2 0 1 9 A N N U A L R E P O R T
S T A T E M E N T O F C O M P A N Y B U S I N E S S
S T O C K H O L D E R S ’
I N F O R M A T I O N
PACCAR is a global technology company that designs and manufactures premium
quality light, medium and heavy duty commercial vehicles sold worldwide under
the Kenworth, Peterbilt and DAF nameplates. PACCAR designs and manufactures
diesel engines and other powertrain components for use in its own products and for
sale to third party manufacturers of trucks and buses. PACCAR distributes
aftermarket truck parts to its dealers through a worldwide network of Parts
Distribution Centers. Finance and leasing subsidiaries facilitate the sale of
PACCAR products in many countries worldwide. PACCAR manufactures and
markets industrial winches under the Braden, Carco and Gearmatic nameplates.
PACCAR maintains exceptionally high standards of quality for all of its products:
they are well engineered, highly customized for specific applications and sell in
the premium segments of their markets, where they have a reputation for superior
performance and pride of ownership.
CONTENTS
1
Financial Highlights
87
Management’s Report on Internal Control
3 Message from the Executive Chairman
Over Financial Reporting
4 Message from the Chief Executive Officer
87
Report of Independent Registered
8 PACCAR Operations
26 Financial Charts
Public Accounting Firm- Opinion
on Financial Statements
27 Stockholder Return Performance Graph
89
Report of Independent Registered
28 Management’s Discussion and Analysis
Public Accounting Firm- Opinion
44 Consolidated Statements of Income
on Internal Control Over Financial Reporting
45 Consolidated Statements
of Comprehensive Income
46 Consolidated Balance Sheets
90 Selected Financial Data
91 Quarterly Results
92 Market Risks and Derivative Instruments
48 Consolidated Statements of Cash Flows
92 Common Stock Market Prices and Dividends
49 Consolidated Statements
of Stockholders’ Equity
50 Notes to Consolidated Financial Statements
93 Officers and Directors
94 Divisions and Subsidiaries
Corporate Offices
PACCAR Building
777 106th Avenue N.E.
Bellevue, Washington
98004
Mailing Address
P.O. Box 1518
Bellevue, Washington
98009
Telephone
425.468.7400
Facsimile
425.468.8216
Website
www.paccar.com
Stock Transfer
and Dividend
Dispersing Agent
Equiniti Trust Company
Shareowner Services
P.O. Box 64854
St. Paul, Minnesota
55164-0854
800.468.9716
www.shareowneronline.com
PACCAR’s transfer agent
maintains the company’s
shareholder records, issues
stock certificates and
distributes dividends and
IRS Forms 1099. Requests
concerning these matters
should be directed to
Equiniti.
Online Delivery of
Annual Report and Proxy
Statement
PACCAR’s 2019 Annual
Report and the 2020 Proxy
Statement are available
on PACCAR’s website at
www.paccar.com/
2020annualmeeting
Stockholders who hold
PACCAR stock in street
name may inquire of their
bank or broker about the
availability of electronic
delivery of annual
meeting documents.
Trademarks Owned by
PACCAR Inc and its
Subsidiaries
DAF, EPIQ, Kenmex,
Kenworth, Leyland,
PACCAR, PACCAR MX-11,
PACCAR MX-13, PACCAR
PX, PacFuel, PacLease,
PacLink, PacTax, PacTrac,
PacTrainer, Peterbilt,
The World’s Best, TRP,
TruckTech+, SmartNav, and
SmartLINQ
Independent Auditors
Ernst & Young LLP
Seattle, Washington
SEC Form 10-K
PACCAR’s annual report
to the Securities and
Exchange Commission
will be furnished to
stockholders on request
to the Corporate
Secretary, PACCAR Inc,
P.O. Box 1518, Bellevue,
Washington 98009. It is
also available online at
www.paccar.com/investors/
investor_resources.asp,
under SEC Filings or
on the SEC’s website at
www.sec.gov.
Annual Stockholders’
Meeting
April 21, 2020, 10:30 a.m.
Meydenbauer Center
11100 N.E. 6th St.
Bellevue, Washington
98004
An Equal Opportunity
Employer
This report was printed
on recycled paper.
F I N A N C I A L H I G H L I G H T S
Truck, Parts and Other Net Sales and Revenues
$ 24,119.7
$ 22,138.6
2019
2018
(millions, except per share data)
1
Financial Services Revenues
Total Revenues
Net Income
Total Assets:
Truck, Parts and Other
Financial Services
Financial Services Debt
Stockholders’ Equity
Per Common Share:
Net Income:
Basic
Diluted
Cash Dividends Declared Per Share
1,480.0
25,599.7
2,387.9
12,289.7
16,071.4
11,222.7
9,706.1
1,357.1
23,495.7
2,195.1
11,082.8
14,399.6
9,950.5
8,592.9
$
6.88
6.87
3.58
$
6.25
6.24
3.09
28.0
21.0
14.0
7.0
0.0
R E V E N U E S
billions of dollars
N E T I N C O M E
billions of dollars
S T O C K H O L D E R S ’ E Q U I T Y
billions of dollars
28.0
2.4
10.0%
10.0
21.0
1.8
7.5%
7.5
14.0
1.2
5.0%
5.0
7.0
0.6
2.5%
2.5
10
11
12
13
14
15
16
17
18
19
10
11
12
13
14
15
16
17
18
19
10
11
12
13
14
15
16
17
18
19
0.0
0.0
0.0%
0.0
■ Revenues
■ Net Income
■ Stockholders’ Equity
Return on Revenues (percent)
Return on Equity (percent)
28%
21%
14%
7%
0%
T O O U R S H A R E H O L D E R S
PACCAR is celebrating 114 years of success and delivered record revenues and record profits to its shareholders
in 2019 — the best year in company history. This is also the 81st consecutive year of earning a net profit — a
3
remarkable achievement. This major milestone was achieved by the steady and consistent leadership of the
company and the unwavering commitment of all employees to exceed our customers’ expectations by delivering the
highest quality products and services. PACCAR has achieved excellent financial results for decades by focusing on
the premium quality segment of its industry — an impressive record considering the cyclicality of the capital
goods business.
I would like to thank Ron Armstrong for his 5 years of dedicated leadership as Chief Executive Officer. Ron and the
senior management team delivered many financial records, launched exciting new products worldwide and increased
the company’s manufacturing and parts capabilities. We wish Ron and his family a healthy and peaceful retirement.
PACCAR is pleased to welcome Preston Feight as the company’s Chief Executive Officer, effective July 1, 2019.
Preston has been with PACCAR for 22 years and has assembled an impressive career as an engineering and sales
executive and as general manager. He was the General Manager of the Kenworth Truck division and President of
DAF Trucks, based in Eindhoven. We look forward to Preston and his senior team building on the strong vibrant
results that PACCAR has achieved for 114 years.
PACCAR’s record year in 2019 is due to many positive factors including excellent Kenworth and Peterbilt market
share in North America and DAF’s strong performance in the European truck market. Customers renewed their
fleets to take advantage of the reliability and operating efficiency of new DAF, Kenworth, and Peterbilt trucks.
PACCAR Parts delivered record aftermarket results reflecting new sales initiatives, a growing population of integrated
and connected PACCAR vehicles, and more TRP stores. PACCAR Financial Services, including PacLease, had a very
good year, generating strong new business revenue. PACCAR benefits from its global diversification, industry leading
independent dealer organizations and increased investments in all segments of the business.
Our shareholders have enjoyed very good returns, with total shareholder return of 45% in 2019, annual regular
dividend growth of 11% in the last twenty years and the $2.30 per share extra dividend paid in early 2020.
The embedded principles of integrity, quality and consistency of purpose define the course in PACCAR’s
operations. The proven business strategy — deliver technologically advanced premium products and provide an
extensive array of tailored aftermarket customer services — enables PACCAR to pragmatically approach growth
opportunities.
I would like to thank the tens of thousands of employees whose hard work, ingenuity and drive for quality
through the decades have enabled PACCAR to grow as a global technology company and deliver excellent results to
our shareholders.
M A R K C . P I G O T T
Executive Chairman
Februar y 19, 2020
T O O U R S H A R E H O L D E R S
PACCAR had an outstanding year in 2019, generating record revenues and profits as well as industry leading
4
operating margins. Revenues climbed to $25.6 billion and net income was $2.39 billion; delivering an after-tax return on
revenue of 9.3%. The company has earned annual net income for 81 consecutive years.
PACCAR’s financial results reflect the company’s premium-quality trucks and services, technology leadership, strong
global truck markets and record truck deliveries, complemented by record aftermarket parts sales and good financial
services results worldwide. These excellent results were due to the capabilities and efforts of our employees who delivered
industry leading product quality, innovation and outstanding operating efficiency.
PACCAR delivered a record 198,800 trucks to its customers, and sold a record $4.02 billion of aftermarket parts.
PACCAR’s excellent credit ratings of A+/A1 supported PACCAR Financial Services’ record new loans and leases of $5.63
billion. Year-end stockholders’ equity was a record $9.71 billion.
Class 8 truck industry retail sales in North America, including Mexico, were 336,000 vehicles in 2019 compared to
311,000 the prior year. The European 16+ tonne market in 2019 was 320,000 vehicles compared to 319,000 in 2018.
PACCAR customers are generating good profits due to strong freight tonnage, low fuel prices and the superior operating
efficiency of Kenworth, Peterbilt and DAF trucks.
PACCAR’s strong financial performance in 2019 benefited from PACCAR Parts’ record pre-tax profits of $830.8
million and PACCAR Financial Services’ pre-tax profits of $298.9 million. After-tax return on beginning stockholders’
equity was an industry leading 27.8% in 2019. PACCAR’s financial performance has enabled the company to declare $7
billion in dividends during the last ten years, which is over 50% of the net income generated during that same period.
PACCAR’s total stockholder return in 2019 was 45% versus 31% for the S&P 500 Index.
INVESTING FOR THE FUTURE — PACCAR’s consistent profitability, strong balance sheet and intense focus on quality,
technology and productivity have allowed the company to invest $6.8 billion in the last decade in world-class facilities,
innovative products and new technologies. PACCAR’s investments provide transportation solutions that deliver the
lowest total cost of operation.
In 2019, capital investments were $743.9 million and research and development expenses were $326.6 million.
PACCAR expanded its vehicle product range, invested in truck and powertrain technologies that increased vehicle fuel
efficiency and reliability and enhanced its manufacturing and parts distribution facilities.
PACCAR made further investments in additional manufacturing capacity to satisfy increasing customer demand
and the engine factories produced a record number of PACCAR MX-13 and MX-11 engines. Kenworth and Peterbilt
have installed 234,000 PACCAR engines since the MX engine line was introduced in 2010. Kenworth, Peterbilt and DAF
completed investments in efficient, high quality robotic cab assembly capabilities that support the growing demand for
PACCAR’s industry leading truck models. PACCAR’s most recent investment in truck manufacturing capacity is the
construction of a new state-of-the-art robotic paint facility in Chillicothe, Ohio.
PACCAR now has three globally aligned embedded software development centers: in Kirkland, Washington; in
Eindhoven, the Netherlands; and in Pune, India. PACCAR introduced over-the-air software update capabilities to
enhance customer uptime. PACCAR is partnering with the Department of Energy on a “Super Truck II program” that
will demonstrate a 100% improvement in freight efficiency.
PACCAR is a leader in the development of battery-electric, hybrid and hydrogen fuel cell vehicles. Kenworth, Peterbilt
and DAF are field testing these technologies with customers and plan to deliver production battery-electric truck models
in the next 12–18 months. While we are preparing for the long term by making investments in alternative powertrain
technologies, diesel is expected to remain the most efficient and cost-effective powertrain technology in heavy truck
5
applications for the foreseeable future.
The PACCAR Technical Center in Pune, India provides support to PACCAR’s global product and technology
initiatives. In China, PACCAR purchases components and continues to examine opportunities to increase participation
in the world’s largest truck market.
CONTINUOUS IMPROVEMENT — Six Sigma and lean process development are integrated into all business activities at
PACCAR and have been adopted at hundreds of the company’s suppliers, dealers and customers. Six Sigma’s statistical
methodology is critical in the development of new product designs, customer services and manufacturing processes.
Six Sigma and other product and process enhancement capabilities leverage advanced data analytics, machine learning
and artificial intelligence tools to increase efficiency and quality. Thousands of PACCAR employees have been trained
in Six Sigma and have implemented over 58,000 projects. Since 1997, PACCAR has delivered billions of dollars in Six
Sigma savings in all facets of the company.
INFORMATION TECHNOLOGY — PACCAR’s Information Technology Division (ITD) and its innovative employees are
an important competitive asset for the company. ITD collaborates closely with all company businesses to develop
software and hardware that enhances the quality and efficiency of products and operations throughout the company.
ITD is integral in DAF Connect, Peterbilt SmartLINQ, and Kenworth TruckTech+ customer connectivity solutions. In
2019 Peterbilt and Kenworth introduced over-the-air vehicle software update capabilities to enhance customer uptime
and efficiency. The ITD team works closely with the truck divisions and suppliers to accelerate development of
advanced driver assistance systems (ADAS) for use in PACCAR vehicles around the world. DAF, Peterbilt and Kenworth
are leaders in developing autonomous driving technologies.
TRUCKS — U.S. and Canadian Class 8 truck industry retail sales in 2019 were 309,000 units and the Mexican market
totaled 27,000 units. The European Union (EU) industry 16+ tonne truck registrations were 320,000 units. The North
American 2019 truck market was the second best market ever, and the European market was the third best.
PACCAR’s Class 8 retail sales share in the U.S. and Canada grew from 29.4% to 30.0% in 2019, while DAF market
share was a robust 16.2% in the 16+ tonne truck market in Europe. Industry Class 6 and 7 truck registrations in the
U.S. and Canada were 108,000 units, up 10% from the previous year. In the EU, the 6- to 16-tonne market was 54,000
units. PACCAR’s market share in the U.S. and Canada medium-duty truck segment was 16.9%. DAF’s share of the
medium-duty truck market in Europe grew to 9.7% from 9.0% in 2018. PACCAR delivered a record 34,400 medium-
duty trucks to its customers in 2019.
A tremendous team effort by the company’s sales, engineering, purchasing, materials, production and customer
service employees contributed to record truck production and industry leading truck, parts and other gross margins
above 14% for the fifth consecutive year. A combination of new technology, process improvements, applied data
analytics and collaboration with suppliers enabled PACCAR facilities to establish records for factory and distribution
center efficiency.
PACCAR’s innovation and manufacturing expertise continued to be recognized as the industry leader in 2019.
Peterbilt, Kenworth and PACCAR Parts were recognized as a “Top Place for Women to Work” by the Women in Trucking
organization. Kenworth Chillicothe and Peterbilt Denton each earned 2019 “Manufacturing Leadership” awards from
the National Association of Manufacturers. DAF earned prestigious National “Truck of the Year” awards in the UK,
6
Poland, Czech Republic and Slovakia. The DAF CF Electric was named the 2019 “Green Logistics Solution” by German
trade magazines VerkehrsRundschau and TRUCKER.
PACCAR Mexico grew heavy-duty market share to 35.1%. PACCAR Mexico’s investments in manufacturing
capability resulted in a 16% increase in truck production to a record 19,700 vehicles.
DAF Brasil increased truck production by 74% in 2019 and PACCAR grew its heavy-duty truck market share in the
Andean region of South America to 9.8%. PACCAR Parts increased South American sales by over 30% as it successfully
grew its presence throughout the continent.
PACCAR Australia had a good year with combined Kenworth and DAF heavy-duty market share of 21.9%. In
addition, Kenworth launched the new T360 and T410 models that utilize PACCAR’s 8" wider, more luxurious global
conventional truck platform.
PACCAR PARTS — PACCAR Parts increased revenues by 5% to $4.02 billion and achieved record pre-tax profits of
$830.8 million as dealers and customers accelerated adoption of innovative e-commerce platforms and global fleet
service programs offering national pricing and centralized billing. PACCAR Parts is the primary source for aftermarket
parts and services for PACCAR vehicles, and supplies its TRP branded parts for all makes of trucks, trailers and buses.
PACCAR dealers expanded TRP aftermarket parts retail stores to 210 locations in 40 countries. Over seven million
heavy-duty trucks operate in North America and Europe. The large vehicle parc and the growing number of PACCAR
MX engines installed in Peterbilt and Kenworth trucks in North America create excellent demand for parts and service
and moderate the cyclicality of truck sales.
PACCAR Parts continues to enhance logistics performance to dealers and customers with projects underway to
build new distribution centers in Las Vegas, Nevada and Ponta Grossa, Brasil.
FINANCIAL SERVICES — PACCAR Financial Services’ (PFS) conservative business approach, coupled with PACCAR’s
superb credit rating of A+/A1 and the strength of the dealer network, enabled PFS to achieve retail market share growth
and pre-tax profit of $298.9 million in 2019. PACCAR issued $2.49 billion in medium term notes at attractive rates
during the year. PFS has operations covering 25 countries on four continents. The global breadth of PFS and its rigorous
credit application process support a record portfolio of 208,000 trucks and trailers, with record total assets of $16.07
billion. PACCAR Financial and PACCAR Leasing are the preferred funding sources for DAF, Peterbilt and Kenworth
trucks, financing 24.5% of dealer new truck sales in the markets where PFS operated in 2019. Strategically located used
truck centers, interactive webcasts and targeted marketing enabled PFS to sell 14,500 used trucks worldwide.
PACCAR Leasing (PacLease) is one of the largest full-service truck rental and leasing operations in North America,
Germany and Australia. PacLease placed 7,700 new PACCAR vehicles in service, a 12% increase over 2018. The
PacLease fleet consisted of over 40,000 vehicles at the end of 2019.
ENVIRONMENTAL LEADERSHIP — PACCAR is a global environmental leader. Many of PACCAR’s manufacturing
facilities have earned ISO 14001 environmental certification. The company’s manufacturing facilities enhanced their
zero-waste-to-landfill programs during the year. PACCAR is a member of the environmental reporting firm CDP,
which evaluates and scores companies on how effectively they are addressing climate change and the environment. For
the second year in a row PACCAR earned an excellent score of “A”, placing it in the top 2% of the over 8,000 reporting
companies from around the world.
A LOOK AHEAD — PACCAR’s employees around the world enable the company to distinguish itself as a global leader
in the technology, capital goods, financial services and aftermarket parts businesses. The outlook for 2020 is for the
7
North American and European economies to grow at a 1-2% rate while South America is expected to grow by 2-3%.
The U.S. and Canada Class 8 truck market in 2020 is expected to normalize and be in the range of 230,000–260,000
vehicles. Registrations for Class 6-7 trucks are expected to be between 90,000–110,000 vehicles. The European truck
market is forecast to remain strong in 2020 with 16+ tonne vehicle registrations in the range of 260,000–290,000
vehicles and demand for medium-duty trucks is expected to range from 45,000–50,000 units.
PACCAR Parts’ industry leading services, the large vehicle parc and strong freight demand in North America and
Europe should provide increased parts deliveries in the company’s aftermarket parts business. The PACCAR Financial
portfolio is expected to continue to perform well due to the growing economies.
PACCAR’s industry leading range of vehicles, modern high technology factories and superb customer service in
parts and financial services, as well as accelerated investments in advanced powertrains, advanced driver assistance
systems, truck connectivity and powerful data analytics applications using artificial intelligence and machine learning
provide an excellent foundation for future growth. PACCAR is well positioned and committed to generating
outstanding results for its shareholders.
P R E S T O N F E I G H T
Chief Executive Officer
Februar y 19, 2020
PACCAR Executive Operating Committee
First Row Left to Right: Jason Skoog, Marco Davila, Kevin Baney, Darrin Siver, Lily Ley, Douglas Grandstaff, Harry Wolters.
Second Row Left to Right: Kyle Quinn, Todd Hubbard, Harrie Schippers, Preston Feight, Gary Moore, Michael Barkley,
David Danforth, Mike Dozier, Jack LeVier.
8
P E T E R B I L T M O T O R S C O M P A N Y
Peterbilt established production records of 46,700 heavy-duty and 11,200 medium-duty
trucks in 2019. Peterbilt introduced the Model 579 UltraLoft Sleeper and the Model 579
9
EV, Electric Vehicle.
Peterbilt introduced and built 5,700 Model 579s with an 80-inch integral UltraLoft sleeper in 2019. The
UltraLoft provides an industry leading 70 cubic feet of storage space, along with superior comfort for
customers and is the best-selling sleeper version of the Model 579.
Peterbilt developed and delivered advanced battery-electric vehicles to customers for field testing. The
fleet of Models 579EV, 520EV and 220EV are designed for regional haul, refuse collection and local pickup
and delivery. The vehicles will be available for production in 12–18 months.
Peterbilt enhanced its advanced driver assistance system (ADAS), which is standard
on the Model 579 and offers multi-lane emergency braking
and highway departure braking.
Peterbilt achieved record medium-duty truck build of
11,200 units, including a record number of Model 220 for
urban delivery, and Models 337 and 348 for vocational
applications.
Peterbilt is a leader in vehicle uptime. The company
introduced its Platinum Service Center program to recognize
Peterbilt dealer locations with the highest levels of customer service, aftermarket support and driver
amenities. Peterbilt dealers added 150 mobile service vehicles to total 700, for dealer service applications.
PACCAR’s online service management tool, installed on 24,000 trucks, provides industry leading technology
and customer communications to manage service and repairs efficiently. Peterbilt introduced over-the-air
(OTA) updates, allowing customers to update engine and emissions systems software anytime, anywhere via a
secure connection through the PACCAR Solutions web portal and the PACCAR OTA app.
The Peterbilt Technician Institute graduated a record 159 certified dealer technicians this year. Over 700
dealer technicians have graduated since 2015. Peterbilt opened a fifth technician campus near Los Angeles,
California.
