
|
|
|
1.7 |
% |
Credit |
|
|
330.2 |
|
|
|
2.3 |
% |
|
|
55.2 |
|
|
|
.4 |
% |
|
|
$ |
994.5 |
|
|
|
6.9 |
% |
|
$ |
487.8 |
|
|
|
3.6 |
% |
* Amortized cost basis immediately after modification as a percentage of the year-end retail portfolio balance.
Modification activity increased to $994.5 million in 2024 from $487.8 million in 2023. The increase in modifications for commercial reasons primarily reflects higher volumes of refinancing. The decrease related to Insignificant delay modifications reflects a decrease in customers requesting payment relief for up to three months, primarily in the U.S., partially offset by an increase in customers requesting payment relief for up to three months in Brasil. The increase in Credit modifications reflects higher volumes of contract modifications in the U.S. The higher Credit modification in the U.S. is mainly due to two large fleet customers that were granted a weighted average of five months term extension in 2024. These customers were not past due at the time of modification and at December 31, 2024.
The following table summarizes the Company’s 30+ days past due accounts:
At December 31, |
|
|
2024 |
|
|
|
2023 |
|
Percentage of retail loan and lease accounts 30+ days past due: |
|
|
|
|
|
|
||
U.S. and Canada |
|
|
1.2 |
% |
|
|
.8 |
% |
Europe |
|
|
.8 |
% |
|
|
.5 |
% |
Mexico, Australia, Brasil and other |
|
|
2.0 |
% |
|
|
1.9 |
% |
Worldwide |
|
|
1.3 |
% |
|
|
1.0 |
% |
Accounts 30+ days past due increased to 1.3% at December 31, 2024 from 1.0% at December 31, 2023. The increased percentage of past due accounts is primarily due to two large fleet customers in the U.S. and Canada and higher past due accounts in Brasil and Europe, partially offset by decreases in past due accounts in Australia. The Company continues to focus on maintaining low past due balances.
26
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 $40.7 million and $35.0 million of accounts worldwide during the fourth quarter of 2024 and the fourth quarter of 2023, respectively, which 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:
At December 31, |
|
|
2024 |
|
|
|
2023 |
|
Pro forma percentage of retail loan and lease accounts 30+ days past due: |
|
|
|
|
|
|
||
U.S. and Canada |
|
|
1.4 |
% |
|
|
.8 |
% |
Europe |
|
|
.8 |
% |
|
|
1.8 |
% |
Mexico, Australia, Brasil and other |
|
|
2.6 |
% |
|
|
2.0 |
% |
Worldwide |
|
|
1.6 |
% |
|
|
1.2 |
% |
The Company typically requires customers to pay current before granting modifications. The higher pro forma percentage of retail loan and lease accounts 30+ days past due in the U.S. and Canada at December 31, 2024 was primarily due to a modification with an insignificant term extension granted to one large fleet customer with additional collateral. The higher pro forma percentage of retail loan and lease accounts 30+ days past due in Mexico, Australia, Brasil and other was primarily due to accounts modified in Brasil.
A contract modification that improves the past due status reduces the probability of default. The effect of modifications is included in the Company’s historical loss information used to determine the allowance for credit losses. 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 December 31, 2024 and 2023.
The Company’s annualized pre-tax return on average total assets for Financial Services was 2.0% in 2024 compared to 2.9% in 2023, respectively.
Other
Included in Other is the Company’s industrial winch manufacturing business through October 31, 2024, as well as sales, income and expenses not attributable to a reportable 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 2024 and 2023. Other SG&A decreased to $84.4 million in 2024 from $87.8 million in 2023, primarily due to a decrease in professional fees partially offset by higher salaries and related expenses.
Other income before tax was $13.5 million in 2024 compared to a loss of $616.8 million in 2023, primarily due to the EC-related charge in the first quarter 2023 which is discussed in Note L of the consolidated financial statements.
Investment income increased to $394.7 million in 2024 from $292.2 million in 2023, primarily due to higher average investment balances in all regions as well as higher investment yields due to higher market interest rates, primarily in the U.S. and Europe.
Income Taxes
In 2024, the effective tax rate was 22.9% compared to 19.5% in 2023. The lower effective tax rate in 2023 was primarily due to a $119.7 million discrete tax benefit for the release of a valuation allowance on deferred tax assets in Brasil. Also included in 2023 was the EC-related charge of $600.0 million, which lowered the effective tax rate in 2023.
($ in millions) |
|
|
|
|
|
|
||
Year Ended December 31, |
|
|
2024 |
|
|
|
2023 |
|
Domestic income before taxes |
|
$ |
3,525.1 |
|
|
$ |
3,913.7 |
|
Foreign income before taxes |
|
|
1,875.8 |
|
|
|
1,804.5 |
|
Total income before taxes |
|
$ |
5,400.9 |
|
|
$ |
5,718.2 |
|
Domestic pre-tax return on revenues |
|
|
18.5 |
% |
|
|
20.4 |
% |
Foreign pre-tax return on revenues |
|
|
12.8 |
% |
|
|
11.3 |
% |
Total pre-tax return on revenues |
|
|
16.0 |
% |
|
|
16.3 |
% |
27
In 2024, domestic income before income taxes and domestic pre-tax return on revenues decreased primarily due to lower Truck operation results. In 2024, foreign income before income taxes increased, as 2023 included the EC-related charge of $600.0 million, which also reduced foreign pre-tax return on revenues.
LIQUIDITY AND CAPITAL RESOURCES:
($ in millions) |
|
|
|
|
|
||
At December 31, |
|
2024 |
|
|
|
2023 |
|
Cash and cash equivalents |
$ |
7,060.8 |
|
|
$ |
7,181.7 |
|
Marketable securities |
|
2,778.8 |
|
|
|
1,822.6 |
|
|
$ |
9,839.6 |
|
|
$ |
9,004.3 |
|
The Company’s total cash and marketable securities at December 31, 2024 increased $835.3 million from the balances at December 31, 2023. Total cash and marketable securities are primarily intended to provide liquidity while preserving capital.
The change in cash and cash equivalents is summarized below:
($ in millions) |
|
|
|
|
|
||
Year Ended December 31, |
|
2024 |
|
|
2023 |
|
|
Operating activities: |
|
|
|
|
|
||
Net income |
$ |
4,162.0 |
|
|
$ |
4,600.8 |
|
Net income items not affecting cash |
|
939.5 |
|
|
|
698.0 |
|
Pension contributions |
|
(40.8 |
) |
|
|
(27.3 |
) |
Changes in operating assets and liabilities, net |
|
(419.8 |
) |
|
|
(1,081.5 |
) |
Net cash provided by operating activities |
|
4,640.9 |
|
|
|
4,190.0 |
|
Net cash used in investing activities |
|
(4,487.3 |
) |
|
|
(2,871.0 |
) |
Net cash (used in) provided by financing activities |
|
(123.1 |
) |
|
|
1,102.2 |
|
Effect of exchange rate changes on cash and cash equivalents |
|
(151.4 |
) |
|
|
69.6 |
|
Net (decrease) increase in cash and cash equivalents |
|
(120.9 |
) |
|
|
2,490.8 |
|
Cash and cash equivalents at beginning of period |
|
7,181.7 |
|
|
|
4,690.9 |
|
Cash and cash equivalents at end of period |
$ |
7,060.8 |
|
|
$ |
7,181.7 |
|
Operating activities: Cash provided by operations increased by $450.9 million to $4.64 billion in 2024 from $4.19 billion in 2023. The increased operating cash flow reflects lower net income of $438.8 million, $241.5 million higher cash provided from net income items not affecting cash, primarily deferred income taxes and the provision for losses on financial services receivables, and lower cash usage from net changes in operating assets and liabilities of $661.7 million. The net changes in operating assets and liabilities are mainly due to higher cash provided by net changes in operating assets, primarily wholesale receivables on new trucks in the Financial Services segment of $787.7 million, trade and other receivables of $587.6 million and lower cash usage of $393.2 million for inventories, partially offset by decrease in accruals of $1,084.7 million, including the EC-related charge and product support liabilities.
