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What changed in Paccar's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Paccar's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+213 added−209 removedSource: 10-K (2024-02-21) vs 10-K (2023-02-22)

Top changes in Paccar's 2023 10-K

213 paragraphs added · 209 removed · 182 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

51 edited+6 added−6 removed52 unchanged
Biggest changeThe Company will continue to fund capital and R&D projects to meet future emissions and certification requirements through the introduction of new technologies to 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.
Biggest changeThe 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.
Some units are ordered by dealers for stocking to meet the needs of certain customers who require immediate delivery or for customers that require chassis to be fitted with specialized bodies.
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.
(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.
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.
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 disclosed greenhouse gas emissions through CDP (formerly Carbon Disclosure Project) since 2014.
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. 7 PACCAR has disclosed greenhouse gas emissions through CDP (formerly Carbon Disclosure Project) since 2014.
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 fuel cell powertrains. To develop these industry-leading products and technologies, PACCAR makes significant research and development and capital investments every year.
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.
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.
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 6 distributed.
Medium-duty trucks have a GVW ranging from 19,500 to 33,000 lbs (Class 6 to 7) in North America, and in Europe, light- and medium-duty trucks range between 6 and 16 metric tonnes. Trucks are configured with engine in front of cab (conventional) or cab-over-engine (COE).
Medium-duty trucks have a GVW ranging from 19,500 to 33,000 lbs (Class 6 to 7) in North America, and in Europe, light- and medium-duty trucks range between 6 and 16 metric tonnes. Trucks are configured with the engine in front of cab (conventional) or cab-over-engine (COE).
PFS’s primary competitors include commercial banks and independent finance and leasing companies. 5 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.
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.
Connected Trucks and Driver Training - The DAF 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.
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.
Sales of industrial winches were less than 1% of total net sales and revenues in 2022, 2021 and 2020. The Braden, Carco and Gearmatic trademarks and trade names are recognized internationally and play an important role in the marketing of those products. PATENTS The Company owns numerous patents which relate to all product lines.
Sales of industrial winches were less than 1% of total net sales and revenues in 2023, 2022 and 2021. The Braden, Carco and Gearmatic trademarks and trade names are recognized internationally and play an important role in the marketing of those products. PATENTS The Company owns numerous patents which relate to all product lines.
PACCAR competes in the Brazilian heavy truck market with DAF COE models assembled at Ponta Grossa in the state of Paraná, Brasil.
PACCAR competes in the Brazilian heavy truck market with DAF COE models assembled in Ponta Grossa in the state of Paraná, Brasil.
Bolgar (54) 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; Human Resources Vice President of Global Operations and Quality for Baxter International, Inc. from April 2016 to December 2019. Todd R.
Bolgar (55) 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; Human Resources Vice President of Global Operations and Quality for Baxter International, Inc. from April 2016 to December 2019. Todd R.
Sales of trucks manufactured with these cabs amounted to approximately 3% of consolidated revenues in 2022. 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.
Sales of trucks manufactured with these cabs amounted to approximately 3% of consolidated revenues in 2023. 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.
PACCAR’s facilities are continuously looking for ways to reduce waste, reuse materials, conserve energy 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.
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.
Advanced Vehicles - PACCAR is launching its SuperTruck 3 program to continue the development of its Class 8 Kenworth and Peterbilt battery-electric and fuel cell vehicles, along with its vehicle charging stations. SuperTruck 3 is a U.S. Department of Energy (DOE) initiative to develop state-of-the-art zero emissions medium- and heavy-duty trucks.
Advanced Vehicles - PACCAR began work on its SuperTruck 3 program to continue the development of its Class 8 Kenworth and Peterbilt battery-electric and fuel cell vehicles, along with its vehicle charging stations. SuperTruck 3 is a U.S. Department of Energy (DOE) initiative to develop state-of-the-art zero emissions medium- and heavy-duty trucks.
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.
ITEM 1. B USINESS. 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.
Commercial truck manufacturing comprises the largest segment of PACCAR’s business and accounted for 75% of total 2022 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.
Commercial truck manufacturing comprises the largest segment of PACCAR’s business and accounted for 77% of total 2023 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.
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 factories to provide all employees with safety-related information.
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.
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 2022 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 inventory levels are determined largely by anticipated customer demand and the need for timely delivery. The Parts segment accounted for 18% of total 2023 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.
The Company also manufactures engines at its Columbus, Mississippi facility. In 202 2 , the Company installed PACCAR engines in approximately 42 % 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.
The Company also manufactures engines at its Columbus, Mississippi facility. In 2023, the Company installed PACCAR engines in approximately 37% 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 primary laws and regulations are the EPA’s Greenhouse Gas Emissions Standards and Fuel Efficiency Standards for Medium and Heavy-Duty Engines and Vehicles, 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 of the California Air Resources Board.
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.
PACCAR's consistent focus on workplace safety has resulted in a recordable injury rate lower than the U.S. industry average. On December 31, 2022, the Company had approximately 31,100 employees. Approximately 38% are U.S. employees. 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 consistent focus on workplace safety has resulted in a recordable injury rate lower than the U.S. industry average. On December 31, 2023, the Company had approximately 32,400 employees. Approximately 39% are U.S. employees. 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.
The value of finished truck components manufactured by independent suppliers ranges from approximately 34 % in Europe to approximately 8 6 % in North America. In addition to materials, the Company’s cost of sales includes labor and factory overhead, vehicle delivery and warranty.
The value of finished truck components manufactured by independent suppliers ranges from approximately 24% in Europe to approximately 87% in North America. In addition to materials, the Company’s cost of sales includes labor and factory overhead, vehicle delivery and warranty.
In addition, the Company’s reports filed with the SEC can be found at www.sec.gov . 8 INFORMATION ABOUT THE COMPANY’S EXECUTIVE OFFICERS Item 401(b) of Regulation S-K: Information about the Company’s Executive Officers as of February 22, 2023 is as fo llows: Name and Age Present Position and Other Position(s) Held During Last Five Years Mark C.
In addition, the Company’s reports filed with the SEC can be found at www.sec.gov . 8 INFORMATION ABOUT THE COMPANY’S EXECUTIVE OFFICERS Item 401(b) of Regulation S-K: Information about the Company’s Executive Officers as of February 21, 2024 is as follows: Name and Age Present Position and Other Position(s) Held During Last Five Years Mark C.
The Company and its suppliers rel y 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 8 5 % of the cost of new trucks.
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.
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 2022, DAF had a 17.3% share of the European heavy-duty market and a 9.7% share of the light/medium-duty market. These markets are highly competitive in price, quality and service.
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 2023, DAF had a 15.6% share of the European heavy-duty market and a 9.1% share of the light/medium-duty market. These markets are highly competitive in price, quality and service.
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 29.8% of retail sales in 2022, and the Company’s medium-duty market share was 10.9%.
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 29.5% of retail sales in 2023, and the Company’s medium-duty market share was 14.5%.
Bloch (46) Vice President of PACCAR and General Manager of PACCAR Parts since March 2022; 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; Assistant General Manager of PACCAR Parts from January 2016 to January 2019. Paulo H.
Laura J. Bloch (47) Vice President of PACCAR and General Manager of PACCAR Parts since March 2022; 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. Paulo H.
Rich (54) Vice President and Chief Technology Officer since March 2021; 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. Harald P.
Rich (55) 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.
PACCAR has established emissions reduction targets in partnership with the Science Based Targets Initiative (SBTi). SBTi works with more than 4,000 companies worldwide to create a clearly defined path to reduce greenhouse gas emissions in line with the Paris Agreement. 7 Operations - PACCAR is committed to environmental responsibility in the vehicle production process.
SBTi works with more than 7,000 companies worldwide to create a clearly defined path to reduce greenhouse gas emissions in line with the Paris Agreement. Operations - PACCAR is committed to environmental responsibility in the vehicle production process.
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 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.
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.
PFS matches the maturity and interest rate characteristics of its debt with the maturity and interest rate characteristics of loans and leases. 5 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.
Michael Dozier (57) Executive Vice President since January 2023; Senior Vice President from January 2020 to December 2022; Vice President of PACCAR from August 2019 to December 2019; Vice President of PACCAR and General Manager, Kenworth from April 2016 to July 2019. Darrin C.
Schippers (61) President and Chief Financial Officer since January 2018. C. Michael Dozier (58) Executive Vice President since January 2023; Senior Vice President from January 2020 to December 2022; Vice President of PACCAR from August 2019 to December 2019; Vice President of PACCAR and General Manager, Kenworth from April 2016 to July 2019. Darrin C.
The Company engages in a continuous program of trademark and trade name protection in all marketing areas of the world. 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 engages in a continuous program of trademark and trade name protection in all marketing areas of the world. The Company’s truck products are subject to noise, emission and safety regulations. Competing manufacturers are subject to the same regulations.
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.
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.
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.
The Company believes in all material respects it is in compliance with the laws and regulations applicable to our plants and operations.
Seidel (55) Vice President of PACCAR and President of DAF Trucks N.V. since August 2022; Director of Finance from October 2017 to July 2022. Jason P. Skoog (51) Vice President of PACCAR and General Manager of Peterbilt since April 2018; Assistant General Manager – Operations, Kenworth from January 2017 to March 2018. Michael K.
Seidel (56) Vice President of PACCAR and President of DAF Trucks N.V. since August 2022; Director of Finance from October 2017 to July 2022. Jason P. Skoog (52) Vice President of PACCAR and General Manager of Peterbilt since April 2018. James W.
Production of the year-end 2022 backlog is expected to be substantially completed during 2023. 4 PARTS The Parts segment includes the distribution of aftermarket parts for trucks and related commercial vehicles to over 2,300 Kenworth, Peterbilt and DAF dealers in 95 countries around the world.