Women in Trucking recognized Peterbilt as a “Top Place for Women to Work” for the second consecutive
year, reinforcing the company’s diverse and inclusive workplace.
The Peterbilt dealer network invested a record $102 million in new and upgraded facilities, adding 21
locations in 2019 and expanding to 400 dealer locations in North America, including 19 TRP stores.
The Peterbilt Model 579 Daycab provides customers with driver comfort and uptime that make Peterbilt the “Class” of the industry. The
advanced PACCAR Powertrain delivers leading performance and efficiency in regional haul applications.
10
K E N W O R T H T R U C K C O M P A N Y
Kenworth achieved heavy-duty market share of 15.2 percent in 2019, and set a vehicle
production record of 60,000 trucks. Kenworth began field trials of its zero emissions
11
hydrogen fuel cell electric Kenworth T680 for regional operations.
The iconic Kenworth W990 began production and was recognized as the fleet driver “reward truck” with its
classic styling. The W990 provides maximum performance and efficiency in heavy haul and arduous operations,
with GCW > 140,000 lbs.
The Kenworth T880 vocational vehicle is standard with the PACCAR 20,000 lb. front steer axle which delivers
enhanced steering efficiency and load carrying capacity. Kenworth announced the
addition of the PACCAR 12-speed automated transmission with PACCAR MX
engine-optimized shift calibrations to enhance performance for the T880.
A new North American PACCAR Embedded Engineering center opened at
Kenworth headquarters in Kirkland, Washington. The facility provides collaborative
working spaces, open-office environments and electronic test labs capable of
replicating truck electronic functionality.
Kenworth TruckTech+ Service Management introduced a web-based fleet portal
with more than 16,000 participating customer trucks. The new Kenworth
TruckTech+ over-the-air update program enables remote download of the latest
PACCAR MX engine updates and calibrations for enhanced fuel economy and
performance.
Kenworth Chillicothe delivered a record 41,000 heavy-duty trucks, as a new
robotic cab assembly cell began producing cabs for the Kenworth T680, T880 and W990. Chillicothe
earned a 2019 “Manufacturing Leadership Award” from the National Association of Manufacturers. Kenworth
Renton has produced more than 150,000 trucks in its 26 year history. The plant’s strong environmental efforts
achieved zero-waste-to-landfill in 2019. The PACCAR Ste-Thérèse plant delivered a record 19,000 medium-duty
trucks. The Ste-Thérèse plant celebrated the production milestone of its 200,000th medium-duty truck – a
Kenworth T270.
Kenworth dealers invested $196 million in world-class facilities, growing the network to a record 426 sales
and service locations in the United States and Canada. A record 182 Kenworth dealerships attained the
prestigious Kenworth PremierCare® Gold Certified status by providing excellent service to maximize customer
uptime.
The Women in Trucking Association recognized Kenworth as a 2019 “Top Place for Women to Work” in the
transportation industry. A Kenworth T680 transported the U.S. Capitol Christmas Tree to Washington, D.C. for
the annual tree-lighting ceremony on Capitol Hill.
The Kenworth T880 flagship vocational model exemplifies Kenworth’s core values of quality, innovation and technology used to produce
The World’s Best® trucks. The T880 offers excellent performance, low operating cost, rugged reliability and outstanding driver comfort for
vocational fleets and truck operators. The T880 is standard with the proprietary PACCAR MX-13 engine and PACCAR front axle rated at
20,000 lbs.
12
D A F T R U C K S
DAF Trucks N.V. achieved 16.2 percent market share in the European heavy-duty
truck market in 2019. DAF expanded in the Asian, African and South American
13
markets, strengthening its position as a premium global vehicle manufacturer.
The DAF CF Electric vehicles began field tests with customers in the Netherlands and Germany, and are
accumulating mileage to optimize the technology while also improving air quality and reducing CO2 emissions.
The DAF CF Electric was honored as the “Green Truck Logistics Solution 2019” by the German trade magazines
VerkehrsRundschau and TRUCKER, reinforcing DAF’s environmental leadership.
DAF’s European market share in the 16+ tonne segment was 16.2 percent with market leadership in the
United Kingdom, the Netherlands, Belgium, Poland, Hungary and Bulgaria.
DAF launched a series of product innovations, including new axles and vehicle configurations, to enhance its
excellent reputation in the vocational segment.
The DAF XF series was elected “Fleet Truck of the Year 2019” at the prestigious Motor Transport Awards in
the UK. At the Commercial Fleet Awards (UK) the DAF LF series was voted “Truck of the Year” and DAF was
honored as “Manufacturer of the Year”. The DAF CF
Construction Model was awarded “Top Bau Truck” by
Transport a Logistika magazine in Slovakia and the Czech
Republic.
DAF sold 7,900 trucks outside the EU in 2019. DAF
introduced the new Euro 5 and Euro 6 trucks in Russia,
Belarus, Ukraine, Latin America, Australia and New Zealand. DAF is the heavy-duty market leader among
European manufacturers in Taiwan.
DAF’s independent dealer network opened 59 new locations, including a new state-of-the-art company
owned dealership in Paris, France, expanding its worldwide network to over 1,100 locations. New dealerships
were opened in Europe, South America, Asia and Africa.
DAF opened a new Digital Technology Center in Eindhoven, the Netherlands, to design next-generation
embedded software and support the development of advanced driver assistance systems and advanced
connected services.
Customers enjoyed the ‘DAF Experience 2019’, which included a tour of DAF’s modern production facilities
and showcased DAF’s premium trucks, aftermarket parts and financial services.
PACCAR Parts’ TRP all-makes aftermarket parts program consists of over 130,000 truck, bus and trailer parts
and is supported by DAF’s worldwide dealer network. DAF dealers opened 20 new TRP stores in Europe, Asia
and Africa, bringing the total to 100 TRP stores.
The DAF CF is a leader in a variety of transport and vocational applications, offering customers superior quality, ergonomics, comfort
and operating efficiency. DAF is at the forefront of product innovation, providing sophisticated vehicle technologies and advanced on-
line fleet management systems.
P A C C A R A U S T R A L I A
PACCAR Australia launched the Kenworth T360 and the Kenworth T410 in 2019.
14
PACCAR has delivered more than 68,000 Kenworth and DAF vehicles operating in
one of the world’s most demanding environments.
PACCAR Australia continued its market leadership in 2019 as Kenworth achieved 18.5 percent market share
and DAF share achieved 3.4 percent. Kenworth launched the new T360 and T410, with the wider 2.1-meter cab.
The T410 earned the prestigious “Good Design Australia Award” for the integration of its innovative features.
PACCAR Australia began construction on its Bayswater factory 100,000 sq' expansion to be completed in 2021.
PACCAR Financial Australia celebrated its 40th anniversary of operation. PacLease’s 17 locations cover the
Australian capital cities and large regional areas.
PACCAR Parts Australia achieved record sales in 2019 by growing its Fleet Services program and TRP
all-makes truck and trailer parts business by 24 percent. PACCAR Australia’s 58 dealer locations support their
customers with exceptional service.
Kenworth trucks are designed and manufactured in Australia to perform in some of the most demanding applications in the world. The
Model T659 road train is designed to haul loads of 200 tonnes while enhancing Kenworth’s excellent reputation for superior product
quality, comfort and productivity.
P A C C A R M E X I C O
PACCAR Mexico (KENMEX) increased production by 16 percent to a record 19,700
vehicles in 2019. KENMEX achieved a market-leading 35.1 percent share of the
15
Class 8 Market in Mexico.
PACCAR Mexico produces a broad range of Kenworth and Peterbilt Class 5-8 vehicles for North, Central,
and South America in its state-of-the-art 590,000 square-foot production facilities in Mexicali, Mexico.
KENMEX has manufactured over 310,000 vehicles since its founding in 1959.
KENMEX celebrated 60 years of production in Mexico in 2019. KENMEX achieved a milestone by
manufacturing record production of 19,700 vehicles including an export record of 8,800 units for the U.S. and
Canadian markets.
KENMEX has installed 5,800 PACCAR MX engines into Kenworth vehicles.
PACCAR Parts Mexico achieved excellent results with record sales. PACCAR Financial Mexico and PacLease
Mexicana financed over 50 percent of the Kenworth truck retail sales in Mexico.
KENMEX dealers have invested over $75 million in the last five years to ensure market-leading quality and
customer service at 135 dealer locations and 1,000 service bays throughout Mexico.
KENMEX celebrated its 60th anniversary in 2019. This picture shows the Kenworth T880, one of the top selling tractors in the
market in Mexico. The advanced PACCAR MX-13 engine delivers industry leading performance and efficiency in over the
road applications.
L E Y L A N D T R U C K S
Leyland Trucks, the United Kingdom’s leading truck manufacturer, celebrated the
16
production of the 50,000th DAF LF Euro 6 and delivered over 19,700 DAF vehicles to
customers in Europe, Asia, Australia, Africa and the Americas.
Leyland Trucks celebrated the production of the 50,000th LF Euro 6 in 2019, and enhanced its reputation as
one of the UK’s leading automotive manufacturing companies. Leyland’s highly efficient 710,000 square-foot
manufacturing facility features a technologically advanced production system that delivers digital instructions to
the robotic chassis paint system. Leyland builds the full DAF product range of LF, CF and XF models for right-
and left-hand drive markets.
Leyland has produced over 190,000 DAF LF distribution vehicles since the launch of the popular vehicle in
2001. The DAF LF was honored as “Truck of the Year” for the third consecutive year and DAF Trucks earned
“Truck Manufacturer of the Year” at the 2019 Commercial Fleet Awards.
Leyland Trucks’ Helping Hand charity celebrated its 25 year anniversary in 2019, generating over £1 million
in donations to local communities.
Leyland manufactures the full DAF product range of LF, CF and XF models for right- and left-hand drive markets, offering superior
operating efficiency, technology and productivity. The DAF LF is the ideal truck for urban and vocational applications.
P A C C A R G L O B A L G R O W T H
PACCAR sells DAF, Kenworth and Peterbilt trucks and parts to customers in over
100 countries on six continents. In 2019, PACCAR expanded its business in South
17
America, Africa and Asia.
DAF Brasil has produced over 9,000 trucks as it celebrates six years of operation. DAF market share in the
Brasilian heavy-duty 40+ tonne segment was 6.2 percent. DAF’s dealers in Brasil have invested over $60 million in 37
service locations. A new PACCAR Parts Distribution Center will open in Ponta Grossa, Brasil in 2020 to enhance
South American DAF and Kenworth dealers’ parts availability.
The DAF new generation Euro 5 and Euro 6 CF and XF trucks were introduced in Russia, Belarus, Ukraine, Latin
America, Australia and New Zealand. DAF delivered a record number of trucks and enhanced its market leadership
in Taiwan. Sales in South Africa grew by over 20 percent.
DAF sold over 3,000 PACCAR engines to leading manufacturers of coaches, buses and special vehicles worldwide.
At the BusWorld exhibition in Brussels, Belgium, DAF introduced Euro 3 and Euro 5 versions of the efficient and
powerful PACCAR MX engines, and a new lightweight rear axle.
The PACCAR India Technical Center provides information technology, engineering and purchasing expertise to
PACCAR operations worldwide.
The DAF assembly facility in Taiwan builds the full range of DAF XF, CF and LF models. DAF Brasil has produced over 9,000 trucks as it
celebrates six years of operation. PACCAR engineering teams in India support the PACCAR truck divisions around the world. PACCAR
engines power buses throughout Europe and Asia.
P A C C A R P A R T S
PACCAR Parts achieved record pre-tax profit of $831 million and worldwide revenue
18
of $4.02 billion in 2019, and delivered a record 1.9 million parts shipments to over
2,200 DAF, Kenworth, Peterbilt and TRP locations.
PACCAR Parts drives uptime for customers with technology solutions that include the PACCAR Parts 365
Center and Fleet Services program, which supports over 1,550 commercial fleets operating more than one
million vehicles. PACCAR Parts’ global eCommerce program allows customers to identify more than 1.4 million
parts, confirm availability and order 24 hours a day, 7 days a week. The Kenworth Privileges, Peterbilt Preferred,
DAF MAX and TRP Performance loyalty programs deliver exclusive benefits to more than 850,000 customers
worldwide.
PACCAR Parts’ 18 distribution centers support customers on six continents with 2.8 million square-feet of
warehouse space. PACCAR Parts will open new distribution centers in Las Vegas, Nevada and Ponta Grossa,
Brasil in 2020.
PACCAR Parts’ successful TRP aftermarket brand celebrated its 25th anniversary in 2019. TRP offers over
130,000 part numbers of many makes and models of trucks, trailers, buses and engines. In 2019, TRP
aftermarket parts retail stores expanded to 210 locations in 40 countries.
In 2020, PACCAR Parts’ new Ponta Grossa, Brasil distribution center will expand customer service throughout South America. PACCAR
Parts’ eCommerce program allows customers 24/7 access. PACCAR Parts’ 365 Center supports customers with roadside assistance,
powertrain support and service management. PACCAR Parts’ TRP brand celebrated its 25th anniversary in 2019.
P A C C A R P O W E R T R A I N
PACCAR enhanced its proprietary automated transmission applications with
PACCAR MX-13 and MX-11 engines. PACCAR MX engines are installed in all DAF
19
16+ tonne vehicles and over 43 percent of Kenworth and Peterbilt Class 8 vehicles.
PACCAR is one of the premier diesel engine manufacturers in the world with over 800,000 square-feet of
production facilities in Columbus, Mississippi and Eindhoven, the Netherlands. PACCAR’s MX-13 and MX-11
engines provide customers with excellent fuel economy and superior durability. PACCAR has two world-class
research and development centers, operating 47 advanced engine test cells and a climatic chassis dynamometer to
enhance its engine and powertrain design. PACCAR has delivered 1.7 million engines, with the Columbus engine
facility manufacturing over 230,000 engines since its opening in 2010.
The PACCAR MX-13 offers horsepower ratings up to 520 HP and 1,900 lb-ft of torque and the MX-11 offers
ratings up to 440 HP and 1,700 lb-ft of torque.
The PACCAR 12-speed automated vocational transmission provides superior performance for construction,
mining, refuse and agriculture. In 2019, the PACCAR Transmission was installed in 44 percent of Kenworth and
Peterbilt on-highway trucks, complementing the excellent performance of the PACCAR MX Engines.
PACCAR engine and axle factories provide technology leadership in commercial vehicle powertrain production. PACCAR Powertrains
are installed in DAF, Kenworth and Peterbilt vehicles worldwide, where they have earned a reputation for superior reliability, durability
and operating efficiency.
P A C C A R F I N A N C I A L S E R V I C E S
PACCAR Financial Services (PFS), which supports the sale of PACCAR trucks
20
worldwide, achieved retail market share of 24.5 percent and earned pre-tax profits
of $299 million in 2019.
The PFS portfolio is comprised of 208,000 trucks and trailers, with total assets of $16.1 billion. PACCAR’s
excellent balance sheet, complemented by its A+/A1 credit rating, enabled PFS to issue $2.5 billion in three-,
four-, and five-year medium term notes in 2019. PFS supports the sale of Kenworth, Peterbilt and DAF trucks in
25 countries on four continents. PFS sold over 14,500 pre-owned PACCAR trucks worldwide in 2019, and
leveraged its network of nine world-class retail used truck centers.
PFC financed 69 percent of dealer inventories and 18 percent of new Kenworth and Peterbilt Class 8 trucks
in the U.S. and Canada. Over 80 percent were funded through its industry leading e-contract and e-signature
platform. PFC upgraded its state-of-the-art Finance Sales and Credit system.
PACCAR Financial Brasil commenced operations in 2019 and supports the growth of DAF Brasil by providing
retail financing to customers and inventory financing for dealers. PACCAR Financial Europe (PFE) has $3.8
billion in assets and provides financial services to DAF dealers and customers in 17 European countries. PFE
achieved a 25 percent market share of DAF vehicles in 2019.
PACCAR Financial facilitates the sale of premium-quality new and used PACCAR vehicles worldwide by
offering a full range of financial products and by utilizing leading-edge web-based information technologies to
streamline financing and leasing for dealers and customers.
P A C C A R L E A S I N G C O M P A N Y
PACCAR Leasing achieved its 30th consecutive year of profitability with a record
worldwide fleet of over 40,000 Kenworth, Peterbilt, and DAF vehicles.
21
PacLease offers premium Kenworth, Peterbilt and DAF vehicles for full-service lease and rental customers.
PacLease is an industry leader in introducing new technologies and providing fleet customers innovative and
complete transportation solutions. PacLease launched its new SalesSuite, a mobile, web-based lease quotation
system which reduces lease transaction quotation time by 40 percent.
In 2019, PacLease delivered its 2,000th vehicle equipped with the PACCAR Integrated Powertrain, which
combines the fuel efficiency and reliability of the PACCAR MX Engine and the durability of the PACCAR
Transmission. PACCAR MX Engines powered over 60 percent of PacLease’s Kenworth and Peterbilt
heavy-duty vehicles.
Customer deliveries increased to 7,700 Kenworth, Peterbilt and DAF vehicles in North America, Europe and
Australia through PacLease’s network of 585 locations.
PacLease Mexico increased deliveries by 29 percent and is the largest Class 8 full-service lease provider in
Mexico, with a fleet of over 7,300 trucks and trailers. PacLease Australia offers the widest network coverage in
Australia with 17 locations. PacLease Europe operates a fleet of over 2,700 DAF trucks and trailers. PacLease
University, the training program for franchise lease and rental sales professionals, trained its 500th student and
expanded into Mexico and Australia this year.
PacLease provides its customers with innovative transportation solutions and premium-quality PACCAR vehicles. PacLease
offers new Peterbilt, Kenworth and DAF trucks with the PACCAR engine and powertrain.
P A C C A R T E C H N I C A L C E N T E R S
PACCAR Technical Centers’ world-class design, simulation and validation
22
capabilities accelerate product development and ensure that PACCAR continues to
deliver the highest quality products in the industry.
PACCAR’s Technical Centers in Europe, North America and India are equipped with state-of-the-art product
development and validation capabilities. The centers are staffed with experts in powertrain and vehicle
development and systems integration. The advanced engineering tools in the Technical Centers are utilized to
innovate and accelerate the launch of new products, including fuel-efficient engines, aerodynamic trucks and
advanced safety systems. To improve uptime, advanced data analytics tools are employed to provide faster
response to customers and proactively recommend maintenance schedules. The Technical Centers utilize
state-of-the-art technologies, including 3-D rapid prototyping of metal components. Technical Center computer
simulations provide insight into durability and performance of engine, powertrain and vehicle components and
systems. The climatic chassis dynamometer allows simulation of terrain grade and variable climate.
The PACCAR Innovation Center in Silicon Valley and advanced engineering work at the Technical Centers
drive research in powertrain electrification, advanced driver assistance systems and electronic connectivity.
PACCAR Technical Centers in Eindhoven, the Netherlands, Silicon Valley, California, Mount Vernon, Washington and Pune, India
advance the quality and competitiveness of PACCAR products worldwide.
I N F O R M A T I O N T E C H N O L O G Y D I V I S I O N
PACCAR’s Information Technology Division (ITD) is an industry leader in innovative
digital technologies that enhance the quality of PACCAR business processes and
23
products. These technologies systematically connect PACCAR with its customers,
dealers and suppliers.
PACCAR ITD unveiled its new PACCAR Technology Center, which showcases advanced technology, new
concepts and creative ideas for the future of PACCAR. The Technology Center links truck sales, dealer analytics,
PACCAR Parts and connected truck; highlighting PACCAR’s technical leadership and vision.
PACCAR ITD is implementing Microsoft HoloLens Augmented Reality training guides to efficiently train
employees who digitally interact with three-dimensional overlays in the production arena. Holographic images,
videos and electronic build instructions enhance the assembly process.
PACCAR connected truck systems monitor vehicle operating data, location and utilization. PACCAR ITD’s
team simulates millions of operating scenarios to provide PACCAR customers the latest information to maximize
their uptime efficiently.
PACCAR is a leader in applied technology including: Advanced Technology; Augmented Reality training guides by using a full scale
hologram; Internet of Things services to increase uptime; and digital services to enhance customer experience.
P A C C A R P H I L A N T H R O P Y
The PACCAR Foundation has contributed over $200 million to educational, social
24
services and arts charitable organizations during its 68 years.
PACCAR’s philanthropy reflects its global business reach. PACCAR donates generously to education, the arts
and social services in locations in which its employees work and live.
PACCAR’s philanthropy recognizes that education is the key to providing people a life full of opportunities.
PACCAR’s grants to universities through scholarships and professorships fund research in science and business
and build world-class facilities for students and faculty.
PACCAR’s philanthropy is focused on health and social well-being including funding cancer research and the
United Way. PACCAR employees contribute their time and resources as volunteers and fundraisers for
organizations worldwide.
PACCAR Environmental Technology Building, Washington State University; Swedish Hospital Mobile Mammography Truck in Seattle;
Center for Science and Innovation, Seattle University; Van Gogh Museum, Amsterdam, the Netherlands.
P A C C A R E N V I R O N M E N T A L L E A D E R S H I P
PACCAR earned an “A” rating in the 2019 Carbon Disclosure Project (CDP)
Evaluation by delivering a comprehensive environmental program including
25
reduction of greenhouse gas emissions in its commercial vehicles and facilities.
PACCAR’s strategy for environmental leadership is to invest in technologically advanced products and energy
efficient, sustainable operations. PACCAR’s 2019 CDP “A” listing represents the top two percent of over 8,000
reporting companies. PACCAR has reduced greenhouse gas emissions for product and facilities consistently since
2013.
