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10-Q – 2026-07-29 – pcar-20260630.htm
$ 344.5 $ 344.5 U.S. taxable municipal / non-U.S. provincial bonds 421.6 421.6 U.S. corporate securities 940.3 940.3 U.S. government securities $ 436.2 436.2 Non-U.S. corporate securities 639.7 639.7 Non-U.S. government securities 213.8 213.8 Other debt securities 207.8 207.8 Total marketable debt securities $ 436.2 $ 2,767.7 $ 3,203.9 Marketable equity securities $ 3.8 $ 3.8 Total marketable securities $ 440.0 $ 2,767.7 $ 3,207.7 Derivatives Cross currency swaps $ 30.0 $ 30.0 Interest-rate swaps 20.0 20.0 Foreign-exchange contracts 12.7 12.7 Commodity contracts .3 .3 Total derivative assets $ 63.0 $ 63.0 Liabilities: Derivatives Cross currency swaps $ 67.1 $ 67.1 Interest-rate swaps 9.7 9.7 Foreign-exchange contracts 89.5 89.5 Total derivative liabilities $ 166.3 $ 166.3 Fair Value Disclosure of Other Financial Instruments For financial instruments that are not recognized at fair value, the Company uses the following methods and assumptions to determine the fair value. These instruments are categorized as Level 2, except cash which is categorized as Level 1 and fixed rate loans which are categorized as Level 3. Cash and Cash Equivalents: Carrying amounts approximate fair value. Financial Services Net Receivables: For floating-rate loans, floating-rate wholesale financing, and operating lease and other trade receivables, carrying values approximate fair values. For fixed rate loans, fair values are estimated using the income approach by discounting cash flows to their present value based on assumptions regarding the credit and market risks to approximate current rates for comparable loans. Finance lease receivables and related allowance for credit losses have been excluded from the accompanying table. Debt: The carrying amounts of Financial Services commercial paper, variable rate bank loans and variable rate term notes approximate fair value. For fixed rate debt, fair values are estimated using the income approach by discounting cash flows to their present value based on current rates for comparable debt. The Company’s estimate of fair value for fixed rate loans and debt that are not carried at fair value was as follows: June 30, 2026 December 31, 2025 CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE Assets: Financial Services fixed rate loans $ 9,955.6 $ 10,003.0 $ 9,928.0 $ 10,118.4 Liabilities: Financial Services fixed rate debt 9,943.9 9,968.4 10,453.1 10,570.6 - 34 - Notes to Consolidated Financial Statements (Unaudited) (Millions, Except Share Amounts) NOTE L - Employee Benefit Plans The Company has several defined benefit pension plans, which cover a majority of its employees. The following information details the components of net pensi on income for the Company’s defined benefit plans: Three Months Ended Six Months Ended June 30 June 30 2026 2025 2026 2025 Service cost $ 22.6 $ 23.2 $ 45.0 $ 47.4 Interest on projected benefit obligation 35.5 36.1 71.1 71.9 Expected return on assets ( 65.0 ) ( 63.1 ) ( 130.4 ) ( 125.4 ) Amortization of prior service costs .4 .4 .8 .7 Recognized actuarial loss .9 .1 2.0 .8 Net pension income $ ( 5.6 ) $ ( 3.3 ) $ ( 11.5 ) $ ( 4.6 ) The components of net pension expense other than service cost are included in Interest and other (income) expenses, net on the Consolidated Statements of Comprehensive Income. During the three and six months ended June 30, 2026, the Company contrib uted $ 3.7 and $ 7.7 to its pension plans, respectively, and $ 5.0 and $ 11.5 for the three and six months ended June 30, 2025, respectively. NOTE M – Commitments and Contingencies On July 19, 2016, the European Commission (EC) concluded its investigation of all major European truck manufacturers and reached a settlement with DAF Trucks N.V., DAF Trucks Deutschland GmbH and PACCAR Inc (collectively “the Company”). Following the settlement, certain EC-related claims and lawsuits have been filed in various jurisdictions primarily in Europe against all major European truck manufacturers including the Company and certain subsidiaries. These claims and lawsuits include individual and collective proceedings seeking monetary damages, including class actions in the United Kingdom (U.K.), the Netherlands and Israel. In certain jurisdictions, additional claimants may bring EC-related claims and lawsuits. Several European courts have issued judgments; some have been favorable while others have been unfavorable and have been appealed. The Company believes it has meritorious defenses to all pending legal claims. In the first quarter 2023, the Company recorded a pre-tax charge of $ 600.0 ($ 446.4 after-tax) for the estimable total cost. The Company has settled with a significant majority of claimants and continues to pursue appropriate resolutions. Due to ongoing settlement costs, the Company updated its estimate and recorded an additional pre-tax charge of $ 350.0 ($ 264.5 after-tax) for the total estimable remaining costs in Interest and other expenses (income), net in the first quarter of 2025. PACCAR is also a defendant in various other legal proceedings and, in addition, there are various other contingent liabilities arising in the normal course of business. After consultation with legal counsel, management does not anticipate that disposition of these various other proceedings and contingent liabilities will have a material effect on the consolidated financial statements. - 35 - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW: PACCAR is a global technology company whose Truck segment includes the design and manufacture of high-quality light-, medium- and heavy-duty commercial trucks. In the U.S. and Canada, trucks are sold under the Kenworth and Peterbilt nameplates, in Europe, under the DAF nameplate and in Mexico, Australia and South America, under the Kenworth and DAF nameplates. The Parts segment includes the distribution of aftermarket parts for trucks and related commercial vehicles. The Company’s Financial Services segment derives its earnings primarily from financing or leasing PACCAR products in North America, Europe, Australia and South America. Second Quarter Financial Highlights: • Worldwide net sales and revenues were $7.55 billion in 2026 compared to $7.51 billion in 2025. • Truck sales were $5.25 billion in 2026 compared to $5.24 billion in 2025. • Parts sales were $1.75 billion in 2026 compared to $1.72 billion in 2025, primarily from higher sales in Europe. • Financial Services revenues were $549.7 million in 2026 compared to $547.7 million in 2025. • Net income was $752.0 million ($1.43 per diluted share) in 2026 compared to $723.8 million ($1.37 per diluted share) in 2025. • Capital investments were $138.7 million in 2026 compared to $221.1 million in 2025. • Research and development (R&D) expenses were $114.3 million in 2026 compared to $112.9 million in 2025. First Six Months Financial Highlights: • Worldwide net sales and revenues were $14.32 billion in 2026 compared to $14.95 billion in 2025, primarily due to lower truck revenues, partially offset by higher parts and financial services revenues. • Truck sales were $9.78 billion in 2026 compared to $10.47 billion in 2025, due to lower truck deliveries in all major markets except Europe. • Parts sales were $3.46 billion in 2026 compared to $3.41 billion in 2025, primarily from higher sales in Europe. • Financial Services revenues were $1.09 billion in 2026 compared to $1.08 billion in 2025. • Net income was $1.36 billion ($2.57 per diluted share) in 2026 compared to $1.23 billion ($2.33 per diluted share) in 2025. In 2025, adjusted net income (non-GAAP), excluding a $264.5 million after-tax charge related to civil litigation in Europe, was $1.49 billion ($2.83 per diluted share). See Reconciliation of GAAP to Non-GAAP Financial Measures on page 53 . • Capital investments were $274.2 million in 2026 compared to $393.0 million in 2025. • Research and development (R&D) expenses were $223.4 million in 2026 compared to $228.3 million in 2025. In the second quarter of 2026, Peterbilt unveiled the Freedom 250 Special Edition Model 589 truck, honoring America's historic 250 th birthday. This truck delivers the superior quality and pride of ownership that Peterbilt customers expect, with a red, white and blue design that celebrates freedom and the open road. Also in the second quarter, DAF Trucks was named 'Truck Manufacturer of the Year' by British Motor Trader magazine at its Commercial Industry Awards ceremony in the U.K. The PACCAR Financial Services (PFS) group of companies has operations covering four continents and 26 countries. The global breadth of PFS and its rigorous credit application process support a portfolio of loans and leases with total assets of $22.27 billion. PFS issued $1.38 billion in medium-term notes during the first six months of 2026 to support new business volume and market share growth and repay