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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

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

 

For the quarterly period ended March 31, 2024

OR

 

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

 

For the transition period from to

 

Commission File No. 001-14817

 

PACCAR Inc

(Exact name of registrant as specified in its charter)

 

Delaware

91-0351110

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer Identification No.)

 

 

777 - 106th Ave. N.E., Bellevue, WA

98004

(Address of principal executive offices)

(Zip Code)

(425) 468-7400

(Registrant's telephone number, including area code)

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

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common stock, $1 par value

PCAR

The Nasdaq Stock Market

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

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

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

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

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

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

Common Stock, $1 par value — 524,145,446 shares as of April 29, 2024

 


 

PACCAR Inc – Form 10-Q

INDEX

 

 

 

 

Page

PART I.

 

FINANCIAL INFORMATION:

 

 

 

 

 

ITEM 1.

 

FINANCIAL STATEMENTS:

 

 

 

Consolidated Statements of Comprehensive Income –

Three Months Ended March 31, 2024 and 2023 (Unaudited)

3

 

 

Consolidated Balance Sheets –

March 31, 2024 (Unaudited) and December 31, 2023

4

 

 

Condensed Consolidated Statements of Cash Flows –

Three Months Ended March 31, 2024 and 2023 (Unaudited)

6

 

 

Consolidated Statements of Stockholders’ Equity –

Three Months Ended March 31, 2024 and 2023 (Unaudited)

7

 

 

Notes to Consolidated Financial Statements (Unaudited)

8

ITEM 2.

 

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

31

ITEM 3.

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

44

ITEM 4.

 

CONTROLS AND PROCEDURES

44

 

 

 

 

PART II.

 

OTHER INFORMATION:

 

 

 

 

 

ITEM 1.

 

LEGAL PROCEEDINGS

45

ITEM 1A.

 

RISK FACTORS

45

ITEM 2.

 

UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES

45

ITEM 3.

 

DEFAULTS UPON SENIOR SECURITIES

45

ITEM 4.

 

MINE SAFETY DISCLOSURES

45

ITEM 5.

 

OTHER INFORMATION

45

ITEM 6.

 

EXHIBITS

46

 

 

INDEX TO EXHIBITS

46

 

 

 

 

SIGNATURE

48

 

 

- 2 -


 

 

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Consolidated Statements of Comprehensive Income (Unaudited)

(Millions, Except Per Share Amounts)

 

 

 

Three Months Ended

 

 

 

March 31

 

 

 

2024

 

 

2023

 

TRUCK, PARTS AND OTHER:

 

 

 

 

 

 

Net sales and revenues

 

$

8,235.0

 

 

$

8,050.1

 

 

 

 

 

 

 

 

Cost of sales and revenues

 

 

6,673.8

 

 

 

6,493.1

 

Research and development

 

 

105.5

 

 

 

97.2

 

Selling, general and administrative

 

 

147.6

 

 

 

159.8

 

Interest and other (income) expenses, net

 

 

(27.0

)

 

 

578.8

 

 

 

6,899.9

 

 

 

7,328.9

 

Truck, Parts and Other Income Before Income Taxes

 

 

1,335.1

 

 

 

721.2

 

 

 

 

 

 

 

 

FINANCIAL SERVICES:

 

 

 

 

 

 

Interest and fees

 

 

303.4

 

 

 

208.0

 

Operating lease, rental and other revenues

 

 

205.9

 

 

 

215.2

 

Revenues

 

 

509.3

 

 

 

423.2

 

 

 

 

 

 

 

 

Interest and other borrowing expenses

 

 

160.0

 

 

 

93.8

 

Depreciation and other expenses

 

 

180.3

 

 

 

142.3

 

Selling, general and administrative

 

 

39.0

 

 

 

35.2

 

Provision for losses on receivables

 

 

16.1

 

 

 

3.1

 

 

 

395.4

 

 

 

274.4

 

Financial Services Income Before Income Taxes

 

 

113.9

 

 

 

148.8

 

Investment income

 

 

85.5

 

 

 

49.0

 

Total Income Before Income Taxes

 

 

1,534.5

 

 

 

919.0

 

Income taxes

 

 

339.2

 

 

 

185.1

 

Net Income

 

$

1,195.3

 

 

$

733.9

 

 

 

 

 

 

 

 

Net Income Per Share

 

 

 

 

 

 

Basic

 

$

2.28

 

 

$

1.40

 

Diluted

 

$

2.27

 

 

$

1.40

 

 

 

 

 

 

 

 

Weighted Average Number of Common Shares Outstanding

 

 

 

 

 

 

Basic

 

 

524.9

 

 

 

523.5

 

Diluted

 

 

526.3

 

 

 

524.4

 

 

 

 

 

 

 

 

Comprehensive Income

 

$

1,089.0

 

 

$

814.1

 

 

See Notes to Consolidated Financial Statements.