PACCAR is a leader in the development of alternative powertrains including battery-electric, fuel cell and
hybrid commercial vehicles. Kenworth, Peterbilt and DAF are field-testing these technologies in North America
and Europe. PACCAR is the market leader in natural gas powered CNG and LNG heavy-duty vehicles. Kenworth,
Peterbilt and DAF trucks have reduced fuel consumption and CO2 emissions up to 15 percent compared with
2014 vehicles. PACCAR is an environmental leader in its factory operations; 88 percent of the company’s
manufacturing locations are zero-waste-to-landfill facilities and 94 percent are ISO 14001 certified. PACCAR
vehicles are over 80 percent recyclable, with steel, aluminum and copper components.
PACCAR is enhancing its environmental leadership with the development of innovative alternative powertrain commercial vehicles,
such as the DAF LF Electric, CF Electric and CF Hybrid Trucks.
F I N A N C I A L C H A R T S
26
U.S. AND CANADA
CLASS 8 MARKET SHARE
WESTERN AND CENTRAL EUROPE
16+ TONNE MARKET SHARE
trucks (000)
320
retail sales
32%
trucks (000)
340
registrations
17%
240
160
80
0
32
24
16
8
0
29%
255
26%
170
23%
20%
85
0
10
11
12
13
14
15
16
17
18
19
10
11
12
13
14
15
16
17
18
19
■ Total U.S. and Canada Class 8 Units
■ Total Western and Central Europe
16+ Tonne Units
PACCAR Market Share (percent)
PACCAR Market Share (percent)
T O TA L A S S E T S
billions of dollars
GEOGRAPHIC REVENUE
billions of dollars
32
24
16
8
0
28
21
14
7
0
10
11
12
13
14
15
16
17
18
19
10
11
12
13
14
15
16
17
18
19
■ Truck, Parts and Other
■ Financial Services
■ United States
■ Rest of World
16%
15%
14%
13%
28
21
14
7
0
S T O C K H O L D E R R E T U R N P E R F O R M A N C E G R A P H
The following line graph compares the yearly percentage change in the cumulative total stockholder return on the
Company’s common stock, to the cumulative total return of the Standard & Poor’s Composite 500 Stock Index
and the return of the industry peer groups of companies identified in the graph (the “Peer Group Index”) for the
last five fiscal years ended December 31, 2019. Standard & Poor’s has calculated a return for each company in the
Peer Group Index weighted according to its respective capitalization at the beginning of each period with
dividends reinvested on a monthly basis. Management believes that the identified companies and methodology
used in the graph for the Peer Group Index provide a better comparison than other indices available. The Peer
Group Index consists of AGCO Corporation, Caterpillar Inc., Cummins Inc., Dana Incorporated, Deere &
Company, Eaton Corporation, Meritor Inc., Navistar International Corporation, Oshkosh Corporation, AB Volvo
and CNH Industrial N.V. The comparison assumes that $100 was invested December 31, 2014, in the Company’s
common stock and in the stated indices and assumes reinvestment of dividends.
27
PACCAR Inc
S&P 500 Index
Peer Group Index
250
200
150
100
50
2014
2015
2016
2017
2018
PACCAR Inc
S&P 500 Index
Peer Group Index
2014
100
100
100
2015
72.90
101.38
79.55
2016
100.87
113.51
113.15
2017
115.82
138.29
170.75
2018
98.08
132.23
141.11
250
200
150
100
50
2019
2019
142.26
173.86
181.31
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S O F F I N A N C I A L
C O N D I T I O N A N D R E S U L T S O F O P E R A T I O N S
28
O V E RV I E W:
PACCAR is a global technology company whose Truck segment includes the design and manufacture of high-quality
light-, medium- and heavy-duty commercial trucks. In North America, trucks are sold under the Kenworth and
Peterbilt nameplates, in Europe, under the DAF nameplate and in Australia and South America, under the Kenworth
and DAF nameplates. The Parts segment includes the distribution of aftermarket parts for trucks and related
commercial vehicles. The Company’s Financial Services segment derives its earnings primarily from financing or
leasing PACCAR products in North America, Europe and Australia. The Company’s Other business includes the
manufacturing and marketing of industrial winches.
2019 Financial Highlights
• Worldwide net sales and revenues were a record $25.60 billion in 2019 compared to $23.50 billion in 2018 due to
record revenues in the Truck, Parts and Financial Services segments.
• Truck sales were $19.99 billion in 2019 compared to $18.19 billion in 2018 primarily due to higher truck
deliveries in the U.S. and Canada and Latin America.
• Parts sales were $4.02 billion in 2019 compared to $3.84 billion in 2018 primarily due to higher demand in the
U.S. and Canada.
• Financial Services revenues were $1.48 billion in 2019 compared to $1.36 billion in 2018. The increase was
primarily due to higher average earning asset balances and higher yields in North America.
• In 2019, PACCAR earned net income for the 81st consecutive year. Net income was $2.39 billion ($6.87 per
diluted share) in 2019 compared to $2.20 billion ($6.24 per diluted share) in 2018 primarily reflecting higher
Truck and Parts revenues and operating results.
• Capital investments were $743.9 million in 2019 compared to $437.1 million in 2018 reflecting continued
investments in the Company’s manufacturing facilities, new product development and enhanced aftermarket
support.
• After-tax return on beginning equity (ROE) was 27.8% in 2019 compared to 27.3% in 2018.
• Research and development (R&D) expenses were $326.6 million in 2019 compared to $306.1 million in 2018.
PACCAR opened Global Embedded Software centers in Kirkland, Washington and Eindhoven, the Netherlands, which
will accelerate embedded software development and connected vehicle solutions to benefit customers’ operating
efficiency.
In January 2020, PACCAR exhibited three vehicles with autonomous and alternative powertrain technologies at the
CES 2020 show in Las Vegas, Nevada: a level 4 autonomous Kenworth T680; a battery-electric Peterbilt Model 520EV;
and a battery-electric Kenworth K270E. These trucks are designed for a range of customer applications, including
over-the-road transportation, refuse collection and urban distribution.
Peterbilt, Kenworth and DAF are field-testing battery-electric, hydrogen fuel cell and hybrid powertrain trucks with
customers in North America and Europe. These customer field tests are providing excellent feedback on future truck
technologies, which will support PACCAR’s environmental and engineering leadership with the development of
innovative alternative powertrain technologies.
PACCAR continues to add global distribution capacity to deliver industry-leading aftermarket parts availability to
customers. PACCAR will open a new 250,000 square-foot parts distribution center in Las Vegas, Nevada and a new
160,000 square-foot parts distribution center in Ponta Grossa, Brasil in 2020 to enhance parts availability for
customers.
PACCAR has been honored for the second consecutive year as a global leader in environmental practices by
environmental reporting firm CDP, earning recognition on the 2019 CDP Climate Change A List. Over 8,000
companies disclosed data about their environmental impacts, risks and opportunities to CDP for independent
assessment. PACCAR is one of only 35 companies in the U.S. earning a CDP score of “A” and is placed in the top 2%
of reporting companies worldwide.
The PACCAR Financial Services (PFS) group of companies has operations covering four continents and 25 countries.
The global breadth of PFS and its rigorous credit application process support a portfolio of loans and leases with
record total assets of $16.07 billion. PFS issued $2.49 billion in medium-term notes during 2019 to support portfolio
growth and repay maturing debt.
29
Truck Outlook
Heavy-duty truck industry retail sales in the U.S. and Canada in 2020 are expected to decrease to 230,000 to 260,000
units compared to 308,800 in 2019. In Europe, the 2020 truck industry registrations for over 16-tonne vehicles are
expected to be 260,000 to 290,000 units compared to 320,200 in 2019. In South America, heavy-duty truck industry
sales in 2020 are estimated to be 100,000 to 110,000 units compared to 105,000 units in 2019.
Parts Outlook
In 2020, PACCAR Parts sales are expected to grow 4-6% compared to 2019.
Financial Services Outlook
Based on the truck market outlook, average earning assets in 2020 are expected to remain similar to 2019 levels.
Current strong levels of freight tonnage are contributing to customers’ profitability and cash flow. If current freight
transportation conditions decline due to weaker economic conditions, then past due accounts, truck repossessions
and credit losses would likely increase from the current low levels and new business volume would likely decline.
Capital Spending and R&D Outlook
Capital investments in 2020 are expected to be $625 to $675 million, and R&D is expected to be $310 to $340 million.
The Company is investing for long-term growth in aerodynamic truck models, integrated powertrains including diesel,
electric, hybrid and hydrogen fuel cell technologies, advanced driver assistance systems, digital services and next-
generation manufacturing and distribution capabilities.
See the Forward-Looking Statements section of Management’s Discussion and Analysis for factors that may affect these
outlooks.
30
R E S U LT S O F O P E R AT I O N S :
The Company’s results of operations for the years ended December 31, 2019 and 2018 are presented below. For
information on the year ended December 31, 2017, refer to Part II, Item 7 in the 2018 Annual Report on Form 10-K.
($ in millions, except per share amounts)
Year Ended December 31,
Net sales and revenues:
Truck
Parts
Other
Truck, Parts and Other
Financial Services
Income (loss) before income taxes:
Truck
Parts
Other
Truck, Parts and Other
Financial Services
Investment income
Income taxes
Net Income
Diluted earnings per share
2019
2018
$ 19,989.5
4,024.9
105.3
24,119.7
1,480.0
$ 25,599.7
$ 1,904.9
830.8
(17.7)
2,718.0
298.9
82.3
(711.3)
$ 2,387.9
6.87
$
$ 18,187.0
3,838.9
112.7
22,138.6
1,357.1
$ 23,495.7
$ 1,672.1
768.6
2.7
2,443.4
305.9
60.9
(615.1)
$ 2,195.1
6.24
$
After-tax return on revenues
9.3%
9.3%
The following provides an analysis of the results of operations for the Company’s three reportable segments - Truck, Parts
and Financial Services. Where possible, the Company has quantified the impact of factors identified in the following
discussion and analysis. In cases where it is not possible to quantify the impact of factors, the Company lists them in
estimated order of importance. Factors for which the Company is unable to specifically quantify the impact include
market demand, fuel prices, freight tonnage and economic conditions affecting the Company’s results of operations.
2019 Compared to 2018:
Truck
The Company’s Truck segment accounted for 78% of revenues in 2019 compared to 77% in 2018.
The Company’s new truck deliveries are summarized below:
Year Ended December 31,
U.S. and Canada
Europe
Mexico, South America, Australia and other
Total units
2019
117,200
59,900
21,700
198,800
2018
105,300
63,800
20,000
189,100
% change
11
(6)
9
5
In 2019, industry retail sales in the heavy-duty market in the U.S. and Canada increased to 308,800 units from
284,800 units in 2018. The Company’s heavy-duty truck retail market share was 30.0% in 2019 compared to 29.4% in
2018. The medium-duty market was 108,100 units in 2019 compared to 98,100 units in 2018. The Company’s
medium-duty market share was 16.9% in 2019 compared to 17.7% in 2018.
The over 16-tonne truck market in Europe in 2019 increased to 320,200 units from 318,800 units in 2018, and DAF’s
market share was 16.2% in 2019 compared to 16.6% in 2018. The 6 to 16-tonne market in 2019 increased to 53,600
units from 51,900 units in 2018. DAF’s market share in the 6 to 16-tonne market in 2019 was 9.7% compared to
9.0% in 2018.
The Company’s worldwide truck net sales and revenues are summarized below:
31
($ in millions)
Year Ended December 31,
Truck net sales and revenues:
U.S. and Canada
Europe
Mexico, South America, Australia and other
Truck income before income taxes
2019
2018
% change
$ 13,106.5
4,797.6
2,085.4
$ 19,989.5
$ 1,904.9
$ 11,357.0
4,808.4
2,021.6
$ 18,187.0
$ 1,672.1
15
3
10
14
Pre-tax return on revenues
9.5%
9.2%
The Company’s worldwide truck net sales and revenues increased to $19.99 billion in 2019 from $18.19 billion in
2018, primarily due to higher truck deliveries in the U.S. and Canada and Latin America, partially offset by
unfavorable currency translation effects. Truck segment income before income taxes and pre-tax return on revenues
increased in 2019, reflecting higher truck unit deliveries and higher gross margins.
The major factors for the Truck segment changes in net sales and revenues, cost of sales and revenues and gross
margin between 2019 and 2018 are as follows:
($ in millions)
2018
Increase (decrease)
Truck sales volume
Average truck sales prices
Average per truck material, labor and other direct costs
Factory overhead and other indirect costs
Extended warranties, operating leases and other
Currency translation
Total increase
2019
net
sales and
revenues
cost of
sales and
revenues
gross
margin
$ 18,187.0
$ 16,039.5
$ 2,147.5
1,613.3
489.8
71.9
(372.5)
1,802.5
$ 19,989.5
1,395.8
297.8
65.2
101.9
(337.6)
1,523.1
$ 17,562.6
217.5
489.8
(297.8)
(65.2)
(30.0)
(34.9)
279.4
$ 2,426.9
• Truck sales volume primarily reflects higher truck deliveries in the U.S. and Canada ($1,414.4 million sales and
$1,180.0 million cost of sales). In Europe, the impact of lower truck unit deliveries was more than offset by a
decrease in units accounted for as operating leases, resulting in higher sales ($236.8 million) and cost of sales
($217.9 million).
• Average truck sales prices increased sales by $489.8 million, primarily due to higher price realization in North
America.
• Average cost per truck increased cost of sales by $297.8 million, primarily reflecting higher material and labor costs.
• Factory overhead and other indirect costs increased $65.2 million, primarily due to higher salaries and related
expenses and higher supplies and maintenance costs to support increased truck production.
• Extended warranties, operating leases and other revenues increased by $71.9 million primarily due to a higher
volume of repair and maintenance (R&M) and extended warranty contracts, as well as higher revenues from
operating leases. Cost of sales and revenues increased by $101.9 million primarily due to higher impairments and
losses on used trucks and higher costs of extended warranty and R&M contracts.
• The currency translation effect on sales and cost of sales reflects a decline in the value of foreign currencies
relative to the U.S. dollar, primarily the euro.
• Truck gross margins increased to 12.1% in 2019 from 11.8% in 2018, primarily due to the factors noted above.
Truck selling, general and administrative expenses (SG&A) for 2019 increased to $269.7 million from $248.3 million
in 2018. The increase was primarily due to higher professional fees ($24.4 million) and higher salaries and related
expenses ($6.8 million), partially offset by favorable currency translation effects ($9.7 million). As a percentage of
sales, Truck SG&A decreased to 1.3% in 2019 from 1.4% in 2018 due to higher net sales.
32
Parts
The Company’s Parts segment accounted for 16% of revenues in 2019 and 2018.
($ in millions)
Year Ended December 31,
Parts net sales and revenues:
U.S. and Canada
Europe
Mexico, South America, Australia and other
Parts income before income taxes
2019
2018
% change
$ 2,731.7
908.5
384.7
$ 4,024.9
830.8
$
$ 2,545.1
921.4
372.4
$ 3,838.9
768.6
$
7
(1)
3
5
8
Pre-tax return on revenues
20.6%
20.0%
The Company’s worldwide parts net sales and revenues increased to a record $4.02 billion in 2019 from $3.84
billion in 2018, due to higher aftermarket demand in U.S. and Canada. The increase in Parts segment income
before income taxes and pre-tax return on revenues in 2019 was primarily due to higher sales volume and higher
price realization, partially offset by unfavorable currency translation.
The major factors for the Parts segment changes in net sales and revenues, cost of sales and revenues and gross
margin between 2019 and 2018 are as follows:
($ in millions)
2018
Increase (decrease)
Aftermarket parts volume
Average aftermarket parts sales prices
Average aftermarket parts direct costs
Warehouse and other indirect costs
Currency translation
Total increase
2019
net
sales and
revenues
cost of
sales and
revenues
gross
margin
$ 3,838.9
$ 2,793.5
$ 1,045.4
75.4
173.9
(63.3)
186.0
$ 4,024.9
51.1
85.5
17.6
(40.9)
113.3
$ 2,906.8
24.3
173.9
(85.5)
(17.6)
(22.4)
72.7
$ 1,118.1
• Aftermarket parts sales volume increased by $75.4 million and related cost of sales increased by $51.1 million due
to higher demand in all markets.
• Average aftermarket parts sales prices increased sales by $173.9 million primarily due to higher price realization
in the U.S. and Canada.
• Average aftermarket parts direct costs increased $85.5 million due to higher material costs.
• Warehouse and other indirect costs increased $17.6 million, primarily due to higher salaries and related expenses
and higher depreciation expense.
• The currency translation effect on sales and cost of sales primarily reflects a decline in the value of foreign
currencies relative to the U.S. dollar, primarily the euro.
• Parts gross margins in 2019 increased to 27.8% from 27.2% in 2018 due to the factors noted above.
Parts SG&A expense for 2019 was $207.8 million compared to $206.2 million in 2018 primarily due to higher
salaries and related expenses, partially offset by lower sales and marketing costs and favorable currency translation
effects. As a percentage of sales, Parts SG&A decreased to 5.2% in 2019 from 5.4% in 2018, primarily due to
higher net sales.
Financial Services
The Company’s Financial Services segment accounted for 6% of revenues in 2019 and 2018.
33
($ in millions)
Year Ended December 31,
New loan and lease volume:
U.S. and Canada
Europe
Mexico, Australia and other
New loan and lease volume by product:
Loans and finance leases
Equipment on operating lease
New loan and lease unit volume:
Loans and finance leases
Equipment on operating lease
Average earning assets:
U.S. and Canada
Europe
Mexico, Australia and other
Average earning assets by product:
Loans and finance leases
Dealer wholesale financing
Equipment on lease and other
Revenues:
U.S. and Canada
Europe
Mexico, Australia and other
Revenues by product:
Loans and finance leases
Dealer wholesale financing
Equipment on lease and other
Income before income taxes
2019
2018
% change
$ 3,425.8
1,349.5
857.7
$ 5,633.0
$ 4,277.1
1,355.9
$ 5,633.0
38,000
13,700
51,700
$ 8,837.7
3,547.6
1,895.5
$ 14,280.8
$ 8,758.8
2,428.8
3,093.2
$ 14,280.8
$
810.1
409.3
260.6
$ 1,480.0
$
470.2
112.8
897.0
$ 1,480.0
298.9
$
$ 3,076.7
1,364.5
792.1
$ 5,233.3
$ 4,177.3
1,056.0
$ 5,233.3
40,500
10,300
50,800
$ 7,815.4
3,364.9
1,749.9
$ 12,930.2
$ 8,094.4
1,847.1
2,988.7
$ 12,930.2
$
763.8
352.6
240.7
$ 1,357.1
$
425.2
72.5
859.4
$ 1,357.1
305.9
$
11
(1)
8
8
2
28
8
(6)
33
2
13
5
8
10
8
31
3
10
6
16
8
9
11
56
4
9
(2)
New loan and lease volume was a record $5.63 billion in 2019 compared to $5.23 billion in 2018, primarily reflecting
higher truck deliveries in the U.S. and Canada. PFS finance market share of new PACCAR truck sales was 24.5% in
2019 compared to 23.9% in 2018.
PFS revenues increased to $1.48 billion in 2019 from $1.36 billion in 2018. The increase was primarily due to revenue
on higher average earning assets and higher portfolio yields reflecting higher market interest rates in North America,
and higher used truck sales volume in Europe, partially offset by the effects of translating weaker foreign currencies
to the U.S. dollar. The effects of currency translation decreased PFS revenues by $26.7 million in 2019, primarily due
to changes in the euro.
PFS income before income taxes decreased to $298.9 million in 2019 from $305.9 million in 2018, primarily due to
lower results on returned lease assets and higher SG&A expenses as $12.0 million of certain initial direct costs were
immediately expensed in 2019 with the adoption of the new lease standard, partially offset by higher average earning
assets balances. Currency exchange effects decreased PFS income before taxes by $3.2 million in 2019.
34
Included in Financial Services “Other Assets” on the Company’s Consolidated Balance Sheets are used trucks held for
sale, net of impairments, of $391.4 million at December 31, 2019 and $226.4 million at December 31, 2018. These
trucks are primarily units returned from matured operating leases in the ordinary course of business, and also include
trucks acquired from repossessions, through acquisitions of used trucks in trades related to new truck sales and trucks
returned from residual value guarantees (RVGs).
The Company recognized losses on used trucks, excluding repossessions, of $57.5 million in 2019 compared to $35.4
million in 2018, including losses on multiple unit transactions of $19.1 million in 2019 compared to $20.2 million in
2018. Used truck losses related to repossessions, which are recognized as credit losses, were not significant for 2019 or
2018.
The major factors for the changes in interest and fees, interest and other borrowing expenses and finance margin
between 2019 and 2018 are outlined below:
($ in millions)
2018
Increase (decrease)
Average finance receivables
Average debt balances
Yields
Borrowing rates
Currency translation and other
Total increase
2019
interest
and fees
interest and other
borrowing expenses
finance
margin
$
497.7
$
186.9
$
310.8
75.4
16.6
(6.7)
85.3
583.0
$
31.5
14.0
(1.9)
43.6
230.5
$
75.4
(31.5)
16.6
(14.0)
(4.8)
41.7
352.5
$
• Average finance receivables increased $1,452.5 million (excluding foreign exchange effects) in 2019 as a result of
retail portfolio new business volume exceeding collections and higher dealer wholesale balances.
• Average debt balances increased $1,456.1 million (excluding foreign exchange effects) in 2019. The higher average
debt balances reflect funding for a higher average earning assets portfolio, which includes loans, finance leases,
wholesale receivables and equipment on operating lease.
• Higher portfolio yields (5.2% in 2019 compared to 5.0% in 2018) increased interest and fees by $16.6 million.
The higher portfolio yields were primarily due to higher market rates in North America.
• Higher borrowing rates (2.2% in 2019 compared to 2.0% in 2018) were primarily due to higher debt market rates
in North America.
• The currency translation effects reflect a decrease in the value of foreign currencies relative to the U.S. dollar,
primarily the euro, the Australian and Canadian dollars and the British pound.