maturing debt. - 36 - Truck Outlook Truck industry heavy-duty retail sales in the U.S. and Canada in 2026 are expected to be 230,000 to 270,000 units compared to 232,800 in 2025. In Europe, 2026 truck industry registrations for over 16-tonne vehicles are expected to be 290,000 to 330,000 units compared to 297,000 in 2025. In South America, heavy-duty truck industry registrations in 2026 are projected to be 100,000 to 110,000 units compared to 115,000 in 2025. The Company has taken mitigating actions to reduce the impact from import tariffs on truck order intake. The Company's North American truck factories are optimally located to operate under the new Section 232 truck tariffs that began in November 2025. The Company’s tariff exposure is minimized by producing trucks locally for the United States, Canada and Mexico. On February 20, 2026, the United States Supreme Court issued a decision invalidating tariffs imposed under the International Emergency Economic Powers Act (IEEPA). This decision resulted in tariff relief and recovery of certain amounts previously paid. The U.S. Environmental Protection Agency's July 2026 notice of proposed rulemaking (NPRM) reaffirmed the EPA 27 NOx emissions limits with proposed revisions to certain compliance requirements, including extended warranty periods, useful life requirements and other provisions. These revisions are intended to ensure technology readiness of new emissions powertrains and mitigate the costs of compliance associated with the useful life and warranty. The Company's results could be impacted by further changes in tariff policy, geopolitical uncertainty, emissions regulations and improving freight fundamentals. Parts Outlook In 2026, PACCAR Parts sales are expected to increase 3-5% compared to 2025, depending on the economic conditions. Financial Services Outlook In 2026, average earning assets are expected to be comparable to 2025. The used truck market is improving. If freight transportation conditions decline due to a weaker economy, then past due accounts, truck repossessions and credit losses would likely increase from the current levels and new business volume and average earning assets would likely decline. Capital Investments and R&D Outlook Capital investments in 2026 are expected to be $700 to $750 million and R&D is expected to be $450 to $480 million. The Company continues to invest in next generation clean diesel, hybrid and battery-electric powertrains, integrated connected vehicle services, and expanded manufacturing capabilities. See the Forward-Looking Statements section of Management’s Discussion and Analysis for factors that may affect these outlooks. - 37 - RESULTS OF OPERATIONS: The Company’s results of operations for the three and six months ended June 30, 2026 and 2025 are presented below. Three Months Ended Six Months Ended June 30 June 30 ($ in millions, except per share amounts) 2026 2025 2026 2025 Net sales and revenues: Truck $ 5,253.1 $ 5,243.1 $ 9,779.6 $ 10,468.9 Parts 1,746.9 1,720.9 3,457.0 3,410.8 Other (3.0 ) (1.2 ) (5.3 ) (3.2 ) Truck, Parts and Other 6,997.0 6,962.8 13,231.3 13,876.5 Financial Services 549.7 547.7 1,091.9 1,075.7 $ 7,546.7 $ 7,510.5 $ 14,323.2 $ 14,952.2 Income before income taxes: Truck $ 360.5 $ 308.8 $ 536.7 $ 673.7 Parts 417.0 416.5 819.3 843.0 Other* (6.1 ) (.5 ) (4.2 ) (353.7 ) Truck, Parts and Other 771.4 724.8 1,351.8 1,163.0 Financial Services 124.1 123.2 239.6 244.3 Investment income 86.0 83.9 166.4 167.7 Income taxes (229.5 ) (208.1 ) (400.5 ) (346.1 ) Net income $ 752.0 $ 723.8 $ 1,357.3 $ 1,228.9 Diluted earnings per share $ 1.43 $ 1.37 $ 2.57 $ 2.33 After-tax return on revenues 10.0 % 9.6 % 9.5 % 8.2 % * In 2025, Other includes a $350.0 million charge related to civil litigation in Europe (EC-related claims) in the first quarter 2025. The following provides an analysis of the results of operations for the Company’s three reportable segments - Truck, Parts and Financial Services. Where possible, the Company has quantified the impact of factors identified in the following discussion and analysis. In cases where it is not possible to quantify the impact of factors, the Company lists them in estimated order of importance. Factors for which the Company is unable to specifically quantify the impact include market demand and impact from tariffs, fuel prices, geopolitical events, freight tonnage and economic conditions affecting the Company’s results of operations. 2026 Compared to 2025: Truck The Company’s Truck segment accounted for 70% and 68% of revenues in the second quarter and the first six months of 2026, respectively, compared to 70% in both the second quarter and the first six months of 2025. The Company’s new truck deliveries are summarized below: Three Months Ended Six Months Ended June 30 June 30 2026 2025 % CHANGE 2026 2025 % CHANGE U.S. and Canada 22,000 23,000 (4 ) 39,800 45,200 (12 ) Europe 11,200 10,600 6 22,400 21,000 7 Mexico, South America, Australia and other 5,500 5,700 (4 ) 9,600 13,200 (27 ) Total units 38,700 39,300 (2 ) 71,800 79,400 (10 ) Worldwide new truck deliveries decreased in the second quarter of 2026 compared to the same period of 2025, primarily reflecting lower retail demand in the U.S and Canada, partially offset by improved demand in Europe and Mexico. New truck deliveries in first six months of 2026 decreased compared to the same period of 2025, reflecting lower retail demand in all major markets except Europe. - 38 - Market share data discussed below is provided by third-party sources and is measured by either retail sales or registrations for the Company’s dealer network as a percentage of total retail sales or registrations depending on the geographic market. In the U.S. and Canada, market share is based on retail sales. In Europe, market share is based primarily on registrations. In the first six months of 2026, industry retail sales in the heavy-duty market in the U.S. and Canada were 104,800 units compared to 120,800 units in the same period of 2025. The Company’s heavy-duty truck retail market share was 29.6% in the first six months of 2026 compared to 30.4% in the first six months of 2025. The medium-duty market was 50,800 units in the first six months of 2026 compared to 54,300 units in the same period of 2025. The Company’s medium-duty market share was 12.3% in the first six months of 2026 compared to 14.0% in the first six months of 2025. In 2026, the U.S. and Canada medium-duty market size and the Company's share for the prior-year periods have been revised, consistent with the third-party data provider. The over 16‑tonne truck market in Europe in the first six months of 2026 was 165,000 units compared to 151,100 units in the first six months of 2025. DAF over 16‑tonne market share was 13.6% in the first six months of 2026 compared to 14.2% in the same period of 2025. The 6 to 16‑tonne market in the first six months of 2026 was 18,300 units compared to 19,900 units in the same period of 2025. DAF market share in the 6 to 16-tonne market in the first six months of 2026 was 9.2% compared to 9.9% in the same period of 2025. The over 16-tonne truck market in Brasil in the first six months of 2026 was 37,200 units compared to 41,700 units in the same period of 2025. DAF Brasil market share for the first six months of 2026 was 7.6% compared to 9.4% in the same period of 2025. The Company’s worldwide truck net sales and revenues are summarized below: Three Months Ended Six Months Ended June 30 June 30 ($ in millions) 2026 2025 % CHANGE 2026 2025 % CHANGE Truck net sales and revenues: U.S. and Canada $ 3,174.4 $ 3,315.5 (4 ) $ 5,848.5 $ 6,511.2 (10 ) Europe 1,274.2 1,190.1 7 2,543.3 2,289.4 11 Mexico, South America, Australia and other 804.5 737.5 9 1,387.8 1,668.3 (17 ) $ 5,253.1 $ 5,243.1 $ 9,779.6 $ 10,468.9 (7 ) Truck income before income taxes $ 360.5 $ 308.8 17 $ 536.7 $ 673.7 (20 ) Pre-tax return on revenues 6.9 % 5.9 % 5.5 % 6.4 % The Company’s worldwide truck net sales and revenues in the second quarter of 2026 were comparable to the same period of 2025. Revenue for the first six months decreased to $9.78 billion in 2026 from $10.47 billion in 2025, primarily due to lower truck unit deliveries from lower retail demand in all major markets except Europe. In the second quarter of 2026, Truck segment income before income taxes and pre-tax return on revenues increased compared to the same period of 2025, primarily due to higher price realization and lower tariff costs. Truck segment income before income taxes and pre-tax return on revenues for the first six months of 2026 decreased from the same period of 2025, primarily due to lower truck unit deliveries from lower retail demand. - 39 - The major factors for the Truck segment changes in net sales and revenues, cost of sales and revenues and gross margin between the three months ended June 30, 2026 and 2025 are as follows: NET COST OF SALES AND SALES AND GROSS ($ in millions) REVENUES