- 3 -


 

 

Consolidated Balance Sheets

(Millions)

 

 

 

March 31

 

 

December 31

 

 

 

2024

 

 

2023 *

 

 

 

(Unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

TRUCK, PARTS AND OTHER:

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

5,895.8

 

 

$

6,836.7

 

Trade and other receivables, net (allowance for losses: 2024 - $.9, 2023 - $.9)

 

 

2,410.9

 

 

 

2,198.1

 

Marketable securities

 

 

1,831.4

 

 

 

1,822.6

 

Inventories, net

 

 

2,742.6

 

 

 

2,576.7

 

Other current assets

 

 

622.4

 

 

 

680.6

 

Total Truck, Parts and Other Current Assets

 

 

13,503.1

 

 

 

14,114.7

 

 

 

 

 

 

 

 

Equipment on operating leases, net

 

 

112.7

 

 

 

127.6

 

Property, plant and equipment, net

 

 

3,796.9

 

 

 

3,780.1

 

Other noncurrent assets, net

 

 

1,808.3

 

 

 

1,837.1

 

Total Truck, Parts and Other Assets

 

 

19,221.0

 

 

 

19,859.5

 

 

 

 

 

 

 

 

FINANCIAL SERVICES:

 

 

 

 

 

 

Cash and cash equivalents

 

 

298.7

 

 

 

345.0

 

Finance and other receivables, net (allowance for losses: 2024 - $139.3, 2023 - $133.0)

 

 

17,873.1

 

 

 

17,571.7

 

Equipment on operating leases, net

 

 

2,042.7

 

 

 

2,175.4

 

Other assets

 

 

938.1

 

 

 

871.8

 

Total Financial Services Assets

 

 

21,152.6

 

 

 

20,963.9

 

 

$

40,373.6

 

 

$

40,823.4

 

 

* The December 31, 2023 consolidated balance sheet has been derived from audited financial statements.

 

See Notes to Consolidated Financial Statements.

 

- 4 -


 

 

Consolidated Balance Sheets

(Millions)

 

 

 

March 31

 

 

December 31

 

 

 

2024

 

 

2023 *

 

 

 

(Unaudited)

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

TRUCK, PARTS AND OTHER:

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

Accounts payable, accrued expenses and other

 

$

5,522.3

 

 

$

5,076.3

 

Dividend payable

 

 

 

 

 

1,675.0

 

Total Truck, Parts and Other Current Liabilities

 

 

5,522.3

 

 

 

6,751.3

 

Residual value guarantees and deferred revenues

 

 

127.2

 

 

 

142.6

 

Other liabilities

 

 

1,993.0

 

 

 

2,121.9

 

Total Truck, Parts and Other Liabilities

 

 

7,642.5

 

 

 

9,015.8

 

 

 

 

 

 

 

 

FINANCIAL SERVICES:

 

 

 

 

 

 

Accounts payable, accrued expenses and other

 

 

1,182.6

 

 

 

992.3

 

Commercial paper and bank loans

 

 

4,914.8

 

 

 

5,609.9

 

Term notes

 

 

9,114.9

 

 

 

8,624.6

 

Deferred taxes and other liabilities

 

 

646.9

 

 

 

702.0

 

Total Financial Services Liabilities

 

 

15,859.2

 

 

 

15,928.8

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY:

 

 

 

 

 

 

Preferred stock, no par value - authorized 1.0 million shares, none issued

 

 

 

 

 

 

Common stock, $1 par value - authorized 1.2 billion shares,
   issued
524.1 and 523.3 million shares

 

 

524.1

 

 

 

523.3

 

Additional paid-in capital

 

 

318.3

 

 

 

269.1

 

Treasury stock, at cost - .04 million and nil shares

 

 

(4.0

)

 

 

 

Retained earnings

 

 

16,833.7

 

 

 

15,780.3

 

Accumulated other comprehensive loss

 

 

(800.2

)

 

 

(693.9

)

Total Stockholders' Equity

 

 

16,871.9

 

 

 

15,878.8

 

 

$

40,373.6

 

 

$

40,823.4

 

 

* The December 31, 2023 consolidated balance sheet has been derived from audited financial statements.