Investing activities: Cash used in investing activities increased by $1.62 billion to $4.49 billion in 2024 from $2.87 billion in 2023. The increase in net cash used in investing activities primarily reflects increased purchases of marketable securities, net of proceeds from sales and maturities, of $801.9 million, a higher net increase in wholesale receivables on equipment of $483.0 million, increased acquisition of equipment on operating leases of $339.4 million and cash contributed to the battery manufacturing joint venture, Amplify Cell Technologies, of $207.6 million. Increased cash used in investing activities was partially offset by cash received from the sale of PACCAR Winch Inc.
Financing activities: Cash used in financing activities was $123.1 million in 2024 compared to cash provided by financing activities of $1.10 billion in 2023, reflecting higher cash dividends and lower net borrowing activity. The Company paid $2.29 billion in dividends in 2024 compared to $1.52 billion in 2023, primarily due to a higher year-end dividend paid in January 2024. Cash provided from net borrowing activities was $2.12 billion, $454.8 million lower than the cash provided by net borrowing activities of $2.57 billion in 2023.
28
The effect of exchange rate changes on cash decreased cash and cash equivalents by $151.4 million in 2024, reflecting a decrease in the value of foreign currencies relative to the U.S. dollar, primarily the euro, Mexican peso and Brazilian real. In 2023, an increase in the value of foreign currencies relative to the U.S. dollar, primarily the euro, Mexican peso and Australian dollar, increased cash and cash equivalents by $69.6 million.
The Company expects to continue paying dividends, although there is no assurance as to future dividends because they are dependent upon future earnings, capital requirements and financial conditions. Cash dividends declared for the last two years were as follows:
QUARTER |
|
|
2024 |
|
|
|
2023 |
|
First |
|
$ |
.27 |
|
|
$ |
.25 |
|
Second |
|
|
.30 |
|
|
|
.25 |
|
Third |
|
|
.30 |
|
|
|
.27 |
|
Fourth |
|
|
.30 |
|
|
|
.27 |
|
Year-End Extra (paid in January of the following year) |
|
|
3.00 |
|
|
|
3.20 |
|
Total dividends declared per share |
|
$ |
4.17 |
|
|
$ |
4.24 |
|
Credit Lines and Other:
The Company has line of credit arrangements of $5.48 billion, of which $4.96 billion were unused at December 31, 2024. Included in these arrangements are $4.00 billion of committed bank facilities, of which $1.50 billion expires in June 2025, $1.25 billion expires in June 2027 and $1.25 billion expires in June 2029. The Company intends to extend or replace these credit facilities on or before expiration 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 committed bank facilities for the year ended December 31, 2024.
On December 4, 2018, PACCAR’s Board of Directors approved the repurchase of up to $500.0 million of the Company’s outstanding common stock without an expiration. The objective of the repurchase plan is to return value to PACCAR shareholders. As of December 31, 2024, the Company has repurchased $110.0 million of shares under this plan. There were no repurchases made under this plan during the year ended December 31, 2024.
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 2024 were $787.3 million compared to $679.4 million in 2023. Over the past decade, the Company’s combined investments in worldwide capital projects and R&D totaled $8.48 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.
Capital investments in 2025 are expected to be $700 to $800 million, and R&D is expected to be $460 to $500 million. PACCAR is investing in its truck factories, including expansions at Kenworth Chillicothe, Ohio, PACCAR Mexico, and the DAF truck assembly plant in Eindhoven, Netherlands. Investments in PACCAR's global engine business include additional manufacturing and remanufacturing capacity. In addition to the capital and R&D investments, the Company expects to invest another $400 to $700 million in its battery joint venture, Amplify Cell Technologies.
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.
29
In November 2024, 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 December 31, 2024 was $7.25 billion. The registration expires in November 2027 and does not limit the principal amount of debt securities that may be issued during that period.
As of December 31, 2024, the Company’s European finance subsidiary, PACCAR Financial Europe, had €597.9 million available for issuance under a €2.50 billion medium-term note program listed on the Euro MTF Market of the Luxembourg Stock Exchange. This program renews annually and expires in July 2025.
In August 2021, PACCAR Financial Mexico registered a 10.00 billion Mexican peso program with the Comision Nacional Bancaria y de Valores to issue medium-term notes and commercial paper. The registration expires in August 2026 and limits the amount of commercial paper (up to one year) to 5.00 billion Mexican pesos. At December 31, 2024, 5.57 billion Mexican pesos were available for issuance.
In August 2018, the Company’s Australian subsidiary, PACCAR Financial Pty. Ltd. (PFPL Australia), established a medium-term note program. The program does not limit the principal amount of debt securities that may be issued under the program. The total amount of medium-term notes outstanding for PFPL Australia as of December 31, 2024 was 700.0 million Australian dollars.
In May 2021, the Company’s Canadian subsidiary, PACCAR Financial Ltd. (PFL Canada), established a medium-term note program. The program does not limit the principal amount of debt securities that may be issued under the program. There were no borrowings under this program as of December 31, 2024.
The Company’s Brazilian subsidiary, Banco PACCAR S.A., established a lending program in December 2021 with the local development bank, Banco Nacional de Desenvolvimento Economico e Social (BNDES), for qualified customers to receive preferential conditions and generally market interest rates. This program is limited to 2.60 billion Brazilian reais and has 1.15 billion Brazilian reais outstanding as of December 31, 2024. The Brazilian subsidiary also established a Letra Financeira (LF) program in May 2024 and the program does not limit the principal amount of debt securities that may be issued under the program. A total of 500.0 million Brazilian reais medium-term notes were outstanding as of December 31, 2024.
The Company believes its cash balances and investments, collections on existing finance receivables, committed bank 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. In the event of a decrease in the Company’s credit ratings or a disruption in the financial markets, the Company may not be able to refinance its maturing debt in the financial markets. In such circumstances, the Company would be exposed to liquidity risk to the degree that the timing of debt maturities differs from the timing of receivable collections from customers. The Company believes its various sources of liquidity, including committed bank facilities, would continue to provide it with sufficient funding resources to service its maturing debt obligations.
30
Commitments
The following summarizes the Company’s contractual cash commitments at December 31, 2024:
|
|
MATURITY |
|
|
||||||||||||||||
($ in millions) |
|
WITHIN 1 |
|
|
1-3 |
|
|
3-5 |
|
|
MORE THAN |
|
|
TOTAL |
|
|||||
Borrowings* |
|
$ |
8,359.6 |
|
|
$ |
5,589.7 |
|
|
$ |
1,647.4 |
|
|
$ |
350.0 |
|
|
$ |
15,946.7 |
|
Interest on debt** |
|
|
408.8 |
|
|
|
440.8 |
|
|
|
108.3 |
|
|
|
73.9 |
|
|
|
1,031.8 |
|
Purchase obligations |
|
|
128.0 |
|
|
|
184.3 |
|
|
|
138.3 |
|
|
|
90.6 |
|
|
|
541.2 |
|
Lease liabilities |
|
|
21.0 |
|
|
|
32.9 |
|
|
|
14.7 |
|
|
|
13.0 |
|
|
|
81.6 |
|
Other obligations |
|
|
81.9 |
|
|
|
5.8 |
|
|
|
.5 |
|
|
|
6.2 |
|
|
|
94.4 |
|
|
|
$ |
8,999.3 |
|
|
$ |
6,253.5 |
|
|
$ |
1,909.2 |
|
|
$ |
533.7 |
|
|
$ |
17,695.7 |
|
* Commercial paper included in borrowings is at par value.