REVENUES MARGIN Three Months Ended June 30, 2025 $ 5,243.1 $ 4,787.8 $ 455.3 (Decrease) increase Truck sales volume (141.7 ) (86.7 ) (55.0 ) Average truck sales prices 86.8 86.8 Average material, labor and other direct costs 27.3 (27.3 ) Factory overhead and other indirect costs (7.2 ) 7.2 Extended warranties, operating leases and other 4.6 (26.4 ) 31.0 Currency translation 60.3 64.0 (3.7 ) Total increase (decrease) 10.0 (29.0 ) 39.0 Three Months Ended June 30, 2026 $ 5,253.1 $ 4,758.8 $ 494.3 • Truck sales volume decreased revenues by $141.7 million and costs by $86.7 million, primarily reflecting lower truck deliveries. • Average truck sales prices increased sales by $86.8 million, primarily due to higher price realization in the U.S. and Canada. • Average cost per truck increased cost of sales by $27.3 million, primarily reflecting higher material, truck content and labor costs, partially offset by lower tariff and product support costs. • Factory overhead and other indirect costs decreased $7.2 million, primarily due to lower overhead costs from lower truck build rates. • Extended warranties, operating leases and other increased revenues by $4.6 million, primarily due to higher volume of R&M and extended warranty contracts. The decrease in cost of sales by $26.4 million reflects lower extended warranty costs in the U.S. and Canada and lower used truck costs in Europe, partially offset by higher costs from R&M contracts. • The currency translation effect on sales and cost of sales primarily reflects an increase in the value of the euro, Australian dollar, and Brazilian real relative to the U.S. dollar. • Truck gross margin was 9.4% in the second quarter of 2026 compared to 8.7% in the same period of 2025 due to the factors noted above. The major factors for the Truck segment changes in net sales and revenues, cost of sales and revenues and gross margin between the six months ended June 30, 2026 and 2025 are as follows: NET COST OF SALES AND SALES AND GROSS ($ in millions) REVENUES REVENUES MARGIN Six Months Ended June 30, 2025 $ 10,468.9 $ 9,504.3 $ 964.6 (Decrease) increase Truck sales volume (1,113.7 ) (913.3 ) (200.4 ) Average truck sales prices 191.7 191.7 Average material, labor and other direct costs 189.6 (189.6 ) Factory overhead and other indirect costs (14.4 ) 14.4 Extended warranties, operating leases and other 17.5 (24.6 ) 42.1 Currency translation 215.2 226.0 (10.8 ) Total decrease (689.3 ) (536.7 ) (152.6 ) Six Months Ended June 30, 2026 $ 9,779.6 $ 8,967.6 $ 812.0 • Truck sales volume decreased revenues by $1.11 billion and costs by $913.3 million, primarily reflecting lower truck deliveries. • Average truck sales prices increased sales by $191.7 million, primarily due to higher price realization in the U.S. and Canada. - 40 - • Average cost per truck increased cost of sales by $189.6 million, primarily reflecting higher material, truck content and labor costs, partially offset by lower tariff and product support costs. • Factory overhead and other indirect costs decreased $14.4 million, primarily due to lower overhead costs from lower truck build rates. • Extended warranties, operating leases and other increased revenues by $17.5 million, primarily due to higher volume of R&M and extended warranty contracts. The decrease in cost of sales by $24.6 million reflects lower extended warranty costs in the U.S. and Canada and lower used truck costs in Europe, partially offset by higher costs from R&M contracts. • The currency translation effect on sales and cost of sales primarily reflects an increase in the value of the euro, Australian dollar, Canadian dollar and Brazilian real relative to the U.S. dollar. • Truck gross margin was 8.3% in the first six months of 2026 compared to 9.2% in the same period of 2025 due to the factors noted above. Truck SG&A expenses in the second quarter of 2026 decreased to $50.0 million from $54.7 million in the same period of 2025, primarily due to lower salaries and related expenses and lower professional fees. For the first six months of 2026, Truck SG&A of $111.4 million was comparable to $112.0 million in the same period of 2025, as lower salaries and related expenses and lower professional fees were mostly offset by higher sales and marketing expenses and currency translation effects. As a percentage of sales, Truck SG&A was 1.0% and 1.1% in the three and six months ended June 30, 2026, respectively, which is consistent with the same periods of 2025. Parts The Company’s Parts segment accounted for 23% and 24% of revenues in the second quarter and the first six months of 2026, respectively, compared to 23% in both the second quarter and the first six months of 2025. Three Months Ended Six Months Ended June 30 June 30 ($ in millions) 2026 2025 % CHANGE 2026 2025 % CHANGE Parts net sales and revenues: U.S. and Canada $ 1,182.1 $ 1,191.5 (1 ) $ 2,330.2 $ 2,374.1 (2 ) Europe 376.3 353.0 7 778.8 706.9 10 Mexico, South America, Australia and other 188.5 176.4 7 348.0 329.8 6 $ 1,746.9 $ 1,720.9 2 $ 3,457.0 $ 3,410.8 1 Parts income before income taxes $ 417.0 $ 416.5 $ 819.3 $ 843.0 (3 ) Pre-tax return on revenues 23.9 % 24.2 % 23.7 % 24.7 % The Company’s worldwide parts net sales and revenues for the second quarter increased to $1.75 billion in 2026 from $1.72 billion in 2025. For the first six months, worldwide parts net sales and revenues increased to $3.46 billion in 2026 from $3.41 billion in 2025. The increase in both periods was primarily due to higher sales in Europe and favorable currency translation effects, partially offset by lower sales in the U.S. and Canada. The major factors for the changes in Parts segment net sales and revenues, cost of sales and revenues and gross margin between the three months ended June 30, 2026 and 2025 are as follows: NET COST OF SALES AND SALES AND GROSS ($ in millions) REVENUES REVENUES MARGIN Three Months Ended June 30, 2025 $ 1,720.9 $ 1,204.7 $ 516.2 (Decrease) increase Aftermarket parts volume (58.9 ) (12.7 ) (46.2 ) Average aftermarket parts sales prices 69.3 69.3 Average aftermarket parts direct costs 10.9 (10.9 ) Warehouse and other indirect costs 12.0 (12.0 ) Currency translation 15.6 11.4 4.2 Total increase 26.0 21.6 4.4 Three Months Ended June 30, 2026 $ 1,746.9 $ 1,226.3 $ 520.6 - 41 - • Aftermarket parts sales volume decreased by $58.9 million and related cost of sales decreased by $12.7 million primarily due to lower sales volume in the U.S. and Canada and a higher mix of lower margin direct ship sales. • Average aftermarket parts sales prices increased sales by $69.3 million, primarily due to higher price realization in the U.S. and Canada and Europe. • Average aftermarket parts direct costs increased $10.9 million due to higher material costs, primarily in the U.S. and Canada and Europe, partially offset by lower tariff costs and higher supplier rebates in the U.S. • Warehouse and other indirect costs increased $12.0 million, primarily due to higher indirect costs, including warehouse expansion costs. • The currency translation effect on sales and cost of sales primarily reflects an increase in the value of the euro, Australian dollar and Brazilian real relative to the U.S. dollar. • Parts gross margin was 29.8% in the second quarter of 2026 compared to 30.0% in the same period of 2025 due to the factors noted above. The major factors for the changes in Parts segment net sales and revenues, cost of sales and revenues and gross margin between the six months ended June 30, 2026 and 2025 are as follows: NET COST OF SALES AND SALES AND GROSS ($ in millions) REVENUES REVENUES MARGIN Six Months Ended June 30, 2025 $ 3,410.8 $ 2,376.2 $ 1,034.6 (Decrease) increase Aftermarket parts volume (187.4 ) (78.4 ) (109.0 ) Average aftermarket parts sales prices 170.8 170.8 Average aftermarket parts direct costs 66.8 (66.8 ) Warehouse and other indirect costs 25.1 (25.1 ) Currency translation 62.8 40.3 22.5 Total increase (decrease) 46.2 53.8 (7.6 ) Six Months Ended June 30, 2026 $ 3,457.0 $ 2,430.0 $ 1,027.0 • Aftermarket parts sales volume decreased by $187.4 million and related cost of sales decreased by $78.4 million primarily due to lower sales volume in the U.S. and Canada and a higher mix of lower margin direct ship sales. • Average aftermarket parts sales prices increased sales by $170.8 million, primarily due to higher price realization in the U.S. and Canada and Europe. • Average aftermarket parts direct costs increased $66.8 million primarily due to higher material costs, mainly in the U.S. and Canada and Europe. • Warehouse and other indirect costs increased $25.1 million, primarily due to higher indirect costs, including warehouse expansion costs. • The currency translation effect on sales and cost of sales primarily reflects an increase in the value of the euro, Australian dollar, and Brazilian real relative to the U.S. dollar. • Parts gross margin was 29.7% in the first six months of 2026 compared to 