The following table summarizes operating lease, rental and other revenues and depreciation and other expenses:
($ in millions)
Year Ended December 31,
Operating lease and rental revenues
Used truck sales and other
Operating lease, rental and other revenues
Depreciation of operating lease equipment
Vehicle operating expenses
Cost of used truck sales and other
Depreciation and other expenses
2019
831.0
66.0
897.0
605.4
143.8
49.0
798.2
$
$
$
$
2018
826.0
33.4
859.4
588.2
121.5
18.3
728.0
$
$
$
$
The major factors for the changes in operating lease, rental and other revenues, depreciation and other expenses and
lease margin between 2019 and 2018 are outlined below:
35
($ in millions)
2018
Increase (decrease)
Used truck sales
Results on returned lease assets
Average operating lease assets
Revenue and cost per asset
Currency translation and other
Total increase (decrease)
2019
operating lease, rental
and other revenues
depreciation and
other expenses
lease
margin
$
859.4
$
728.0
$
131.4
32.3
34.7
(11.2)
(18.2)
37.6
897.0
$
31.1
28.9
30.0
(.9)
(18.9)
70.2
798.2
$
1.2
(28.9)
4.7
(10.3)
.7
(32.6)
98.8
$
• A higher sales volume of used trucks received on trade increased operating lease, rental and other revenues by
$32.3 million and increased depreciation and other expenses by $31.1 million.
• Results on returned lease assets increased depreciation and other expenses by $28.9 million primarily due to
higher losses on sales of returned lease units in Europe.
• Average operating lease assets increased $173.2 million (excluding foreign exchange effects), which increased
revenues by $34.7 million and related depreciation and other expenses by $30.0 million.
• Revenue per asset decreased $11.2 million primarily due to lower rental income and lower fleet utilization. Cost
per asset decreased $.9 million due to lower depreciation expense and lower vehicle related expenses, partially
offset by higher operating lease impairments in Europe.
• The currency translation effects reflect a decrease in the value of foreign currencies relative to the U.S. dollar,
primarily the euro.
Financial Services SG&A expense increased to $137.0 million in 2019 from $119.8 million in 2018. The increase was
due to higher salaries and related expenses to support portfolio growth and the adoption of the new lease accounting
standard under which $12.0 million of certain initial direct costs were immediately expensed. In prior years, these
costs were capitalized and amortized to expense over the lease term. As a percentage of revenues, Financial Services
SG&A increased to 9.3% in 2019 from 8.8% in 2018.
The following table summarizes the provision for losses on receivables and net charge-offs:
($ in millions)
2019
2018
U.S. and Canada
Europe
Mexico, Australia and other
provision for
losses on
receivables
$
$
13.5
(3.2)
5.1
15.4
net
charge-offs
14.0
$
(.8)
4.2
17.4
$
provision for
losses on
receivables
$
$
10.4
(.8)
6.9
16.5
net
charge-offs
6.9
$
5.9
4.4
17.2
$
The provision for losses on receivables was $15.4 million in 2019 compared to $16.5 million in 2018, reflecting
continued good portfolio performance. The decrease in provision for losses was primarily driven by higher recoveries
on charged-off accounts in Europe.
36
The Company modifies loans and finance leases as a normal part of its Financial Services operations. The Company
may modify loans and finance leases for commercial reasons or for credit reasons. Modifications for commercial
reasons are changes to contract terms for customers that are not considered to be in financial difficulty. Insignificant
delays are modifications extending terms up to three months for customers experiencing some short-term financial
stress, but not considered to be in financial difficulty. Modifications for credit reasons are changes to contract terms
for customers considered to be in financial difficulty. The Company’s modifications typically result in granting more
time to pay the contractual amounts owed and charging a fee and interest for the term of the modification. When
considering whether to modify customer accounts for credit reasons, the Company evaluates the creditworthiness of
the customers and modifies those accounts that the Company considers likely to perform under the modified terms.
When the Company modifies a loan or finance lease for credit reasons and grants a concession, the modification is
classified as a troubled debt restructuring (TDR).
The post-modification balance of accounts modified during the years ended December 31, 2019 and 2018 are
summarized below:
($ in millions)
2019
2018
Commercial
Insignificant delay
Credit - no concession
Credit - TDR
recorded
investment
% of total
portfolio*
recorded
investment
% of total
portfolio*
$ 316.4
83.2
23.3
2.5
$ 425.4
3.5%
.9%
.3%
4.7%
$ 213.6
50.3
52.2
13.1
$ 329.2
2.5%
.6%
.6%
.2%
3.9%
* Recorded investment immediately after modification as a percentage of the year-end retail portfolio balance.
In 2019, total modification activity increased compared to 2018 due to higher modifications for commercial reasons
and insignificant delay, partially offset by lower modifications for credit - no concession and credit - TDR. The
increase in modifications for commercial reasons primarily reflects higher volumes of refinancing. The increase in
modifications for insignificant delay reflects more fleet customers requesting payment relief for up to three months.
The decrease in modifications for credit - no concession is primarily due to lower volumes of refinancing in Europe
for customers in financial difficulty. Credit - TDR modifications decreased to $2.5 million in 2019 from $13.1 million
in 2018 as there were no large fleet modifications in 2019 compared to modifications for two fleet customers in 2018.
The following table summarizes the Company’s 30+ days past due accounts:
At December 31,
Percentage of retail loan and lease accounts 30+ days past due:
U.S. and Canada
Europe
Mexico, Australia and other
Worldwide
2019
.4%
.7%
2.0%
.7%
2018
.1%
.5%
1.6%
.4%
Accounts 30+ days past due increased slightly to .7% at December 31, 2019 from .4% at December 31, 2018, and
remain at low levels. The Company continues to focus on maintaining low past due balances.
When the Company modifies a 30+ days past due account, the customer is then generally considered current under
the revised contractual terms. The Company modified $1.7 million and $7.2 million of accounts worldwide during
the fourth quarter of 2019 and the fourth quarter of 2018, respectively, which were 30+ days past due and became
current at the time of modification. Had these accounts not been modified and continued to not make payments, the
pro forma percentage of retail loan and lease accounts 30+ days past due would have been as follows:
37
At December 31,
Pro forma percentage of retail loan and lease accounts 30+ days past due:
U.S. and Canada
Europe
Mexico, Australia and other
Worldwide
2019
.4%
.7%
2.1%
.7%
2018
.2%
.5%
1.8%
.5%
Modifications of accounts in prior quarters that were more than 30 days past due at the time of modification are
included in past dues if they were not performing under the modified terms at December 31, 2019 and 2018. The
effect on the allowance for credit losses from such modifications was not significant at December 31, 2019 and 2018.
The Company’s 2019 and 2018 annualized pre-tax return on average assets for Financial Services was 2.0% and 2.2%,
respectively.
Other
Other includes the winch business as well as sales, income and expenses not attributable to a reportable segment. Other
also includes non-service cost components of pension expense and a portion of corporate expense. Other sales represent
less than 1% of consolidated net sales and revenues for 2019 and 2018. Other SG&A increased to $84.0 million in 2019
from $70.4 million in 2018 primarily due to higher compensation costs.
Other (loss) income before tax was $(17.7) million in 2019 compared to $2.7 million in 2018. The loss in 2019
compared to income in 2018 was primarily due to higher compensation costs, lower results from the winch business
and higher expected costs to resolve certain environmental matters.
Investment income increased to $82.3 million in 2019 from $60.9 million in 2018, primarily due to higher average
portfolio balances and higher yields on U.S. investments due to higher market interest rates.
Income Taxes
In 2019, the effective tax rate was 23.0% compared to 21.9% in 2018. The Company’s effective tax rate for 2018
benefitted from a one-time reduction in tax liability related to extended warranty contracts.
($ in millions)
Year Ended December 31,
Domestic income before taxes
Foreign income before taxes
Total income before taxes
Domestic pre-tax return on revenues
Foreign pre-tax return on revenues
Total pre-tax return on revenues
2019
$ 2,201.1
898.1
$ 3,099.2
2018
$ 1,775.2
1,035.0
$ 2,810.2
14.5%
8.6%
12.1%
13.4%
10.1%
12.0%
In 2019, domestic income before income taxes and pre-tax return on revenues improved primarily due to higher
revenues from truck operations. The decrease in foreign income before income taxes and pre-tax return on revenues
was primarily due to lower truck and finance results in Europe and lower truck volumes in Australia.
38
L I Q U I D I T Y A N D C A P I TA L R E S O U R C E S :
($ in millions)
At December 31,
Cash and cash equivalents
Marketable debt securities
2019
$ 4,175.1
1,162.1
$ 5,337.2
2018
$ 3,435.9
1,020.4
$ 4,456.3
The Company’s total cash and marketable debt securities at December 31, 2019 increased $880.9 million from the
balances at December 31, 2018, primarily due to an increase in cash and cash equivalents.
The change in cash and cash equivalents is summarized below:
($ in millions)
Year Ended December 31,
Operating activities:
Net income
Net income items not affecting cash
Pension contributions
Changes in operating assets and liabilities, net
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by financing activities
Effect of exchange rate changes on cash
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
2019
2018
$ 2,387.9
1,190.1
(35.7)
(682.0)
2,860.3
(2,207.4)
83.4
2.9
739.2
3,435.9
$ 4,175.1
$ 2,195.1
1,123.2
(88.9)
(237.1)
2,992.3
(1,930.7)
71.1
(61.5)
1,071.2
2,364.7
$ 3,435.9
Operating activities: Cash provided by operations decreased by $132.0 million to $2.86 billion in 2019 from $2.99
billion in 2018. The decrease in operating cash flows reflects lower cash inflows of $556.5 million from accounts
payable and accrued expenses as payments for goods and services exceeded purchases by $27.6 million in 2019
compared to purchases of goods and services exceeding payments by $528.9 million in 2018. Additionally, lower
operating cash flows reflect a reduction in liabilities for RVGs and deferred revenues of $454.7 million, primarily due
to a lower volume of new RVG contracts accounted for as operating leases in 2019 compared to 2018. The lower cash
inflows were partially offset by higher cash inflow of $357.3 million from inventories as there were $24.6 million in
net inventory reductions in 2019 versus $332.7 million in net purchases in 2018. There was a $226.8 million increase
from accounts receivable as sales of goods and services exceeding cash receipts were lower in 2019 compared to 2018.
In addition, there was a higher net income of $192.8 million and an increase of $140.3 million from income taxes,
primarily due to lower tax payments in 2019 compared to 2018.
Investing activities: Cash used in investing activities increased by $276.7 million to $2.21 billion in 2019 from $1.93
billion in 2018. Higher net cash used in investing activities reflects $450.7 million for marketable debt securities as
there were $135.1 million in net purchases of marketable debt securities in 2019 compared to $315.6 million in net
proceeds from sales of marketable debt securities in 2018. Payments for property, plant and equipment increased by
$116.4 million. This was partially offset by lower net originations from retail loans and finance leases of $251.9
million and fewer acquisitions of equipment on operating leases of $97.9 million.
Financing activities: Cash provided by financing activities was $83.4 million in 2019, $12.3 million higher than the
$71.1 million provided in 2018. In 2019, the Company issued $2.50 billion of term debt, repaid term debt of $1.79
billion and increased its outstanding commercial paper and short-term bank loans by $557.1 million. In 2018, the
Company issued $2.34 billion of term debt, repaid term debt of $1.76 billion and increased its outstanding
commercial paper and short-term bank loans by $625.9 million. This resulted in cash provided by borrowing
activities of $1.27 billion in 2019, $60.9 million higher than the cash provided by borrowing activities of $1.21 billion
in 2018. The Company paid $1.14 billion in dividends in 2019, $334.3 million higher than the $804.3 million paid in
2018 due primarily to a higher extra dividend paid in January 2019. In addition, the Company repurchased 1.7
million shares of common stock for $110.2 million in 2019 compared to the purchase of 5.8 million shares for $354.4
million in 2018.
39
Credit Lines and Other:
The Company has line of credit arrangements of $3.58 billion, of which $3.27 billion were unused at December 31,
2019. Included in these arrangements are $3.00 billion of committed bank facilities, of which $1.00 billion expires in
June 2020, $1.00 billion expires in June 2023 and $1.00 billion expires in June 2024. The Company intends to extend or
replace these credit facilities on or before expiration to maintain facilities of similar amounts and duration. These credit
facilities are maintained primarily to provide backup liquidity for commercial paper borrowings and maturing medium-
term notes. There were no borrowings under the committed bank facilities for the year ended December 31, 2019.
On July 9, 2018, PACCAR’s Board of Directors approved the repurchase of up to $300.0 million of the Company’s
outstanding common stock, and on December 4, 2018, approved a plan to repurchase an additional $500.0 million of
common stock upon completion of the prior plan. During the second quarter of 2019, the Company completed the
repurchase of $300.0 million of the Company’s common stock under the authorization approved on July 9, 2018. As
of December 31, 2019, the Company has repurchased $69.5 million of shares under the December 4, 2018
authorization.
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.
Over the past decade, the Company’s combined investments in worldwide capital projects and R&D totaled $6.77
billion, and have significantly increased the operating capacity and efficiency of its facilities and enhanced the quality
and operating efficiency of the Company’s premium products.
Capital investments in 2020 are expected to be $625 to $675 million, and R&D is expected to be $310 to $340
million. The Company is investing for long-term growth in aerodynamic truck models, integrated powertrains
including diesel, electric, hybrid and hydrogen fuel cell technologies, advanced driver assistance systems, digital
services and next-generation manufacturing and distribution capabilities.
The Company conducts business in certain countries which have been experiencing or may experience significant
financial stress, fiscal or political strain and are subject to the corresponding potential for default. The Company
routinely monitors its financial exposure to global financial conditions, global counterparties and operating
environments. As of December 31, 2019, the Company’s exposures in such countries were insignificant.
Financial Services
The Company funds its financial services activities primarily from collections on existing finance receivables and
borrowings in the capital markets. The primary sources of borrowings in the capital markets are commercial paper
and medium-term notes issued in the public markets and, to a lesser extent, bank loans. An additional source of
funds is loans from other PACCAR companies.
In November 2018, the Company’s U.S. finance subsidiary, PACCAR Financial Corp. (PFC), filed a shelf registration
under the Securities Act of 1933. The total amount of medium-term notes outstanding for PFC as of December 31,
2019 was $5.55 billion. In February 2020, PFC issued $300.0 million of medium-term notes under this registration.
The registration expires in November 2021 and does not limit the principal amount of debt securities that may be
issued during that period.
40
As of December 31, 2019, the Company’s European finance subsidiary, PACCAR Financial Europe, had €1.35 billion
available for issuance under a €2.50 billion medium-term note program listed on the Professional Securities Market
of the London Stock Exchange. This program replaced an expiring program in the second quarter of 2019 and is
renewable annually through the filing of a new listing.
In April 2016, PACCAR Financial Mexico registered a 10.00 billion peso medium-term note and commercial paper
program with the Comision Nacional Bancaria y de Valores. The registration expires in April 2021 and limits the
amount of commercial paper (up to one year) to 5.00 billion pesos. At December 31, 2019, 6.80 billion pesos were
available for issuance.
In August 2018, the Company’s Australian subsidiary, PACCAR Financial Pty. Ltd. (PFPL), registered a medium-term
note program. The program does not limit the principal amount of debt securities that may be issued under the
program. The total amount of medium-term notes outstanding for PFPL as of December 31, 2019 was 300.0 million
Australian dollars.
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.
Commitments
The following summarizes the Company’s contractual cash commitments at December 31, 2019:
($ in millions)
Borrowings*
Purchase obligations
Interest on debt**
Lease liabilities
Other obligations
within
1 year
$ 5,631.3
83.8
156.2
15.7
38.7
$ 5,925.7
maturity
1-3 years
3-5 years
more than
5 years
$ 4,581.1
123.6
155.5
17.9
3.3
$ 4,881.4
$ 1,030.8
.8
19.8
4.2
1.2
$ 1,056.8
$
$
2.5
2.5
total
$ 11,243.2
208.2
331.5
40.3
43.2
$ 11,866.4
* Commercial paper included in borrowings is at par value.
** Interest on floating-rate debt is based on the applicable market rates at December 31, 2019.
Total cash commitments for borrowings and interest on term debt were $11.57 billion and were related to the
Financial Services segment. As described in Note J of the consolidated financial statements, borrowings consist
primarily of term notes and commercial paper issued by the Financial Services segment. The Company expects to
fund its maturing Financial Services debt obligations principally from funds provided by collections from customers
on loans and lease contracts, as well as from the proceeds of commercial paper and medium-term note borrowings.
Purchase obligations are the Company’s contractual commitments to acquire future production inventory and capital
equipment. Other obligations primarily include commitments to purchase energy.
The Company’s other commitments include the following at December 31, 2019:
41
($ in millions)
Loan and lease commitments
Residual value guarantees
Letters of credit
within
1 year
$
885.8
445.9
9.5
$ 1,341.2
commitment expiration
1-3 years
3-5 years
$
$
730.2
.1
730.3
$
$
131.3
.3
131.6
more than
5 years
$
$
26.7
1.4
28.1
total
$
885.8
1,334.1
11.3
$ 2,231.2
Loan and lease commitments are for funding new retail loan and lease contracts. Residual value guarantees represent
the Company’s commitment to acquire trucks at a guaranteed value if the customer decides to return the truck at a
specified date in the future.
I M PA C T O F E N V I R O N M E N TA L M AT T E R S :
The Company, its competitors and industry in general are subject to various domestic and foreign requirements
relating to the environment. The Company believes its policies, practices and procedures are designed to prevent
unreasonable risk of environmental damage and that its handling, use and disposal of hazardous or toxic substances
have been in accordance with environmental laws and regulations in effect at the time such use and disposal occurred.
The Company is involved in various stages of investigations and cleanup actions in different countries related to
environmental matters. In certain of these matters, the Company has been designated as a “potentially responsible
party” by domestic and foreign environmental agencies. The Company has accrued the estimated costs to investigate
and complete cleanup actions where it is probable that the Company will incur such costs in the future. Expenditures
related to environmental activities in the years ended December 31, 2019 and 2018 were $1.3 million and $1.2 million,
respectively. While the timing and amount of the ultimate costs associated with future environmental cleanup cannot
be determined, management expects that these matters will not have a significant effect on the Company’s
consolidated cash flow, liquidity or financial condition.
C R I T I C A L A C C O U N T I N G P O L I C I E S :
The Company’s significant accounting policies are disclosed in Note A of the consolidated financial statements. In the
preparation of the Company’s financial statements, in accordance with U.S. generally accepted accounting principles,
management uses estimates and makes judgments and assumptions that affect asset and liability values and the
amounts reported as income and expense during the periods presented. The following are accounting policies which,
in the opinion of management, are particularly sensitive and which, if actual results are different from estimates used
by management, may have a material impact on the financial statements.
Operating Leases
Trucks sold pursuant to agreements accounted for as operating leases are disclosed in Note F of the consolidated
financial statements. In determining its estimate of the residual value of such vehicles, the Company considers the
length of the lease term, the truck model, the expected usage of the truck and anticipated market demand. Operating
lease terms generally range from three to five years. The resulting residual values on operating leases generally range
between 30% and 70% of the original equipment cost. If the sales price of a truck at the end of the term of the
agreement differs from the Company’s estimated residual value, a gain or loss will result.
Future market conditions, changes in government regulations and other factors outside the Company’s control could
impact the ultimate sales price of trucks returned under these contracts. Residual values are reviewed regularly and
adjusted if market conditions warrant. A decrease in the estimated equipment residual values would increase annual
depreciation expense over the remaining lease term.
During 2019 and 2018, market values on equipment returning upon operating lease maturity were generally lower
than the residual values on the equipment, resulting in an increase in depreciation expense of $109.0 million and
$45.7 million, respectively.
42
At December 31, 2019, the aggregate residual value of equipment on operating leases in the Financial Services
segment and residual value guarantee on trucks accounted for as operating leases in the Truck segment was $2.36
billion. A 10% decrease in used truck values worldwide, if expected to persist over the remaining maturities of the
Company’s operating leases, would reduce residual value estimates and result in the Company recording an average
of approximately $67 million of additional depreciation per year.
Allowance for Credit Losses
The allowance for credit losses related to the Company’s loans and finance leases is disclosed in Note E of the
consolidated financial statements. The Company has developed a systematic methodology for determining the
allowance for credit losses for its two portfolio segments, retail and wholesale. The retail segment consists of retail
loans and finance leases, net of unearned interest. The wholesale segment consists of truck inventory financing loans
to dealers that are collateralized by trucks and other collateral. The wholesale segment generally has less risk than the
retail segment. Wholesale receivables generally are shorter in duration than retail receivables, and the Company
requires periodic reporting of the wholesale dealer’s financial condition, conducts periodic audits of the trucks being
financed and in many cases obtains guarantees or other security such as dealership assets. In determining the
allowance for credit losses, retail loans and finance leases are evaluated together since they relate to a similar
customer base, their contractual terms require regular payment of principal and interest, generally over three to five
years, and they are secured by the same type of collateral. The allowance for credit losses consists of both specific and
general reserves.
The Company individually evaluates certain finance receivables for impairment. Finance receivables that are
evaluated individually for impairment consist of all wholesale accounts and certain large retail accounts with past due
balances or otherwise determined to be at a higher risk of loss. A finance receivable is impaired if it is considered
probable the Company will be unable to collect all contractual interest and principal payments as scheduled. In
addition, all retail loans and leases which have been classified as TDRs and all customer accounts over 90 days past
due are considered impaired. Generally, impaired accounts are on non-accrual status. Impaired accounts classified as
TDRs which have been performing for 90 consecutive days are placed on accrual status if it is deemed probable that
the Company will collect all principal and interest payments.