** Interest on floating-rate debt is based on the applicable market rates at December 31, 2024.
Total cash commitments for borrowings and interest on term debt were $16.98 billion and were related to the Financial Services segment. As described in Note J of the consolidated financial statements, borrowings consist primarily of term notes and commercial paper issued by the Financial Services segment. The Company expects to fund its maturing Financial Services debt obligations principally from funds provided by collections from customers on loans and lease contracts, as well as from the proceeds of commercial paper and medium-term note borrowings. Purchase obligations are the Company’s contractual commitments to acquire future production inventory and capital equipment. Other obligations primarily include commitments for commodities.
The Company’s other commitments include the following at December 31, 2024:
|
|
COMMITMENT EXPIRATION |
|
|
|
|
||||||||||||||
($ in millions) |
|
WITHIN 1 |
|
|
1-3 |
|
|
3-5 |
|
|
MORE THAN |
|
|
TOTAL |
|
|||||
Loan and lease commitments |
|
$ |
949.3 |
|
|
|
|
|
|
|
|
|
|
|
$ |
949.3 |
|
|||
Residual value guarantees |
|
|
306.6 |
|
|
$ |
237.9 |
|
|
$ |
74.9 |
|
|
$ |
12.8 |
|
|
|
632.2 |
|
Letters of credit |
|
|
10.5 |
|
|
|
|
|
|
.2 |
|
|
|
13.0 |
|
|
|
23.7 |
|
|
|
|
$ |
1,266.4 |
|
|
$ |
237.9 |
|
|
$ |
75.1 |
|
|
$ |
25.8 |
|
|
$ |
1,605.2 |
|
Loan and lease commitments are for funding new retail loan and lease contracts. Residual value guarantees represent the Company’s commitment to acquire trucks at a guaranteed value if the customer decides to return the truck at a specified date in the future.
IMPACT OF ENVIRONMENTAL MATTERS:
The Company, its competitors and industry in general are subject to various domestic and foreign requirements relating to the environment and greenhouse gases. The statutory and regulatory requirements governing greenhouse gas and non-greenhouse gas emissions are included in Item 1A, “Risk Factors – Emissions Requirements and Reduction Targets.” The Company believes its policies, practices and procedures are designed to prevent unreasonable risk of environmental damage and that its handling, use and disposal of hazardous or toxic substances have been in accordance with environmental laws and regulations in effect at the time such use and disposal occurred.
The Company is involved in various stages of investigations and cleanup actions in different countries related to environmental matters. In certain of these matters, the Company has been designated as a “potentially responsible party” by domestic and foreign environmental agencies. The Company has accrued the estimated costs to investigate and complete cleanup actions where it is probable that the Company will incur such costs in the future. Expenditures related to environmental activities in the years ended December 31, 2024 and 2023 were $4.4 million and $3.0 million, respectively. While the timing and amount of the ultimate costs associated with future environmental cleanup cannot be determined, management expects that these matters will not have a significant effect on the Company’s consolidated cash flow, liquidity or financial condition.
31
CRITICAL ACCOUNTING POLICIES:
The Company’s significant accounting policies are disclosed in Note A of the consolidated financial statements. In the preparation of the Company’s financial statements, in accordance with U.S. generally accepted accounting principles, management uses estimates and makes judgments and assumptions that affect asset and liability values and the amounts reported as income and expense during the periods presented. The following are accounting policies which, in the opinion of management, are particularly sensitive and which, if actual results are different from estimates used by management, may have a material impact on the financial statements.
Operating Leases
Trucks sold pursuant to agreements accounted for as operating leases are disclosed in Note F of the consolidated financial statements. In determining its estimate of the residual value of such vehicles, the Company considers the length of the lease term, the truck model, the expected usage of the truck and anticipated market demand. Operating lease terms generally range from three to five years. The resulting residual values on operating leases generally range between 30% and 70% of the original equipment cost. If the sales price of a truck at the end of the term 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. A decrease in the estimated equipment residual values would increase annual depreciation expense over the remaining lease term.
During 2024, market values on equipment returning upon operating lease maturity were generally lower than the residual values on the equipment, resulting in an increase in depreciation expense of $22.7 million.
At December 31, 2024, the aggregate residual value of equipment on operating leases in the Financial Services segment and residual value guarantee on trucks accounted for as operating leases in the Truck segment was $1.16 billion. A 10% decrease in used truck values worldwide, if expected to persist over the remaining maturities of the Company’s operating leases, would reduce residual value estimates and result in the Company recording additional depreciation expense of approximately $46.3 million in 2025, $20.5 million in 2026, $19.4 million in 2027, $16.4 million in 2028, and $13.2 million in 2029 and thereafter.
Allowance for Credit Losses
The allowance for credit losses related to the Company’s loans and finance leases is disclosed in Note E of the consolidated financial statements. 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 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 three to 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 expected credit losses. Finance receivables that are evaluated individually 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. In general, finance receivables that are 90 days past due are placed on non-accrual status. Finance receivables on non-accrual status 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.
Individually evaluated receivables on non-accrual status are generally considered collateral dependent. Large balance retail and all wholesale receivables on non-accrual status are individually evaluated for loss based on the value of the underlying collateral or a discounted cash flow analysis. Small balance receivables on non-accrual status with similar risk characteristics are evaluated as a separate pool to determine the appropriate reserve for losses using the historical loss information discussed below.
32
The Company evaluates finance receivables that are not individually evaluated 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, current market 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 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 sources and 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 expected credit losses, net of recoveries, inherent in the portfolio.
The adequacy of the allowance is evaluated quarterly based on the most recent past due account information and current and future market conditions. As accounts become past due, the likelihood that they will not be fully collected increases. The Company’s experience indicates the probability of not fully collecting past due accounts ranges between 10% and 80%. Over the past two years, the Company’s year-end 30+ days past due accounts have ranged between 1.0% and 1.3% of loan and lease receivables. Historically, a 100 basis point increase in the 30+ days past due percentage has resulted in an increase in credit losses of 1 to 25 basis points of receivables. At December 31, 2024, 30+ days past dues were 1.3%. If past dues were 100 basis points higher or 2.3% as of December 31, 2024, the Company’s estimate of credit losses would likely have increased by a range of $1 to $35 million depending on the extent of the past dues, the estimated value of the collateral as compared to amounts owed and general economic factors.
Product Warranty
Product warranty, including changes in estimates for pre-existing warranties, is disclosed in Note I of the consolidated financial statements. The expenses related to product warranty are estimated and recorded at the time products are sold based on historical and current data and reasonable expectations for the future regarding the frequency and cost of warranty claims, net of recoveries. Estimates consider product type, geographical differences, labor rates, and any other known factors affecting the number or amount of expected claim payments. For new products with no historical experience, reference to similar products is utilized. Management takes actions to minimize warranty costs through quality-improvement programs; however, actual claim costs incurred could materially differ from the estimated amounts and require adjustments to the reserve. Historically those adjustments have not been material. Over the past two years, warranty expense as a percentage of Truck, Parts and Other net sales and revenues has ranged between 2.5% and 2.9%. If the 2024 warranty expense had been .2% higher as a percentage of net sales and revenues in 2024, warranty expense would have increased by approximately $63 million.