See Notes to Consolidated Financial Statements.

 

- 5 -


 

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Millions)

 

 

 

Three Months Ended

 

 

 

March 31

 

 

 

2024

 

 

2023

 

OPERATING ACTIVITIES:

 

 

 

 

 

 

Net Income

 

$

1,195.3

 

 

$

733.9

 

Adjustments to reconcile net income to cash provided by operations:

 

 

 

 

 

 

Depreciation and amortization:

 

 

 

 

 

 

Property, plant and equipment

 

 

104.2

 

 

 

103.0

 

Equipment on operating leases and other

 

 

130.8

 

 

 

118.1

 

Provision for losses on financial services receivables

 

 

16.1

 

 

 

3.1

 

Other, net

 

 

17.9

 

 

 

(58.5

)

Pension contributions

 

 

(26.0

)

 

 

(5.8

)

Change in operating assets and liabilities:

 

 

 

 

 

 

Trade and other receivables

 

 

(240.6

)

 

 

(448.6

)

Wholesale receivables on new trucks

 

 

(183.4

)

 

 

(451.2

)

Inventories

 

 

(203.8

)

 

 

(401.7

)

Accounts payable and accrued expenses

 

 

584.9

 

 

 

663.1

 

Income taxes, warranty and other

 

 

73.6

 

 

 

429.4

 

Net Cash Provided by Operating Activities

 

 

1,469.0

 

 

 

684.8

 

 

 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

Originations of retail loans and finance leases

 

 

(1,438.5

)

 

 

(1,199.3

)

Collections on retail loans and finance leases

 

 

1,196.8

 

 

 

1,030.3

 

Net increase in wholesale receivables on used equipment

 

 

(75.7

)

 

 

(9.9

)

Purchases of marketable debt securities

 

 

(319.9

)

 

 

(217.5

)

Proceeds from sales and maturities of marketable debt securities

 

 

294.1

 

 

 

206.6

 

Payments for property, plant and equipment

 

 

(191.3

)

 

 

(138.7

)

Acquisitions of equipment for operating leases

 

 

(160.5

)

 

 

(153.1

)

Proceeds from asset disposals

 

 

169.1

 

 

 

171.4

 

Other, net

 

 

(.2

)

 

 

17.5

 

Net Cash Used in Investing Activities

 

 

(526.1

)

 

 

(292.7

)

 

 

 

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

 

 

 

Payments of cash dividends

 

 

(1,816.5

)

 

 

(1,105.3

)

Purchases of treasury stock

 

 

(4.0

)

 

 

(3.0

)

Proceeds from stock compensation transactions

 

 

35.4

 

 

 

20.5

 

Net (decrease) increase in commercial paper, short-term bank loans and other

 

 

(561.6

)

 

 

209.6

 

Proceeds from term debt

 

 

1,015.0

 

 

 

826.1

 

Payments on term debt

 

 

(548.3

)

 

 

(638.7

)

Net Cash Used in Financing Activities

 

 

(1,880.0

)

 

 

(690.8

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(50.1

)

 

 

17.9

 

Net Decrease in Cash and Cash Equivalents

 

 

(987.2

)

 

 

(280.8

)

Cash and cash equivalents at beginning of period

 

 

7,181.7

 

 

 

4,690.9

 

Cash and cash equivalents at end of period

 

$

6,194.5

 

 

$

4,410.1

 

 

See Notes to Consolidated Financial Statements.

- 6 -


 

 

Consolidated Statements of Stockholders’ Equity (Unaudited)

(Millions, Except Per Share Amounts)

 

 

 

Three Months Ended

 

 

 

March 31

 

 

 

2024

 

 

2023

 

COMMON STOCK, $1 PAR VALUE:

 

 

 

 

 

 

Balance at beginning of period

 

$

523.3

 

 

$

522.0

 

Stock compensation

 

 

.8

 

 

 

.6

 

Balance at end of period

 

 

524.1

 

 

 

522.6

 

 

 

 

 

 

 

 

ADDITIONAL PAID-IN CAPITAL:

 

 

 

 

 

 