Impaired receivables are generally considered collateral dependent. Large balance retail and all wholesale impaired
receivables are individually evaluated to determine the appropriate reserve for losses. The determination of reserves
for large balance impaired receivables considers the fair value of the associated collateral. When the underlying
collateral fair value exceeds the Company’s recorded investment, no reserve is recorded. Small balance impaired
receivables with similar risk characteristics are evaluated as a separate pool to determine the appropriate reserve for
losses using the historical loss information discussed below.
The Company evaluates finance receivables that are not individually impaired on a collective basis and determines
the general allowance for credit losses for both retail and wholesale receivables based on historical loss information,
using past due account data and current market conditions. Information used includes assumptions regarding the
likelihood of collecting current and past due accounts, repossession rates, the recovery rate on the underlying
collateral based on used truck values and other pledged collateral or recourse. The Company has developed a range
of loss estimates for each of its country portfolios based on historical experience, taking into account loss frequency
and severity in both strong and weak truck market conditions. A projection is made of the range of estimated credit
losses inherent in the portfolio from which an amount is determined as probable based on current market conditions
and other factors impacting the creditworthiness of the Company’s borrowers and their ability to repay. After
determining the appropriate level of the allowance for credit losses, a provision for losses on finance receivables is
charged to income as necessary to reflect management’s estimate of incurred credit losses, net of recoveries, inherent
in the portfolio.
The adequacy of the allowance is evaluated quarterly based on the most recent past due account information and
current market conditions. As accounts become past due, the likelihood that they will not be fully collected increases.
The Company’s experience indicates the probability of not fully collecting past due accounts ranges between 30%
and 70%. Over the past three years, the Company’s year-end 30+ days past due accounts have ranged between .4%
and .7% of loan and lease receivables. Historically, a 100 basis point increase in the 30+ days past due percentage has
resulted in an increase in credit losses of 2 to 35 basis points of receivables. At December 31, 2019, 30+ days past
dues were .7%. If past dues were 100 basis points higher or 1.7% as of December 31, 2019, the Company’s estimate
of credit losses would likely have increased by a range of $2 to $32 million depending on the extent of the past dues,
the estimated value of the collateral as compared to amounts owed and general economic factors.
43
Product Warranty
Product warranty is disclosed in Note I of the consolidated financial statements. The expenses related to product
warranty are estimated and recorded at the time products are sold based on historical and current data and
reasonable expectations for the future regarding the frequency and cost of warranty claims, net of recoveries.
Management takes actions to minimize warranty costs through quality-improvement programs; however, actual claim
costs incurred could materially differ from the estimated amounts and require adjustments to the reserve. Historically
those adjustments have not been material. Over the past two years, warranty expense as a percentage of Truck, Parts
and Other net sales and revenues has ranged between 1.6% and 1.7%. If the 2019 warranty expense had been .2%
higher as a percentage of net sales and revenues in 2019, warranty expense would have increased by approximately
$48 million.
F O RWA R D - L O O K I N G S TAT E M E N T S :
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; labor disruptions; shortages of commercial truck drivers;
increased warranty costs; litigation, including EC settlement-related claims; or legislative and governmental regulations.
A more detailed description of these and other risks is included under the heading Part 1, Item 1A, “Risk Factors” and
Item 3, “Legal Proceedings” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
C O N S O L I D A T E D S T A T E M E N T S O F I N C O M E
44
Year Ended December 31,
TRUCK, PARTS AND OTHER:
Net sales and revenues
Cost of sales and revenues
Research and development
Selling, general and administrative
Interest and other (income), net
Truck, Parts and Other Income Before Income Taxes
FINANCIAL SERVICES:
Interest and fees
Operating lease, rental and other revenues
Revenues
Interest and other borrowing expenses
Depreciation and other expenses
Selling, general and administrative
Provision for losses on receivables
Financial Services Income Before Income Taxes
Investment income
Total Income Before Income Taxes
Income taxes
Net Income
Net Income Per Share
Basic
Diluted
Weighted Average Number of Common Shares Outstanding
Basic
Diluted
See notes to consolidated financial statements.
2019
2018
2017
(millions, except per share data)
$ 24,119.7
$ 22,138.6
$ 18,187.5
20,555.6
326.6
561.5
(42.0)
21,401.7
2,718.0
583.0
897.0
1,480.0
230.5
798.2
137.0
15.4
1,181.1
298.9
18,925.0
306.1
524.9
(60.8)
19,695.2
2,443.4
497.7
859.4
1,357.1
186.9
728.0
119.8
16.5
1,051.2
305.9
15,628.9
264.7
464.0
(46.4)
16,311.2
1,876.3
431.1
837.8
1,268.9
149.6
727.5
107.8
22.3
1,007.2
261.7
82.3
3,099.2
711.3
$ 2,387.9
60.9
2,810.2
615.1
$ 2,195.1
35.3
2,173.3
498.1
$ 1,675.2
$
$
6.88
6.87
$
$
6.25
6.24
$
$
4.76
4.75
346.9
347.5
351.0
351.8
351.9
352.9
C O N S O L I D A T E D S T A T E M E N T S O F C O M P R E H E N S I V E I N C O M E
Year Ended December 31,
Net income
Other comprehensive income:
Unrealized (losses) gains on derivative contracts
Net (loss) gain arising during the period
Tax effect
Reclassification adjustment
Tax effect
Unrealized gains (losses) on marketable debt securities
Net holding gain (loss)
Tax effect
Reclassification adjustment
Tax effect
Pension plans
Net (loss) gain arising during the period
Tax effect
Reclassification adjustment
Tax effect
Foreign currency translation gain (loss)
Net other comprehensive (loss) income
Comprehensive Income
See notes to consolidated financial statements.
2019
2018
(millions)
2017
45
$ 2,387.9
$ 2,195.1
$ 1,675.2
(76.1)
19.1
51.7
(12.0)
(17.3)
11.6
(2.9)
(.4)
.1
8.4
121.6
(30.7)
(121.5)
31.0
.4
.2
(.1)
(.2)
.1
(125.5)
33.9
133.4
(36.3)
5.5
(1.5)
.4
(.6)
.2
(1.5)
(74.8)
18.0
21.9
(5.0)
(39.9)
47.2
(1.6)
$ 2,386.3
(114.0)
27.2
36.7
(8.7)
(58.8)
(213.3)
(271.7)
$ 1,923.4
37.1
(16.7)
26.6
(8.5)
38.5
292.0
334.5
$ 2,009.7
C O N S O L I D A T E D B A L A N C E S H E E T S
46
A S S E T S
December 31,
TRUCK, PARTS AND OTHER:
Current Assets
Cash and cash equivalents
Trade and other receivables, net
Marketable debt securities
Inventories, net
Other current assets
Total Truck, Parts and Other Current Assets
Equipment on operating leases, net
Property, plant and equipment, net
Other noncurrent assets, net
Total Truck, Parts and Other Assets
FINANCIAL SERVICES:
Cash and cash equivalents
Finance and other receivables, net
Equipment on operating leases, net
Other assets
Total Financial Services Assets
2019
2018
(millions)
$ 4,007.3
1,306.1
1,162.1
1,153.2
388.0
8,016.7
545.5
2,883.8
843.7
12,289.7
167.8
12,086.0
3,102.6
715.0
16,071.4
$ 28,361.1
$ 3,279.2
1,314.4
1,020.4
1,184.7
364.7
7,163.4
786.6
2,480.9
651.9
11,082.8
156.7
10,840.8
2,855.0
547.1
14,399.6
$ 25,482.4
C O N S O L I D A T E D B A L A N C E S H E E T S
L I A B I L I T I E S A N D S T O C K H O L D E R S ’ E Q U I T Y
December 31,
TRUCK, PARTS AND OTHER:
Current Liabilities
Accounts payable, accrued expenses and other
Dividend payable
Total Truck, Parts and Other Current Liabilities
Residual value guarantees and deferred revenues
Other liabilities
Total Truck, Parts and Other Liabilities
FINANCIAL SERVICES:
Accounts payable, accrued expenses and other
Commercial paper and bank loans
Term notes
Deferred taxes and other liabilities
Total Financial Services Liabilities
STOCKHOLDERS’ EQUITY:
Preferred stock, no par value - authorized 1.0 million shares, none issued
Common stock, $1 par value - authorized 1.2 billion shares;
issued 346.3 million and 346.6 million shares
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total Stockholders’ Equity
See notes to consolidated financial statements.
2019
2018
(millions)
47
$ 3,194.2
796.5
3,990.7
587.3
1,435.1
6,013.1
629.0
4,110.2
7,112.5
790.2
12,641.9
$ 3,027.7
695.1
3,722.8
842.4
1,145.7
5,710.9
523.2
3,540.8
6,409.7
704.9
11,178.6
346.3
61.4
10,398.5
(1,100.1)
9,706.1
$ 28,361.1
346.6
69.4
9,275.4
(1,098.5)
8,592.9
$ 25,482.4
C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S
48
Year Ended December 31,
OPERATING ACTIVITIES:
Net Income
Adjustments to reconcile net income to cash provided by operations:
Depreciation and amortization:
Property, plant and equipment
Equipment on operating leases and other
Provision for losses on financial services receivables
Deferred taxes
Other, net
Pension contributions
Change in operating assets and liabilities:
(Increase) decrease in assets other than cash and cash equivalents:
Receivables:
Trade and other receivables
Wholesale receivables on new trucks
Inventories
Other assets, net
(Decrease) increase in liabilities:
Accounts payable and accrued expenses
Residual value guarantees and deferred revenues
Other liabilities, net
Net Cash Provided by Operating Activities
INVESTING ACTIVITIES:
Originations of retail loans and finance leases
Collections on retail loans and finance leases
Net (increase) decrease in wholesale receivables on used equipment
Purchases of marketable debt securities
Proceeds from sales and maturities of marketable debt securities
Payments for property, plant and equipment
Acquisitions of equipment for operating leases
Proceeds from asset disposals
Other, net
Net Cash Used in Investing Activities
2019
2018
(millions)
2017
$ 2,387.9
$ 2,195.1
$ 1,675.2
322.2
755.1
15.4
70.8
26.6
(35.7)
(72.3)
(520.2)
24.6
(365.4)
(27.6)
(179.7)
458.6
2,860.3
(4,081.8)
3,388.8
(47.7)
(850.6)
715.5
(574.0)
(1,396.8)
638.1
1.1
(2,207.4)
337.6
716.5
16.5
17.5
35.1
(88.9)
(299.1)
(512.3)
(332.7)
(187.0)
528.9
275.0
290.1
2,992.3
(3,858.9)
2,914.0
(.9)
(615.9)
931.5
(457.6)
(1,494.7)
653.7
(1.9)
(1,930.7)
321.4
786.1
22.3
(173.9)
43.6
(70.6)
(193.7)
(272.0)
(149.9)
189.8
333.6
166.3
37.6
2,715.8
(3,116.8)
2,713.7
5.2
(970.3)
779.5
(423.4)
(1,423.2)
470.7
(1,964.6)
FINANCING ACTIVITIES:
Payments of cash dividends
Purchases of treasury stock
Proceeds from stock compensation transactions
Net increase in commercial paper and short-term bank loans and other
Proceeds from term debt
Payments on term debt
Net Cash Provided by (Used in) Financing Activities
Effect of exchange rate changes on cash
Net Increase in Cash and Cash Equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
See notes to consolidated financial statements.
(1,138.6)
(110.2)
60.8
557.1
2,504.3
(1,790.0)
83.4
2.9
739.2
3,435.9
$ 4,175.1
(804.3)
(354.4)
19.3
625.9
2,339.9
(1,755.3)
71.1
(61.5)
1,071.2
2,364.7
$ 3,435.9
(558.3)
39.3
352.1
1,670.2
(1,897.1)
(393.8)
91.6
449.0
1,915.7
$ 2,364.7
C O N S O L I D A T E D S T A T E M E N T S O F S T O C K H O L D E R S ’ E Q U I T Y
December 31,
COMMON STOCK, $1 PAR VALUE:
Balance at beginning of year
Treasury stock retirement
Stock compensation
Balance at end of year
ADDITIONAL PAID-IN CAPITAL:
Balance at beginning of year
Treasury stock retirement
Stock compensation and tax benefit
Balance at end of year
TREASURY STOCK, AT COST:
Balance at beginning of year
Purchases, shares: 2019 - 1.68; 2018 - 5.85; 2017 - nil
Retirements
Balance at end of year
RETAINED EARNINGS:
Balance at beginning of year
Net income
Cash dividends declared on common stock,
per share: 2019 - $3.58; 2018 - $3.09; 2017 - $2.19
Treasury stock retirement
Cumulative effect of change in accounting principles
Balance at end of year
ACCUMULATED OTHER COMPREHENSIVE LOSS:
Balance at beginning of year
Other comprehensive (loss) income
Reclassifications to retained earnings in accordance
with ASU 2018-02
Balance at end of year
Total Stockholders’ Equity
See notes to consolidated financial statements.
2019
2018
2017
49
(millions, except per share data)
$
346.6
(1.7)
1.4
346.3
69.4
(85.7)
77.7
61.4
$
351.8
(5.8)
.6
346.6
123.2
(88.3)
34.5
69.4
$
350.7
1.1
351.8
70.1
53.1
123.2
(110.2)
110.2
(354.4)
354.4
9,275.4
2,387.9
(1,242.0)
(22.8)
10,398.5
8,369.1
2,195.1
(1,078.8)
(260.3)
50.3
9,275.4
7,484.9
1,675.2
(771.1)
(19.9)
8,369.1
(1,098.5)
(1.6)
(793.6)
(271.7)
(1,128.1)
334.5
(1,100.1)
$ 9,706.1
(33.2)
(1,098.5)
$ 8,592.9
(793.6)
$ 8,050.5
50
A .
S I G N I F I C A N T A C C O U N T I N G P O L I C I E S
Description of Operations: PACCAR Inc (the Company or PACCAR) is a multinational company operating in three
principal segments: (1) the Truck segment includes the design and manufacture of high-quality, light-, medium- and
heavy-duty commercial trucks; (2) the Parts segment includes the distribution of aftermarket parts for trucks and
related commercial vehicles; and (3) the Financial Services segment (PFS) includes finance and leasing products and
services provided to customers and dealers. PACCAR’s finance and leasing activities are principally related to PACCAR
products and associated equipment. PACCAR’s sales and revenues are derived primarily from North America and
Europe. The Company also operates in Australia and Brasil and sells trucks and parts to customers in Asia, Africa, the
Middle East and South America.
Principles of Consolidation: The consolidated financial statements include the accounts of the Company and its
wholly owned domestic and foreign subsidiaries. All significant intercompany accounts and transactions are eliminated
in consolidation.
Use of Estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting
principles requires management to make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those estimates.
Revenue Recognition:
Truck, Parts and Other: The Company enters into sales contracts with customers associated with purchases of the
Company’s products and services including trucks, parts, product support, and other related services. Generally, the
Company recognizes revenue for the amount of consideration it will receive for delivering a product or service to a
customer. Revenue is recognized when the customer obtains control of the product or receives benefits of the service.
The Company excludes sales taxes, value added taxes and other related taxes assessed by government agencies from
revenue. There are no significant financing components included in product or services revenue since generally
customers pay shortly after the products or services are transferred. In the Truck and Parts segment, when the Company
grants extended payment terms on selected receivables and charges interest, interest income is recognized when earned.
The Company recognizes truck and parts sales as revenue 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 part 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. As a practical expedient, the Company is not disclosing truck order backlog, as a
significant majority of the backlog has a duration of less than one year.
Truck sales with RVGs that allow customers the option to return their truck are accounted for as a sale when the
customer does not have an economic incentive to return the truck to the Company, or as an operating lease when the
customer does have an economic incentive to return the truck. The estimate of customers’ economic incentive to return
the trucks is based on an analysis of historical guaranteed buyback value and estimated market value. When truck sales
with RVGs are accounted for as a sale, revenue is recognized when the truck is transferred to the customer less an
amount for expected returns. Expected return rates are estimated by using a historical weighted average return rate over
a five-year period. The estimated value of the truck assets to be returned and the related return liabilities at December 31,
2019 were $473.0 and $503.4, respectively, compared to $319.8 and $329.3 at December 31, 2018, respectively. The
Company’s total commitment to acquire trucks at a guaranteed value for contracts accounted for as a sale was $894.5 at
December 31, 2019.
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 I, Product
Support Liabilities, in the Notes to the Consolidated Financial Statements for further information. Also included are
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions) 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. Total operating lease income from truck sales
with RVGs for the years ended December 31, 2019 and 2018 was $159.7 and $152.6, respectively.
51
Aftermarket parts sales allow for returns which are estimated at the time of sale based on historical data. At December 31,
2019, the estimated value of the returned goods asset and the related return liability were $56.3 and $126.3, respectively,
compared to $49.0 and $104.5 at December 31, 2018, respectively. Parts dealer services and other revenues are
recognized as services are performed.
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 to lease equipment to 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. Rental revenues for the years ended December 31,
2019, 2018 and 2017 were $798.2, $797.1 and $760.9, respectively. Depreciation and related leased unit operating
expenses were $721.6, $686.9 and $665.7 for the years ended December 31, 2019, 2018 and 2017, respectively.
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 December 31, 2019 or December 31, 2018. 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.
Cash and Cash Equivalents: Cash equivalents consist of liquid investments with a maturity at date of purchase of 90
days or less.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions) 52
Marketable Debt Securities: The Company’s investments in marketable debt securities are classified as available-for-
sale. These investments are stated at fair value with any unrealized gains or losses, net of tax, included as a component
of accumulated other comprehensive income (loss) (AOCI).
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 that 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 other-than-temporary. Realized losses are recognized upon management’s determination
that a decline in fair value is other-than-temporary. The determination of other-than-temporary impairment is a
subjective process, requiring the use of judgments and assumptions regarding the amount and timing of recovery. The
Company reviews and evaluates its investments at least quarterly to identify investments that have indications of other-
than-temporary impairments. It is reasonably possible that a change in estimate could occur in the near term relating
to other-than-temporary impairment. Accordingly, the Company considers several factors when evaluating debt
securities for other-than-temporary impairment, including whether the decline in fair value of the security is due to
increased default risk for the specific issuer or market interest rate risk.
In assessing default risk, the Company considers the collectability of principal and interest payments by monitoring
changes to issuers’ credit ratings, specific credit events associated with individual issuers as well as the credit ratings of
any financial guarantor, and the extent and duration to which amortized cost exceeds fair value.
In assessing market interest rate risk, including benchmark interest rates and credit spreads, the Company considers its
intent for selling the securities and whether it is more likely than not the Company will be able to hold these securities
until the recovery of any unrealized losses.
Receivables:
Trade and Other Receivables: The Company’s trade and other receivables are recorded at cost, net of allowances. At
December 31, 2019 and 2018, respectively, trade and other receivables included trade receivables from dealers and
customers of $1,055.0 and $1,103.6 and other receivables of $251.1 and $210.8 relating primarily to value added tax
receivables and supplier allowances and rebates.
Finance and Other Receivables:
Loans – Loans represent fixed or floating-rate loans to customers collateralized by the vehicles purchased and are
recorded at amortized cost.
Finance leases – Finance leases are sales-type finance leases, which lease equipment to retail customers and dealers.
These leases are reported as the sum of minimum lease payments receivable and estimated residual value of the
property subject to the contracts, reduced by unearned interest.
Dealer wholesale financing – Dealer wholesale financing is floating-rate wholesale loans to PACCAR dealers for new
and used trucks and are recorded at amortized cost. The loans are collateralized by the trucks being financed.
Operating lease receivables and other – Operating lease receivables and other include monthly rentals due on operating
leases, unamortized loan and lease origination costs, interest on loans and other amounts due within one year in the
normal course of business.
Allowance for Credit Losses:
Truck, Parts and Other: The Company historically has not experienced significant losses or past due amounts on trade
and other receivables in its Truck, Parts and Other businesses. Accounts are considered past due once the unpaid
balance is over 30 days outstanding based on contractual payment terms. Accounts are charged-off against the
allowance for credit losses when, in the judgment of management, they are considered uncollectible. The allowance for
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions) credit losses for Truck, Parts and Other was $1.0 for the years ended December 31, 2019 and 2018. Net charge-offs
were $.3, $.1 and $.1 for the years ended December 31, 2019, 2018 and 2017, respectively.
53
Financial Services: The Company continuously monitors the payment performance of its finance receivables. For large
retail finance customers and dealers with wholesale financing, the Company regularly reviews their financial statements
and makes site visits and phone contact as appropriate. If the Company becomes aware of circumstances that could
cause those customers or dealers to face financial difficulty, whether or not they are past due, the customers are placed
on a watch list.
The Company modifies loans and finance leases in the normal course of its Financial Services operations. The
Company may modify loans and finance leases for commercial reasons or for credit reasons. Modifications for
commercial reasons are changes to contract terms for customers that are not considered to be in financial difficulty.
Insignificant delays are modifications extending terms up to three months for customers experiencing some short-term
financial stress, but not considered to be in financial difficulty. Modifications for credit reasons are changes to contract
terms for customers considered to be in financial difficulty. The Company’s modifications typically result in granting
more time to pay the contractual amounts owed and charging a fee and interest for the term of the modification.
When considering whether to modify customer accounts for credit reasons, the Company evaluates the creditworthiness
of the customers and modifies those accounts that the Company considers likely to perform under the modified terms.
When the Company modifies a loan or finance lease for credit reasons and grants a concession, the modification is
classified as a troubled debt restructuring (TDR). The Company does not typically grant credit modifications for
customers that do not meet minimum underwriting standards since the Company normally repossesses the financed
equipment in these circumstances. When such modifications do occur, they are considered TDRs.
On average, modifications extended contractual terms by approximately five months in 2019 and six months in 2018
and did not have a significant effect on the weighted average term or interest rate of the total portfolio at December 31,
2019 and 2018.