30.3% in the same period of 2025 due to the factors noted above. Parts SG&A expense in the second quarter of 2026 increased to $67.8 million from $64.6 million in the same period of 2025. For the first six months 2026, Parts SG&A increased to $135.5 million from $125.5 million in the same period of 2025. The increase in both periods was primarily due to higher currency translation effects and higher system related costs. As a percentage of sales, Parts SG&A was 3.9% in the three and six months ended June 30, 2026 compared to 3.8% and 3.7% in the three and six months ended June 30, 2025, respectively. - 42 - Financial Services The Company’s Financial Services segment accounted for 7% and 8% of revenues in the second quarter and the first six months of 2026, respectively, compared to 7% in both the second quarter and the first six months of 2025. Three Months Ended Six Months Ended June 30 June 30 ($ in millions) 2026 2025 % CHANGE 2026 2025 % CHANGE New loan and lease volume: U.S. and Canada $ 931.1 $ 1,044.5 (11 ) $ 1,584.1 $ 1,788.9 (11 ) Europe 336.1 329.8 2 684.2 636.2 8 Mexico, Australia, Brasil and other 393.6 479.2 (18 ) 744.1 937.6 (21 ) $ 1,660.8 $ 1,853.5 (10 ) $ 3,012.4 $ 3,362.7 (10 ) New loan and lease volume by product: Loans and finance leases $ 1,420.9 $ 1,678.5 (15 ) $ 2,606.2 $ 3,030.9 (14 ) Equipment on operating lease 239.9 175.0 37 406.2 331.8 22 $ 1,660.8 $ 1,853.5 (10 ) $ 3,012.4 $ 3,362.7 (10 ) New loan and lease unit volume: Loans and finance leases 9,430 11,750 (20 ) 17,470 21,300 (18 ) Equipment on operating lease 1,990 1,600 24 3,430 3,130 10 11,420 13,350 (14 ) 20,900 24,430 (14 ) Average earning assets: U.S. and Canada $ 12,008.7 $ 12,196.2 (2 ) $ 11,980.0 $ 12,138.2 (1 ) Europe 4,159.4 4,104.7 1 4,194.6 3,972.5 6 Mexico, Australia, Brasil and other 4,961.3 5,027.1 (1 ) 4,985.8 4,916.1 1 $ 21,129.4 $ 21,328.0 (1 ) $ 21,160.4 $ 21,026.8 1 Average earning assets by product: Loans and finance leases $ 15,588.4 $ 14,957.2 4 $ 15,585.4 $ 14,690.4 6 Dealer wholesale financing 3,582.8 4,365.0 (18 ) 3,622.5 4,344.3 (17 ) Equipment on lease and other 1,958.2 2,005.8 (2 ) 1,952.5 1,992.1 (2 ) $ 21,129.4 $ 21,328.0 (1 ) $ 21,160.4 $ 21,026.8 1 Revenues: U.S. and Canada $ 220.2 $ 229.4 (4 ) $ 436.1 $ 466.4 (6 ) Europe 144.6 137.3 5 291.1 260.8 12 Mexico, Australia, Brasil and other 184.9 181.0 2 364.7 348.5 5 $ 549.7 $ 547.7 $ 1,091.9 $ 1,075.7 2 Revenues by product: Loans and finance leases $ 288.4 $ 278.2 4 $ 575.2 $ 542.5 6 Dealer wholesale financing 57.8 79.4 (27 ) 115.9 158.1 (27 ) Equipment on lease and other 203.5 190.1 7 400.8 375.1 7 $ 549.7 $ 547.7 $ 1,091.9 $ 1,075.7 2 Income before income taxes $ 124.1 $ 123.2 1 $ 239.6 $ 244.3 (2 ) New loan and lease volume was $1.66 billion in the second quarter of 2026 compared to $1.85 billion in the second quarter of 2025. New loan and lease volume was $3.01 billion in the first six months of 2026 compared to $3.36 billion in the same period of 2025. The decrease in both periods was primarily due to lower new loan and lease volume from lower retail sales of PACCAR trucks, primarily in the U.S. and Canada, and lower finance market share, primarily in Brasil. The increase in equipment on operating lease dollar volume was primarily due to higher market demand in Europe and the U.S. and Canada, partly offset by lower demand in Mexico. The effects of currency translation increased new loan and lease volume by $42.2 million and $112.9 million in the second quarter and first six months of 2026, respectively, primarily due to an increase in the value of the Mexican peso and the euro relative to the U.S. dollar. In the second quarter of 2026, PFS finance market share of new PACCAR truck sales was 24.7% compared to 25.9% in the same period of 2025. In the first six months of 2026, PFS finance market share of new PACCAR truck sales was 24.5% compared to 25.3% in the same period of of 2025. - 43 - In the second quarter of 2026, PFS revenues slightly increased to $549.7 million from $547.7 million in the same period of 2025. In the first six months of 2026, PFS revenues increased to $1.09 billion from $1.08 billion in the same period of 2025. The increase in both periods was primarily due to favorable currency translation effects and higher average retail loan and finance lease portfolio, mostly offset by a lower dealer wholesale portfolio. The effects of currency translation increased PFS revenues by $21.7 million and $56.3 million in the three and six months ended June 30, 2026, respectively. In the second quarter of 2026, PFS income before income taxes increased to $124.1 million from $123.2 million in the same period of 2025. The increase was primarily due to favorable currency translation effects and higher finance margin, mostly offset by a higher provision for losses. In the first six months of 2026, PFS income before income taxes decreased to $239.6 million from $244.3 million in the same period of 2025. The decrease in the first six months of 2026 was primarily due to a higher provision for losses, partly offset by favorable currency translation effects and improving used truck results. The effects of currency translation increased PFS income before income taxes by $5.8 million and $13.6 million in the second quarter and the first six months of 2026, respectively, primarily due to an increase in the value of the Mexican peso relative to the U.S. dollar. Included in Financial Services Other assets on the Company’s Consolidated Balance Sheets are used trucks held for sale, net of impairments, of $318.6 million at June 30, 2026 and $389.4 million at December 31, 2025. These trucks are primarily units returned from matured operating leases in the ordinary course of business, and also include trucks acquired from repossessions or through acquisitions of used trucks in trades related to new truck sales and trucks returned from RVGs. The Company recognized losses on used trucks, excluding repossessions, of $6.3 million in the second quarter of 2026 compared to $7.5 million in the second quarter of 2025, including $4.9 million of losses on multiple unit transactions in the second quarter of 2026 compared to $9.0 million in the second quarter of 2025. Used truck losses related to repossessions, which are recognized as credit losses, were $7.4 million for the second quarter of 2026 and $3.3 million for the second quarter of 2025. The Company recognized losses on used trucks, excluding repossessions, of $12.0 million in the first six months of 2026 compared to $18.6 million in the same period of 2025, including $12.8 million of losses on multiple unit transactions in the first six months of 2026 compared to $21.0 million in the same period of 2025. Used truck losses related to repossessions, which are recognized as credit losses, were $12.1 million for the first six months of 2026 and $6.6 million for the first six months of 2025. The major factors for the changes in interest and fees, interest and other borrowing expenses and finance margin for the three months ended June 30, 2026 and 2025 are outlined below: ($ in millions) INTEREST AND FEES INTEREST AND OTHER BORROWING EXPENSES FINANCE MARGIN Three Months Ended June 30, 2025 $ 357.6 $ 200.3 $ 157.3 (Decrease) increase Average finance receivables (11.8 ) (11.8 ) Average debt balances (16.4 ) 16.4 Yields (13.2 ) (13.2 ) Borrowing rates (10.5 ) 10.5 Currency translation and other 13.6 6.5 7.1 Total (decrease) increase (11.4 ) (20.4 ) 9.0 Three Months Ended June 30, 2026 $ 346.2 $ 179.9 $ 166.3 • Average finance receivables decreased $664.2 million (excluding foreign exchange effects), decreasing interest and fees by $11.8 million, primarily due to lower dealer wholesale balances. • Average debt balances decreased $1.41 billion (excluding foreign exchange effects), decreasing interest and other borrowing costs by $16.4 million. The lower average debt balances reflect funding for a lower average earning assets portfolio, which includes loans, finance leases, wholesale receivables and equipment on operating lease. • Slightly lower portfolio yields (7.2% in 2026 compared to 7.4% in 2025) decreased interest and fees by $13.2 million. The lower portfolio yields were primarily due to lower market rates on new portfolio assets, primarily in the U.S. - 44 - • Lower borrowing rates (4.8% in 2026 compared to 5.2% in 2025) decreased interest and other borrowing expenses by $10.5 million and were primarily due to lower debt market rates, primarily in Europe and Mexico. • The currency translation effects reflect an increase in the value of foreign currencies relative to the U.S. dollar, primarily the Mexican peso and Brazilian real. The major factors for the changes in interest and fees, interest and other borrowing expenses and finance margin for the six months ended June 30, 2026 and 2025 are outlined below: ($ in millions) INTEREST AND FEES INTEREST AND OTHER BORROWING EXPENSES FINANCE MARGIN Six Months Ended