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 and components, including semiconductors; labor disruptions; shortages of commercial truck drivers; increased warranty costs; cybersecurity risks to the Company’s information technology systems; pandemics; climate-related risks; global conflicts; litigation, including European Commission (EC) settlement-related claims; or legislative and governmental regulations. A more detailed description of these and other risks is included under the heading Part I, Item 1A, “Risk Factors” and in Note L in the Notes to Consolidated Financial Statements of this Annual Report on Form 10-K.
33
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Currencies are presented in millions for the market risks and derivative instruments sections below.
Interest-Rate Risks - See Note P for a description of the Company’s hedging programs and exposure to interest rate fluctuations. The Company measures its interest-rate risk by estimating the amount by which the fair value of interest-rate sensitive assets and liabilities, including derivative financial instruments, would change assuming an immediate 100 basis point increase across the yield curve as shown in the following table:
Fair Value (Losses) Gains |
|
2024 |
|
|
2023 |
|
||
CONSOLIDATED: |
|
|
|
|
|
|
||
Assets |
|
|
|
|
|
|
||
Cash equivalents and marketable debt securities |
|
$ |
(49.6 |
) |
|
$ |
(29.2 |
) |
FINANCIAL SERVICES: |
|
|
|
|
|
|
||
Assets |
|
|
|
|
|
|
||
Fixed rate loans |
|
|
(157.7 |
) |
|
|
(146.5 |
) |
Interest-rate swaps |
|
|
(35.1 |
) |
|
|
|
|
Liabilities |
|
|
|
|
|
|
||
Fixed rate term debt |
|
|
198.9 |
|
|
|
156.8 |
|
Interest-rate swaps |
|
|
|
|
|
1.2 |
|
|
Total |
|
$ |
(43.5 |
) |
|
$ |
(17.7 |
) |
Currency Risks - The Company enters into foreign currency exchange contracts to hedge its exposure to exchange rate fluctuations of foreign currencies, particularly the Canadian dollar, the euro, the British pound, the Australian dollar, the Brazilian real and the Mexican peso (see Note P for additional information concerning these hedges). Based on the Company’s sensitivity analysis, the potential loss in fair value for such financial instruments from a 10% unfavorable change in quoted foreign currency exchange rates would be a loss of $126.3 related to contracts outstanding at December 31, 2024, compared to a loss of $259.7 at December 31, 2023. These amounts would be largely offset by changes in the values of the underlying hedged exposures.
Commodity Price Risks - The Company enters into commodity forward contracts to hedge the prices of certain commodities used in the production of trucks (see Note P for additional information concerning these hedges). The objective is to reduce the fluctuation in earnings and cash flows associated with adverse movement in commodity prices. Based on the Company’s sensitivity analysis, the potential loss in fair value for such financial instruments from a 10% unfavorable change in quoted commodity prices would be nil related to contracts outstanding at December 31, 2024, compared to a loss of $3.3 at December 31, 2023. The Company had no commodity contracts at December 31, 2024.
,
34
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31, |
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
|
|
(millions, except per share data) |
|
|||||||||
TRUCK, PARTS AND OTHER: |
|
|
|
|
|
|
|
|
|
|||
Net sales and revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Cost of sales and revenues |
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
|
|
|
|
|
|
|
|
|||
Selling, general and administrative |
|
|
|
|
|
|
|
|
|
|||
Interest and other (income) expenses, net |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|||
Truck, Parts and Other Income Before Income Taxes |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
FINANCIAL SERVICES: |
|
|
|
|
|
|
|
|
|
|||
Interest and fees |
|
|
|
|
|
|
|
|
|
|||
Operating lease, rental and other revenues |
|
|
|
|
|
|
|
|
|
|||
Revenues |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Interest and other borrowing expenses |
|
|
|
|
|
|
|
|
|
|||
Depreciation and other expenses |
|
|
|
|
|
|
|
|
|
|||
Selling, general and administrative |
|
|
|
|
|
|
|
|
|
|||
Provision for losses on receivables |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Financial Services Income Before Income Taxes |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Investment income |
|
|
|
|
|
|
|
|
|
|||
Total Income Before Income Taxes |
|
|
|
|
|
|
|
|
|
|||
Income taxes |
|
|
|
|
|
|
|
|
|
|||
Net Income |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Net Income Per Share |
|
|
|
|
|
|
|
|
|
|||
Basic |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Weighted Average Number of Common Shares Outstanding |
|
|
|
|
|
|
|
|
|
|||
Basic |
|
|
|
|
|
|
|
|
|
|||
Diluted |
|
|
|
|
|
|
|
|
|
|||
See notes to consolidated financial statements.
35
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year Ended December 31, |
|
|
2024 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
(millions) |
|
|||||||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|||
Unrealized gains (losses) on derivative contracts |
|
|
|
|
|
|
|
|
|
|||
Net gain (loss) arising during the period |
|
|
|
|
|
( |
) |
|
|
|
||
Tax effect |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Reclassification adjustment |
|
|
( |
) |
|
|
|
|
|
|
||
Tax effect |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
( |
) |
|
|
|
||
Unrealized gains (losses) on marketable debt securities |
|
|
|
|
|
|
|
|
|
|||
Net holding gain (loss) |
|
|
|
|
|
|
|
|
( |
) |
||
Tax effect |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Reclassification adjustment |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Tax effect |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
( |
) |
||
Pension plans |
|
|
|
|
|
|
|
|
|
|||
Net gain (loss) arising during the period |
|
|
|
|
|
( |
) |
|
|
|
||
Tax effect |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Reclassification adjustment |
|
|
|
|
|
|
|
|
|
|||
Tax effect |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|||
Foreign currency translation (loss) gain |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Net other comprehensive (loss) income |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Comprehensive Income |
|
$ |
|
|
$ |
|
|
$ |
|
|||
See notes to consolidated financial statements.
36
CONSOLIDATED BALANCE SHEETS
December 31, |
|
2024 |
|
|
2023 |
|
||
|
|
(millions) |
|
|||||
ASSETS |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
TRUCK, PARTS AND OTHER: |
|
|
|
|
|
|
||
Current Assets |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Trade and other receivables, net (allowance for losses: 2024 - $ |
|
|
|
|
|
|
||
Marketable securities |
|
|
|
|
|
|
||
Inventories, net |
|
|
|
|
|
|
||
Other current assets |
|
|
|
|
|
|
||
Total Truck, Parts and Other Current Assets |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Equipment on operating leases, net |
|
|
|
|
|
|
||
Property, plant and equipment, net |
|
|
|
|
|
|
||
Other noncurrent assets, net |
|
|
|
|
|
|
||
Total Truck, Parts and Other Assets |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
FINANCIAL SERVICES: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
|
|
|
|
|
||
Finance and other receivables, net (allowance for losses: 2024 - $ |
|
|
|
|
|
|
||
Equipment on operating leases, net |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
Total Financial Services Assets |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
37
CONSOLIDATED BALANCE SHEETS
December 31, |
|
2024 |
|
|
2023 |
|
||
|
|
(millions) |
|
|||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
TRUCK, PARTS AND OTHER: |
|
|
|
|
|
|
||
Current Liabilities |
|
|
|
|
|
|
||
Accounts payable, accrued expenses and other |
|
$ |
|
|
$ |
|
||
Dividend payable |
|
|
|
|
|
|
||
Total Truck, Parts and Other Current Liabilities |
|
|
|
|
|
|
||
Residual value guarantees and deferred revenues |
|
|
|
|
|
|
||
Other liabilities |
|
|
|
|
|
|
||
Total Truck, Parts and Other Liabilities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
FINANCIAL SERVICES: |
|
|
|
|
|
|
||
Accounts payable, accrued expenses and other |
|
|
|
|
|
|
||
Commercial paper and bank loans |
|
|
|
|
|
|
||
Term notes |
|
|
|
|
|
|
||
Deferred taxes and other liabilities |
|
|
|
|
|
|
||
Total Financial Services Liabilities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
STOCKHOLDERS' EQUITY: |
|
|
|
|
|
|
||
Preferred stock, |
|
|
|
|
|
|
||
Common stock, $ |
|
|
|
|
|
|
||
Additional paid-in capital |
|
|
|
|
|
|
||
Retained earnings |
|
|
|
|
|
|
||
Accumulated other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
Total Stockholders' Equity |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
See notes to consolidated financial statements.