Balance at beginning of period

 

 

269.1

 

 

 

196.1

 

Stock compensation

 

 

49.2

 

 

 

34.2

 

Balance at end of period

 

 

318.3

 

 

 

230.3

 

 

 

 

 

 

 

 

TREASURY STOCK, AT COST:

 

 

 

 

 

 

Balance at beginning of period

 

 

 

 

 

 

Purchases

 

 

(4.0

)

 

 

(3.0

)

Balance at end of period

 

 

(4.0

)

 

 

(3.0

)

 

 

 

 

 

 

 

RETAINED EARNINGS:

 

 

 

 

 

 

Balance at beginning of period

 

 

15,780.3

 

 

 

13,402.4

 

Net income

 

 

1,195.3

 

 

 

733.9

 

Cash dividends declared on common stock

 

 

(141.9

)

 

 

(131.0

)

Balance at end of period

 

 

16,833.7

 

 

 

14,005.3

 

 

 

 

 

 

 

 

ACCUMULATED OTHER COMPREHENSIVE LOSS:

 

 

 

 

 

 

Balance at beginning of period

 

 

(693.9

)

 

 

(953.4

)

Other comprehensive (loss) income

 

 

(106.3

)

 

 

80.2

 

Balance at end of period

 

 

(800.2

)

 

 

(873.2

)

Total Stockholders’ Equity

 

$

16,871.9

 

 

$

13,882.0

 

 

 

 

 

 

 

 

Cash dividends declared on common stock, per share

 

$

.27

 

 

$

.25

 

 

See Notes to Consolidated Financial Statements.

 

- 7 -


 

 

Notes to Consolidated Financial Statements (Unaudited)

(Millions, Except Share Amounts)

 

NOTE A - Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10‑Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. For further information, refer to the consolidated financial statements and footnotes included in PACCAR Inc’s (PACCAR or the Company) Annual Report on Form 10‑K for the year ended December 31, 2023.

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

The dilutive and antidilutive options are shown separately in the table below:

 

Three Months Ended March 31,

 

2024

 

 

2023

 

Additional shares

 

 

1,439,200

 

 

 

958,300

 

Antidilutive options

 

 

671,000

 

 

 

889,000

 

New Accounting Pronouncements: In November 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in this ASU improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This ASU is effective for annual periods beginning after December 15, 2023, and interim periods within annual periods beginning after December 15, 2024. Early adoption is permitted. The amendments in this ASU should be applied retrospectively to all prior periods presented. The implementation of this ASU will result in additional disclosures and will not have an impact on the Company’s consolidated financial statements.

 

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this ASU require entities to disclose certain, specific categories within the rate reconciliation and enhance disclosures regarding income taxes paid and income tax expense. This ASU is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The amendments in this ASU should be applied on a prospective basis; however, retrospective application is permitted. The implementation of this ASU will result in additional disclosures and will not have an impact on the Company’s consolidated financial statements.

The Company adopted ASU 2022-03, Fair Value Measurement (Topic 820)—Fair Value Measurement of Equity Securities Subject to Contractual Sale Restriction on January 1, 2024, which had no material impact on the Company’s consolidated financial statements.

NOTE B – Sales and Revenues

Truck, Parts and Other

The Company enters into sales contracts with customers associated with purchases of the Company’s products and services including trucks, parts, product support, and other related services. Generally, the Company recognizes revenue for the amount of consideration it will receive for delivering a product or service to a customer. Revenue is recognized when the customer obtains control of the product or receives benefits of the service. The Company excludes sales taxes, value added taxes and other related taxes assessed by government agencies from revenue. There are no significant financing components included in product or services revenue since generally customers pay shortly after the products or services are transferred. In the Truck and Parts segment, when the Company grants extended payment terms on selected receivables and charges interest, interest income is recognized when earned.