PARTS The Parts segment includes the distribution of aftermarket parts for trucks and related commercial vehicles to over 2,300 Kenworth, Peterbilt and DAF dealers in 95 countries around the world.
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 not manufactured by the Company are certified to use up to B20 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.
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.
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 announced in December 2023 that it will construct a new engine remanufacturing facility in Columbus, Mississippi to be opened in 2025.
PACCAR’s Zero Emissions Trucks - PACCAR’s research and development efforts include several 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.
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.
Pigott (69) 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.
Pigott (70) 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 (56) Chief Executive Officer since July 2019; Executive Vice President from September 2018 to June 2019. Harrie C.A.M.
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. 6 The Company designs and manufactures engines for use in PACCAR vehicles worldwide.
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.
Wolters (52) 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; European Sales Director, DAF Trucks, from October 2017 to August 2018 .
Walton (59) Vice President and General Counsel since August 2020; Senior Counsel from August 2007 to July 2020. Harry M.B. Wolters (53) 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.
Baney (52) Vice President of PACCAR and General Manager of Kenworth Truck Company since August 2019; Assistant General Manager – Sales and Marketing, Kenworth from January 2017 to July 2019. Laura J.
Siver (57) Executive Vice President since January 2023; Senior Vice President from January 2017 to December 2022. Kevin D. Baney (53) Senior Vice President since January 2024; Vice President of PACCAR and General Manager of Kenworth Truck Company from August 2019 to December 2023; Assistant General Manager – Sales and Marketing, Kenworth from January 2017 to July 2019. John N.
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.
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.
Selected dealers in North America 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.
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.
The Company had a total production backlog of $18.1 billion at the end of 2022. Within this backlog, orders scheduled for delivery within three months (90 days) are considered to be firm. The 90‑day backlog approximated $8.0 billion at December 31, 2022, $5.2 billion at December 31, 2021 and $4.6 billion at December 31, 2020.
The Company believes the cost of complying with these regulations will not be detrimental to its business. 4 The Company had a total production backlog of $17.4 billion at the end of 2023. Within this backlog, orders scheduled for delivery within three months (90 days) are considered to be firm.
PFS accounted for 5% of total net sales and revenues and 52% of total assets in 2022. 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.
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).
Hubbard (60) Vice President, Global Financial Services since February 2019; President, PACCAR Financial Corp. from April 2011 to January 2019. A. Lily Ley (57) Vice President and Chief Information Officer since January 2017. John N.
Hubbard (61) Vice President, Global Financial Services since February 2019. A. Lily Ley (58) Vice President and Chief Information Officer since January 2017. Brice J. Poplawski (59) 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.
PACCAR established its science-based greenhouse gas emission reduction targets to meet the goals of the Paris Agreement. The Company continually monitors developments in emissions and climate change-related laws and regulations in the markets in which the Company conducts business.
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. PACCAR established its science-based greenhouse gas emission reduction targets to meet the goals of the Paris Agreement.
Removed
PFS matches the maturity and interest rate characteristics of its debt with the maturity and interest rate characteristics of loans and leases.
Added
The 90‑day backlog approximated $7.6 billion at December 31, 2023, $8.0 billion at December 31, 2022 and $5.2 billion at December 31, 2021. Production of the year-end 2023 backlog is expected to be substantially completed during 2024.
Removed
In addition, the Company is subject to certain other licensing requirements to do business in the United States and Europe.
Added
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 5% of total net sales and revenues and 51% of total assets in 2023. PFS is primarily responsible for managing the sales of the Company’s used trucks.
Removed
In 2022, PACCAR achieved an “A” score from CDP, placing in the top 1.5% of more than 18,000 reporting companies and demonstrating a robust approach to reducing greenhouse gas emissions in Kenworth, Peterbilt and DAF vehicles and from our global operations. PACCAR has earned an “A” or “A-” rating for eight consecutive years.
Added
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.
Removed
Preston Feight (55) Chief Executive Officer since July 2019; Executive Vice President from September 2018 to June 2019; Vice President of PACCAR and President of DAF Trucks N.V. from April 2016 to August 2018. Harrie C.A.M. Schippers (60) President and Chief Financial Officer since January 2018. C.
Added
PACCAR earned an "A-" score on its CDP environmental report in 2023, placing the Company in the Leadership tier of over 21,000 reporting companies worldwide. The Company has earned an “A” or “A-” score from CDP for the past nine years. PACCAR has established emissions reduction targets in partnership with the Science Based Targets Initiative (SBTi).
Removed
Siver (56) Executive Vice President since January 2023; Senior Vice President from January 2017 to December 2022. Michael T. Barkley (67) Senior Vice President and Controller since January 2016. Kevin D.
Added
Battery Manufacturing - PACCAR, Cummins, Daimler Trucks and EVE Energy are partnering to produce state-of-the-art commercial vehicle batteries in a 21-gigawatt hour (GWh) factory in Marshall County, Mississippi, subject to regulatory approval. Production is expected to begin in 2027.
Removed
Walton (58) Vice President and General Counsel since August 2020; Senior Counsel from August 2007 to July 2020. Harry M.B.
Added
Walenczak (49) 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 August 2021. Michael K.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

20 edited+3 added−9 removed25 unchanged
Biggest changeUnexpected 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.
Biggest changeSupplier 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 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.
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.
Substantially all of the Company’s finance contracts which used to reference LIBOR (London Inter-Bank Offered Rate), including dealer wholesale financing contracts, retail loan and lease contracts, medium-term notes, hedging instruments and line of credit arrangements, have been transitioned to alternative benchmark rates.
All of the Company’s finance contracts which used to reference LIBOR (London Inter-Bank Offered Rate), including dealer wholesale financing contracts, retail loan and lease contracts, medium-term notes, hedging instruments and line of credit arrangements, have been transitioned to alternative benchmark rates.
Commodity or component price increases, cost pressures due to inflation, sign ificant 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.
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.
For additional disclosures regarding accounting estimates, see “Critical Accounting Policies” under Item 7 of this Form 10-K. Taxes. Changes in stat utory income tax rates in the countries in which the Company operates impact the Company’s effective tax rate.
For additional disclosures regarding accounting estimates, see “Critical Accounting Policies” under Item 7 of this Form 10-K. 12 Taxes. Changes in statutory income tax rates in the countries in which the Company operates impact the Company’s effective tax rate.
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, 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 of the California Air Resources Board.
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 Company does not expect the cessation of LIBOR or the anticipated changes to other benchmark rates will have a material impact on the results of operations. Information Technology.
The Company does not expect the cessation of CDOR or the anticipated changes to other benchmark rates will have a material impact on the results of operations. Information Technology and Cybersecurity.
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; or outside parties attempting to disrupt the Company’s business or gain unauthorized access to the Company’s electronic data. The Company maintains and continues to invest in protections to guard against such events.
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; or outside parties attempting to disrupt the Company’s business or gain unauthorized access to the Company’s electronic data.
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.
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. UNRESOLVE D STAFF COMMENTS. None.
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.
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.
PACCAR expects that climate change-related laws, regulations, and international accords will continue to evolve. The Company 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. Litigation, Product Liability and Regulatory.
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. Litigation, Product Liability and Regulatory. The Company’s products are subject to recall for environmental, performance and safety-related issues.
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.
Product recalls, lawsuits, regulatory actions or increases in the reserves the Company establishes for contingencies may increase the Company’s costs and lower profits.
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.
ITEM 1A. RI SK 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 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 (such as COVID-19), wars, 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.
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 (such as COVID-19), wars, geopolitical tensions and conflicts (such as conflicts in Ukraine and Israel), terrorism and labor strikes.
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).
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).
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.
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’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. 12 Currency Exchange and Translation .
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.
Examples of these protections include conducting third-party penetration tests, implementing software detection and prevention tools, event monitoring, and disaster recoverability. Additionally, the Company maintains a cybersecurity insurance policy. Despite these safeguards, there remains a risk of system disruptions, unauthorized access and data loss.
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.
PACCAR established its science-based greenhouse gas emission reduction targets to meet the goals of the Paris Agreement. 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 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.
These and other unforeseen pandemic related factors could impact the Company’s business and results of operations. Environmental Regulations. The Company’s operations are subject to environmental laws and regulations that impose significant compliance costs.
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.
Removed
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.
Added
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.
Removed
Supplier delivery performance can be adversely affected if increased demand for these suppliers’ products exceeds their production capacity. The Company has been affected by an industry-wide undersupply of component parts and anticipates the shortages may continue to affect deliveries into 2023.
Added
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.
Removed
The Company has not experienced any notable security incidents that would have a material impact on the results of operations and financial condition of the Company. Certain dealers and suppliers have reported they have experienced cyberattacks and those have not caused any material impact to the Company.
Added
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 emission. PACCAR established its science-based greenhouse gas emission reduction targets to meet the goals of the Paris Agreement.
Removed
PACCAR’s global operations are subject to extensive trade, competition and anti-corruption laws and regulations that could impose significant compliance costs. Conflict in Ukraine. In accordance with international sanctions, in February 2022 the Company suspended truck and parts sales to Russia and Belarus. The Company has no factories in Russia and has managed export sales to Russia through independent dealers.
Removed
In 2021, 2,500 trucks were sold into Russia and Belarus. The Company also sold parts in these markets through a third-party owned warehouse. The trucks were sold on a fully paid-up basis; accordingly, the Company does not have significant receivables exposure. Inventory balances are not significant. The conflict may affect energy supplies in Europe.
Removed
If the availability of energy in Europe is severely constrained, truck delivery volumes could be impacted. The Company continues to monitor the situation closely. The conflict has not had a significant impact on the results of operations or cash flows of the Company.
Removed
The potential future impact on the Company’s business will depend on further developments, including the severity and duration of the conflict and its effect on European and global economic conditions. COVID-19 Pandemic.