38
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
||||||
Year Ended December 31, |
|
2024 |
|
|
2023 |
|
|
|
2022 |
|
||
|
|
(millions) |
|
|||||||||
OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|||
Net Income |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Adjustments to reconcile net income to cash provided by operations: |
|
|
|
|
|
|
|
|
|
|||
Depreciation and amortization: |
|
|
|
|
|
|
|
|
|
|||
Property, plant and equipment |
|
|
|
|
|
|
|
|
|
|||
Equipment on operating leases and other |
|
|
|
|
|
|
|
|
|
|||
Provision for losses on financial services receivables |
|
|
|
|
|
|
|
|
|
|||
Deferred taxes |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other, net |
|
|
|
|
|
|
|
|
|
|||
Pension contributions |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Change in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|||
Decrease (increase) in assets other than cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|||
Receivables: |
|
|
|
|
|
|
|
|
|
|||
Trade and other receivables |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Wholesale receivables on new trucks |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Inventories |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Other assets, net |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Increase (decrease) in liabilities: |
|
|
|
|
|
|
|
|
|
|||
Accounts payable and accrued expenses |
|
|
|
|
|
|
|
|
|
|||
Residual value guarantees and deferred revenues |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other liabilities, net |
|
|
( |
) |
|
|
|
|
|
|
||
Net Cash Provided by Operating Activities |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|||
Originations of retail loans and finance leases |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Collections on retail loans and finance leases |
|
|
|
|
|
|
|
|
|
|||
Net increase in wholesale receivables on equipment |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Purchases of marketable debt securities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Proceeds from sales and maturities of marketable debt securities |
|
|
|
|
|
|
|
|
|
|||
Payments for property, plant and equipment |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Acquisitions of equipment for operating leases |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Proceeds from asset disposals |
|
|
|
|
|
|
|
|
|
|||
Contributions to joint venture |
|
|
( |
) |
|
|
|
|
|
|
||
Other, net |
|
|
|
|
|
|
|
|
|
|||
Net Cash Used in Investing Activities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|||
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|||
Payments of cash dividends |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Purchases of treasury stock |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Proceeds from stock compensation transactions |
|
|
|
|
|
|
|
|
|
|||
Net increase in commercial paper, short-term bank loans and other |
|
|
|
|
|
|
|
|
|
|||
Proceeds from term debt |
|
|
|
|
|
|
|
|
|
|||
Payments on term debt |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net Cash (Used in) Provided by Financing Activities |
|
|
( |
) |
|
|
|
|
|
|
||
Effect of exchange rate changes on cash and cash equivalents |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Net (Decrease) Increase in Cash and Cash Equivalents |
|
|
( |
) |
|
|
|
|
|
|
||
Cash and cash equivalents at beginning of period |
|
|
|
|
|
|
|
|
|
|||
Cash and cash equivalents at end of period |
|
$ |
|
|
$ |
|
|
$ |
|
|||
See notes to consolidated financial statements.
39
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
December 31, |
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
|
|
(millions, except per share data) |
|
|||||||||
COMMON STOCK, $1 PAR VALUE: |
|
|
|
|
|
|
|
|
|
|||
Balance at beginning of year |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
||||
Stock compensation |
|
|
|
|
|
|
|
|
|
|||
Balance at end of year |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
ADDITIONAL PAID-IN CAPITAL: |
|
|
|
|
|
|
|
|
|
|||
Balance at beginning of year |
|
|
|
|
|
|
|
|
|
|||
Treasury stock retirement |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Stock compensation |
|
|
|
|
|
|
|
|
|
|||
Balance at end of year |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
TREASURY STOCK, AT COST: |
|
|
|
|
|
|
|
|
|
|||
Balance at beginning of year |
|
|
|
|
|
|
|
|
|
|||
Purchases, shares: 2024 - |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Retirements |
|
|
|
|
|
|
|
|
|
|||
Balance at end of year |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
RETAINED EARNINGS: |
|
|
|
|
|
|
|
|
|
|||
Balance at beginning of year |
|
|
|
|
|
|
|
|
|
|||
Net income |
|
|
|
|
|
|
|
|
|
|||
Cash dividends declared on common stock, |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|||
Balance at end of year |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
ACCUMULATED OTHER COMPREHENSIVE LOSS: |
|
|
|
|
|
|
|
|
|
|||
Balance at beginning of year |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other comprehensive (loss) income |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Balance at end of year |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total Stockholders’ Equity |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
See notes to consolidated financial statements.
40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024, 2023 and 2022 (currencies in millions)
Description of Operations: PACCAR Inc (the Company or PACCAR) is a multinational company operating in
Principles of Consolidation: The consolidated financial statements include the accounts of the Company and its wholly owned domestic and foreign subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation.
Use of Estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Revenue Recognition:
Truck, Parts and Other: The Company 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 the amount of 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 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 products or services are transferred. In the Truck and Parts segments, when the Company grants extended payment terms on selected receivables and charges interest, interest income is recognized when earned.
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 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 included in revenues and the related costs are included in cost of sales. 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 truck is transferred to the customer less an amount for expected returns. Expected return rates are estimated by using a historical return rate.
Aftermarket parts sales allow for returns which are estimated at the time of sale based on historical data. Parts dealer services and other revenues are recognized as services are performed.
41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024, 2023 and 2022 (currencies in millions)
The following table presents the balance sheet classification of the estimated value of the returned goods assets and the related return liabilities:
At December 31, |
|
2024 |
|
|
2023 |
|
||||||||||
|
|
ASSETS |
|
|
LIABILITIES |
|
|
ASSETS |
|
|
LIABILITIES |
|
||||
Trucks |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other current assets |
|
$ |
|
|
|
|
|
$ |
|
|
|
|
||||
Accounts payable, accrued expenses and other |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Other noncurrent assets, net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Parts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other current assets |
|
$ |
|
|
|
|
|
$ |
|
|
|
|
||||
Accounts payable, accrued expenses and other |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The Company’s total commitment to acquire trucks at a guaranteed value for contracts accounted for as a sale was $
Revenues from extended warranties, operating leases and other include optional extended warranty and R&M service contracts which can be purchased for periods generally ranging up to
Revenue from winch sales and other was primarily derived from the industrial winch business through October 31, 2024. 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 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 rentals on 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 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. for the years ended December 31, 2024, 2023 and 2022 were $
42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024, 2023 and 2022 (currencies in millions)
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,
Finance leases are secured by the trucks and related equipment being leased and the lease terms generally range from to
Operating lease terms generally range from to
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.
Cash and Cash Equivalents: Cash equivalents consist of liquid investments with a maturity at date of purchase of
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.
43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024, 2023 and 2022 (currencies in millions)
Equity Method Investment:
In the second quarter of 2024, PACCAR and three partners completed the formation of a U.S. battery manufacturing joint venture, Amplify Cell Technologies, with PACCAR owning a
Receivables:
Trade and Other Receivables: The Company’s trade and other receivables are recorded at cost, net of allowances. At December 31, 2024 and 2023, respectively, trade and other receivables included trade receivables from dealers and customers of $
Finance and Other Receivables:
Loans – Loans represent fixed or floating-rate loans to customers collateralized by the vehicles purchased and are recorded at amortized cost.