- 8 -


 

 

Notes to Consolidated Financial Statements (Unaudited)

(Millions, Except Share Amounts)

 

The following table disaggregates Truck, Parts and Other revenues by major sources:

 

Three Months Ended March 31,

 

2024

 

 

2023

 

Truck

 

 

 

 

 

 

Truck sales

 

$

6,304.7

 

 

$

6,206.0

 

Revenues from extended warranties, operating leases and other

 

 

236.3

 

 

 

207.8

 

 

 

6,541.0

 

 

 

6,413.8

 

Parts

 

 

 

 

 

 

Parts sales

 

 

1,625.6

 

 

 

1,574.2

 

Revenues from dealer services and other

 

 

50.3

 

 

 

48.8

 

 

 

1,675.9

 

 

 

1,623.0

 

Winch sales and other

 

 

18.1

 

 

 

13.3

 

Truck, Parts and Other sales and revenues

 

$

8,235.0

 

 

$

8,050.1

 

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

Truck sales with RVGs that allow customers the option to return their truck are accounted for as a sale when the customer does not have an economic incentive to return the truck to the Company, or as an operating lease when the customer does have an economic incentive to return the truck. The estimate of customers’ economic incentive to return the trucks is based on an analysis of historical guaranteed buyback value and estimated market value. When truck sales with RVGs are accounted for as a sale, revenue is recognized when the truck is transferred to the customer less an amount for expected returns. Expected return rates are estimated by using a historical return rate.

Aftermarket parts sales allow for returns which are estimated at the time of sale based on historical data. Parts dealer services and other revenues are recognized as services are performed.

 

The following table presents the balance sheet classification of the estimated value of the returned goods assets and the related return liabilities:

 

 

 

March 31, 2024

 

 

December 31, 2023

 

 

 

ASSETS

 

 

LIABILITIES

 

 

ASSETS

 

 

LIABILITIES

 

Trucks

 

 

 

 

 

 

 

 

 

 

 

 

Other current assets

 

$

132.7

 

 

 

 

 

$

147.3

 

 

 

 

Accounts payable, accrued expenses and other

 

 

 

$

135.7

 

 

 

 

$

149.5

 

Other noncurrent assets, net

 

 

171.6

 

 

 

 

 

 

186.7

 

 

 

 

Other liabilities

 

 

 

 

180.2

 

 

 

 

 

196.4

 

 

$

304.3

 

 

$

315.9

 

 

$

334.0

 

 

$

345.9

 

Parts

 

 

 

 

 

 

 

 

 

 

Other current assets

 

$

92.3

 

 

 

 

 

$

86.8

 

 

 

 

Accounts payable, accrued expenses and other

 

 

 

$

226.4

 

 

 

 

$

216.3

 

 

 

$

92.3

 

 

$

226.4

 

 

$

86.8

 

 

$

216.3

 

The Company’s total commitment to acquire trucks at a guaranteed value for contracts accounted for as a sale was $678.5 at March 31, 2024.

 

- 9 -


 

 

Notes to Consolidated Financial Statements (Unaudited)

(Millions, Except Share Amounts)

 

Revenues from extended warranties, operating leases and other include optional extended warranty and repair and maintenance (R&M) service contracts which can be purchased for periods generally ranging up to five years. The Company defers revenue based on stand-alone observable selling prices when it receives payments in advance and generally recognizes the revenue on a straight-line basis over the warranty or R&M contract periods. See Note F, Product Support Liabilities, in the Notes to the Consolidated Financial Statements for further information. Also included are truck sales with an RVG accounted for as an operating lease. A liability is created for the residual value obligation with the remainder of the proceeds recorded as deferred revenue. The deferred revenue is recognized on a straight-line basis over the guarantee period, which typically ranges from three to five years. Deferred revenue related to trucks sold with an RVG was $19.1 at March 31, 2024. The Company expects to recognize approximately $11.4 of the remaining deferred revenue in 2024, $5.0 in 2025, $1.8 in 2026, $.8 in 2027 and $.1 in 2028. Total operating lease revenue from truck sales with RVGs was $9.8 and $12.8 for the three months ended March 31, 2024 and 2023, respectively. The Company’s total commitment to acquire trucks at a guaranteed value for contracts accounted for as a lease was $108.1 at March 31, 2024.

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

Financial Services

The Company’s Financial Services segment products include loans to customers collateralized by the vehicles being financed, finance leases for retail customers and dealers, dealer wholesale financing which includes floating-rate wholesale loans to PACCAR dealers for new and used trucks, and operating leases which include rentals on Company owned equipment. Interest income from finance and other receivables is recognized using the interest method. Certain loan origination costs are deferred and amortized to interest income over the expected life of the contracts using the straight-line method which approximates the interest method.