The Company has developed a systematic methodology for determining the allowance for credit losses for its two
portfolio segments, retail and wholesale. The retail segment consists of retail loans and sales-type finance leases, net of
unearned interest. The wholesale segment consists of truck inventory financing loans to dealers that are collateralized
by trucks and other collateral. The wholesale segment generally has less risk than the retail segment. Wholesale
receivables generally are shorter in duration than retail receivables, and the Company requires periodic reporting of
the wholesale dealer’s financial condition, conducts periodic audits of the trucks being financed and in many cases,
obtains guarantees or other security such as dealership assets. In determining the allowance for credit losses, retail
loans and finance leases are evaluated together since they relate to a similar customer base, their contractual terms
require regular payment of principal and interest, generally over three to five years, and they are secured by the same
type of collateral. The allowance for credit losses consists of both specific and general reserves.
The Company individually evaluates certain finance receivables for impairment. Finance receivables that are evaluated
individually for impairment consist of all wholesale accounts and certain large retail accounts with past due balances
or otherwise determined to be at a higher risk of loss. A finance receivable is impaired if it is considered probable the
Company will be unable to collect all contractual interest and principal payments as scheduled. In addition, all retail
loans and leases which have been classified as TDRs and all customer accounts over 90 days past due are considered
impaired. Generally, impaired accounts are on non-accrual status. Impaired accounts classified as TDRs which have
been performing for 90 consecutive days are placed on accrual status if it is deemed probable that the Company will
collect all principal and interest payments.
Impaired receivables are generally considered collateral dependent. Large balance retail and all wholesale impaired
receivables are individually evaluated to determine the appropriate reserve for losses. The determination of reserves for
large balance impaired receivables considers the fair value of the associated collateral. When the underlying collateral
fair value exceeds the Company’s recorded investment, no reserve is recorded. Small balance impaired receivables with
similar risk characteristics are evaluated as a separate pool to determine the appropriate reserve for losses using the
historical loss information discussed below.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions) 54
The Company evaluates finance receivables that are not individually impaired on a collective basis and determines the
general allowance for credit losses for both retail and wholesale receivables based on historical loss information, using
past due account data and current market conditions. Information used includes assumptions regarding the likelihood
of collecting current and past due accounts, repossession rates, the recovery rate on the underlying collateral based on
used truck values and other pledged collateral or recourse. The Company has developed a range of loss estimates for
each of its country portfolios based on historical experience, taking into account loss frequency and severity in both
strong and weak truck market conditions. A projection is made of the range of estimated credit losses inherent in the
portfolio from which an amount is determined as probable based on current market conditions and other factors
impacting the creditworthiness of the Company’s borrowers and their ability to repay. After determining the
appropriate level of the allowance for credit losses, a provision for losses on finance receivables is charged to income as
necessary to reflect management’s estimate of incurred credit losses, net of recoveries, inherent in the portfolio.
In determining the fair value of the collateral, the Company uses a pricing matrix and categorizes the fair value as
Level 2 in the hierarchy of fair value measurement. The pricing matrix is reviewed quarterly and updated as
appropriate. The pricing matrix considers the make, model and year of the equipment as well as recent sales prices of
comparable equipment sold individually, which is the lowest unit of account, through wholesale channels to the
Company’s dealers (principal market). The fair value of the collateral also considers the overall condition of the
equipment.
Accounts are charged-off against the allowance for credit losses when, in the judgment of management, they are
considered uncollectible, which generally occurs upon repossession of the collateral. Typically the timing between the
repossession and charge-off is not significant. In cases where repossession is delayed (e.g., for legal proceedings), the
Company records a partial charge-off. The charge-off is determined by comparing the fair value of the collateral, less
cost to sell, to the recorded investment.
Inventories: Inventories are stated at the lower of cost or market. Cost of inventories in the U.S. is determined
principally by the last in, first-out (LIFO) method. Cost of all other inventories is determined principally by the
first-in, first-out (FIFO) method. Cost of sales and revenues include shipping and handling costs incurred to deliver
products to dealers and customers.
Equipment on Operating Leases: The Company’s Financial Services segment leases equipment under operating
leases to its customers. In addition, in the Truck segment, equipment sold to customers in Europe subject to an RVG
by the Company may be accounted for as an operating lease. Equipment is recorded at cost and is depreciated on the
straight-line basis to the lower of the estimated residual value or guarantee value. Lease and guarantee periods
generally range from three to five years. Estimated useful lives of the equipment range from three to ten years. The
Company reviews residual values of equipment on operating leases periodically to determine that recorded amounts
are appropriate.
Property, Plant and Equipment: Property, plant and equipment are stated at cost. Depreciation is computed
principally by the straight-line method based on the estimated useful lives of the various classes of assets. Certain
production tooling is amortized on a unit of production basis.
Long-lived Assets and Goodwill: The Company evaluates the carrying value of property, plant and equipment when
events and circumstances warrant a review. Goodwill is tested for impairment at least on an annual basis. There were
no significant impairment charges for the three years ended December 31, 2019. Goodwill was $109.1 and $112.0 at
December 31, 2019 and 2018, respectively. The decrease in value was mostly due to currency translation.
Product Support Liabilities: Product support liabilities include estimated future payments related to product
warranties and deferred revenues on optional extended warranties and R&M contracts. The Company generally offers
one year warranties covering most of its vehicles and related aftermarket parts. For vehicles equipped with engines
manufactured by PACCAR, the Company generally offers two year warranties on the engine. Specific terms and
conditions vary depending on the product and the country of sale. Optional extended warranty and R&M contracts
can be purchased for periods which generally range up to five years. Warranty expenses and reserves are estimated and
recorded at the time products or contracts are sold based on historical and current data and reasonable expectations
for the future regarding the frequency and cost of warranty claims, net of any recoveries. The Company periodically
assesses the adequacy of its recorded liabilities and adjusts them as appropriate to reflect actual experience. Revenue
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions) from extended warranty and R&M contracts is deferred and recognized to income generally on a straight-line basis
over the contract period. Warranty and R&M costs on these contracts are recognized as incurred.
55
Derivative Financial Instruments: As part of its risk management strategy, the Company enters into derivative
contracts to hedge against interest rate and foreign currency risk. Certain derivative instruments designated as fair value
hedges, cash flow hedges or net investment hedges are subject to hedge accounting. Derivative instruments that are not
subject to hedge accounting are held as derivatives not designated as hedged instruments. The Company’s policies
prohibit the use of derivatives for speculation or trading. At the inception of each hedge relationship, the Company
documents its risk management objectives, procedures and accounting treatment. All of the Company’s interest-rate and
certain foreign-exchange contracts are transacted under International Swaps and Derivatives Association (ISDA) master
agreements. Each agreement permits the net settlement of amounts owed in the event of default and certain other
termination events. For derivative financial instruments, the Company has elected not to offset derivative positions in
the balance sheet with the same counterparty under the same agreements and is not required to post or receive
collateral.
Exposure limits and minimum credit ratings are used to minimize the risks of counterparty default. The Company’s
maximum exposure to potential default of its derivative counterparties is limited to the asset position of its derivative
portfolio. The asset position of the Company’s derivative portfolio was $56.3 at December 31, 2019.
The Company uses regression analysis to assess effectiveness of interest-rate contracts and net investment hedges at
inception and uses quantitative analysis to assess subsequent effectiveness on a quarterly basis. For foreign-exchange
contracts, the Company performs quarterly assessments to ensure that critical terms continue to match. All components
of the derivative instrument’s gain or loss are included in the assessment of hedge effectiveness. Hedge accounting is
discontinued prospectively when the Company determines that a derivative financial instrument has ceased to be a
highly effective hedge. Cash flows from derivative instruments are included in operating activities in the Consolidated
Statements of Cash Flows.
Foreign Currency Translation: For most of the Company’s foreign subsidiaries, the local currency is the functional
currency. All assets and liabilities are translated at year-end exchange rates and all income statement amounts are
translated at the weighted average rates for the period. Translation adjustments are recorded in AOCI. The Company
uses the U.S. dollar as the functional currency for all but one of its Mexican subsidiaries, which uses the local currency.
For the U.S. functional currency entities in Mexico, inventories, cost of sales, property, plant and equipment and
depreciation are remeasured at historical rates and resulting adjustments are included in net income.
Earnings per Share: Basic earnings per common share are computed by dividing earnings by the weighted average number of
common shares outstanding, plus the effect of any participating securities. Diluted earnings per common share are computed
assuming that all potentially dilutive securities are converted into common shares under the treasury stock method.
Reclassifications: Due to the adoption of the new lease accounting standard, the Company reclassified certain prior period
balances to conform to the 2019 presentation. Operating cash flows from sales-type finance leases and dealer direct loans on
new trucks for the years ended December 31, 2018 and 2017 were reclassified to Other assets, net (increase of $30.1 million
for 2018 and $58.4 million for 2017) and Trade and other receivables (decrease of $57.1 million for 2018 and increase of $13.5
million for 2017), respectively, within cash provided by operating activities in the Consolidated Statements of Cash Flows. The
Company changed its presentation of Finance leases as of December 31, 2018 in Note E from gross to net of unearned interest
for comparability with the current period. As of December 31, 2018, unearned interest on finance leases was $387.5 million.
New Accounting Pronouncements:
New Lease Standard: In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting
Standards Update (ASU) 2016-02, Leases (Topic 842), including subsequently issued ASUs to clarify the
implementation guidance in ASU 2016-02. Under the new lease standard, lessees recognize a right-of-use asset and a
lease liability for virtually all leases (other than short-term leases). Lessor accounting is largely unchanged, except for a
reduction in the capitalization of certain initial direct costs and the classification of certain cash flows. This ASU may
be applied retrospectively in each reporting period presented or modified retrospectively with the cumulative effect
adjustment to the opening balance of retained earnings. The Company adopted this ASU on January 1, 2019 on a
modified retrospective basis, with no effect on Retained earnings.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions) 56
The Company elected the package of practical expedients for its leases existing prior to the adoption of this ASU that
will retain prior conclusions about lease identification, lease classification and initial direct costs under the new
standard. For lessee accounting, the Company elected the short-term lease exemption to not recognize right-of-use
assets and lease liabilities for any leases with a duration of twelve months or less. For lessor accounting, the Company
elected to exclude taxes collected from customers, such as sales and use and value added, from the measurement of
lease income and expense.
The new standard requires lessors within the scope of ASC 942, Financial Services – Depository and Lending, to
classify principal payments received from sales-type and direct financing leases in investing activities in the
statement of cash flows. The Company continues to present cash receipts from direct finance leases as an investing
cash inflow and reclassified cash flows from sales-type leases from operating to investing activities. For the year
ended December 31, 2019, total cash originations and cash receipts from sales-type leases were $224.3 million and
$197.0 million, respectively.
The cumulative effect of the changes made to the Company’s Consolidated Balance Sheet on January 1, 2019 for the
adoption of ASU 2016-02 was as follows:
Consolidated Balance Sheets
ASSETS
TRUCK, PARTS AND OTHER:
Other noncurrent assets, net
FINANCIAL SERVICES:
Other assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
TRUCK, PARTS AND OTHER:
Accounts payable, accrued expenses and other
Other liabilities
Accounts payable, accrued expenses and other
Deferred taxes and other liabilities
balance at
december 31, 2018
change due to
new standard
balance at
january 1, 2019
$
651.9
$
40.9
$
692.8
547.1
5.8
552.9
3,027.7
1,145.7
523.2
704.9
12.6
28.5
1.3
4.3
3,040.3
1,174.2
524.5
709.2
Other New Accounting Pronouncements: In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit
Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, including subsequently issued ASUs to
clarify the implementation guidance in ASU 2016-13. The amendment introduces new guidance for credit losses on
financial assets measured at amortized cost, including finance receivables, trade receivables and available-for-sale
debt securities. Under this new model, expected credit losses will be based on relevant information about past
events, including historical experience, current conditions and reasonable and supportable forecasts that affect
collectability, replacing the current incurred loss model. This ASU also updates the methodology for recording
credit losses on available-for-sale debt securities from the write-down for other-than-temporary impairment to the
allowance approach. The ASU is effective for annual periods beginning after December 15, 2019 and interim
periods within those annual periods. Early adoption is permitted. This amendment should be applied on a modified
retrospective basis with a cumulative effect adjustment to retained earnings as of the beginning of the period of
adoption. Upon adoption on January 1, 2020, the allowance for credit losses on finance receivable portfolio will
increase by $6.2 million, and the increase in allowance for losses on trade receivables and available-for-sale debt
securities will be immaterial. The cumulative effect adjustment will decrease Retained earnings by $4.6 million, net of tax.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions)
In addition to adopting the ASUs disclosed above, the Company adopted the following standard on its effective date of
January 1, 2019, which had no material impact on the Company’s consolidated financial statements.
57
standard
2018-07
Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment
Accounting.
description
The FASB also issued the following standards, which are not expected to have a material impact on the Company’s
consolidated financial statements.
standard
2018-13*
2018-14*
2018-15*
description
Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the
Disclosure Requirements for Fair Value Measurement.
Compensation – Retirement Benefits – Defined Benefit Plans – General (Topic 715-
20): Disclosure Framework – Changes to the Disclosure Requirements for Defined
Benefit Plans.
Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40):
Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing
Arrangement That Is a Service Contract.
effective date
January 1, 2020
January 1, 2021
January 1, 2020
2019-12**
Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.
January 1, 2021
* The Company will adopt on the effective date.
** The Company will early adopt in 2020.
B .
S A L E S A N D R E V E N U E S
The following table disaggregates Truck, Parts and Other revenues by major sources:
Year Ended December 31,
Truck
Truck sales
Revenues from extended warranties, operating leases and other
Parts
Parts sales
Revenues from dealer services and other
Winch sales and other
Truck, Parts and Other sales and revenues
The following table summarizes Financial Services lease revenues by lease type:
Year Ended December 31,
Finance lease revenues
Operating lease revenues
Total lease revenues
2019
2018
$ 19,225.2
764.3
19,989.5
3,912.1
112.8
4,024.9
105.3
$ 24,119.7
$ 17,447.8
739.2
18,187.0
3,731.9
107.0
3,838.9
112.7
$ 22,138.6
2019
199.7
798.2
997.9
$
$
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions)
58
C .
I N V E S T M E N T S I N M A R K E TA B L E D E B T S E C U R I T I E S
Marketable debt securities consisted of the following at December 31:
2019
U.S. tax-exempt securities
U.S. corporate securities
U.S. government and agency securities
Non-U.S. corporate securities
Non-U.S. government securities
Other debt securities
2018
U.S. tax-exempt securities
U.S. corporate securities
U.S. government and agency securities
Non-U.S. corporate securities
Non-U.S. government securities
Other debt securities
amortized
cost
$
318.1
163.8
128.4
347.7
72.3
123.7
$ 1,154.0
amortized
cost
$
326.0
147.6
98.9
272.5
55.9
122.6
$ 1,023.5
unrealized
gains
unrealized
losses
$
$
2.2
1.9
.9
2.3
.2
1.1
8.6
$
$
.1
.2
.1
.1
.5
unrealized
gains
unrealized
losses
$
$
.3
.2
.2
.4
.1
.2
1.4
$
$
1.2
.4
.4
1.6
.1
.8
4.5
fair
value
$
320.2
165.7
129.3
349.8
72.4
124.7
$ 1,162.1
fair
value
$
325.1
147.4
98.7
271.3
55.9
122.0
$ 1,020.4
The cost of marketable debt securities is adjusted for amortization of premiums and accretion of discounts to
maturity. Amortization, accretion, interest and dividend income and realized gains and losses are included in
investment income. The cost of securities sold is based on the specific identification method. Gross realized gains were
$1.3, $1.1 and $1.4, and gross realized losses were $.4, $.8 and $.5 for the years ended December 31, 2019, 2018 and
2017, respectively.
Marketable debt securities with continuous unrealized losses and their related fair values were as follows:
At December 31,
2019
2018
Fair value
Unrealized losses
less than
twelve months
177.0
.4
$
twelve months
or greater
31.4
$
.1
less than
twelve months
252.8
.8
$
twelve months
or greater
397.9
$
3.7
For the investment securities in gross unrealized loss positions identified above, the Company does not intend to sell
the investment securities. It is more likely than not that the Company will not be required to sell the investment
securities before recovery of the unrealized losses, and the Company expects that the contractual principal and interest
will be received on the investment securities. As a result, the Company recognized no other-than-temporary
impairments during the periods presented.
Contractual maturities on marketable debt securities at December 31, 2019 were as follows:
Maturities:
Within one year
One to five years
Six to ten years
More than ten years
amortized
cost
$
291.6
806.4
24.0
32.0
$ 1,154.0
fair
value
$
292.1
813.9
24.1
32.0
$ 1,162.1
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions)
Marketable debt securities included $49.7 and $7.4 of variable rate demand obligations (VRDOs) at December 31,
2019 and 2018, respectively. VRDOs are debt instruments with long-term scheduled maturities which have interest
rates that reset periodically. Actual maturities of VRDOs may differ from contractual maturities because these
securities may be sold when interest rates are reset.
59
D .
I N V E N T O R I E S
Inventories include the following:
At December 31,
Finished products
Work in process and raw materials
Less LIFO reserve
$
2019
584.6
754.9
1,339.5
(186.3)
$ 1,153.2
$
2018
563.2
803.3
1,366.5
(181.8)
$ 1,184.7
Inventories valued using the LIFO method comprised 46% and 47% of consolidated inventories before deducting the
LIFO reserve at December 31, 2019 and 2018, respectively.
E .
F I N A N C E A N D O T H E R R E C E I VA B L E S
Finance and other receivables include the following:
At December 31,
Loans
Finance leases
Dealer wholesale financing
Operating lease receivables and other
Less allowance for losses:
Loans and leases
Dealer wholesale financing
Operating lease receivables and other
2019
$ 5,241.7
3,906.7
2,907.4
142.6
$ 12,198.4
(104.4)
(4.3)
(3.7)
$ 12,086.0
2018
$ 4,630.5
3,807.2
2,342.3
174.6
$ 10,954.6
(103.8)
(6.8)
(3.2)
$ 10,840.8
The net activity of dealer direct loans and dealer wholesale financing on new trucks is shown in the operating section
of the Consolidated Statements of Cash Flows since those receivables finance the sale of Company inventory.
Annual minimum payments due on loans are as follows:
Beginning January 1, 2020
2020
2021
2022
2023
2024
Thereafter
loans
$ 1,633.6
1,323.6
1,043.9
759.9
377.3
103.4
$ 5,241.7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions)
60
Annual minimum payments due on finance lease receivables and a reconciliation of the undiscounted cash flows to
the net investment in finance leases are as follows:
Beginning January 1, 2020
2020
2021
2022
2023
2024
Thereafter
Unguaranteed residual values
Unearned interest on finance leases
Net investment in finance leases
finance
leases
$ 1,360.6
1,032.1
757.3
506.6
246.5
100.0
$ 4,003.1
316.3
(412.7)
3,906.7
Experience indicates substantially all of dealer wholesale financing will be repaid within one year. In addition,
repayment experience indicates that some loans, leases and other finance receivables will be paid prior to contract
maturity, while others may be extended or modified.
For the following credit quality disclosures, finance receivables are classified into two portfolio segments, wholesale
and retail. The retail portfolio is further segmented into dealer retail and customer retail. The dealer wholesale
segment consists of truck inventory financing to PACCAR dealers. The dealer retail segment consists of loans and
leases to participating dealers and franchises that use the proceeds to fund customers’ acquisition of commercial
vehicles and related equipment. The customer retail segment consists of loans and leases directly to customers for the
acquisition of commercial vehicles and related equipment. Customer retail receivables are further segregated between
fleet and owner/operator classes. The fleet class consists of customer retail accounts operating more than five trucks.
All other customer retail accounts are considered owner/operator. These two classes have similar measurement
attributes, risk characteristics and common methods to monitor and assess credit risk.
Allowance for Credit Losses: The allowance for credit losses is summarized as follows:
Balance at January 1
Provision for losses
Charge-offs
Recoveries
Currency translation and other
Balance at December 31
Balance at January 1
Provision for losses
Charge-offs
Recoveries
dealer
customer
2019
wholesale
$
6.8
(1.6)
(.6)
$
retail
10.0
(1.0)
$
(.3)
4.3
$
.2
9.2
$
$
retail
93.8
14.2
(24.2)
10.7
.7
95.2
$
$
other*
3.2
3.8
(3.6)
.3
$
3.7
$
total
113.8
15.4
(28.4)
11.0
.6
112.4
dealer
customer
2018
wholesale
$
6.0
1.0
$
retail
9.4
.7
$
retail
92.5
13.6
(20.0)
9.9
(2.2)
93.8
$
$
other*
9.3
1.2
(7.5)
.4
(.2)
3.2
$
$
total
117.2
16.5
(27.5)
10.3
(2.7)
113.8
Currency translation and other
Balance at December 31
(.2)
6.8
$
(.1)
10.0
$
$
* Operating lease and other trade receivables.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions)
dealer
customer
2017
61
Balance at January 1
Provision for losses
Charge-offs
Recoveries
wholesale
$
5.5
$
retail
9.6
(.3)
$
Currency translation and other
Balance at December 31
.5
6.0
$
.1
9.4
$
$
* Operating lease and other trade receivables.
retail
87.5
21.1
(24.8)
5.0
3.7
92.5
$
$
other*
8.6
1.5
(1.9)
.3
.8
9.3
$
$
total
111.2
22.3
(26.7)
5.3
5.1
117.2
Information regarding finance receivables evaluated and determined individually and collectively is as follows:
At December 31, 2019
Recorded investment for impaired finance
receivables evaluated individually
Allowance for impaired finance receivables
determined individually
Recorded investment for finance receivables
evaluated collectively
Allowance for finance receivables determined
collectively
At December 31, 2018
Recorded investment for impaired finance
receivables evaluated individually
Allowance for impaired finance receivables
determined individually
Recorded investment for finance receivables
evaluated collectively
Allowance for finance receivables determined
collectively
dealer
customer
wholesale
retail
retail
total
$
2.3
$
47.6
$
49.9
6.5
6.5
$ 2,907.4
1,643.3
7,455.2
12,005.9
4.3
9.2
88.7
102.2
dealer
customer
wholesale
retail
retail
total
$
.1
$
2.5
$
36.7
$
39.3
.1
5.8
5.9
2,342.2
1,462.1
6,936.4
10,740.7
6.7
10.0
88.0
104.7
The recorded investment for finance receivables that are on non-accrual status is as follows:
At December 31,
Dealer:
Wholesale
Retail
Customer retail:
Fleet
Owner/operator
2019
2018
$
$
2.3
40.2
7.2
49.7
.1
27.5
7.9
35.5
$
$
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions)
62
Impaired Loans: Impaired loans are summarized below. The impaired loans with specific reserve represent the
unpaid principal balance. The recorded investment of impaired loans as of December 31, 2019 and 2018 was
not significantly different than the unpaid principal balance.