Finance leases – Finance leases are sales-type finance leases, which lease equipment to retail customers and dealers. These leases are reported as the sum of minimum lease payments receivable and estimated residual value of the property subject to the contracts, reduced by unearned interest.
Dealer wholesale financing – Dealer wholesale financing is floating-rate wholesale loans to PACCAR dealers for new and used trucks and are recorded at amortized cost. The loans are collateralized by the trucks being financed.
Operating lease receivables and other – Operating lease receivables and other include monthly rentals due on operating leases, unamortized loan and lease origination costs, interest on loans and other amounts due within one year in the normal course of business.
Allowance for Credit Losses:
Truck, Parts and Other: The Company historically has not experienced significant losses or past due amounts on trade and other receivables in its Truck, Parts and Other businesses. Accounts are considered past due once the unpaid balance is over
Financial Services: 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.
44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024, 2023 and 2022 (currencies in millions)
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. 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.
On average, commercial and other modifications extended contractual terms by approximately
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 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 to
The Company individually evaluates certain finance receivables for expected credit losses. Finance receivables that are evaluated individually 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. In general, finance receivables that are 90 days past due are placed on non-accrual status. Finance receivables on non-accrual status 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.
Individually evaluated receivables on non-accrual status are generally considered collateral dependent. Large balance retail and all wholesale receivables on non-accrual status are individually evaluated for loss based on the value of the underlying collateral or a discounted cash flow analysis. Small balance receivables on non-accrual status 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 evaluated 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, current market 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 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 sources and 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 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.
45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024, 2023 and 2022 (currencies in millions)
Accounts are 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 amortized cost basis.
Inventories: Inventories are stated at the lower of cost or net realizable value. Cost of inventories is determined principally by the first-in, first-out (FIFO) method. Cost of sales and revenues include shipping and handling costs incurred to deliver products to dealers and customers.
Equipment on Operating Leases: The Company’s Financial Services segment leases equipment under operating leases to its customers. In addition, in the Truck segment, equipment sold to customers in Europe subject to a RVG by the Company may be accounted for as an operating lease. Equipment is recorded at cost and is depreciated on the straight-line basis to the lower of the estimated residual value or guarantee value. Lease and guarantee periods generally range from to
Property, Plant and Equipment: Property, plant and equipment are stated at cost. Depreciation is computed by the straight-line method based on the estimated useful lives of various classes of assets. Certain production tooling and equipment are amortized on a unit of production basis.
Derivative Financial Instruments: As part of its risk management strategy, the Company enters into derivative contracts to hedge against the risks of interest rates, foreign currency rates and commodity prices. Certain derivative instruments designated as fair value hedges, cash flow hedges or net investment hedges are subject to hedge accounting. Derivative instruments that are not subject to hedge accounting are held as 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, 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 derivative counterparties is limited to the asset position of its derivative portfolio. The asset position of the Company’s derivative portfolio was $
46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024, 2023 and 2022 (currencies in millions)
The Company assesses hedges at inception and on an ongoing basis to determine the designated derivatives are highly effective in offsetting changes in fair values or cash flow of the hedged items. Hedge accounting is discontinued prospectively when the Company determines a derivative financial instrument has ceased to be a highly effective hedge. Cash flows from derivative instruments are included in Operating activities in the Consolidated Statements of Cash Flows.
Government Grants: The Company receives incentives from U.S. and non-U.S. governmental entities in the form of tax rebates or credits, grants, and loans. The benefit is generally recorded when all conditions attached to the incentive have been met and there is reasonable assurance of the receipt. Government incentives are recorded in accordance with their purpose as a reduction of expense, a reduction of the cost of the capital investment, or other income. The amount of government incentives recorded as a reduction of expenses and the amount of grants receivable for the years ended December 31, 2024, 2023 and 2022 are immaterial.
Foreign Currency Translation: For most of the Company’s foreign subsidiaries, the local currency is the functional currency. All assets and liabilities are translated at year-end exchange rates and all income statement amounts are translated at the weighted average rates for the period. Translation adjustments are recorded in AOCI. The Company uses the U.S. dollar as the functional currency for all but one of its Mexican subsidiaries, which uses the local currency. For the U.S. functional currency entities in Mexico, inventories, cost of sales, property, plant and equipment and depreciation are remeasured at historical rates and resulting adjustments are included in net income.
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.
On
New Accounting Pronouncements: In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this ASU require entities to disclose certain, specific categories within the rate reconciliation and enhance disclosures regarding income taxes paid and income tax expense. This ASU is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The amendments in this ASU should be applied on a prospective basis; however, retrospective application is permitted. The implementation of this ASU will result in additional disclosures and will not have an impact on the Company’s consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendments in this ASU expand the disclosures in the notes to the financial statements about specific cost and expense categories presented on the face of the income statement. This ASU is effective for annual periods beginning after December 15, 2026, and interim periods within annual periods beginning after December 15, 2027. Early adoption is permitted. The amendments in this ASU should be applied either (1) prospectively to financial statements issued for reporting periods after the effective date or (2) retrospectively to any or all prior periods presented. The Company is currently evaluating the impact of this update on the related notes to the financial statements.
The Company
STANDARD |
|
DESCRIPTION |
|
2022-03 |
|
Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions |
|
|
|
|
|
2023-07 |
|
Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures |
|
47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024, 2023 and 2022 (currencies in millions)
The following table disaggregates Truck, Parts and Other revenues by major sources:
Year Ended December 31, |
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
Truck |
|
|
|
|
|
|
|
|
|
|||
Truck sales |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Revenues from extended warranties, operating leases and other |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Parts |
|
|
|
|
|
|
|
|
|
|||
Parts sales |
|
|
|
|
|
|
|
|
|
|||
Revenues from dealer services and other |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Winch sales and other* |
|
|
|
|
|
|
|
|
|
|||
Truck, Parts and Other sales and revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|||
*
The following table summarizes Financial Services lease revenues by lease type:
Year Ended December 31, |
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
Finance lease revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Operating lease revenues |
|
|
|
|
|
|
|
|
|
|||
Total lease revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Marketable securities consisted of the following at December 31:
|
|
|
|
|
UNREALIZED |
|
|
UNREALIZED |
|
|
FAIR |
|
||||
2024 |
|
COST |
|
|
GAINS |
|
|
LOSSES |
|
|
VALUE |
|
||||
Marketable debt securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. tax-exempt securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
U.S. taxable municipal / non-U.S. provincial bonds |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. corporate securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Non-U.S. corporate securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Non-U.S. government securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other debt securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketable equity securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total marketable securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024, 2023 and 2022 (currencies in millions)
|
|
|
|
|
UNREALIZED |
|
|
UNREALIZED |
|
|
FAIR |
|
||||
2023 |
|
COST |
|
|
GAINS |
|
|
LOSSES |
|
|
VALUE |
|
||||
Marketable debt securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. tax-exempt securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
U.S. taxable municipal / non-U.S. provincial bonds |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. corporate securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Non-U.S. corporate securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Non-U.S. government securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other debt securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketable equity securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total marketable securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
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 $
Net unrealized gains (losses) on marketable equity securities recognized in investment income were $
Marketable debt securities with continuous unrealized losses and their related fair values were as follows:
At December 31, |
|
2024 |
|
|
2023 |
|
||||||||||
|
|
LESS THAN |
|
|
TWELVE |
|
|
LESS THAN |
|
|
TWELVE |
|
||||
Fair value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Unrealized losses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
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,
Contractual maturities on marketable debt securities at December 31, 2024 were as follows:
|
|
AMORTIZED |
|
|
FAIR |
|
||
Maturities: |
|
COST |
|
|
VALUE |
|
||
Within one year |
|
$ |
|
|
$ |
|
||
One to five years |
|
|
|
|
|
|
||
Six to ten years |
|
|
|
|
|
|
||
More than ten years |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024, 2023 and 2022 (currencies in millions)
Inventories are stated at the lower of cost or net realizable value. Cost of inventories is determined principally by the first-in, first-out (FIFO) method.