Operating lease rental revenue is recognized on a straight-line basis over the term of the lease. Customer contracts may include additional services such as excess mileage, repair and maintenance and other services on which revenue is recognized when earned. The Company’s full-service lease arrangements bundle these additional services. Rents for full-service lease contracts are allocated between lease and non-lease components based on the relative stand-alone price of each component. Taxes, such as sales and use and value added, which are collected by the Company from a customer, are excluded from the measurement of lease income and expenses.

Recognition of interest income and rental revenue is suspended (put on non-accrual status) when the receivable becomes more than 90 days past the contractual due date or earlier if some other event causes the Company to determine that collection is not probable. Accordingly, no finance receivables more than 90 days past due were accruing interest at March 31, 2024 or December 31, 2023. Recognition is resumed if the receivable becomes current by the payment of all amounts due under the terms of the existing contract and collection of remaining amounts is considered probable (if not contractually modified) or if the customer makes scheduled payments for three months and collection of remaining amounts is considered probable (if contractually modified). Payments received while the finance receivable is on non-accrual status are applied to interest and principal in accordance with the contractual terms.

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

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

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

 

- 10 -


 

 

Notes to Consolidated Financial Statements (Unaudited)

(Millions, Except Share Amounts)

 

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

 

Three Months Ended March 31,

 

2024

 

 

2023

 

Finance lease revenues

 

$

82.6

 

 

$

54.9

 

Operating lease revenues

 

 

174.9

 

 

 

196.8

 

Total lease revenues

 

$

257.5

 

 

$

251.7

 

 

NOTE C - Investments in Marketable Securities

Debt Securities

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

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

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

Equity Securities

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

Marketable securities at March 31, 2024 and December 31, 2023 consisted of the following:

 

 

 

 

 

 

UNREALIZED

 

 

UNREALIZED

 

 

FAIR

 

At March 31, 2024

 

COST

 

 

GAINS

 

 

LOSSES

 

 

VALUE

 

Marketable debt securities

 

 

 

 

 

 

 

 

 

 

 

 

U.S. tax-exempt securities

 

$

259.0

 

 

$

.4

 

 

$

3.2

 

 

$

256.2

 

U.S. taxable municipal / non-U.S. provincial bonds

 

 

280.5

 

 

 

.3

 

 

 

5.8

 

 

 

275.0

 

U.S. corporate securities

 

 

410.4

 

 

 

.6

 

 

 

4.9

 

 

 

406.1

 

U.S. government securities

 

 

146.3

 

 

 

 

 

 

2.1

 

 

 

144.2

 

Non-U.S. corporate securities

 

 

532.8

 

 

 

1.3

 

 

 

6.1

 

 

 

528.0

 

Non-U.S. government securities

 

 

154.6

 

 

 

1.0

 

 

 

1.1

 

 

 

154.5

 

Other debt securities

 

 

66.0

 

 

 

.1

 

 

 

1.5

 

 

 

64.6

 

Marketable equity securities

 

 

10.0

 

 

 

 

 

 

7.2

 

 

 

2.8

 

Total marketable securities

 

$

1,859.6

 

 

$

3.7

 

 

$

31.9

 

 

$

1,831.4

 

 

- 11 -


 

 

Notes to Consolidated Financial Statements (Unaudited)

(Millions, Except Share Amounts)

 

 

 

 

 

 

 

UNREALIZED

 

 

UNREALIZED

 

 

FAIR

 

At December 31, 2023

 

COST

 

 

GAINS

 

 

LOSSES

 

 

VALUE

 

Marketable debt securities

 

 

 

 

 

 

 

 

 

 

 

 

U.S. tax-exempt securities

 

$

312.5

 

 

$

1.2

 

 

$

3.0

 

 

$

310.7

 

U.S. taxable municipal / non-U.S. provincial bonds

 

 

244.9

 

 

 

.8

 

 

 

5.6

 

 

 

240.1

 

U.S. corporate securities

 

 

357.1

 

 

 

1.4

 

 

 

5.2

 

 

 

353.3

 

U.S. government securities

 

 

159.2

 

 

 

.6

 

 

 

1.7

 

 

 

158.1

 

Non-U.S. corporate securities

 

 

529.4

 

 

 

2.3

 

 

 

7.5

 

 

 

524.2

 

Non-U.S. government securities

 

 

141.0

 

 

 

1.5

 

 

 

1.3

 

 

 

141.2

 

Other debt securities

 

 

92.8

 

 

 

.3

 

 

 

2.5

 

 

 

90.6

 

Marketable equity securities

 

 

10.0