Removed
The effects of the COVID-19 pandemic decreased over the course of 2022 but still caused disruptions to the global supply chain, in particular the undersupply of component parts and semiconductor chips. A recurrence of a severe COVID-19 strain could cause industry capacity constraints on our suppliers, and localized outbreaks of COVID-19 may necessitate facility slowdowns or shutdowns.
Removed
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.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES. The Company and its subsidiaries own and operate manufacturing plants in five U.S. states, three countries in Europe, and in Australia, Brasil, Canada and Mexico. The Company also has 18 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.
Biggest changeITEM 2. PR OPERTIES. The Company and its subsidiaries own and operate manufacturing plants in five U.S. states, three countries in Europe, and in Australia, Brasil, Canada and Mexico. The Company also has 18 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.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 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
Biggest changeITEM 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 SAF ETY DISCLOSURES. Not applicable. 13 PAR T II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe comparison assumes that $100 was invested December 31, 2017, in the Company’s common stock and in the stated indices and assumes reinvestment of dividends. 2017 2018 2019 2020 2021 2022 PACCAR Inc 100 84.68 122.83 137.25 144.97 169.61 S&P 500 Index 100 95.62 125.72 148.85 191.58 156.88 Peer Group Index 100 82.72 106.15 140.73 173.49 190.49 (b) Use of Proceeds from Registered Securities.
Biggest changeThe comparison assumes that $100 was invested December 31, 2018, in the Company’s common stock and in the stated indices and assumes reinvestment of dividends. 2018 2019 2020 2021 2022 2023 PACCAR Inc 100 145.05 162.08 171.19 200.29 310.48 S&P 500 Index 100 131.49 155.68 200.37 164.08 207.21 Current Peer Group Index 100 128.46 171.67 209.23 228.09 275.53 Prior Peer Group Index 100 128.32 170.13 209.74 230.29 272.34 15 (b) Use of Proceeds from Registered Securities.
Not applicable. (c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers. 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, 2022, the Company has repurchased $110.0 million of shares under this plan.
Not applicable. (c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers. 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, 2023, the Company has repurchased $110.0 million of shares under this plan.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. ( a ) Market Information, Holders, Dividends, Securities Authorized for Issuance Under Equity Compensation Plans and Performance Graph. Market Information and Holders. Common stock of the Company is traded on the Nasdaq Stock Market under the symbol PCAR.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOC KHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. (a) Market Information, Holders, Dividends, Securities Authorized for Issuance Under Equity Compensation Plans and Performance Graph. Market Information and Holders. Common stock of the Company is traded on the Nasdaq Stock Market under the symbol PCAR.
There were 1,495 record holders of the common stock at December 31, 2022. 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.
There were 1,426 record holders of the common stock at December 31, 2023. 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 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 649,986 shares that represent deferred cash awards payable in stock.
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 650,075 shares that represent deferred cash awards payable in stock.
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 in the graph (the “Peer Group Index”) for the last five fiscal years ended December 31, 2022.
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 “Current Peer Group Index” and “Prior Peer Group Index”) for the last five fiscal years ended December 31, 2023.
Securities available for future grant are authorized under the following two plans: (i) 15,036,039 shares under the LTI Plan, and (ii) 963,913 shares under the RSDC Plan. 15 Stockholder Return Performance Graph.
Securities available for future grant are authorized under the following two plans: (i) 14,072,474 shares under the LTI Plan, and (ii) 945,936 shares under the RSDC Plan. 14 Stockholder Return Performance Graph.
Number of Securities Granted and to be Issued Related to Outstanding Options and Restricted Stock Units Weighted-average Exercise Price of Outstanding Options Securities Available for Future Grant Stock compensation plans approved by stockholders 5,244,614 $ 51.10 15,999,952 All stock compensation plans have been approved by the stockholders.
Number of Securities Granted and to be Issued Related to Outstanding Options and Restricted Stock Units Weighted-average Exercise Price of Outstanding Options Securities Available for Future Grant Stock compensation plans approved by stockholders 4,917,291 $ 57.77 15,018,410 All stock compensation plans have been approved by the stockholders.
The Peer Group Index consists of AGCO Corporation, Caterpillar Inc., CNH Industrial N.V., Cummins Inc., Dana Incorporated, Deere & Company, Eaton Corporation, Navistar International Corporation (from 2017 through 2020), Oshkosh Corporation, TRATON SE (effective January 1, 2021) and AB Volvo. TRATON SE acquired Navistar International Corporation in 2021.
The Prior Peer Group Index consisted of AGCO Corporation, Caterpillar Inc., CNH Industrial N.V., Cummins Inc., Dana Incorporated, Deere & Company, Eaton Corporation, Navistar International Corporation, Oshkosh Corporation, TRATON SE and AB Volvo.
The following table provides information as of December 31, 2022 regarding compensation plans under which PACCAR equity securities are authorized for issuance and has been adjusted to reflect the Company’s 50% stock dividend in February 2023.
The following table provides information as of December 31, 2023 regarding compensation plans under which PACCAR equity securities are authorized for issuance.
There were no repurchases made during the fourth quarter of 2022.
There were no repurchases made during the fourth quarter of 2023. ITEM 6. [Reserved] 16
Removed
Meritor Inc. is no longer included in the Peer Group Index of the performance graph due to its acquisition by Cummins Inc. in 2022.
Added
Effective January 1, 2023, the Company revised its peer group to include Daimler Truck Holdings AG (effective January 1, 2022) and Iveco Group N.V. (effective January 1, 2022), direct competitors and publicly traded companies, and Terex Corporation (effective January 1, 2019), a more representative Company peer. The Company removed CNH Industrial N.V., which spun-off Iveco, and Dana Incorporated.
Added
The Current Peer Index also includes AGCO Corporation, Caterpillar Inc., Cummins Inc., Deere & Company, Eaton Corporation, Oshkosh Corporation, TRATON SE (effective January 1, 2021), Navistar International Corporation (from 2018 through 2020) and AB Volvo.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

93 edited+20 added−11 removed29 unchanged
Biggest change($ in millions) Year Ended December 31, 2022 2021 % CHANGE New loan and lease volume: U.S. and Canada $ 3,376.5 $ 3,338.9 1 Europe 1,483.4 1,316.2 13 Mexico, Australia, Brasil and other 1,355.8 1,016.6 33 $ 6,215.7 $ 5,671.7 10 New loan and lease volume by product: Loans and finance leases $ 5,209.6 $ 4,683.7 11 Equipment on operating lease 1,006.1 988.0 2 $ 6,215.7 $ 5,671.7 10 New loan and lease unit volume: Loans and finance leases 42,100 39,100 8 Equipment on operating lease 11,600 11,000 5 53,700 50,100 7 Average earning assets: U.S. and Canada $ 8,647.4 $ 8,635.2 Europe 3,810.0 3,787.1 1 Mexico, Australia, Brasil and other 2,544.0 2,107.6 21 $ 15,001.4 $ 14,529.9 3 Average earning assets by product: Loans and finance leases $ 10,279.4 $ 9,952.1 3 Dealer wholesale financing 1,933.9 1,472.6 31 Equipment on lease and other 2,788.1 3,105.2 (10 ) $ 15,001.4 $ 14,529.9 3 Revenues: U.S. and Canada $ 684.3 $ 759.9 (10 ) Europe 498.3 676.8 (26 ) Mexico, Australia, Brasil and other 322.8 251.1 29 $ 1,505.4 $ 1,687.8 (11 ) Revenues by product: Loans and finance leases $ 532.0 $ 481.9 10 Dealer wholesale financing 96.7 42.5 128 Equipment on lease and other 876.7 1,163.4 (25 ) $ 1,505.4 $ 1,687.8 (11 ) Income before income taxes $ 588.9 $ 437.6 35 New loan and lease volume increased to $6.22 billion in 2022 from $5.67 billion in 2021, primarily reflecting higher truck new loan and lease volume in Europe and Brasil.
Biggest change( $ in millions ) Year Ended December 31, 2023 2022 % CHANGE New loan and lease volume: U.S. and Canada $ 3,662.3 $ 3,376.5 8 Europe 1,586.6 1,483.4 7 Mexico, Australia, Brasil and other 1,956.4 1,355.8 44 $ 7,205.3 $ 6,215.7 16 New loan and lease volume by product: Loans and finance leases $ 6,538.6 $ 5,209.6 26 Equipment on operating lease 666.7 1,006.1 (34 ) $ 7,205.3 $ 6,215.7 16 New loan and lease unit volume: Loans and finance leases 47,200 42,100 12 Equipment on operating lease 7,200 11,600 (38 ) 54,400 53,700 1 Average earning assets: U.S. and Canada $ 9,478.5 $ 8,647.4 10 Europe 4,465.9 3,810.0 17 Mexico, Australia, Brasil and other 3,596.5 2,544.0 41 $ 17,540.9 $ 15,001.4 17 Average earning assets by product: Loans and finance leases $ 11,903.3 $ 10,279.4 16 Dealer wholesale financing 3,100.2 1,933.9 60 Equipment on lease and other 2,537.4 2,788.1 (9 ) $ 17,540.9 $ 15,001.4 17 Revenues: U.S. and Canada $ 759.7 $ 684.3 11 Europe 555.7 498.3 12 Mexico, Australia, Brasil and other 496.5 322.8 54 $ 1,811.9 $ 1,505.4 20 Revenues by product: Loans and finance leases $ 839.8 $ 532.0 58 Dealer wholesale financing 169.5 96.7 75 Equipment on lease and other 802.6 876.7 (8 ) $ 1,811.9 $ 1,505.4 20 Income before income taxes $ 540.3 $ 588.9 (8 ) New loan and lease volume increased to $7.21 billion in 2023 from $6.22 billion in 2022.
Historical credit loss information 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.