Average recorded investment
$
4.9
At December 31, 2019
Impaired loans with a specific reserve
Associated allowance
Impaired loans with no specific reserve
Net carrying amount of impaired loans
At December 31, 2018
Impaired loans with a specific reserve
Associated allowance
Impaired loans with no specific reserve
Net carrying amount of impaired loans
dealer
customer retail
wholesale
retail
owner/
fleet operator
$
2.3
2.3 $
10.9
(2.1)
8.8
6.7
15.5
2.4 $
16.6
$
$
$
3.1
(.6)
2.5
.4
2.9
3.4
$
$
$
dealer
customer retail
wholesale
retail
owner/
fleet operator
$
.1
(.1)
$
2.5
2.5 $
14.5
(2.3)
12.2
4.9
17.1
3.2 $
29.3
$
$
$
3.4
(1.0)
2.4
.3
2.7
2.8
$
$
$
total
14.0
(2.7)
11.3
9.4
20.7
27.3
total
18.0
(3.4)
14.6
7.7
22.3
35.4
$
$
$
$
$
$
Average recorded investment
$
.1
During the period the loans above were considered impaired, interest income recognized on a cash basis was as follows:
Year Ended December 31,
Dealer:
Retail
Customer retail:
Fleet
Owner/operator
2019
2018
2017
$
.2
1.3
.2
1.7
$
$
2.0
.2
2.2
$
$
1.6
.1
1.7
$
Credit Quality: The Company’s customers are principally concentrated in the transportation industry in
North America, Europe and Australia. The Company’s portfolio assets are diversified over a large number of
customers and dealers with no single customer or dealer balances representing over 5% of the total portfolio
assets. The Company retains as collateral a security interest in the related equipment.
At the inception of each contract, the Company considers the credit risk based on a variety of credit quality
factors including prior payment experience, customer financial information, credit-rating agency ratings, loan-
to-value ratios and other internal metrics. On an ongoing basis, the Company monitors credit quality based
on past due status and collection experience as there is a meaningful correlation between the past due status
of customers and the risk of loss.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions)
The Company has three credit quality indicators: performing, watch and at-risk. Performing accounts pay in
accordance with the contractual terms and are not considered high-risk. Watch accounts include accounts 31
to 90 days past due and large accounts that are performing but are considered to be high risk. Watch accounts
are not impaired. At-risk accounts are accounts that are impaired, including TDRs, accounts over 90 days past
due and other accounts on non-accrual status. The tables below summarize the Company’s finance receivables
by credit quality indicator and portfolio class.
63
At December 31, 2019
Performing
Watch
At-risk
At December 31, 2018
Performing
Watch
At-risk
dealer
customer retail
wholesale
retail
owner/
fleet operator
$ 2,897.3
10.1
$ 2,907.4
$ 1,643.3
2.3
$ 1,645.6
$ 6,251.0
56.4
40.3
$ 6,347.7
$ 1,138.0
9.8
7.3
$ 1,155.1
dealer
customer retail
wholesale
retail
owner/
fleet operator
$ 2,329.5
12.6
.2
$ 2,342.3
$ 1,462.1
2.5
$ 1,464.6
$ 5,759.0
70.0
28.5
$ 5,857.5
$ 1,099.3
8.2
8.1
$ 1,115.6
total
$ 11,929.6
76.3
49.9
$ 12,055.8
total
$ 10,649.9
90.8
39.3
$ 10,780.0
The tables below summarize the Company’s finance receivables by aging category. In determining past due status, the
Company considers the entire contractual account balance past due when any installment is over 30 days past due.
Substantially all customer accounts that were greater than 30 days past due prior to credit modification became
current upon modification for aging purposes.
At December 31, 2019
Current and up to 30 days past due
31 - 60 days past due
Greater than 60 days past due
At December 31, 2018
Current and up to 30 days past due
31 - 60 days past due
Greater than 60 days past due
dealer
customer retail
wholesale
retail
$ 2,907.4
$ 1,645.6
$ 2,907.4
$ 1,645.6
owner/
fleet operator
$ 6,297.1
23.0
27.6
$ 6,347.7
$ 1,140.7
8.7
5.7
$ 1,155.1
total
$ 11,990.8
31.7
33.3
$ 12,055.8
dealer
customer retail
wholesale
retail
owner/
fleet operator
$ 2,342.1
.1
.1
$ 2,342.3
$ 1,464.6
$ 1,464.6
$ 5,835.6
11.2
10.7
$ 5,857.5
$ 1,103.1
6.7
5.8
$ 1,115.6
total
$ 10,745.4
18.0
16.6
$ 10,780.0
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions)
64
Troubled Debt Restructurings: The balance of TDRs was $14.1 and $20.1 at December 31, 2019 and 2018, respectively.
At modification date, the pre-modification and post-modification recorded investment balances for finance receivables
modified during the period by portfolio class were as follows:
2019
2018
Fleet
Owner/operator
recorded investment
pre-modification post-modification
2.2
.3
2.5
2.2
.3
2.5
$
$
$
$
recorded investment
pre-modification post-modification
12.1
1.0
13.1
12.1
1.0
13.1
$
$
$
$
The effect on the allowance for credit losses from such modifications was not significant at December 31, 2019 and 2018.
TDRs modified during the previous twelve months that subsequently defaulted (i.e., became more than 30 days past due)
in the years ended December 31, 2019 and 2018 were nil.
There were no finance receivables modified as TDRs during the previous twelve months that subsequently defaulted and
were charged off for the years ended December 31, 2019 and 2018.
Repossessions: When the Company determines a customer is not likely to meet its contractual commitments, the
Company repossesses the vehicles which serve as collateral for the loans, finance leases and equipment under operating
leases. The Company records the vehicles as used truck inventory included in Financial Services Other assets on the
Consolidated Balance Sheets. The balance of repossessed inventory at December 31, 2019 and 2018 was $25.6 and $10.8,
respectively. Proceeds from the sales of repossessed assets were $62.4, $75.8 and $58.3 for the years ended December 31,
2019, 2018 and 2017, respectively. These amounts are included in Proceeds from asset disposals in the Consolidated
Statements of Cash Flows. Write-downs of repossessed equipment on operating leases are recorded as impairments and
included in Financial Services Depreciation and other expenses on the Consolidated Statements of Income.
F.
E Q U I P M E N T O N O P E R AT I N G L E A S E S
A summary of equipment on operating leases for Truck, Parts and Other and for the Financial Services segment is
presented below.
At December 31,
Equipment on operating leases
Less allowance for depreciation
truck, parts and other
financial services
2019
706.3
(160.8)
545.5
$
$
2018
948.1
(161.5)
786.6
$
$
2019
$ 4,350.0
(1,247.4)
$ 3,102.6
2018
$ 4,098.3
(1,243.3)
$ 2,855.0
Annual minimum lease payments due on Financial Services operating leases beginning January 1, 2020 are $646.8,
$472.9, $281.1, $126.5, $40.8 and $6.9 thereafter.
When the equipment is sold subject to an RVG, the full sales price is received from the customer. A liability is
established for the residual value obligation with the remainder of the proceeds recorded as deferred lease revenue.
These amounts are summarized below:
At December 31,
Residual value guarantees
Deferred lease revenues
truck, parts and other
2019
439.6
147.7
587.3
$
$
2018
591.1
251.3
842.4
$
$
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions)
The deferred lease revenue is amortized on a straight-line basis over the RVG contract period. At December 31, 2019,
the annual amortization of deferred revenues beginning January 1, 2020 is $78.6, $41.7, $17.6, $8.9, $.8 and
$.1 thereafter. Annual maturities of the RVGs beginning January 1, 2020 are $187.3, $150.8, $55.9, $31.2, $8.3 and
$6.1 thereafter.
65
G . P R O P E RT Y, P L A N T A N D E Q U I P M E N T
Property, plant and equipment include the following:
At December 31,
Land
Buildings and improvements
Machinery, equipment and production tooling
Construction in progress
Less allowance for depreciation
useful lives
10 - 40 years
3 - 12 years
$
2019
271.8
1,382.2
3,998.2
741.7
6,393.9
(3,510.1)
$ 2,883.8
$
2018
265.4
1,329.0
3,884.5
308.8
5,787.7
(3,306.8)
$ 2,480.9
H . A C C O U N T S PAYA B L E , A C C R U E D E X P E N S E S A N D O T H E R
Accounts payable, accrued expenses and other include the following:
At December 31,
Truck, Parts and Other:
Accounts payable
Product support liabilities
Accrued expenses
Accrued capital expenditures
Salaries and wages
Other
I .
P R O D U C T S U P P O RT L I A B I L I T I E S
Changes in product support liabilities are summarized as follows:
warranty reserves
Balance at January 1
Cost accruals
Payments
Change in estimates for pre-existing warranties
Currency translation and other
Balance at December 31
deferred revenues on extended warranties and r&m contracts
Balance at January 1
Deferred revenues
Revenues recognized
Currency translation
Balance at December 31
2019
380.2
386.3
(343.7)
19.8
(2.6)
440.0
2019
699.9
499.1
(396.4)
(1.2)
801.4
$
$
$
$
2019
2018
$ 1,115.7
508.1
693.4
270.3
271.8
334.9
$ 3,194.2
2018
298.8
331.9
(271.8)
25.6
(4.3)
380.2
2018
653.9
448.2
(385.0)
(17.2)
699.9
$
$
$
$
$ 1,304.9
446.7
626.5
98.8
267.7
283.1
$ 3,027.7
2017
282.1
242.1
(236.8)
(2.0)
13.4
298.8
2017
573.5
371.8
(328.2)
36.8
653.9
$
$
$
$
The Company expects to recognize approximately $252.0 of the remaining deferred revenues on extended warranties
and R&M contracts in 2020, $237.6 in 2021, $160.1 in 2022, $107.0 in 2023, $34.2 in 2024 and $10.5 thereafter.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions)
66
Product support liabilities are included in the accompanying Consolidated Balance Sheets as follows:
At December 31,
Truck, Parts and Other:
Accounts payable, accrued expenses and other
Other liabilities
Financial Services:
Deferred taxes and other liabilities
warranty reserves
2019
2018
$
270.6
169.4
$
233.0
147.2
$
440.0
$
380.2
deferred revenues
2019
237.5
547.6
16.3
801.4
$
$
2018
213.7
468.8
17.4
699.9
$
$
J .
B O R R O W I N G S A N D C R E D I T A R R A N G E M E N T S
Financial Services borrowings include the following:
At December 31,
Commercial paper
Bank loans
Term notes
2019
effective
rate
1.5%
7.1%
1.9%
1.9%
borrowings
$ 3,797.2
313.0
4,110.2
7,112.5
$ 11,222.7
2018
effective
rate
1.9%
7.2%
1.8%
2.0%
borrowings
$ 3,256.8
284.0
3,540.8
6,409.7
$ 9,950.5
Commercial paper and term notes borrowings were $10,909.7 and $9,666.5 at December 31, 2019 and 2018,
respectively. Unamortized debt issuance costs, unamortized discounts and the net effect of fair value hedges were
$(20.5) and $(19.3) at December 31, 2019 and 2018, respectively. The effective rate is the weighted average rate as of
December 31, 2019 and 2018 and includes the effects of interest-rate contracts.
The annual maturities of the Financial Services borrowings are as follows:
Beginning January 1, 2020
2020
2021
2022
2023
2024
commercial
paper
$ 3,800.5
$ 3,800.5
bank
loans
114.1
107.1
66.3
20.2
5.3
313.0
$
$
term
notes
$ 1,716.7
2,216.0
2,191.7
705.3
300.0
$ 7,129.7
total
$ 5,631.3
2,323.1
2,258.0
725.5
305.3
$ 11,243.2
Interest paid on borrowings was $203.8, $166.5 and $127.4 in 2019, 2018 and 2017, respectively.
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. The medium-term notes are issued by PACCAR Financial Corp.
(PFC), PACCAR Financial Europe, PACCAR Financial Mexico and PACCAR Financial Pty. Ltd. (PFPL).
In November 2018, the Company’s U.S. finance subsidiary, PFC, filed a shelf registration under the Securities Act of
1933. The total amount of medium-term notes outstanding for PFC as of December 31, 2019 was $5,550.0. In
February 2020, PFC issued $300.0 of medium-term notes under this registration. The registration expires in November
2021 and does not limit the principal amount of debt securities that may be issued during that period.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions)
As of December 31, 2019, the Company’s European finance subsidiary, PACCAR Financial Europe, had €1,350.0
available for issuance under a €2,500.0 medium-term note program listed on the Professional Securities Market of the
London Stock Exchange. This program replaced an expiring program in the second quarter of 2019 and is renewable
annually through the filing of a new listing.
67
In April 2016, PACCAR Financial Mexico registered a 10,000.0 pesos medium-term note and commercial paper
program with the Comision Nacional Bancaria y de Valores. The registration expires in April 2021 and limits the
amount of commercial paper (up to one year) to 5,000.0 pesos. At December 31, 2019, 6,800.0 pesos remained
available for issuance.
In August 2018, the Company’s Australian subsidiary, PACCAR Financial Pty. Ltd. (PFPL), registered a medium-term
note program. The program does not limit the principal amount of debt securities that may be issued under the
program. The total amount of medium-term notes outstanding for PFPL as of December 31, 2019 was 300.0
Australian dollars.
The Company has line of credit arrangements of $3,579.7, of which $3,266.7 were unused at December 31, 2019.
Included in these arrangements are $3,000.0 of committed bank facilities, of which $1,000.0 expires in June 2020,
$1,000.0 expires in June 2023 and $1,000.0 expires in June 2024. The Company intends to replace these credit facilities
on or before expiration with facilities of similar amounts and duration. These credit facilities are maintained primarily
to provide backup liquidity for commercial paper borrowings and maturing medium-term notes. There were no
borrowings under the committed bank facilities for the year ended December 31, 2019.
K .
L E A S E S
The Company leases certain facilities and equipment. The Company determines whether an arrangement is or
contains a lease at inception. The Company accounts for lease and non-lease components separately. The consideration
in the contract is allocated to each separate lease and non-lease component of the contract generally based on the
relative stand-alone price of the components. The lease component is accounted for in accordance with the lease
standard and the non-lease component is accounted for in accordance with other standards. The Company uses its
incremental borrowing rate in determining the present value of lease payments unless the rate implicit in the lease is
available. The lease term may include options to extend or terminate the lease if it is reasonably certain that the
Company will exercise that option. Leases that have a term of 12 months or less at the commencement date (“short-
term leases”) are not included in the right-of-use assets and the lease liabilities. Lease expense for the short-term leases
is recognized on a straight-line basis over the lease term.
The components of lease expense were as follows:
Year Ended December 31,
Finance lease cost
Amortization of right-of-use assets
Interest on lease liabilities
Operating lease cost
Short-term lease cost
Variable lease cost
Total lease cost
2019
.9
.1
16.9
.7
1.8
20.4
$
$
For the years ended December 31, 2019, 2018 and 2017, total rental expenses for all leases amounted to $20.4, $35.7
and $30.1, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions)
68
Balance sheet information related to leases was as follows:
At December 31, 2019
TRUCK, PARTS AND OTHER:
Other noncurrent assets
FINANCIAL SERVICES:
Other assets
Total right-of-use assets
TRUCK, PARTS AND OTHER:
Accounts payable, accrued expenses and other
Other liabilities
FINANCIAL SERVICES:
Accounts payable, accrued expenses and other
Deferred taxes and other liabilities
Total lease liabilities
The weighted-average remaining lease term and discount rate are as follows:
At December 31, 2019
Weighted-average remaining lease term
Weighted-average discount rate
Maturities of lease liabilities are as follows:
Beginning January 1, 2020
2020
2021
2022
2023
2024
Thereafter
Total lease payments
Less: interest
Total lease liabilities
Cash flow information related to leases was as follows:
Year Ended December 31,
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases
Operating cash flows from finance leases
Financing cash flows from finance leases
Right-of-use assets obtained in exchange for lease liabilities
Operating leases
Finance leases
operating
leases
finance
leases
$
$
$
$
31.7
5.2
36.9
13.0
19.5
1.5
3.7
37.7
$
$
$
1.1
1.1
.7
.5
$
1.2
operating
leases
3.8 years
finance
leases
2.2 years
1.9%
4.0%
operating
leases
finance
leases
$
$
14.9
10.3
7.2
3.0
1.1
2.5
39.0
(1.3)
37.7
$
$
$
.8
.3
.1
.1
1.3
(.1)
1.2
2019
17.0
.2
1.0
8.9
.7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions)
L . C O M M I T M E N T S A N D C O N T I N G E N C I E S
69
At December 31, 2019, PACCAR had standby letters of credit and surety bonds totaling $47.8, from third-party
financial institutions, in the normal course of business, which guarantee various insurance, financing and other
activities. At December 31, 2019, PACCAR’s financial services companies, in the normal course of business, had
outstanding commitments to fund new loan and lease transactions amounting to $885.8. The commitments generally
expire in 90 days. The Company had other commitments, primarily to purchase production inventory, equipment and
energy amounting to $119.8, $63.9, $60.6, $.8 and nil for 2020, 2021, 2022, 2023 and 2024 and beyond, respectively.
The Company is involved in various stages of investigations and cleanup actions in different countries related to
environmental matters. In certain of these matters, the Company has been designated as a “potentially responsible
party” by domestic and foreign environmental agencies. The Company has accrued the estimated costs to investigate
and complete cleanup actions where it is probable that the Company will incur such costs in the future. Expenditures
related to environmental activities for the years ended December 31, 2019, 2018 and 2017 were $1.3, $1.2 and $1.9,
respectively.
While the timing and amount of the ultimate costs associated with future environmental cleanup cannot be
determined, management expects that these matters will not have a significant effect on the Company’s consolidated
financial position.
On July 19, 2016, the European Commission (EC) concluded its investigation of all major European truck
manufacturers and reached a settlement with DAF. Following the settlement, claims and lawsuits have been filed
against the Company, DAF and certain DAF subsidiaries and other truck manufacturers in various European
jurisdictions. These claims and lawsuits include a number of collective proceedings, including proposed class actions in
the United Kingdom, alleging EC-related claims and seeking unspecified damages. Others may bring EC-related claims
and lawsuits against the Company or its subsidiaries. While the Company believes it has meritorious defenses, such
claims and lawsuits will likely take a significant period of time to resolve. The Company cannot reasonably estimate a
range of loss, if any, that may result given the early stage of these claims and lawsuits. An adverse outcome of such
proceedings could have a material impact on the Company’s results of operations.
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.
M . E M P L O Y E E B E N E F I T S
Severance Costs: The Company incurred severance expense in 2019, 2018 and 2017 of $5.8, $.7 and $.8, respectively.
Defined Benefit Pension Plans: The Company has several defined benefit pension plans, which cover a majority of its
employees. The Company evaluates its actuarial assumptions on an annual basis and considers changes based upon
market conditions and other factors.
The expected return on plan assets is determined by using a market-related value of assets, which is calculated based
on an average of the previous five years of asset gains and losses.
Generally, accumulated unrecognized actuarial gains and losses are amortized using the 10% corridor approach. The
corridor is defined as the greater of either 10% of the projected benefit obligation or the market-related value of plan
assets. The amortization amount is the excess beyond the corridor divided by the average remaining estimated service
life of participants on a straight-line basis.
The Company funds its pensions in accordance with applicable employee benefit and tax laws. The Company
contributed $35.7 to its pension plans in 2019 and $88.9 in 2018. The Company expects to contribute in the range of
$80.0 to $120.0 to its pension plans in 2020, of which $21.4 is estimated to satisfy minimum funding requirements.
Annual benefits expected to be paid beginning January 1, 2020 are $133.2, $103.0, $109.1, $113.6, $120.5 and a total
of $683.5 for the five years thereafter.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions) 70
Plan assets are invested in global equity and debt securities through professional investment managers with the
objective to achieve targeted risk adjusted returns and maintain liquidity sufficient to fund current benefit payments.
Typically, each defined benefit plan has an investment policy that includes a target for asset mix, including maximum
and minimum ranges for allocation percentages by investment category. The actual allocation of assets may vary at
times based upon rebalancing policies and other factors. The Company periodically assesses the target asset mix by
evaluating external sources of information regarding the long-term historical return, volatilities and expected future
returns for each investment category. In addition, the long-term rates of return assumptions for pension accounting
are reviewed annually to ensure they are appropriate. Target asset mix and forecast long-term returns by asset
category are considered in determining the assumed long-term rates of return, although historical returns realized
are given some consideration.
The fair value of mutual funds, common stocks and U.S. treasuries is determined using the market approach and is
based on the quoted prices in active markets. These securities are categorized as Level 1. The fair value of debt
securities is determined using the market approach and is based on the quoted market prices of the securities or
other observable inputs. These securities are categorized as Level 2.