June 30, 2025 $ 700.6 $ 390.9 $ 309.7 (Decrease) increase Average finance receivables (17.2 ) (17.2 ) Average debt balances (29.4 ) 29.4 Yields (23.8 ) (23.8 ) Borrowing rates (14.3 ) 14.3 Currency translation and other 31.5 15.5 16.0 Total (decrease) increase (9.5 ) (28.2 ) 18.7 Six Months Ended June 30, 2026 $ 691.1 $ 362.7 $ 328.4 • Average finance receivables decreased $497.3 million (excluding foreign exchange effects), decreasing interest and fees by $17.2 million, primarily due to lower dealer wholesale balances. • Average debt balances decreased $1.26 billion (excluding foreign exchange effects), decreasing interest and other borrowing costs by $29.4 million. The lower average debt balances reflect funding for a lower average earning assets portfolio, which includes loans, finance leases, wholesale receivables and equipment on operating lease. • Slightly lower portfolio yields (7.3% in 2026 compared to 7.4% in 2025) decreased interest and fees by $23.8 million. The lower portfolio yields were primarily due to lower market rates on new portfolio assets, primarily in the U.S. • Lower borrowing rates (4.8% in 2026 compared to 5.1% in 2025) decreased interest and other borrowing expenses by $14.3 million and were primarily due to lower debt market rates, primarily in the U.S. • The currency translation effects reflect an increase in the value of foreign currencies relative to the U.S. dollar, primarily the Mexican peso and Brazilian real. The following table summarizes operating lease, rental and other revenues and depreciation and other expenses: Three Months Ended Six Months Ended June 30 June 30 ($ in millions) 2026 2025 2026 2025 Operating lease and rental revenues $ 162.0 $ 161.9 $ 322.4 $ 317.1 Used truck sales 31.7 18.8 58.8 40.9 Insurance, franchise and other revenues 9.8 9.4 19.6 17.1 Operating lease, rental and other revenues $ 203.5 $ 190.1 $ 400.8 $ 375.1 Depreciation of operating lease equipment $ 111.5 $ 116.4 $ 223.5 $ 234.7 Vehicle operating expenses 19.1 17.5 38.0 34.1 Cost of used truck sales 32.7 19.0 60.5 41.7 Insurance, franchise and other expenses 1.9 2.0 3.3 4.1 Depreciation and other expenses $ 165.2 $ 154.9 $ 325.3 $ 314.6 - 45 - The major factors for the changes in operating lease, rental and other revenues, depreciation and other expenses and lease margin between the three months ended June 30, 2026 and 2025 are outlined below: ($ in millions) OPERATING LEASE, RENTAL AND OTHER REVENUES DEPRECIATION AND OTHER EXPENSES LEASE MARGIN Three Months Ended June 30, 2025 $ 190.1 $ 154.9 $ 35.2 Increase (decrease) Used truck sales 12.5 13.4 (.9 ) Results on returned lease assets (1.9 ) 1.9 Average operating lease assets (13.7 ) (10.8 ) (2.9 ) Revenue and cost per asset 6.3 4.3 2.0 Currency translation and other 8.3 5.3 3.0 Total increase 13.4 10.3 3.1 Three Months Ended June 30, 2026 $ 203.5 $ 165.2 $ 38.3 • Used truck sales from units received on trade increased revenues by $12.5 million and increased related depreciation and other expenses by $13.4 million, reflecting higher used truck sales volume in Europe. • Results on returned lease assets decreased depreciation and other expenses by $1.9 million. • Average operating lease assets decreased $80.2 million (excluding foreign exchange effects), which decreased revenues by $13.7 million and related depreciation and other expenses by $10.8 million. • Revenue per asset increased $6.3 million primarily due to higher average truck values financed. Cost per asset increased $4.3 million due to higher depreciation and operating expenses, mainly in the U.S. and Canada and Europe. • The currency translation effects reflect an increase in the value of foreign currencies relative to the U.S. dollar, primarily the Mexican peso and the euro. The major factors for the changes in operating lease, rental and other revenues, depreciation and other expenses and lease margin between the six months ended June 30, 2026 and 2025 are outlined below: ($ in millions) OPERATING LEASE, RENTAL AND OTHER REVENUES DEPRECIATION AND OTHER EXPENSES LEASE MARGIN Six Months Ended June 30, 2025 $ 375.1 $ 314.6 $ 60.5 Increase (decrease) Used truck sales 15.1 16.0 (.9 ) Results on returned lease assets (7.8 ) 7.8 Average operating lease assets (34.1 ) (27.3 ) (6.8 ) Revenue and cost per asset 18.5 12.2 6.3 Currency translation and other 26.2 17.6 8.6 Total increase 25.7 10.7 15.0 Six Months Ended June 30, 2026 $ 400.8 $ 325.3 $ 75.5 • Used truck sales from units received on trade increased revenues by $15.1 million and increased related depreciation and other expenses by $16.0 million, reflecting higher used truck sales volume in Europe. • Results on returned lease assets decreased depreciation and other expenses by $7.8 million, primarily due to improved used truck pricing. • Average operating lease assets decreased $111.9 million (excluding foreign exchange effects), which decreased revenues by $34.1 million and related depreciation and other expenses by $27.3 million. • Revenue per asset increased $18.5 million primarily due to higher average truck values financed. Cost per asset increased $12.2 million due to higher depreciation and operating expenses, mainly in the U.S. and Canada and Europe. • The currency translation effects reflect an increase in the value of foreign currencies relative to the U.S. dollar, primarily the Mexican peso and the euro. - 46 - Financial Services SG&A for the second quarter of 2026 increased to $41.1 million from $40.1 million in the same period of 2025. For the first six months of 2026, Financial Services SG&A increased to $80.8 million from $78.4 million in the same period of 2025. The increase in both periods was due to unfavorable foreign currency translation effects. As an annualized percentage of average earning assets, Financial Services SG&A was .8% for both the second quarter and the first six months of 2026 compared to .8% and .7% for the same periods of 2025, respectively. The following table summarizes the provision for losses on receivables and net charge-offs: Three Months Ended Six Months Ended June 30, 2026 June 30, 2026 ($ in millions) PROVISION FOR LOSSES ON RECEIVABLES NET CHARGE- OFFS PROVISION FOR LOSSES ON RECEIVABLES NET CHARGE- OFFS U.S. and Canada $ 10.8 $ 11.2 $ 26.4 $ 28.1 Europe 3.7 3.4 6.7 6.3 Mexico, Australia, Brasil and other 24.9 30.3 50.4 53.6 $ 39.4 $ 44.9 $ 83.5 $ 88.0 Three Months Ended Six Months Ended June 30, 2025 June 30, 2025 ($ in millions) PROVISION FOR LOSSES ON RECEIVABLES NET CHARGE- OFFS PROVISION FOR LOSSES ON RECEIVABLES NET CHARGE- OFFS U.S. and Canada $ 14.8 $ 17.5 $ 22.1 $ 30.9 Europe 2.7 3.1 4.9 5.2 Mexico, Australia, Brasil and other 11.7 4.3 20.5 9.8 $ 29.2 $ 24.9 $ 47.5 $ 45.9 The provision for losses on receivables increased to $39.4 million in the second quarter of 2026 from $29.2 million in the same period of 2025. In the first six months of 2026, the provision for losses on receivables increased to $83.5 million from $47.5 million in the same period of 2025. The increase in the second quarter and the first six months of 2026 compared to 2025 was primarily due to a higher provision in Brasil, reflecting an increase in 30+ days past due accounts. Net charge-offs increased to $44.9 million in the second quarter of 2026 from $24.9 million in the same period of 2025. In the first six months of 2026, net charge-offs increased to $88.0 million from $45.9 million in the same period of 2025. Higher net charge-offs in Brasil reflected challenging economic conditions, including higher interest rates and slowing freight activities. The Company modifies loans and finance leases as a normal part of its Financial Services operations. The Company may modify loans and finance leases for commercial reasons or for credit reasons. Modifications for commercial reasons are changes to contract terms for customers that are not considered to be in financial difficulty. Insignificant delays are modifications extending terms up to three months for customers experiencing some short-term financial stress, but not considered to be in financial difficulty. Modifications for credit reasons are changes to contract terms for customers considered to be in financial difficulty. The Company’s modifications typically result in granting more time to pay the contractual amounts owed and charging a fee and interest for the term of the modification. When considering whether to modify customer accounts for credit reasons, the Company evaluates the creditworthiness of the customers and modifies those accounts that the Company considers likely to perform under the modified terms. - 47 - The post-modification balances of accounts modified during the six months ended June 30, 2026 and 2025 are summarized below: 2026 2025 ($ in millions) AMORTIZED COST BASIS % OF TOTAL PORTFOLIO* AMORTIZED COST BASIS % OF TOTAL PORTFOLIO* Commercial $ 100.0 1.3 % $ 182.3 2.4 % Insignificant delay 229.2 2.9 % 171.8 2.2 % Credit 