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.
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 1.6% and 1.9%.
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 1.9% and 2.9%.
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 to purchase energy.
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 to commodities.
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, 2022 and 2021 are presented below. For information on the year ended December 31, 2020, refer to Part II, Item 7 in the 2021 Annual Report on Form 10-K.
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, 2023 and 2022 are presented below. For information on the year ended December 31, 2021, refer to Part II, Item 7 in the 2022 Annual Report on Form 10-K.
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, 2022.
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, 2023.
The allowance for credit losses consists of both specific and general reserves. The Company individually evaluates certain finance receivables for impairment. Finance receivables that are evaluated individually for impairment consist of all wholesale accounts and certain large retail accounts with past due balances or otherwise determined to be at a higher risk of loss.
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.
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 15% and 70%.
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 70%.
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; pandemics; climate-related risks; global conflicts; litigation, including European Commission (EC) settlement-related claims; or legislative and governmental regulations.
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. 31
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. 32
The retail segment consists of retail loans and 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.
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.
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, 2022 2021 Pro forma percentage of retail loan and lease accounts 30+ days past due: U.S. and Canada .1 % Europe .2 % .4 % Mexico, Australia, Brasil and other 2.0 % 1.2 % Worldwide .5 % .3 % Modifications of accounts in prior quarters that were more than 30 days past due at the time of modification are included in past dues if they were not performing under the modified terms at December 31, 2022 and 2021.
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, 2023 2022 Pro forma percentage of retail loan and lease accounts 30+ days past due: U.S. and Canada .8 % .1 % Europe 1.8 % .2 % Mexico, Australia, Brasil and other 2.0 % 2.0 % Worldwide 1.2 % .5 % 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, 2023 and 2022.
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, 2022 and 2021 were $4.6 million and $4.0 million, respectively.
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, 2023 and 2022 were $3.0 million and $4.6 million, respectively.
The total amount of medium-term notes outstanding for PFPL Australia as of December 31, 2022 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.
The total amount of medium-term notes outstanding for PFPL Australia as of December 31, 2023 was 850.0 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.
If the 2022 warranty expense had been .2% higher as a percentage of net sales and revenues in 2022, warranty expense would have increased by approximately $55 million. FORWARD-LOOKING STATEMENTS: This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.
If the 2023 warranty expense had been .2% higher as a percentage of net sales and revenues in 2023, warranty expense would have increased by approximately $67 million. FORWARD-LOOKING STATEMENTS: This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.
The effect on the allowance for credit losses from such modifications was not significant at December 31, 2022 and 2021.
The effect on the allowance for credit losses from such modifications was not significant at December 31, 2023 and 2022.
Over the past two years, the Company’s year-end 30+ days past due accounts have ranged between .3% and .4% 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 2 to 40 basis points of receivables.
Over the past two years, the Company’s year-end 30+ days past due accounts have ranged between .4% and 1.0% 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 2 to 25 basis points of receivables.
Small balance impaired receivables with similar risk characteristics are evaluated as a separate pool to determine the appropriate reserve for losses using the historical loss and economic forecasts information discussed below. 30 The Company evaluates finance receivables that are not individually impaired and share similar risk characteristics on a collective basis and determines the general allowance for credit losses for both retail and wholesale receivables based on historical loss information, using past due account data, current market conditions, and expected changes in future macroeconomic conditions that affect collectability.
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. 31 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.
At December 31, 2022, 9.08 billion Mexican pesos were available for issuance. In August 2018, the Company’s Australian subsidiary, PACCAR Financial Pty. Ltd. (PFPL Australia), registered a medium-term note program. The program does not limit the principal amount of debt securities that may be issued under the program.
At December 31, 2023, 6.32 billion Mexican pesos were available for issuance. In August 2018, the Company’s Australian subsidiary, PACCAR Financial Pty. Ltd. (PFPL Australia), registered a medium-term note program. The program does not limit the principal amount of debt securities that may be issued under the program.
At December 31, 2022, 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 $1.74 billion.
At December 31, 2023, 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 $1.49 billion.
If past dues were 100 basis points higher or 1.4% as of December 31, 2022, the Company’s estimate of credit losses would likely have increased by a range of $2 to $44 million depending on the extent of the past dues, the estimated value of the collateral as compared to amounts owed and general economic factors.
If past dues were 100 basis points higher or 2.0% as of December 31, 2023, the Company’s estimate of credit losses would likely have increased by a range of $2 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.
The total amount of medium-term notes outstanding for PFC as of December 31, 2022 was $5.85 billion. In January 2023, PFC issued $300.0 million of medium-term notes under this registration. The registration expires in November 2024 and does not limit the principal amount of debt securities that may be issued during that period.
The total amount of medium-term notes outstanding for PFC as of December 31, 2023 was $6.10 billion. In January 2024, PFC issued $600.0 million of medium-term notes under this registration. The registration expires in November 2024 and does not limit the principal amount of debt securities that may be issued during that period.
If economic conditions were to worsen, lower freight volumes could reduce the demand for replacement parts, resulting in lower parts revenues and operating results. Financial Services Outlook In 2023, average earning assets are expected to increase 4-7% compared to 2022.
If economic conditions were to worsen, lower freight volumes could reduce the demand for replacement parts, resulting in lower parts revenues and operating results. Financial Services Outlook In 2024, average earning assets are expected to increase 3-5% compared to 2023.
The following table summarizes the Company’s 30+ days past due accounts: At December 31, 2022 2021 Percentage of retail loan and lease accounts 30+ days past due: U.S. and Canada .1 % Europe .2 % .4 % Mexico, Australia, Brasil and other 1.6 % 1.2 % Worldwide .4 % .3 % Accounts 30+ days past due increased to .4% at December 31, 2022 from .3% at December 31, 2021.
The following table summarizes the Company’s 30+ days past due accounts: At December 31, 2023 2022 Percentage of retail loan and lease accounts 30+ days past due: U.S. and Canada .8 % .1 % Europe .5 % .2 % Mexico, Australia, Brasil and other 1.9 % 1.6 % Worldwide 1.0 % .4 % Accounts 30+ days past due increased to 1.0% at December 31, 2023 from .4% at December 31, 2022.
Factors for which the Company is unable to specifically quantify the impact include market demand, fuel prices, freight tonnage, economic conditions and COVID-19 related factors affecting the Company’s results of operations. 18 2022 Compared to 2021: Truck The Company’s Truck segment accounted for 75% of revenues in 2022 compared to 71% in 2021.
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. 18 2023 Compared to 2022: Truck The Company’s Truck segment accounted for 77% of revenues in 2023 compared to 75% in 2022.
As a percentage of sales, Parts SG&A was 3.8% in 2022 and 4.3% in 2021. 21 Financial Services The Company’s Financial Services segment accounted for 5% of revenues in 2022 compared to 7% in 2021.
As a percentage of sales, Parts SG&A was 3.7% in 2023 and 3.8% in 2022. 21 Financial Services The Company’s Financial Services segment accounted for 5% of revenues in 2023 and 2022.
Cash dividends declared for the last two years were as follows: QUARTER 2022 2021 First $ .23 $ .21 Second .23 .23 Third .23 .23 Fourth .25 .23 Year-End Extra (paid in January of the following year) 1.87 1.00 Total dividends declared per share* $ 2.80 $ 1.89 * The sum of quarterly per share amounts do not equal per share amounts reported for the full year due to rounding.
Cash dividends declared for the last two years were as follows: QUARTER 2023 2022 First $ .25 $ .23 Second .25 .23 Third .27 .23 Fourth .27 .25 Year-End Extra (paid in January of the following year) 3.20 1.87 Total dividends declared per share* $ 4.24 $ 2.80 * The sum of quarterly per share amounts do not equal per share amounts reported for the full year due to rounding.
As of December 31, 2022, the Company’s European finance subsidiary, PACCAR Financial Europe, had €1.12 billion 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 2023.
As of December 31, 2023, the Company’s European finance subsidiary, PACCAR Financial Europe, had €911.7 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 September 2024.
During 2022, market values on equipment returning upon operating lease maturity were generally higher than the residual values on the equipment, resulting in a decrease in depreciation expense of $173.2 million.
During 2023, market values on equipment returning upon operating lease maturity were generally higher than the residual values on the equipment, resulting in a decrease in depreciation expense of $63.8 million.
The following table summarizes the provision for losses on receivables and net charge-offs: 2022 2021 ($ in millions) PROVISION FOR LOSSES ON RECEIVABLES NET CHARGE-OFFS PROVISION FOR LOSSES ON RECEIVABLES NET CHARGE-OFFS U.S. and Canada $ (5.1 ) $ (.9 ) $ (2.2 ) $ 1.0 Europe .8 .6 (1.7 ) 2.6 Mexico, Australia, Brasil and other 9.8 (.4 ) 4.4 4.7 $ 5.5 $ (.7 ) $ .5 $ 8.3 The provision for losses on receivables increased to $5.5 million in 2022 from $.5 million in 2021, mainly driven by portfolio growth and higher past due balances in Brasil, partially offset by improved portfolio performance in North America and Europe.
The following table summarizes the provision for losses on receivables and net charge-offs: 2023 2022 ( $ in millions ) PROVISION FOR LOSSES ON RECEIVABLES NET CHARGE-OFFS PROVISION FOR LOSSES ON RECEIVABLES NET CHARGE-OFFS U.S. and Canada $ 7.9 $ 8.6 $ (5.1 ) $ (.9 ) Europe 4.4 2.9 .8 .6 Mexico, Australia, Brasil and other 19.0 11.8 9.8 (.4 ) $ 31.3 $ 23.3 $ 5.5 $ (.7 ) The provision for losses on receivables increased to $31.3 million in 2023 from $5.5 million in 2022, primarily driven by higher charge-offs, portfolio growth and higher past due balances in 2023.