Inventories include the following:
At December 31, |
|
2024 |
|
|
2023 |
|
||
Finished products |
|
$ |
|
|
$ |
|
||
Work in process and raw materials |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
Finance and other receivables include the following:
At December 31, |
|
2024 |
|
|
2023 |
|
||
Loans |
|
$ |
|
|
$ |
|
||
Finance leases |
|
|
|
|
|
|
||
Dealer wholesale financing |
|
|
|
|
|
|
||
Operating lease receivables and other |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Less allowance for losses: |
|
|
|
|
|
|
||
Loans and leases |
|
|
( |
) |
|
|
( |
) |
Dealer wholesale financing |
|
|
( |
) |
|
|
( |
) |
Operating lease receivables and other |
|
|
( |
) |
|
|
( |
) |
|
|
$ |
|
|
$ |
|
||
Included in Finance and other receivables, net on the Consolidated Balance Sheets is accrued interest receivable (net of allowance for credit losses) of $
Annual minimum payments due on loans are as follows:
Beginning January 1, |
|
LOANS |
|
|
2025 |
|
$ |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
Thereafter |
|
|
|
|
|
|
$ |
|
|
50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024, 2023 and 2022 (currencies in millions)
Annual minimum payments due on finance lease receivables and a reconciliation of the undiscounted cash flows to the net investment in finance leases are as follows:
Beginning January 1, |
|
FINANCE |
|
|
2025 |
|
$ |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
Thereafter |
|
|
|
|
|
|
|
|
|
Unguaranteed residual values |
|
|
|
|
Unearned interest on finance leases |
|
|
( |
) |
Net investment in finance leases |
|
$ |
|
|
Experience indicates substantially all of dealer wholesale financing will be repaid within
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 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.
Allowance for Credit Losses: The allowance for credit losses is summarized as follows:
|
|
2024 |
|
|||||||||||||||||
|
|
DEALER |
|
|
CUSTOMER |
|
|
|
|
|
|
|
||||||||
|
|
WHOLESALE |
|
|
RETAIL |
|
|
RETAIL |
|
|
OTHER* |
|
|
TOTAL |
|
|||||
Balance at January 1 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Provision for losses |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|||
Charge-offs |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
||
Recoveries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Currency translation and other |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Balance at December 31 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
|
|
2023 |
|
|||||||||||||||||
|
|
DEALER |
|
|
CUSTOMER |
|
|
|
|
|
|
|
||||||||
|
|
WHOLESALE |
|
|
RETAIL |
|
|
RETAIL |
|
|
OTHER* |
|
|
TOTAL |
|
|||||
Balance at January 1 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Provision for losses |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Charge-offs |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Recoveries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Currency translation and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Balance at December 31 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
*
51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024, 2023 and 2022 (currencies in millions)
|
|
2022 |
|
|||||||||||||||||
|
|
DEALER |
|
|
CUSTOMER |
|
|
|
|
|
|
|
||||||||
|
|
WHOLESALE |
|
|
RETAIL |
|
|
RETAIL |
|
|
OTHER* |
|
|
TOTAL |
|
|||||
Balance at January 1 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Provision for losses |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|||
Charge-offs |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
||
Recoveries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Currency translation and other |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Balance at December 31 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
*
Credit Quality: The Company’s customers are principally concentrated in the transportation industry in North America, Europe, Australia and 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
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 collateral dependent. At-risk accounts are collateral dependent, including accounts over 90 days past due and other accounts on non-accrual status.
52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024, 2023 and 2022 (currencies in millions)
The tables below summarize the amortized cost basis of the Company’s finance receivables within each credit quality indicator by year of origination and portfolio class and current period gross charge-offs of the Company’s finance receivables by year of origination and portfolio class.
|
REVOLVING |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
At December 31, 2024 |
LOANS |
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
PRIOR |
|
|
TOTAL |
|
||||||||
Amortized cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Dealer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Wholesale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
||||||||
Watch |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
At-risk |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
||||||||
Retail: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Watch |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Total dealer |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Customer retail: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Fleet: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Watch |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
At-risk |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Owner/operator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Watch |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
At-risk |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Total customer retail |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
REVOLVING |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
At December 31, 2024 |
LOANS |
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
PRIOR |
|
|
TOTAL |
|
||||||||
Gross charge-offs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Customer retail: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Fleet |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Owner/operator |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024, 2023 and 2022 (currencies in millions)
|
REVOLVING |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
At December 31, 2023 |
LOANS |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
PRIOR |
|
|
TOTAL |
|
||||||||
Amortized cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Dealer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Wholesale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
||||||||
Watch |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
||||||||
Retail: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Total dealer |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Customer retail: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Fleet: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Watch |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
At-risk |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Owner/operator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Performing |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Watch |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
At-risk |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Total customer retail |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
REVOLVING |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
At December 31, 2023 |
LOANS |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
PRIOR |
|
|
TOTAL |
|
||||||||
Gross charge-offs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Dealer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Wholesale |
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
||||||||
Total dealer |
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Customer retail: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Fleet |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Owner/operator |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total customer retail |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Total |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024, 2023 and 2022 (currencies in millions)
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 |
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
OWNER/ |
|
|
|
|
|||||
At December 31, 2024 |
|
WHOLESALE |
|
|
RETAIL |
|
|
FLEET |
|
|
OPERATOR |
|
|
TOTAL |
|
|||||
Current and up to 30 days past due |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
31 – 60 days past due |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Greater than 60 days past due |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
|
|
DEALER |
|
|
CUSTOMER RETAIL |
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
OWNER/ |
|
|
|
|
|||||
At December 31, 2023 |
|
WHOLESALE |
|
|
RETAIL |
|
|
FLEET |
|
|
OPERATOR |
|
|
TOTAL |
|
|||||
Current and up to 30 days past due |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
31 – 60 days past due |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Greater than 60 days past due |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
The amortized cost basis of finance receivables that are on non-accrual status was as follows:
|
|
DEALER |
|
CUSTOMER RETAIL |
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
OWNER/ |
|
|
|
|
||||
At December 31, 2024 |
|
WHOLESALE |
|
|
RETAIL |
|
FLEET |
|
|
OPERATOR |
|
|
TOTAL |
|
||||
Amortized cost basis with a specific reserve |
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Amortized cost basis with no specific reserve |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The increase in amortized cost basis with a specific reserve is due to customers in the U.S. and Canada and Brasil.