323.5 4.2 % 141.6 1.9 % $ 652.7 8.4 % $ 495.7 6.5 % * Amortized cost basis immediately after modification as a percentage of ending retail portfolio, on an annualized basis. Modification activity increased to $652.7 million in the first six months of 2026 from $495.7 million in the same period of 2025. The decrease in modifications for Commercial reasons primarily reflects lower volumes of refinancing, primarily in the U.S. The increase related to Insignificant delay modifications reflects an increase in customers requesting payment relief for up to three months, primarily in Australia. These customers were predominately not past due at the time of modification and at June 30, 2026. The increase in Credit modifications reflect higher volumes of contract modifications for customers experiencing financial difficulty in the U.S., Mexico and Australia due to weak market conditions. The following table summarizes the Company’s 30+ days past due accounts: June 30 2026 December 31 2025 June 30 2025 Percentage of retail loan and lease accounts 30+ days past due: U.S. and Canada 1.4 % 1.8 % .8 % Europe 1.1 % 1.0 % .6 % Mexico, Australia, Brasil and other 4.7 % 4.6 % 2.4 % Worldwide 2.2 % 2.4 % 1.2 % Accounts 30+ days past due was 2.2% at June 30, 2026 compared to 2.4% at December 31, 2025 and 1.2% at June 30, 2025. The decreased past dues as of June 30, 2026 compared to December 31, 2025 in the U.S. and Canada reflects customer payments, accounts charged off and modifications. Customer payment performance improved in the second quarter of 2026, reflecting more favorable freight market conditions in the U.S. and Canada. This was partially offset by increased past due accounts in Brasil. The Company continues to focus on maintaining low past due balances. When the Company modifies a 30+ days past due account, the customer is then generally considered current under the revised contractual terms. Contract modifications, which were 30+ days past due and became current at the time of modification, were $72.8 million worldwide during the second quarter of 2026, $72.9 million during the fourth quarter of 2025 and $60.8 million during the second quarter of 2025. 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: June 30 2026 December 31 2025 June 30 2025 Pro forma percentage of retail loan and lease accounts 30+ days past due: U.S. and Canada 1.4 % 2.1 % .9 % Europe 1.1 % 1.1 % .7 % Mexico, Australia, Brasil and other 6.5 % 5.8 % 3.8 % Worldwide 2.6 % 2.8 % 1.6 % The Company typically requires customers to pay current before granting modifications. The higher pro forma percentage of retail loan and lease accounts 30+ days past due at June 30, 2026 in Mexico, Australia, Brasil and other was primarily due to one large fleet customer modified in Australia. - 48 - A contract modification that improves the past due status reduces the probability of default. The effect of modifications is included in the Company’s historical loss information used to determine the allowance for credit losses. Modifications of accounts in prior quarters that were more than 30 days past due at the time of modification are included in past dues if they were not performing under the modified terms at June 30, 2026, December 31, 2025 and June 30, 2025. For certain modifications to customers experiencing financial difficulties that are at-risk at June 30, 2026, December 31, 2025 and June 30, 2025, the allowance for credit losses is based on the value of the underlying collateral or a discounted cash flow analysis. The Company’s annualized pre-tax return on average total assets for Financial Services was 2.2% and 2.1% for the second quarter and the first six months of 2026, respectively, compared to 2.1% and 2.2% for the second quarter and the first six months of 2025, respectively. Other Included in Other is sales, income and expenses not attributable to a reportable segment. Other also includes non-service cost components of pension expense and certain corporate income and expenses. Other sales represent less than 1% of consolidated net sales and revenues for both the second quarter and the first six months of 2026 and 2025. Other SG&A increased to $20.8 million for the second quarter of 2026 from $19.9 million for the second quarter of 2025, primarily due to higher professional fees. Other SG&A decreased to $41.3 million for the first six months of 2026 from $45.0 million for the same period of 2025, primarily due to lower salaries and related expenses. For the second quarter of 2026, Other loss before income taxes was $6.1 million compared to $.5 million in 2025 and includes certain foreign currency translation effects. For the first six months of 2026, Other loss before income taxes was $4.2 million compared to $353.7 million in 2025, primarily due to the EC-related charge in the first quarter 2025 which is discussed in Note M of the consolidated financial statements. Investment income for the second quarter increased to $86.0 million in 2026 from $83.9 million in 2025, primarily due to higher portfolio balances in all major markets except Mexico, partially offset by lower investment yields from lower market interest rates in all major markets except Brasil and Australia. Investment income for the first six months decreased slightly to $166.4 million in 2026 from $167.7 million in 2025, primarily due to lower investment yields from lower market interest rates in all major markets except Brasil and Australia, partially offset by an increase in average investment balances in all major markets except Mexico. Income Taxes The effective tax rate for the second quarter of 2026 was 23.4% compared to 22.3% for the second quarter of 2025. The effective tax rate for the first six months of 2026 was 22.8% compared to 22.0% for the same period of 2025. The increase in both periods was primarily attributable to a shift in the geographic mix of pre-tax earnings, with a greater proportion of earnings generated in foreign jurisdictions with higher statutory tax rates. Three Months Ended Six Months Ended June 30 June 30 ($ in millions) 2026 2025 2026 2025 Domestic income before taxes $ 628.9 $ 605.2 $ 1,102.5 $ 1,252.7 Foreign income before taxes 352.6 326.7 655.3 322.3 Total income before taxes $ 981.5 $ 931.9 $ 1,757.8 $ 1,575.0 Domestic pre-tax return on revenues 15.1 % 13.9 % 14.1 % 14.6 % Foreign pre-tax return on revenues 10.4 % 10.4 % 10.1 % 5.1 % Total pre-tax return on revenues 13.0 % 12.4 % 12.3 % 10.5 % Domestic income before taxes improved in the second quarter of 2026 compared with the same period of 2025, primarily due to higher Truck operation results. Foreign income before taxes also increased, reflecting higher Truck, Parts and Financial Services operation results, primarily in Europe. Total pre-tax return on revenues increased in the second quarter of 2026 compared with the same period of 2025, reflecting higher returns in Truck operations. - 49 - For the first six months of 2026, domestic income before taxes and domestic pre-tax return on revenues decreased primarily due to lower Truck and Parts operation results. For the first six months of 2025, foreign income before taxes included the EC-related charge of $350.0 million in the first quarter of 2025, which also reduced foreign pre-tax return on revenues. LIQUIDITY AND CAPITAL RESOURCES: June 30 December 31 ($ in millions) 2026 2025 Cash and cash equivalents $ 5,574.7 $ 6,307.9 Marketable securities 3,259.6 3,207.7 $ 8,834.3 $ 9,515.6 The Company’s total cash and marketable securities at June 30, 2026 decreased by $681.3 million from the balances at December 31, 2025. Total cash and marketable securities are primarily intended to provide liquidity while preserving capital. The change in cash and cash equivalents is summarized below: ($ in millions) Six Months Ended June 30, 2026 2025 Operating activities: Net income $ 1,357.3 $ 1,228.9 Net income items not affecting cash 383.6 451.2 Pension contributions (7.7 ) (11.5 ) Changes in operating assets and liabilities, net (60.6 ) 75.1 Net cash provided by operating activities 1,672.6 1,743.7 Net cash used in investing activities (431.8 ) (1,010.1 ) Net cash used in financing activities (1,958.4 ) (2,425.8 ) Effect of exchange rate changes on cash and cash equivalents (15.6 ) 181.3 Net decrease in cash and cash equivalents (733.2 ) (1,510.9 ) Cash and cash equivalents at beginning of period 6,307.9 7,060.8 Cash and cash equivalents at end of period $ 5,574.7 $ 5,549.9 Operating activities: Cash provided by operations decreased by $71.1 million to $1,672.6 million in the first six months of 2026 from $1,743.7 million in 2025. The decreased operating cash flow reflects higher cash usage from net changes in operating assets and liabilities of $135.7 million and lower cash provided from net income items not affecting cash of $67.6 million, primarily deferred income taxes, partially offset by higher net income of $128.4 million. The net changes