Parts The Company’s Parts segment accounted for 20% of revenues in 2022 compared to 21% in 2021.
Parts The Company’s Parts segment accounted for 18% of revenues in 2023 compared to 20% in 2022.
The Company modified $8.9 million and $.4 million of accounts worldwide during the fourth quarter of 2022 and the fourth quarter of 2021, respectively, which were 30+ days past due and became current at the time of modification.
The Company modified $35.0 million, primarily in Europe, and $8.9 million of accounts worldwide during the fourth quarter of 2023 and the fourth quarter of 2022, respectively, which were 30+ days past due and became current at the time of modification.
Parts SG&A expense in 2022 increased to $216.3 million from $210.3 million in 2021. The increase was primarily due to higher salaries and related expenses, and higher travel expenses, partially offset by lower sales and marketing costs and currency translation effects.
Parts SG&A expense in 2023 increased to $238.0 million from $216.3 million in 2022. The increase was primarily due to higher salaries and related expenses, partially offset by lower sales and marketing costs.
($ in millions) Year Ended December 31, 2022 2021 Domestic income before taxes $ 2,322.9 $ 1,391.4 Foreign income before taxes 1,525.8 1,004.9 Total income before taxes $ 3,848.7 $ 2,396.3 Domestic pre-tax return on revenues 14.7 % 11.1 % Foreign pre-tax return on revenues 11.7 % 9.2 % Total pre-tax return on revenues 13.4 % 10.2 % In 2022, both domestic and foreign income before income taxes and pre-tax return on revenues increased primarily due to the improved results from Truck, Parts and Financial Services operations.
( $ in millions ) Year Ended December 31, 2023 2022 Domestic income before taxes $ 3,913.7 $ 2,322.9 Foreign income before taxes 1,804.5 1,525.8 Total income before taxes $ 5,718.2 $ 3,848.7 Domestic pre-tax return on revenues 20.4 % 14.7 % Foreign pre-tax return on revenues 11.3 % 11.7 % Total pre-tax return on revenues 16.3 % 13.4 % In 2023, both domestic and foreign income before income taxes and domestic pre-tax return on revenues increased primarily due to the improved results from Truck and Parts operations.
The effect of currency translation decreased PFS income before income taxes by $20.1 million in 2022, primarily due to a lower euro relative to the U.S. dollar. 22 Included in Financial Services “Other Assets” on the Company’s Consolidated Balance Sheets are used trucks held for sale, net of impairments, of $ 141.7 million at December 31, 2022 and $ 92.1 million at December 31, 2021 .
The effect of currency translation increased PFS income before income taxes by $15.0 million in 2023, primarily due to a stronger Mexican peso and euro relative to the U.S. dollar. 22 Included in Financial Services “Other Assets” on the Company’s Consolidated Balance Sheets are used trucks held for sale, net of impairments, of $309.8 million at December 31, 2023 and $141.7 million at December 31, 2022.
LIQUIDITY AND CAPITAL RESOURCES: ($ in millions) At December 31, 2022 2021 Cash and cash equivalents $ 4,690.9 $ 3,428.3 Marketable securities 1,614.2 1,559.4 $ 6,305.1 $ 4,987.7 The Company’s total cash and marketable securities at December 31, 2022, increased $1.32 billion from the balances at December 31, 2021.
LIQUIDITY AND CAPITAL RESOURCES: ( $ in millions ) At December 31, 2023 2022 Cash and cash equivalents $ 7,181.7 $ 4,690.9 Marketable securities 1,822.6 1,614.2 $ 9,004.3 $ 6,305.1 The Company’s total cash and marketable securities at December 31, 2023, increased $2.70 billion from the balances at December 31, 2022.
The Company recognized gains on used trucks, excluding repossessions, of $140.1 million in 2022 compared to $30.3 million in 2021, including losses on multiple unit transactions of $.8 million in 2022 compared to $17.7 million in 2021. Used truck gains in 2022 and 2021 related to repossessions, which are recognized as credit recoveries, were insignificant.
The Company recognized gains on used trucks, excluding repossessions, of $43.5 million in 2023 compared to $140.1 million in 2022, including losses on multiple unit transactions of $12.3 million in 2023 compared to $.8 million in 2022. Used truck losses related to repossessions, which are recognized as credit losses, in 2023 were $4.6 million and were insignificant in 2022.
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 $69.1 million in 2023, $55.8 in 2024, $33.4 in 2025, $12.1 in 2026, $3.8 in 2027 and thereafter.
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 $73.6 million in 2024, $34.8 million in 2025, $20.5 million in 2026, $13.1 million in 2027, $6.8 million in 2028 and thereafter.
Modification activity decreased to $364.5 in 2022 from $608.3 in 2021. The decrease in modifications for commercial reasons primarily reflects lower volumes of refinancing. The increase in Insignificant Delay reflects an increase in customers requesting payment relief for up to three months.
Modification activity increased to $487.8 in 2023 from $364.5 in 2022. The decrease in modifications for commercial reasons primarily reflects lower volumes of refinancing. The increase related to Insignificant Delay reflects an increase in customers requesting payment relief for up to three months, primarily in the U.S.
The Company’s new truck deliveries are summarized below: Year Ended December 31, 2022 2021 % CHANGE U.S. and Canada 95,600 86,300 11 Europe 62,400 53,200 17 Mexico, South America, Australia and other 27,900 23,200 20 Total units 185,900 162,700 14 The increase in new truck deliveries worldwide in 2022 compared to 2021 was driven by higher build rates and increased demand in all markets.
The Company’s new truck deliveries are summarized below: Year Ended December 31, 2023 2022 % CHANGE U.S. and Canada 109,100 95,600 14 Europe 63,200 62,400 1 Mexico, South America, Australia and other 31,900 27,900 14 Total units 204,200 185,900 10 The increase in new truck deliveries worldwide in 2023 compared to 2022 was driven by higher build rates and increased demand in all major markets.
Credit Lines and Other: The Company has line of credit arrangements of $3.70 billion, of which $3.36 billion were unused at December 31, 2022. Included in these arrangements are $3.00 billion of committed bank facilities, of which $1.00 billion expires in June 2023, $1.00 billion expires in June 2025 and $1.00 billion expires in June 2027.
Credit Lines and Other: The Company has line of credit arrangements of $4.20 billion, of which $3.66 billion were unused at December 31, 2023. Included in these arrangements are $3.00 billion of committed bank facilities, of which $1.00 billion expires in June 2024, $1.00 billion expires in June 2026 and $1.00 billion expires in June 2028.
Where possible, the Company has quantified the impact of factors identified in the following discussion and analysis. In cases where it is not possible to quantify the impact of factors, the Company lists them in estimated order of importance.
In cases where it is not possible to quantify the impact of factors, the Company lists them in estimated order of importance.
The change in cash and cash equivalents is summarized below: ($ in millions) Year Ended December 31, 2022 2021 Operating activities: Net income $ 3,011.6 $ 1,865.5 Net income items not affecting cash 601.6 715.5 Pension contributions (39.1 ) (25.1 ) Changes in operating assets and liabilities, net (547.1 ) (369.2 ) Net cash provided by operating activities 3,027.0 2,186.7 Net cash used in investing activities (2,033.0 ) (1,362.7 ) Net cash provided by (used in) financing activities 304.9 (882.9 ) Effect of exchange rate changes on cash (36.3 ) (52.4 ) Net increase (decrease) in cash and cash equivalents 1,262.6 (111.3 ) Cash and cash equivalents at beginning of the year 3,428.3 3,539.6 Cash and cash equivalents at end of the year $ 4,690.9 $ 3,428.3 26 Operating activities: Cash provided by operations increased by $840.3 million to $3.03 billion in 2022 from $2.19 billion in 2021.
The change in cash and cash equivalents is summarized below: ($ in millions ) Year Ended December 31, 2023 2022 Operating activities: Net income $ 4,600.8 $ 3,011.6 Net income items not affecting cash 698.0 601.6 Pension contributions (27.3 ) (39.1 ) Changes in operating assets and liabilities, net (1,081.5 ) (547.1 ) Net cash provided by operating activities 4,190.0 3,027.0 Net cash used in investing activities (2,871.0 ) (2,033.0 ) Net cash provided by financing activities 1,102.2 304.9 Effect of exchange rate changes on cash 69.6 (36.3 ) Net increase in cash and cash equivalents 2,490.8 1,262.6 Cash and cash equivalents at beginning of the year 4,690.9 3,428.3 Cash and cash equivalents at end of the year $ 7,181.7 $ 4,690.9 26 Operating activities: Cash provided by operations increased by $1.16 billion to $4.19 billion in 2023 from $3.03 billion in 2022.
The Company’s other commitments include the following at December 31, 2022: COMMITMENT EXPIRATION ($ in millions) WITHIN 1 YEAR 1-3 YEARS 3-5 YEARS MORE THAN 5 YEARS TOTAL Loan and lease commitments $ 1,363.3 $ 1,363.3 Residual value guarantees 674.6 $ 384.6 $ 63.5 $ 11.6 1,134.3 Letters of credit 22.1 .2 .9 23.2 $ 2,060.0 $ 384.8 $ 63.5 $ 12.5 $ 2,520.8 Loan and lease commitments are for funding new retail loan and lease contracts.
The Company’s other commitments include the following at December 31, 2023: COMMITMENT EXPIRATION ( $ in millions ) WITHIN 1 YEAR 1-3 YEARS 3-5 YEARS MORE THAN 5 YEARS TOTAL Loan and lease commitments $ 940.7 $ 940.7 Residual value guarantees 414.2 $ 385.6 $ 52.8 $ 11.1 863.7 Letters of credit 22.7 1.0 23.7 $ 1,377.6 $ 385.6 $ 52.8 $ 12.1 $ 1,828.1 Loan and lease commitments are for funding new retail loan and lease contracts.