|
|
DEALER |
|
CUSTOMER RETAIL |
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
OWNER/ |
|
|
|
|
|||
At December 31, 2023 |
|
WHOLESALE |
|
RETAIL |
|
FLEET |
|
|
OPERATOR |
|
|
TOTAL |
|
|||
Amortized cost basis with a specific reserve |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
Amortized cost basis with no specific reserve |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Total |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
Interest income recognized on a cash basis for finance receivables that are on non-accrual status was as follows:
|
|
|
|
|
|
|
|
|
|
|||
Year Ended December 31, |
|
2024 |
|
|
2023 |
|
|
|
2022 |
|
||
Dealer: |
|
|
|
|
|
|
|
|
|
|||
Retail |
|
|
|
|
|
|
|
$ |
|
|||
Customer retail: |
|
|
|
|
|
|
|
|
|
|||
Fleet |
|
$ |
|
|
$ |
|
|
|
|
|||
Owner/operator |
|
|
|
|
|
|
|
|
|
|||
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024, 2023 and 2022 (currencies in millions)
Customers Experiencing Financial Difficulty: The Company modified $
|
|
|
|
|
|
|
||
At December 31, |
|
2024 |
|
|
2023 |
|
||
Customer retail: |
|
|
|
|
|
|
||
Fleet |
|
$ |
|
|
$ |
|
||
Owner/operator |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
% of total retail portfolio |
|
|
% |
|
< |
|
||
The higher other than insignificant modifications to customers experiencing financial difficulties was primarily for two large fleet customers in the U.S. The modifications granted customers additional time to pay. The financial effects of the term extensions added a weighted-average of
There were $
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 December 31, 2024 and 2023 was $
Proceeds from the sales of repossessed assets were $
A summary of equipment on operating leases for Truck, Parts and Other and for the Financial Services segment is presented below:
|
|
TRUCK, PARTS AND OTHER |
|
|
FINANCIAL SERVICES |
|
||||||||||
At December 31, |
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
Equipment on operating leases |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Less allowance for depreciation |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Annual minimum lease payments due on Financial Services operating leases beginning January 1, 2025 are $
56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024, 2023 and 2022 (currencies in millions)
When the equipment is sold subject to a RVG, the full sales price is received from the customer. A liability is established for the residual value obligation with the remainder of the proceeds recorded as deferred lease revenue.
|
|
TRUCK, PARTS AND OTHER |
|
|||||
At December 31, |
|
|
2024 |
|
|
|
2023 |
|
Residual value guarantees |
|
$ |
|
|
$ |
|
||
Deferred lease revenues |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
Annual maturities of the RVGs beginning January 1, 2025 are $
Property, plant and equipment included the following:
At December 31, |
|
USEFUL LIVES |
|
|
2024 |
|
|
|
2023 |
|
Land |
|
|
|
$ |
|
|
$ |
|
||
Buildings and improvements |
|
|
|
|
|
|
|
|||
Machinery, equipment and production tooling |
|
|
|
|
|
|
|
|||
Construction in progress |
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
||
Less allowance for depreciation |
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
$ |
|
|
$ |
|
Accounts payable, accrued expenses and other include the following:
At December 31, |
|
|
2024 |
|
|
|
2023 |
|
Truck, Parts and Other: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
|
|
$ |
|
||
Product support liabilities |
|
|
|
|
|
|
||
Accrued expenses |
|
|
|
|
|
|
||
Right-of-return liabilities |
|
|
|
|
|
|
||
Accrued capital expenditures |
|
|
|
|
|
|
||
Salaries and wages |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
Changes in product support liabilities are summarized as follows:
WARRANTY RESERVES |
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
Balance at January 1 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Cost accruals |
|
|
|
|
|
|
|
|
|
|||
Payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Change in estimates for pre-existing warranties |
|
|
|
|
|
|
|
|
|
|||
Currency translation and other |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Balance at December 31 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024, 2023 and 2022 (currencies in millions)
DEFERRED REVENUES ON EXTENDED WARRANTIES AND R&M CONTRACTS |
|
|
2024 |
|
|
|
2023 |
|
|
|
2022 |
|
Balance at January 1 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Deferred revenues |
|
|
|
|
|
|
|
|
|
|||
Revenues recognized |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Currency translation |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Balance at December 31 |
|
$ |
|
|
$ |
|
|
$ |
|
The Company expects to recognize approximately $
Product support liabilities are included in the accompanying Consolidated Balance Sheets as follows:
|
|
WARRANTY RESERVES |
|
|
DEFERRED REVENUES |
|
||||||||||
At December 31, |
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
Truck, Parts and Other: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Accounts payable, accrued expenses and other |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Other liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Financial Services: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Accounts payable, accrued expenses and other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deferred taxes and other liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Financial Services borrowings include the following:
|
|
2024 |
|
|
2023 |
|
||||||||||
|
|
EFFECTIVE |
|
|
|
|
|
EFFECTIVE |
|
|
|
|
||||
At December 31, |
|
RATE |
|
|
BORROWINGS |
|
|
RATE |
|
|
BORROWINGS |
|
||||
Commercial paper |
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
||||
Bank loans |
|
|
% |
|
|
|
|
|
% |
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Term notes |
|
|
% |
|
|
|
|
|
% |
|
|
|
||||
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
||||
Commercial paper and term notes borrowings were $
The annual maturities of the Financial Services borrowings are as follows:
|
|
COMMERCIAL |
|
|
BANK |
|
|
TERM |
|
|
|
|
||||
Beginning January 1, |
|
PAPER |
|
|
LOANS |
|
|
NOTES |
|
|
TOTAL |
|
||||
2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
2026 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
2027 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
2028 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
2029 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
2030 and beyond |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024, 2023 and 2022 (currencies in millions)
Interest paid on borrowings was $
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. Bank loans were primarily issued by Nacional Financiera (NAFIN), Scotiabank Mexico, HSBC Mexico and Banco Nacional de Desenvolvimento Economico e Social (BNDES). The medium-term notes are issued by PACCAR Financial Corp. (PFC), PACCAR Financial Europe (PFE), PACCAR Financial Mexico (PFM), PACCAR Financial Pty. Ltd. (PFPL Australia), PACCAR Financial Ltd. (PFL Canada) and Banco PACCAR S.A. (PFB).
In November 2024, the Company’s U.S. finance subsidiary, PFC, filed a shelf registration under the Securities Act of 1933. The total amount of medium-term notes outstanding for PFC as of December 31, 2024 was $
As of December 31, 2024, the Company’s European finance subsidiary, PFE, had €
In August 2021, PFM registered a
In August 2018, the Company's Australian subsidiary, PFPL Australia established a medium-term note program. The program does not limit the principal amount of debt securities that may be issued under the program. The total amount of medium-term notes outstanding for PFPL Australia as of December 31, 2024 was
In May 2021, the Company's Canadian subsidiary, PFL Canada established a medium-term note program. The program does not limit the principal amount of debt securities that may be issued under the program. There were
The Company’s Brazilian subsidiary, PFB, established a lending program in December 2021 with the local development bank, BNDES, for qualified customers to receive preferential conditions and generally market interest rates. This program is limited to
The Company has line of credit arrangements of $
The Company leases certain facilities and equipment. The Company determines whether an arrangement is or contains a lease at inception. The Company accounts for lease and non-lease components separately. The consideration in the contract is allocated to each separate lease and non-lease component of the contract generally based on the relative stand-alone price of the components. The lease component is accounted for in accordance with the lease standard and the non-lease component is accounted for in accordance with other standards. The Company uses its incremental borrowing rate in determining the present value of lease payments unless the rate implicit in the lease is available. The lease term may include options to extend or terminate the lease if it is reasonably certain that the Company will exercise that option. Leases that have a term of 12 months or less at the commencement date (“short-term leases”) are not included in the right-of-use assets and the lease liabilities. Lease expense for the short-term leases are recognized on a straight-line basis over the lease term.
59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024, 2023 and 2022 (currencies in millions)
The components of lease expense were as follows:
Year Ended December 31, |
|
|
2024 |
|
|
|
2023 |
|
|
|
2022 |
|
Finance lease cost |
|
|
|
|
|
|
|
|
|
|||
Amortization of right-of-use assets and interest |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Operating lease cost |
|
|
|
|
|
|
|
|
|
|||
Short-term lease cost |
|
|
|
|
|
|
|
|
|
|||
Variable lease cost |
|
|
|
|
|
|||||||