in operating assets and liabilities are mainly due to higher net cash used for inventory of $226.5 million, a larger increase in trade and other receivables of $218.2 million and lower cash provided by wholesale receivables in the Financial Services segment of $112.2 million, partially offset by an increase in accounts payable and accruals of $403.6 million. Investing activities: Cash used in investing activities decreased by $578.3 million to $431.8 million in the first six months of 2026 from $1,010.1 million in 2025. The decrease in cash used in investing activities primarily reflects $584.5 million lower originations of retail loans and finance leases, net of collections, and $94.6 million lower acquisition of property, plant and equipment, partially offset by higher acquisitions of equipment on operating leases of $89.6 million and a decrease in net cash provided for in the settlement of a net investment hedge of $59.2 million presented in Other, net in the Company's Consolidated Statements of Cash Flows. Financing activities: Cash used in financing activities was $1,958.4 million for the first six months of 2026, $467.4 million lower than the $2,425.8 million used in 2025, reflecting lower cash dividends and lower net borrowing activities. In the first six months of 2026, the Company paid $1.09 billion in dividends compared to $1.92 billion in 2025. Cash used in net borrowing activities was $907.2 million in 2026, $411.9 million higher than the $495.3 million in 2025. The effect of exchange rate changes on cash decreased cash and cash equivalents by $15.6 million in the first six months of 2026, reflecting a decrease in the value of foreign currencies relative to the U.S. dollar, primarily the euro. In the first six months of 2025, an increase in the value of foreign currencies relative to the U.S. dollar, primarily the euro, Brazilian real and the British pound, increased cash and cash equivalents by $181.3 million. - 50 - Credit Lines and Other The Company has $4.00 billion of committed bank facilities, of which $1.50 billion expires in May 2027, $1.25 billion expires in June 2029 and $1.25 billion expires in June 2031. 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 six months ended June 30, 2026. In addition, the Company has other lines of credit arrangements of $1.70 billion, of which $1.33 billion were unused at June 30, 2026. On December 4, 2018, PACCAR’s Board of Directors approved the program to repurchase up to $500.0 million of the Company’s outstanding common stock with no expiration. The objective of the repurchase is to return value to PACCAR shareholders. As of June 30, 2026, the Company has repurchased $128.4 million of shares under this plan. There were no repurchases made under this plan during the first six months of 2026. Truck, Parts and Other The Company provides funding for working capital, capital expenditures, R&D, dividends, stock repurchases and other business initiatives and commitments primarily from cash provided by operations. Management expects this method of funding to continue in the future. Investments for manufacturing property, plant and equipment in the first six months of 2026 was $272.4 million compared to $390.5 million for the same period of 2025. Over the past decade, the Company’s combined investments in worldwide capital projects and R&D totaled $9.32 billion and have significantly increased the operating capacity and efficiency of its facilities and enhanced the quality and operating efficiency of the Company’s premium products. In 2026, total capital investments are expected to be $700 to $750 million and R&D is expected to be $450 to $480 million. The Company continues to invest in next generation clean diesel, hybrid and battery-electric powertrains, integrated connected vehicle services, and expanded manufacturing capabilities. In addition to the capital and R&D investments, the Company expects to continue investing in its U.S.-based battery joint venture, Amplify Cell Technologies. Financial Services The Company funds its financial services activities primarily from collections on existing finance receivables and borrowings in the capital markets. The primary sources of borrowings in the capital markets are commercial paper and medium-term notes issued in the public markets and, to a lesser extent, bank loans. In November 2024, the Company’s U.S. finance subsidiary, PACCAR Financial Corp. (PFC), filed a shelf registration under the Securities Act of 1933. The total amount of medium-term notes outstanding for PFC as of June 30, 2026 was $7.75 billion. The registration expires in November 2027 and does not limit the principal amount of debt securities that may be issued during that period. As of June 30, 2026, the Company’s European finance subsidiary, PACCAR Financial Europe, had €1.25 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 May 2027. In August 2021, the Company's Mexican subsidiary, PACCAR Financial Mexico, registered a 10.00 billion Mexican peso program with the Comision Nacional Bancaria y de Valores to issue medium-term notes and commercial paper. The registration expires in August 2026 and limits the amount of commercial paper (up to one year) to 5.00 billion Mexican pesos. At June 30, 2026, 6.80 billion Mexican pesos were available for issuance. The Company intends to renew the registration before it expires. In August 2018, the Company’s Australian subsidiary, PACCAR Financial Pty. Ltd. (PFPL Australia), established a medium-term note program. The program does not limit the principal amount of debt securities that may be issued under the program. The total amount of medium-term notes outstanding for PFPL Australia as of June 30, 2026 was 850.0 million Australian dollars. - 51 - In May 2021, the Company’s Canadian subsidiary, PACCAR Financial Ltd. (PFL Canada), established a medium-term note program. The program does not limit the principal amount of debt securities that may be issued under the program. There were no borrowings under this program as of June 30, 2026. In December 2021, the Company’s Brazilian subsidiary, Banco PACCAR S.A., established a lending program with the local development bank, Banco Nacional de Desenvolvimento Economico e Social (BNDES), for qualified customers to receive preferential conditions and generally market interest rates. The program is limited to 3.00 billion Brazilian reais and has 1.34 billion Brazilian reais outstanding as of June 30, 2026. The Brazilian subsidiary also established a Letra Financeira (LF) program in May 2024 and the program does not limit the principal amount of debt securities that may be issued under the program. There were no borrowings under this program as of June 30, 2026. The Company believes its cash balances and investments, collections on existing finance receivables, committed bank facilities and current investment-grade credit ratings of A+/A1 will continue to provide it with sufficient resources and access to capital markets at competitive interest rates and therefore contribute to the Company maintaining its liquidity and financial stability. In the event of a decrease in the Company’s credit ratings or a disruption in the financial markets, the Company may not be able to refinance its maturing debt in the financial markets. In such circumstances, the Company would be exposed to liquidity risk to the degree that the timing of debt maturities differs from the timing of receivable collections from customers. The Company believes its various sources of liquidity, including committed bank facilities, would continue to provide it with sufficient funding resources to service its maturing debt obligations. - 52 - RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES: This Form 10-Q includes “adjusted net income (non-GAAP)” and “adjusted net income per diluted share (non-GAAP)”, which are financial measures that are not in accordance with U.S. generally accepted accounting principles (“GAAP”), since they exclude a charge for EC-related claims. These measures differ from the most directly comparable measures calculated in accordance with GAAP and may not be comparable to similarly titled non-GAAP financial measures used by other companies. Adjustment for the EC-related claims relates to a pre-tax charge of $350.0 million ($264.5 million after-tax) for estimable total costs recorded in Interest and other (income) expenses, net in the first quarter 2025. The Company utilizes these non-GAAP measures to allow investors and management to evaluate operating trends by excluding a significant charge that is not representative of company performance. Reconciliations from the most directly comparable GAAP measures to adjusted net income (non-GAAP) and adjusted net income per diluted shares (non-GAAP) are as follows: Six Months Ended ($ in millions, except per share amounts) June 30, 2025 Net income $ 1,228.9 EC-related claims, net of taxes 264.5 Adjusted net income (non-GAAP) $ 1,493.4 Per diluted share Net income $ 2.33 EC-related claims, net of taxes .50 Adjusted net income (non-GAAP) $ 2.83 - 53 - FORWARD-LOOKING STATEMENTS: This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements relating to future results of operations or financial position and any other statement that does not relate to any historical or current fact. Such statements are based on currently available operating, financial and other information and are subject to risks and uncertainties that may affect actual results. Risks and uncertainties include, but are not limited to: a significant decline in industry sales; competitive pressures; reduced market share; reduced availability of or higher prices for fuel; increased safety, emissions, or other regulations or tariffs resulting in higher costs and/or sales restrictions; currency or commodity price fluctuations; lower used truck prices; insufficient or under-utilization of manufacturing capacity; supplier interruptions; insufficient liquidity in the capital markets; fluctuations in interest rates; changes in the levels of the Financial Services segment new business volume due to unit fluctuations in new PACCAR truck sales or reduced market shares; changes affecting the profitability of truck owners and operators; price changes impacting truck sales prices and residual values; insufficient supplier capacity or access to raw materials and components, including semiconductors; labor disruptions; shortages of commercial truck drivers; increased warranty costs; cybersecurity risks to the Company’s information technology systems; use of artificial intelligence and machine learning in business processes; pandemics; climate-related risks; global conflicts; litigation, including EC settlement-related claims; or legislative and governmental regulations. A more detailed description of these and other risks is included under the headings Part I, Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 and in Part II, Item 1, “Legal Proceedings” and Part II, Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q. - 54 - ITEM 3. QUANTITATIVE AND QUALITATI VE DISCLOSURES ABOUT MARKET RISK There were no material changes in the Company’s market risk during the six months ended June 30, 2026. For additional information, refer to Item 7A as presented in the 2025 Annual Report on Form 10‑K. ITEM 4. CONTROLS AND PROCEDURES The Company’s management, with the participation of the Principal Executive Officer and Principal Financial Officer, conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the period covered by this report. Based on that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report. There have been no changes in the Company’s internal controls over financial reporting that occurred during the fiscal quarter covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. - 55 - PART II – OTHE R INFORMATION ITEM 1. LEGAL PROCEEDINGS Refer to Note M – “Commitments and Contingencies” in the Notes to Consolidated Financial Statements (Part I, Item 1) for discussion on litigation matters, which is incorporated by reference herein. ITEM 1A. RI SK FACTORS For information regarding risk factors, refer to Part I, Item 1A as presented in the 2025 Annual Report on Form 10-K. There have been no material changes in the Company’s risk factors during the three months ended June 30, 2026. ITEM 2. UNREGISTERED SALES OF EQUI TY SECURITIES AND USE OF PROCEEDS For Items 2(a) and (b), there was no reportable information for the three months ended June 30, 2026. (c) Issuer purchases of equity securities. On December 4, 2018, PACCAR’s Board of Directors approved the program to repurchase up to $500.0 million of the Company’s outstanding common stock with no expiration. As of June 30, 2026, the Company has repurchased $128.4 million of shares under this plan. There were no repurchases made under this plan during the first six months of 2026. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. ITEM 5. OTHER INFORMATION None of the Company’s directors or officers adopted , modified or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company’s quarter ended June 30, 2026, as such terms are defined under Item 408(a) of Regulation S-K. - 56 - ITEM 6. EXHIBITS Any exhibits filed herewith are listed in the accompanying index to exhibits. INDEX TO EXHIBITS Exhibit Number Exhibit Description Form Date of First Filing Exhibit Number File Number (3) (i) Articles of Incorporation: Amended and Restated Certificate of Incorporation of PACCAR Inc 8-K May 4, 2018 3(i) 001-14817 Certificate of Amendment of the Amended and Restated Certificate of Incorporation of PACCAR Inc 8-K April 24, 2020 3(i) 001-14817 Certificate of Amendment of the Amended and Restated Certificate of Incorporation of PACCAR Inc 8-K April 29, 2022 3(i) 001-14817 (ii) Bylaws: Seventh Amended and Restated Bylaws of PACCAR Inc 8-K July 26, 2022 3(ii) 001-14817 (4) Instruments defining the rights of security holders, including indentures**: (a) Indenture for Senior Debt Securities dated as of November 20, 2009 between PACCAR Financial Corp. and U.S. Bank Trust Company, National Association (as a successor to The Bank of New York Mellon Trust Company, N.A. ) S-3 November 20, 2009 4.1 333-163273 (b) Forms of Medium-Term Note, Series Q (PACCAR Financial Corp.) S-3 November 1, 2021 4.3 and 4.4 333-260663 (c) Forms of Medium-Term Note, Series R (PACCAR Financial Corp.) S-3 November 7, 2024 4.4 and 4.5 333-283056 (d) Terms and Conditions of the Notes applicable to the €2,500,000,000 Medium Term Note Programme of PACCAR Financial Europe B.V. set forth in the Information Memorandum dated July 13, 2022 10-Q August 2, 2022 4(h) 001-14817 (e) Terms and Conditions of the Notes applicable to the €2,500,000,000 Medium Term Note Programme of PACCAR Financial Europe B.V. set forth in the Information Memorandum dated July 17, 2024 10-Q October 30, 2024 4(h) 001-14817 (f) Terms and Conditions of the Notes applicable to the €2,500,000,000 Medium Term Note Programme of PACCAR Financial Europe B.V. set forth in the Information Memorandum dated May 8, 2025 10-Q July 31, 2025 4(j) 001-14817 (g) Terms and Conditions of the Notes applicable to the €2,500,000,000 Medium Term Note Programme of PACCAR Financial Europe B.V. set forth in the Information Memorandum dated May 6, 2026* (h) Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 10-K February 19, 2020 4(j) 001-14817 (10) Material Contracts: (a) PACCAR Inc Amended and Restated Supplemental Retirement Plan 10-K February 27, 2009 10(a) 001-14817 (b) Amended and Restated Deferred Compensation Plan 10-Q May 10, 2012 10(b) 001-14817 * filed herewith ** Pursuant to the Instructions to Exhibits, certain instruments defining the rights of holders of long-term debt securities of the Company and its wholly owned subsidiaries are not filed because the total amount of securities authorized under any such instrument does not exceed 10 percent of the Company’s total assets. The Company will file copies of such instruments upon request of the Commission. - 57 - Exhibit Number Exhibit Description Form Date of First Filing Exhibit Number File Number (c) Third Amended and Restated PACCAR Inc Restricted Stock and Deferred Compensation Plan for Non-Employee Directors 10-Q May 2, 2024 10(d) 001-14817 (d) Form of Deferred Restricted Stock Unit Grant Agreement for Non-Employee Directors 10-Q July 31, 2024 10(e) 001-14817 (e) Form of Restricted Stock Grant Agreement for Non-Employee Directors 10-Q July 31, 2024 10(f) 001-14817 (f) PACCAR Inc Senior Executive Yearly Incentive Compensation Plan 10-K February 18, 2026 10(f) 001-14817 (g) PACCAR Inc Long Term Incentive Plan 10-K February 18, 2026 10(g) 001-14817 (h) PACCAR Inc Long Term Incentive Plan, Form of Stock Option Agreement 10-K February 19, 2025 10(h) 001-14817 (i) PACCAR Inc Long Term Incentive Plan, Form of Restricted Stock Award Agreement 10-K February 18, 2026 10(i) 001-14817 (j) PACCAR Inc Long Term Incentive Plan, Form of Restricted Stock Unit Agreement 10-K February 18, 2026 10(j) 001-14817 (k) PACCAR Inc Savings Investment Plan, Amendment and Restatement effective September 1, 2016 10-Q November 4, 2016 10(q) 001-14817 (31) Rule 13a-14(a)/15d-14(a) Certifications: (a) Certification of Principal Executive Officer* (b) Certification of Principal Financial Officer* (32) Section 1350 Certifications: Certification pursuant to rule 13a-14(b) and section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. section 1350)* (101.INS) Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. (101.SCH) Inline XBRL Taxonomy Extension Schema Document* (104) Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)* * filed herewith - 58 - SIGNA TURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PACCAR Inc (Registrant) Date July 29, 2026 By /s/ B. J. Poplawski B. J. Poplawski Senior Vice President and Chief Financial Officer (Principal Financial Officer) - 59 -