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 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 increase in Credit modifications reflects higher volumes of contract modifications and requests for payment relief primarily in Brasil.
The decrease in Credit modifications reflects lower volumes of contract modifications and requests for payment relief, primarily in Brasil, partially offset by higher volumes of credit modifications in Europe.
The effect of currency translation decreased new loan and lease volume by $209.3 million, primarily due to the lower euro relative to the U.S. dollar. PFS finance market share of new PACCAR truck sales was 25.6% in 2022 compared to 26.6% in 2021. PFS revenues decreased to $1.51 billion in 2022 from $1.69 billion in 2021.
The effect of currency translation increased new loan and lease volume by $98.7 million, primarily due to the stronger Mexican peso and euro relative to the U.S. dollar. PFS finance market share of new PACCAR truck sales was 24.0% in 2023 compared to 25.6% in 2022. PFS revenues increased to $1.81 billion in 2023 from $1.51 billion in 2022.
The Company’s worldwide truck net sales and revenues are summarized below: ($ in millions) Year Ended December 31, 2022 2021 % CHANGE Truck net sales and revenues: U.S. and Canada $ 12,521.8 $ 9,877.6 27 Europe 5,866.5 4,489.8 31 Mexico, South America, Australia and other 3,097.9 2,432.3 27 $ 21,486.2 $ 16,799.7 28 Truck income before income taxes $ 1,753.3 $ 804.9 118 Pre-tax return on revenues 8.2 % 4.8 % The Company’s worldwide truck net sales and revenues increased to $21.49 billion in 2022 from $16.80 billion in 2021 due to higher truck deliveries and improved price realization in all markets, partially offset by unfavorable currency translation effects.
The Company’s worldwide truck net sales and revenues are summarized below: ( $ in millions ) Year Ended December 31, 2023 2022 % CHANGE Truck net sales and revenues: U.S. and Canada $ 15,898.5 $ 12,521.8 27 Europe 6,871.3 5,866.5 17 Mexico, South America, Australia and other 4,076.6 3,097.9 32 $ 26,846.4 $ 21,486.2 25 Truck income before income taxes $ 3,799.9 $ 1,753.3 117 Pre-tax return on revenues 14.2 % 8.2 % The Company’s worldwide truck net sales and revenues increased to $26.85 billion in 2023 from $21.49 billion in 2022 primarily due to higher truck unit deliveries, improved price realization in all markets and favorable currency translation effects, primarily the euro.
Cash provided by net borrowing activities in 2022 of $1.28 billion was $1.49 billion higher than the cash used for borrowing activities of $210.9 million in 2021 reflecting higher funding to support financial services portfolio growth.
Cash provided from net borrowing activities was $2.57 billion, $1.30 billion higher than the cash provided by net borrowing activities of $1.28 billion in 2022 reflecting higher funding to support financial services portfolio growth.
The major factors for the changes in interest and fees, interest and other borrowing expenses and finance margin between 2022 and 2021 are outlined below: ($ in millions) INTEREST AND FEES INTEREST AND OTHER BORROWING EXPENSES FINANCE MARGIN 2021 $ 524.4 $ 150.9 $ 373.5 Increase (decrease) Average finance receivables 61.5 61.5 Average debt balances 13.0 (13.0 ) Yields 56.1 56.1 Borrowing rates 55.0 (55.0 ) Currency translation and other (13.3 ) (2.6 ) (10.7 ) Total increase 104.3 65.4 38.9 2022 $ 628.7 $ 216.3 $ 412.4 • Average finance receivables increased $1.17 billion (excluding foreign exchange effects) in 2022 primarily due to higher average loan and dealer wholesale balances. • Average debt balances increased $568.7 million (excluding foreign exchange effects) in 2022, reflecting higher funding requirements for the portfolio which includes loans, finance leases, dealer wholesale financing and equipment on operating leases. • Higher portfolio yields (5.1% in 2022 compared to 4.6% in 2021) increased interest and fees by $56.1 million.
The major factors for the changes in interest and fees, interest and other borrowing expenses and finance margin between 2023 and 2022 are outlined below: ( $ in millions ) INTEREST AND FEES INTEREST AND OTHER BORROWING EXPENSES FINANCE MARGIN 2022 $ 628.7 $ 216.3 $ 412.4 Increase (decrease) Average finance receivables 183.6 183.6 Average debt balances 76.1 (76.1 ) Yields 177.7 177.7 Borrowing rates 200.2 (200.2 ) Currency translation and other 19.3 8.0 11.3 Total increase 380.6 284.3 96.3 2023 $ 1,009.3 $ 500.6 $ 508.7 • Average finance receivables increased $2.77 billion (excluding foreign exchange effects) in 2023 primarily due to higher average loan, finance lease and dealer wholesale balances. • Average debt balances increased $1.91 billion (excluding foreign exchange effects) in 2023, reflecting higher funding requirements for the portfolio, which includes loans, finance leases, dealer wholesale and equipment on operating lease. • Higher portfolio yields (6.7% in 2023 compared to 5.1% in 2022) increased interest and fees by $177.7 million.
The industry-wide undersupply of component products had an impact on deliveries. Market share data discussed below is provided by third-party sources and is measured by either registrations or retail sales for the Company’s dealer network as a percentage of total registrations or retail sales depending on the geographic market.
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 on registrations.
Cost per asset increased $16.3 million due to higher operating expenses. • The currency translation effects reflect a decrease in the value of foreign currencies relative to the U.S. dollar, primarily the euro. Financial Services SG&A expense increased to $133.9 million in 2022 from $129.4 million in 2021.
Cost per asset increased $42.1 million due to higher depreciation and operating expenses. • The currency translation effects reflect an increase in the value of foreign currencies relative to the U.S. dollar, primarily the Mexican peso and euro. Financial Services SG&A expense increased to $149.0 million in 2023 from $133.9 million in 2022.
The increase in Parts segment income before income taxes and pre-tax return on revenues was primarily due to higher sales volume and higher margins, partially offset by unfavorable currency translation effects. 20 The major factors for the Parts segment changes in net sales and revenues, cost of sales and revenues and gross margin between 2022 and 2021 are as follows: NET SALES AND COST OF SALES AND GROSS ($ in millions) REVENUES REVENUES MARGIN 2021 $ 4,944.3 $ 3,530.4 $ 1,413.9 Increase (decrease) Aftermarket parts volume 375.9 238.7 137.2 Average aftermarket parts sales prices 609.4 609.4 Average aftermarket parts direct costs 286.5 (286.5 ) Warehouse and other indirect costs 52.6 (52.6 ) Currency translation (165.3 ) (98.6 ) (66.7 ) Total increase 820.0 479.2 340.8 2022 $ 5,764.3 $ 4,009.6 $ 1,754.7 • Aftermarket parts sales volume increased by $375.9 million and related cost of sales increased by $238.7 million primarily due to higher demand in all markets. • Average aftermarket parts sales prices increased sales by $609.4 million primarily due to higher price realization in North America and Europe. • Average aftermarket parts direct costs increased $286.5 million due to higher material and freight costs. • Warehouse and other indirect costs increased $52.6 million primarily due to higher salaries and related expenses, costs of supplies and higher shipping costs. • The currency translation effect on sales and cost of sales primarily reflects a decline in the value of the euro relative to the U.S. dollar. • Parts gross margin was 30.4% in 2022 compared to from 28.6% in 2021 due to the factors noted above.
The increase in Parts segment income before income taxes and pre-tax return on revenues was primarily due to higher price realization in all markets. 20 The major factors for the Parts segment changes in net sales and revenues, cost of sales and revenues and gross margin between 2023 and 2022 are as follows: NET SALES AND COST OF SALES AND GROSS ( $ in millions ) REVENUES REVENUES MARGIN 2022 $ 5,764.3 $ 4,009.6 $ 1,754.7 Increase (decrease) Aftermarket parts volume 22.5 9.2 13.3 Average aftermarket parts sales prices 614.2 614.2 Average aftermarket parts direct costs 297.6 (297.6 ) Warehouse and other indirect costs 44.8 (44.8 ) Currency translation 13.4 8.4 5.0 Total increase 650.1 360.0 290.1 2023 $ 6,414.4 $ 4,369.6 $ 2,044.8 • Aftermarket parts sales volume increased by $22.5 million and related cost of sales increased by $9.2 million primarily reflecting higher sales volume in Brasil, Australia and Europe, partially offset by lower sales volume in the U.S. • Average aftermarket parts sales prices increased sales by $614.2 million primarily due to higher price realization in North America and Europe. • Average aftermarket parts direct costs increased $297.6 million due to higher material costs, primarily in the U.S. and Europe. • Warehouse and other indirect costs increased $44.8 million primarily due to higher salaries and related expenses and costs of supplies. • The currency translation effect on sales and cost of sales primarily reflects an increase in the value of the euro relative to the U.S. dollar, partially offset by a decrease in the value of the Australian dollar and the Canadian dollar relative to the U.S. dollar. • Parts gross margin was 31.9% in 2023 compared to 30.4% in 2022 due to the factors noted above.
Truck selling, general and administrative expenses (SG&A) in 2022 increased to $280.0 million from $267.9 million in 2021. The increase was primarily due to higher professional expenses, higher salaries and related expenses and travel costs, partially offset by currency translation effects. As a percentage of sales, Truck SG&A was 1.3% in 2022 and 1.6% in 2021.
Truck selling, general and administrative expenses (SG&A) in 2023 decreased to $278.5 million from $280.0 million in 2022. The decrease was primarily due to lower professional expenses, and lower sales and marketing expenses, offset by higher salaries and travel related costs. As a percentage of sales, Truck SG&A was 1.0% in 2023 and 1.3% in 2022.
The following table summarizes operating lease, rental and other revenues and depreciation and other expenses: ($ in millions) Year Ended December 31, 2022 2021 Operating lease and rental revenues $ 807.2 $ 860.5 Used truck sales 50.5 284.2 Insurance, franchise and other revenues 19.1 18.7 Operating lease, rental and other revenues $ 876.8 $ 1,163.4 Depreciation of operating lease equipment $ 474.9 $ 597.8 Vehicle operating expenses 33.9 87.2 Cost of used truck sales 49.3 280.5 Insurance, franchise and other expenses 2.7 3.9 Depreciation and other expenses $ 560.8 $ 969.4 23 The major factors for the changes in operating lease, rental and other revenues, depreciation and other expenses and lease margin between 2022 and 2021 are outlined below: ($ in millions) OPERATING LEASE, RENTAL AND OTHER REVENUES DEPRECIATION AND OTHER EXPENSES LEASE MARGIN 2021 $ 1,163.4 $ 969.4 $ 194.0 (Decrease) increase Used truck sales (228.8 ) (226.3 ) (2.5 ) Results on returned lease assets (130.4 ) 130.4 Average operating lease assets (39.0 ) (31.6 ) (7.4 ) Revenue and cost per asset 30.3 16.3 14.0 Currency translation and other (49.2 ) (36.6 ) (12.6 ) Total (decrease) increase (286.7 ) (408.6 ) 121.9 2022 $ 876.7 $ 560.8 $ 315.9 • Lower sales volume of used trucks in Europe and the U.S. decreased revenues by $228.8 million and related depreciation and other expenses by $226.3 million. • Results on returned lease assets decreased depreciation and other expenses by $130.4 million primarily due to higher gains on sales of returned lease units as a result of higher used truck market values. • Average operating lease assets decreased $137.8 million (excluding foreign exchange effects), which decreased revenues by $39.0 million and related depreciation and other expenses by $31.6 million. • Revenue per asset increased $30.3 million primarily due to higher rental utilization.
The following table summarizes operating lease, rental and other revenues and depreciation and other expenses: ( $ in millions ) Year Ended December 31, 2023 2022 Operating lease and rental revenues $ 751.8 $ 807.2 Used truck sales 23.0 50.5 Insurance, franchise and other revenues 27.8 19.0 Operating lease, rental and other revenues $ 802.6 $ 876.7 Depreciation of operating lease equipment $ 488.6 $ 474.9 Vehicle operating expenses 73.1 33.9 Cost of used truck sales 24.1 49.3 Insurance, franchise and other expenses 4.9 2.7 Depreciation and other expenses $ 590.7 $ 560.8 23 The major factors for the changes in operating lease, rental and other revenues, depreciation and other expenses and lease margin between 2023 and 2022 are outlined below: ( $ in millions ) OPERATING LEASE, RENTAL AND OTHER REVENUES DEPRECIATION AND OTHER EXPENSES LEASE MARGIN 2022 $ 876.7 $ 560.8 $ 315.9 (Decrease) increase Used truck sales (27.8 ) (25.6 ) (2.2 ) Results on returned lease assets 107.6 (107.6 ) Average operating lease assets (129.4 ) (110.3 ) (19.1 ) Revenue and cost per asset 53.1 42.1 11.0 Currency translation and other 30.0 16.1 13.9 Total (decrease) increase (74.1 ) 29.9 (104.0 ) 2023 $ 802.6 $ 590.7 $ 211.9 • Lower sales volume and lower market prices of used truck on trade, primarily in Europe, decreased revenues by $27.8 million and related depreciation and other expenses by $25.6 million. • Results on returned lease assets increased depreciation and other expenses by $107.6 million primarily due to lower gains on sales of returned lease units as a result of lower used truck market values. • Average operating lease assets decreased $280.7 million (excluding foreign exchange effects), which decreased revenues by $129.4 million and related depreciation and other expenses by $110.3 million. • Revenue per asset increased $53.1 million primarily due to higher lease rates reflecting higher average truck value financed and higher market rates.
The medium-duty market was 88,300 units in 2022 compared to 83,700 units in 2021. The Company’s medium-duty market share was 10.9% in 2022 compared to 19.8% in 2021. The over 16‑tonne truck market in Europe in 2022 increased to 297,500 units from 278,000 units in 2021, and DAF’s market share was 17.3% in 2022 compared to 15.9% in 2021.
The Company’s medium-duty market share was 14.5% in 2023 compared to 10.9% in 2022. The over 16‑tonne truck market in Europe in 2023 increased to 343,300 units from 297,500 units in 2022, and DAF’s market share was 15.6% in 2023 compared to 17.3% in 2022. The 6 to 16‑tonne market was 46,800 units in 2023 and 38,800 units in 2022.
The higher portfolio yields were primarily due to higher market rates in Europe, North America and Brasil. • Higher borrowing rates (2.0% in 2022 compared to 1.4% in 2021) were primarily due to higher debt market rates. • The currency translation effects reflect a decrease in the value of foreign currencies relative to the U.S. dollar, primarily the euro.
The higher portfolio yields were primarily due to higher market rates in all markets. • Higher borrowing rates (3.9% in 2023 compared to 2.0% in 2022) were primarily due to higher debt market rates in all markets. • The currency translation effects reflect a increase in the value of foreign currencies relative to the U.S. dollar, primarily the Mexican peso, Brazilian real and euro.
Over the past decade, the Company’s combined investments in worldwide capital projects and R&D totaled $7.25 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.
Investments for manufacturing property, plant and equipment in 2023 were $679.4 million compared to $491.2 million in 2022. Over the past decade, the Company’s combined investments in worldwide capital projects and R&D totaled $7.68 billion and have significantly increased the operating capacity and efficiency of its facilities and enhanced the quality and operating efficiency of the Company’s premium products.
Impaired accounts classified as TDRs which have been performing for 90 consecutive days are placed on accrual status if it is deemed probable that the Company will collect all principal and interest payments. Impaired receivables are generally considered collateral dependent. Large balance retail and all wholesale impaired receivables are individually evaluated to determine the appropriate reserve for losses.
In general, finance receivables that are 90 days past due are placed on non-accrual status. Finance receivables on non-accrual status which have been performing for 90 consecutive days are placed on accrual status if it is deemed probable that the Company will collect all principal and interest payments. Individually evaluated receivables on non-accrual status are generally considered collateral dependent.
($ in millions) Year Ended December 31, 2022 2021 % CHANGE Parts net sales and revenues: U.S. and Canada $ 4,087.5 $ 3,312.4 23 Europe 1,141.1 1,164.6 (2 ) Mexico, South America, Australia and other 535.7 467.3 15 $ 5,764.3 $ 4,944.3 17 Parts income before income taxes $ 1,446.6 $ 1,110.0 30 Pre-tax return on revenues 25.1 % 22.5 % The worldwide parts net sales and revenues increased to $5.76 billion in 2022 from $4.94 billion in 2021 primarily due to higher demand in all markets and higher price realization, partially offset by unfavorable currency translation effects.
( $ in millions ) Year Ended December 31, 2023 2022 % CHANGE Parts net sales and revenues: U.S. and Canada $ 4,441.7 $ 4,087.5 9 Europe 1,357.0 1,141.1 19 Mexico, South America, Australia and other 615.7 535.7 15 $ 6,414.4 $ 5,764.3 11 Parts income before income taxes $ 1,702.6 $ 1,446.6 18 Pre-tax return on revenues 26.5 % 25.1 % The Company’s worldwide parts net sales and revenues increased to $6.41 billion in 2023 from $5.76 billion in 2022 primarily due to higher price realization in all markets.
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.
Total cash commitments for borrowings and interest on term debt were $14.94 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.
Capital Spending and R&D Outlook Capital investments in 2023 are expected to be $525 to $575 million, and R&D is expected to be $360 to $410 million. The Company is increasing its investment in next generation clean diesel and electric powertrain technologies, autonomous driving systems, connected vehicle services, advanced manufacturing and enhanced distribution capabilities.
Capital Spending and R&D Outlook Capital investments in 2024 are expected to be $700 to $750 million, and R&D is expected to be $460 to $500 million. The Company is increasing its investment in fuel efficient diesel and electric powertrain technologies, connected vehicle services, and next-generation manufacturing and parts distribution capabilities.
At December 31, 2022 , 30+ days past dues were .4%.
At December 31, 2023, 30+ days past dues were 1.0%.
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, 2022, 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, 2022 .
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, 2023, the Company has repurchased $110.0 million of shares under this plan.
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 2022 were $491.2 million compared to $495.6 million in 2021.
There were no repurchases made under this plan during the year ended December 31, 2023. Truck, Parts and Other The Company provides funding for working capital, capital expenditures, R&D, dividends, stock repurchases and other business initiatives and commitments primarily from cash provided by operations. Management expects this method of funding to continue in the future.
The determination of reserves for large balance impaired receivables considers the fair value of the associated collateral. When the underlying collateral fair value exceeds the Company’s amortized cost basis, no reserve is recorded.
Large balance retail and all wholesale receivables on non-accrual status are individually evaluated to determine the appropriate reserve for losses. The determination of reserves for large balance receivables on non-accrual status considers the fair value of the associated collateral. When the underlying collateral fair value exceeds the Company’s amortized cost basis, no reserve is recorded.
In 2021, Truck segment income before taxes and pretax return on revenues reflect the tempering of truck unit deliveries due to the global semiconductor and component supply shortages. 19 The major factors for the Truck segment changes in net sales and revenues, cost of sales and revenues and gross margin between 2022 and 2021 are as follows: NET COST OF SALES AND SALES AND GROSS ($ in millions) REVENUES REVENUES MARGIN 2021 $ 16,799.7 $ 15,485.4 $ 1,314.3 Increase (decrease) Truck sales volume 3,052.7 2,557.3 495.4 Average truck sales prices 2,380.8 2,380.8 Average per truck material, labor and other direct costs 1,658.2 (1,658.2 ) Factory overhead and other indirect costs 176.8 (176.8 ) Extended warranties, operating leases and other 98.9 106.0 (7.1 ) Currency translation (845.9 ) (778.3 ) (67.6 ) Total increase 4,686.5 3,720.0 966.5 2022 $ 21,486.2 $ 19,205.4 $ 2,280.8 • Truck sales volume reflects higher heavy-duty truck deliveries in all major markets. • Average truck sales prices increased sales by $2.38 billion, primarily due to higher price realization worldwide reflecting inflationary cost increases and the positive effect of new truck models. • Average cost per truck increased cost of sales by $1.66 billion, primarily reflecting higher raw material, freight, labor and product support costs. • Factory overhead and other indirect costs increased $176.8 million, primarily due to higher labor costs, materials, utilities and depreciation. • Extended warranties, operating leases and other revenues increased by $98.9 million and cost of sales by $106.0 million, primarily due to higher revenues and associated costs from repairs and maintenance, service contracts and operating leases.
Truck segment income before income taxes and pretax return on revenues reflect the impact of higher truck unit deliveries and improved margins. 19 The major factors for the Truck segment changes in net sales and revenues, cost of sales and revenues and gross margin between 2023 and 2022 are as follows: NET COST OF SALES AND SALES AND GROSS ( $ in millions ) REVENUES REVENUES MARGIN 2022 $ 21,486.2 $ 19,205.4 $ 2,280.8 Increase (decrease) Truck sales volume 2,465.8 1,918.0 547.8 Average truck sales prices 2,785.9 2,785.9 Average per truck material, labor and other direct costs 916.7 (916.7 ) Factory overhead and other indirect costs 204.3 (204.3 ) Extended warranties, operating leases and other 40.5 134.2 (93.7 ) Currency translation 68.0 62.0 6.0 Total increase 5,360.2 3,235.2 2,125.0 2023 $ 26,846.4 $ 22,440.6 $ 4,405.8 • Truck sales volume reflects higher truck deliveries in all major markets. • Average truck sales prices increased sales by $2.79 billion, primarily due to higher price realization worldwide reflecting the positive effect of new truck models as well as inflationary cost increases. • Average cost per truck increased cost of sales by $916.7 million, primarily reflecting higher raw material, labor and product support costs, mainly warranty expense. • Factory overhead and other indirect costs increased $204.3 million, primarily due to higher labor costs, maintenance, depreciation and utilities. • Extended warranties, operating leases and other increased revenues by $40.5 million and increased cost of sales by $134.2 million.
In the U.S. and Canada, market share is based on retail sales. In Europe, market share is based primarily on registrations. In 2022, industry retail sales in the heavy-duty market in the U.S. and Canada increased to 283,500 units from 249,900 units in 2021. The Company’s heavy-duty truck retail market share was 29.8% in 2022 compared to 29.2% in 2021.
In 2023, industry retail sales in the heavy-duty market in the U.S. and Canada increased to 297,000 units from 283,500 units in 2022. The Company’s heavy-duty truck retail market share was 29.5% in 2023 compared to 29.8% in 2022. The medium-duty market was 105,300 units in 2023 compared to 88,300 units in 2022.
The Company paid $1.00 billion in dividends in 2022 compared to $708.0 million in 2021 primarily due to a higher extra dividend paid in January 2022. 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.
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.
The decrease was primarily due to lower unit volume of used truck sales in Europe and the U.S., partially offset by higher interest and fee income driven by portfolio growth and higher portfolio yields. The effects of currency translation decreased PFS revenues by $63.0 million in 2022, primarily due to a lower euro relative to the U.S. dollar.
The increase was primarily due to higher interest and fee income driven by portfolio growth and higher portfolio yields. The effects of currency translation increased PFS revenues by $40.8 million in 2023, primarily due to a stronger Mexican peso and euro relative to the U.S. dollar.
When the Company modifies a loan or finance lease for credit reasons and grants a concession, the modification is classified as a troubled debt restructuring (TDR). 24 The post-modification balance s of accounts modified during the years ended December 31, 2022 and 2021 are summarized below: 2022 2021 ($ in millions) AMORTIZED COST BASIS % OF TOTAL PORTFOLIO* AMORTIZED COST BASIS % OF TOTAL PORTFOLIO* Commercial $ 225.4 2.0 % $ 484.2 4.8 % Insignificant delay 79.3 .7 % 63.8 .6 % Credit - no concession 48.1 .4 % 52.3 .5 % Credit - TDR 11.7 .1 % 8.0 .1 % $ 364.5 3.2 % $ 608.3 6.0 % * Amortized cost basis immediately after modification as a percentage of the year-end retail portfolio balance.
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. 24 The post-modification balances of accounts modified during the years ended December 31, 2023 and 2022 are summarized below: 2023 2022 ( $ in millions ) AMORTIZED COST BASIS % OF TOTAL PORTFOLIO* AMORTIZED COST BASIS % OF TOTAL PORTFOLIO* Commercial $ 200.1 1.5 % $ 225.4 2.0 % Insignificant delay 232.5 1.7 % 79.3 .7 % Credit 55.2 .4 % 59.8 .5 % $ 487.8 3.6 % $ 364.5 3.2 % * Amortized cost basis immediately after modification as a percentage of the year-end retail portfolio balance.
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.
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.
In addition, the increase in cost of sales and revenues was partially offset by gains on sales of used trucks and lower impairments in Europe due to an improved used truck market. • The currency translation effect on sales and cost of sales primarily reflects a decline in the value of the euro relative to the U.S. dollar. • Truck gross margin was 10.6% in 2022 compared to 7.8% in 2021 due to the factors noted above.
The increase in cost of sales was primarily due to higher costs from extended warranty and service contracts. • The currency translation effect on sales and cost of sales reflects an increase in the value of the euro and Brazilian real relative to the U.S. dollar, partially offset by the decrease in the value of the Canadian dollar and Australian dollar relative to the U.S. dollar. • Truck gross margin was 16.4% in 2023 compared to 10.6% in 2022 due to the factors noted above.
Capital investments in 2023 are expected to be $525 to $575 million, and R&D is expected to be $360 to $410 million.
Capital investments in 2024 are expected to be $700 to $750 million, and R&D is expected to be $460 to $500 million.
The Company’s annualized pre-tax return on average total assets for Financial Services increased to 3.7% in 2022 from 2.8% in 2021, primarily driven by improved used truck results and higher finance and lease margins. 25 Other Other includes the winch business as well as sales , income and expenses not attributable to a reportable segment.
The Company’s annualized pre-tax return on average total assets for Financial Services was 2.9% in 2023 compared to 3.7% in 2022, respectively. 25 Other Other includes the winch business 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.
The lower effective tax rate in 2022 was primarily due to the change in mix of income generated in jurisdictions with lower tax rates in 2022 as compared to 2021.
The l ower 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, and the change in mix of income generated in jurisdictions with lower tax rates in 2023 as compared to 2022.
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 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.
The increase was primarily due to higher salaries and related expenses, partially offset by decreases in the value of foreign currencies relative to the U.S. dollar, primarily the euro. As a percentage of average earning assets, Financial Services SG&A was .9% in both 2022 and 2021.
The increase was primarily due to higher salaries and related expenses, higher travel costs and unfavorable currency translation effects, primarily the Mexican peso and euro. As a percentage of average earning assets, Financial Services SG&A was .8% in 2023 and .9% in 2022.
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. 29 CRITICAL ACCOUNTING POLICIES: The Company’s significant accounting policies are disclosed in Note A of the consolidated financial statements.
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. 29 RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES: This Form 10-K includes “adjusted net income (non-GAAP)” and “adjusted net income per diluted share (non-GAAP)”, which are financial measures that are not in accordance with U.S. generally accepted accounting principles (“GAAP”), since they exclude a charge for EC-related claims.
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 $17.18 billion. PFS issued $3.05 billion in medium-term notes during 2022 to support new business volume and repay maturing debt.
Subject to regulatory approval, the 21-gigawatt hour (GWh) factory is expected to begin producing battery cells in 2027. 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 $20.96 billion.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe 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 2022 2021 CONSOLIDATED: Assets Cash equivalents and marketable debt securities $ (26.7 ) $ (26.7 ) FINANCIAL SERVICES: Assets Fixed rate loans (117.4 ) (110.5 ) Liabilities Fixed rate term debt 136.6 127.6 Interest-rate swaps 6.4 4.5 Total $ (1.1 ) $ (5.1 ) 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) .
Biggest changeThe 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 2023 2022 CONSOLIDATED: Assets Cash equivalents and marketable debt securities $ (29.2 ) $ (26.7 ) FINANCIAL SERVICES: Assets Fixed rate loans (146.5 ) (117.4 ) Liabilities Fixed rate term debt 156.8 136.6 Interest-rate swaps 1.2 6.4 Total $ (17.7 ) $ (1.1 ) 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) .
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.
ITEM 7A. QUANTITATIVE AND QUALITAT IVE 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.
These amounts would be largely offset by changes in the values of the underlying hedged exposures. , 32
These amounts would be largely offset by changes in the values of the underlying hedged exposures. , 33
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 a loss of $2.5 related to contracts outstanding at December 31, 2022, compared to a loss of $18.4 at December 31, 2021.
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 a loss of $3.3 related to contracts outstanding at December 31, 2023, compared to a loss of $2.5 at December 31, 2022.
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 $216.6 related to contracts outstanding at December 31, 2022, compared to a loss of $210.8 at December 31, 2021.
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 $259.7 related to contracts outstanding at December 31, 2023, compared to a loss of $216.6 at December 31, 2022.

Other PCAR 10-K year-over-year comparisons