The fair value of commingled trust funds is determined using the market approach and is based on the unadjusted
net asset value (NAV) per unit as determined by the sponsor of the fund based on the fair values of underlying
investments. These assets are collective investment trusts, and substantially all of these investments have no
redemption restrictions or unfunded commitments. Securities measured at NAV per unit as a practical expedient are
not classified in the fair value hierarchy.
The following information details the allocation of plan assets by investment type. See Note Q for definitions of fair
value levels.
At December 31, 2019
Equities:
U.S. equities
Global equities
Total equities
Fixed income:
U.S. fixed income
Non-U.S. fixed income
Total fixed income
Cash and other
Total plan assets
At December 31, 2018
Equities:
U.S. equities
Global equities
Total equities
Fixed income:
U.S. fixed income
Non-U.S. fixed income
Total fixed income
Cash and other
Total plan assets
fair value hierarchy
target
level 1
level 2
total
measured
at nav
total
$
860.1
973.1
1,833.2
$
860.1
973.1
1,833.2
50 - 70%
30 - 50%
50 - 70%
30 - 50%
$
214.0
$
214.0
10.6
224.6
$
$
260.3
28.1
288.4
68.2
356.6
$
$
474.3
28.1
502.4
78.8
581.2
488.3
322.0
810.3
1.7
$ 2,645.2
962.6
350.1
1,312.7
80.5
$ 3,226.4
fair value hierarchy
target
level 1
level 2
total
measured
at nav
total
$
680.2
772.6
1,452.8
$
680.2
772.6
1,452.8
$
223.2
$
223.2
9.0
232.2
$
$
223.4
21.6
245.0
69.0
314.0
$
$
446.6
21.6
468.2
78.0
546.2
419.6
279.0
698.6
1.6
$ 2,153.0
866.2
300.6
1,166.8
79.6
$ 2,699.2
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions)
The following weighted average assumptions relate to all pension plans of the Company:
71
At December 31,
Discount rate
Rate of increase in future compensation levels
Assumed long-term rate of return on plan assets
2019
2.9%
3.8%
6.3%
2018
3.9%
3.8%
6.3%
The components of the change in projected benefit obligation and change in plan assets are as follows:
At December 31,
Change in projected benefit obligation:
Benefit obligation at January 1
Service cost
Interest cost
Benefits paid
Actuarial loss (gain)
Currency translation and other
Participant contributions
Projected benefit obligation at December 31
Change in plan assets:
Fair value of plan assets at January 1
Employer contributions
Actual return on plan assets
Benefits paid
Currency translation and other
Participant contributions
Fair value of plan assets at December 31
Funded status at December 31
At December 31,
Amounts recorded on Balance Sheet:
Other noncurrent assets
Account payable, accrued expenses and other
Other liabilities
Accumulated other comprehensive loss:
Actuarial loss
Prior service cost
Net initial transition amount
2019
2018
$ 2,655.4 $ 2,820.7
108.3
85.8
(87.6)
(232.6)
(39.6)
.4
$ 3,234.4 $ 2,655.4
102.0
95.6
(127.0)
478.0
30.0
.4
35.7
588.1
(127.0)
30.0
.4
$ 2,699.2 $ 2,919.6
88.9
(177.5)
(87.6)
(44.6)
.4
$ 3,226.4 $ 2,699.2
43.8
$
(8.0) $
2019
2018
$
146.5 $
39.9
114.6
512.5
5.1
.1
174.7
4.9
126.0
471.5
6.2
.1
Of the December 31, 2019 amounts in accumulated other comprehensive loss, $41.7 of unrecognized actuarial loss
and $1.5 of unrecognized prior service cost are expected to be amortized into net pension expense in 2020.
The accumulated benefit obligation for all pension plans of the Company was $2,806.3 and $2,356.2 at
December 31, 2019 and 2018, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions)
72
Information for all plans with an accumulated benefit obligation in excess of plan assets is as follows:
At December 31,
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
The components of pension expense are as follows:
Year Ended December 31,
Service cost
Interest on projected benefit obligation
Expected return on assets
Amortization of prior service costs
Recognized actuarial loss
Net pension expense
$
2019
170.6 $
150.1
23.4
2018
138.3
124.0
22.0
2019
102.0 $
95.6
(176.6)
1.4
20.5
42.9 $
2018
108.3 $
85.8
(177.2)
1.4
35.3
53.6 $
2017
92.9
81.1
(159.7)
1.2
25.4
40.9
$
$
The components of net pension expense other than service cost are included in Interest and other (income), net on
the Consolidated Statements of Income.
Multi-employer Plans: The Company participates in multi-employer plans in the U.S. and Europe. These are typically
under collective bargaining agreements and cover its union-represented employees. The Company’s participation in
the following multi-employer plans for the years ended December 31 are as follows:
pension plan
Metal and Electrical Engineering Industry Pension Fund
Western Metal Industry Pension Plan
Other plans
pension
plan
number
135668
001
ein
91-6033499
company contributions
2019
27.8 $
3.8
1.2
32.8 $
2018
27.9 $
2.7
1.2
31.8 $
2017
25.0
1.4
.8
27.2
$
$
The Company contributions shown in the table above approximate the multi-employer pension expense for each of
the years ended December 31, 2019, 2018 and 2017, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions)
Metal and Electrical Engineering Industry Pension Fund is a multi-employer union plan incorporating all DAF
employees in the Netherlands and is covered by a collective bargaining agreement that will expire November 30, 2020.
The Company’s contributions were less than 5% of the total contributions to the plan for the last two reporting
periods ending December 2019. The plan is required by law (the Netherlands Pension Act) to have a coverage ratio in
excess of 104.3%. Because the coverage ratio of the plan was 96.9% at December 31, 2019, a funding improvement
plan effective through 2028 is in place. The funding improvement plan includes a possible reduction in pension
benefits and delays in future benefit increases.
73
The Western Metal Industry Pension Plan is located in the U.S. and is covered by a collective bargaining agreement
that will expire on November 1, 2020. In accordance with the U.S. Pension Protection Act of 2006, the plan continued
to be certified as critical (red) status as of December 31, 2019, and a funding improvement plan has been implemented
requiring additional contributions through 2022 as long as the plan remains in critical status. Contributions by the
Company were 20% and 14% of the total contributions to the plan for the years ended December 31, 2019 and 2018,
respectively.
Other plans are principally located in the U.S. and the Company’s contributions to these plans for the years ended
December 31, 2019 and 2018 were less than 5% of each plan’s total contributions. As of December 31, 2019, one of the
other plans was under a funding improvement plan.
There were no significant changes for the multi-employer plans in the periods presented that affected comparability
between periods.
Defined Contribution Plans: The Company maintains several defined contribution benefit plans whereby it contributes
designated amounts on behalf of participant employees. The largest plan is for U.S. salaried employees where the
Company matches a percentage of employee contributions up to an annual limit. The match was 5% of eligible pay in
2019, 2018 and 2017. Other plans are located in Australia, Brasil, Canada, the Netherlands, Belgium and Germany.
Expenses for these plans were $48.3, $45.3 and $37.9 in 2019, 2018 and 2017, respectively.
I N C O M E TA X E S
N .
The Company’s tax rate is based on income and statutory tax rates in the various jurisdictions in which the Company
operates. Tax law requires certain items to be included in the Company’s tax returns at different times than the items
reflected in the Company’s financial statements. As a result, the Company’s annual tax rate reflected in its financial
statements is different than that reported in its tax returns. Some of these differences are permanent, such as expenses
that are not deductible in the Company’s tax return, and some differences reverse over time, such as depreciation
expense. These temporary differences create deferred tax assets and liabilities. The Company establishes valuation
allowances for its deferred tax assets if, based on the available evidence, it is more likely than not that some portion or
all of the deferred tax assets will not be realized.
The components of the Company’s income before income taxes include the following:
Year Ended December 31,
Domestic
Foreign
2019
$ 2,201.1
898.1
$ 3,099.2
2018
$ 1,775.2
1,035.0
$ 2,810.2
2017
$ 1,347.8
825.5
$ 2,173.3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions)
74
The components of the Company’s provision for income taxes include the following:
Year Ended December 31,
Current provision:
Federal
State
Foreign
Deferred provision (benefit):
Federal
State
Foreign
2019
2018
2017
$
$
352.3
96.8
191.4
640.5
40.7
(4.3)
34.4
70.8
711.3
$
$
267.1
67.5
263.0
597.6
22.6
1.3
(6.4)
17.5
615.1
$
$
397.7
63.8
210.5
672.0
(173.8)
2.3
(2.4)
(173.9)
498.1
Tax benefits recognized for net operating loss carryforwards were $12.4, $5.0 and $4.3 for the years ended 2019, 2018
and 2017, respectively.
A reconciliation of the statutory U.S. federal tax rate to the effective income tax rate is as follows:
Statutory rate
Effect of:
Rate change on deferred taxes
Transition tax
State
Federal domestic production deduction
Tax on foreign earnings
Other, net
2019
21.0%
2.3
.9
(1.2)
23.0%
2018
21.0%
(.2)
2.2
1.0
(2.1)
21.9%
2017
35.0%
(14.0)
6.0
1.8
(1.1)
(4.0)
(.8)
22.9%
On December 22, 2017, the U.S. enacted new federal income tax legislation, the Tax Cuts and Jobs Act (“the Tax Act”).
The Tax Act lowered the U.S. statutory income tax rate from 35% to 21%, imposed a one-time transition tax on the
Company’s foreign earnings, which previously had been deferred from U.S. income tax and created a modified
territorial system. As a result, the Company recorded $304.0 of deferred tax benefits, due to the re-measurement of net
deferred tax liabilities at the new lower statutory tax rate. In addition, the Company recorded $130.6 of tax expense on
the Company’s foreign earnings, which previously had been deferred from U.S. income tax and no adjustments have
been made to the amounts.
Based on the Company’s current operations, the Company does not expect that the repatriation of future foreign
earnings will be subject to significant income tax as a result of the U.S. modified territorial system.
At December 31, 2019, the Company had net operating loss carryforwards of $460.9, of which $370.7 related to
foreign subsidiaries and $90.2 related to states in the U.S. The related deferred tax asset was $123.3, for which a $99.6
valuation allowance has been provided. The carryforward periods range from four years to indefinite, subject to
certain limitations under applicable laws. The future tax benefits of net operating loss carryforwards are evaluated on a
regular basis, including a review of historical and projected operating results.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions)
The tax effects of temporary differences representing deferred tax assets and liabilities are as follows:
75
2019
2018
At December 31,
Assets:
Accrued expenses
Net operating loss and tax credit carryforwards
Postretirement benefit plans
Allowance for losses on receivables
Goodwill and intangibles
Other
Valuation allowance
Liabilities:
Financial Services leasing depreciation
Depreciation and amortization
Postretirement benefit plans
Other
Net deferred tax liability
The balance sheet classification of the Company’s deferred tax assets and liabilities are as follows:
At December 31,
Truck, Parts and Other:
Other noncurrent assets, net
Other liabilities
Financial Services:
Other assets
Deferred taxes and other liabilities
Net deferred tax liability
2019
115.4
(5.3)
36.8
(737.4)
(590.5)
$
$
Cash paid for income taxes was $586.0, $607.6 and $661.4 in 2019, 2018 and 2017, respectively.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
Balance at January 1
Additions for tax positions related to the current year
Additions for tax positions related to prior years
Reductions related to settlements
Lapse of statute of limitations
Balance at December 31
$
2019
21.2
6.5
3.0
$
$
30.7
$
2018
22.9
11.2
(5.7)
(7.2)
21.2
$
$
203.5
132.0
4.9
31.4
18.7
103.3
493.8
(118.5)
375.3
(777.5)
(159.4)
(28.9)
(965.8)
(590.5)
$
179.4
112.1
30.7
24.2
102.0
448.4
(118.3)
330.1
(676.4)
(145.2)
(8.0)
(32.9)
(862.5)
(532.4)
2018
97.1
(2.5)
37.7
(664.7)
(532.4)
2017
17.3
5.6
$
$
$
$
$
22.9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions)
76
The Company had $30.7, $21.2 and $22.9 of unrecognized tax benefits, of which $28.4, $18.9 and $16.8 would impact
the effective tax rate, if recognized, as of December 31, 2019, 2018 and 2017, respectively.
The Company recognized $.8, $(.1) and $.2 of expense (income) related to interest in 2019, 2018 and 2017,
respectively. Accrued interest expense and penalties were $1.9, $1.1 and $1.1 as of December 31, 2019, 2018 and 2017,
respectively. Interest and penalties are classified as income taxes in the Consolidated Statements of Income.
The Company believes it is reasonably possible that approximately $7.9 of unrecognized tax benefits, resulting
primarily from research and development tax credits, will be resolved within the next twelve months. As of December 31,
2019, the United States Internal Revenue Service has completed examinations of the Company’s tax returns for all
years through 2014. The Company’s tax returns for other major jurisdictions remain subject to examination for the
years ranging from 2011 through 2019.
O . S T O C K H O L D E R S ’ E Q U I T Y
Accumulated Other Comprehensive Income (Loss): The components of AOCI and the changes in AOCI, net of tax, included
in the Consolidated Balance Sheets and the Consolidated Statements of Stockholders’ Equity, consisted of the following:
Balance at January 1, 2019
Recorded into AOCI
Reclassified out of AOCI
Net other comprehensive
(loss) income
Balance at December 31, 2019
Balance at January 1, 2018
Recorded into AOCI
Reclassified out of AOCI
Net other comprehensive
income (loss)
Reclassifications to retained
earnings in accordance
with ASU 2018-02
Balance at December 31, 2018
$
derivative
contracts
marketable
debt securities
$
$
2.0
(57.0)
39.7
(17.3)
(15.3)
$
$
(2.3)
8.7
(.3)
8.4
6.1
derivative
contracts
marketable
debt securities
$
1.2
90.9
(90.5)
$
(1.8)
.1
(.1)
pension
plans
(477.8)
(56.8)
16.9
(39.9)
(517.7)
pension
plans
(375.6)
(86.8)
28.0
foreign
currency
translation
(620.4)
47.2
total
$ (1,098.5)
(57.9)
56.3
47.2
(573.2)
(1.6)
$ (1,100.1)
foreign
currency
translation
$
(417.4)
(213.3)
$
total
(793.6)
(209.1)
(62.6)
.4
.4
2.0
(.5)
(2.3)
$
(58.8)
(213.3)
(271.7)
(43.4)
(477.8)
10.3
(620.4)
$
(33.2)
$ (1,098.5)
Balance at January 1, 2017
Recorded into AOCI
Reclassified out of AOCI
Net other comprehensive
income (loss)
Balance at December 31, 2017
derivative
contracts
marketable
debt securities
$
$
(4.3)
(91.6)
97.1
5.5
1.2
$
$
(.3)
(1.1)
(.4)
(1.5)
(1.8)
pension
plans
(414.1)
20.4
18.1
38.5
(375.6)
foreign
currency
translation
(709.4)
292.0
total
$ (1,128.1)
219.7
114.8
292.0
(417.4)
334.5
(793.6)
$
$
$
$
$
$
$
$
$
$
$
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions)
Reclassifications out of AOCI during the years ended December 31, 2019, 2018 and 2017 were as follows:
77
aoci components
Unrealized losses and (gains) on derivative contracts:
Truck, Parts and Other
line item in the consolidated statements
of income
Foreign-exchange contracts
Net sales and revenues
Cost of sales and revenues
Interest and other (income), net
$
Financial Services
Interest-rate contracts
Interest and other borrowing expenses
Pre-tax expense increase (reduction)
Tax (benefit) expense
After-tax expense increase (reduction)
Unrealized gains on marketable debt securities:
Marketable debt securities
Investment income
Tax expense
After-tax income increase
Unrealized losses on pension plans:
Truck, Parts and Other
Actuarial loss
Prior service costs
Interest and other (income), net
Interest and other (income), net
Pre-tax expense increase
Tax benefit
After-tax expense increase
Total reclassifications out of AOCI
$
amount reclassified out of aoci
2019
2018
2017
21.2
(4.1)
2.1
32.5
51.7
(12.0)
39.7
(.4)
.1
(.3)
20.5
1.4
21.9
(5.0)
16.9
56.3
$
$
5.4
(6.6)
(1.6)
12.1
3.9
1.8
(118.7)
(121.5)
31.0
(90.5)
(.2)
.1
(.1)
115.6
133.4
(36.3)
97.1
(.6)
.2
(.4)
35.3
25.4
1.4
36.7
(8.7)
28.0
(62.6)
$
1.2
26.6
(8.5)
18.1
114.8
$
Other Capital Stock Changes: The Company purchased and retired treasury shares of 1.7, 5.8 and nil million in 2019,
2018 and 2017, respectively.
P.
D E R I VAT I V E F I N A N C I A L I N S T R U M E N T S
As part of its risk management strategy, the Company enters into derivative contracts to hedge against interest rate
and foreign currency risk.
Interest-Rate Contracts: The Company enters into various interest-rate contracts, including interest-rate swaps and
cross currency interest-rate swaps. Interest-rate swaps involve the exchange of fixed for floating rate or floating for
fixed rate interest payments based on the contractual notional amounts in a single currency. Cross currency interest-
rate swaps involve the exchange of notional amounts and interest payments in different currencies. The Company is
exposed to interest-rate and exchange-rate risk caused by market volatility as a result of its borrowing activities. The
objective of these contracts is to mitigate the fluctuations on earnings, cash flows and fair value of borrowings. Net
amounts paid or received are reflected as adjustments to interest expense.
At December 31, 2019, the notional amount of the Company’s interest-rate contracts was $3,196.7. Notional maturities
for all interest-rate contracts are $612.2 for 2020, $1,200.3 for 2021, $864.4 for 2022, $286.8 for 2023, $151.9 for 2024
and $81.1 thereafter.
Foreign-Exchange Contracts: The Company enters into foreign-exchange contracts to hedge certain anticipated
transactions and assets and liabilities denominated in foreign currencies, particularly the Canadian dollar, the euro, the
British pound, the Australian dollar, the Brazilian real and the Mexican peso. The objective is to reduce fluctuations in
earnings and cash flows associated with changes in foreign currency exchange rates. The Company enters into foreign-
exchange contracts as net investment hedges to reduce the foreign currency exposure from its investments in foreign
subsidiaries. At December 31, 2019, the notional amount of the outstanding foreign-exchange contracts was $1,035.1.
Foreign-exchange contracts mature within one year.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions)
78
The following table presents the balance sheet classification, fair value, gross and pro forma net amounts of derivative
financial instruments:
At December 31,
Derivatives designated under hedge accounting:
Interest-rate contracts:
Financial Services:
Other assets
Deferred taxes and other liabilities
Foreign-exchange contracts:
Truck, Parts and Other:
Other current assets
Accounts payable, accrued expenses and other
Derivatives not designated as hedging instruments:
Foreign-exchange contracts:
Truck, Parts and Other:
Other current assets
Accounts payable, accrued expenses and other
Financial Services:
Other assets
Deferred taxes and other liabilities
Gross amounts recognized in Balance Sheet
Less amounts not offset in financial instruments:
Truck, Parts and Other:
Foreign-exchange contracts
Financial Services:
Interest-rate contracts
Pro forma net amount
2019
2018
assets
liabilities
assets
liabilities
$ 45.8
$ 84.5
$ 31.0
$ 18.5
10.1
$ 55.9
9.2
$ 40.2
8.9
$ 93.4
4.2
$ 22.7
$
.4
$
.4
$ 1.8
2.3
$ 4.1
$
.4
.9
$
1.3
$
.9
1.0
$ 1.9
$ 56.3
$ 44.3
$ 94.7
$ 24.6
(.4)
(.4)
(.9)
(.9)
(8.6)
$ 47.3
(8.6)
$ 35.3
(3.9)
$ 89.9
(3.9)
$ 19.8
The following table presents the amount of expense (income) from derivative financial instruments recognized
in the Consolidated Statements of Income:
Year Ended December 31,
Truck, Parts and Other:
Cash flow hedges
Net investment hedge
Total
Financial Services:
Fair value hedges
Cash flow hedges
Total
2019
2018
2017
$ 19.2
4.6
$ 23.8
$
1.5
32.5
$ 34.0
$ (2.8)
$ 17.8
$ (2.8)
$ 17.8
$
1.8
(118.7)
$(116.9)
$
.8
115.6
$ 116.4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions)
Fair Value Hedges
Changes in the fair value of derivatives designated as fair value hedges are recorded in earnings together with the
changes in fair value of the hedged item attributable to the risk being hedged. The following table presents the
amounts recorded on the Consolidated Balance Sheets related to cumulative basis adjustments for fair value hedges:
79
At December 31,
Financial Services
Term notes:
Carrying amount of hedged liabilities
Cumulative basis adjustment included in the carrying amount
2019
2018
$
90.5
(.5)
$
188.7
(1.3)
The above table excludes the cumulative basis adjustments on discounted hedge relationships of $(1.5) and $(2.9) as of
December 31, 2019 and 2018, respectively.
Cash Flow Hedges
Substantially all of the Company’s interest-rate contracts and some foreign-exchange contracts have been designated as
cash flow hedges. Changes in the fair value of derivatives designated as cash flow hedges are recorded in AOCI. Amounts
in AOCI are reclassified into net income in the same period in which the hedged transaction affects earnings. The
maximum length of time over which the Company is hedging its exposure to the variability in future cash flows is 8.5
years.
The following table presents the pre-tax effects of derivative instruments recognized in other comprehensive income
(loss) (OCI):
Year Ended December 31,
2019
2018
2017
(Loss) gain recognized in OCI:
Truck, Parts and Other
Financial Services
interest-
rate
contracts
foreign-
exchange
contracts
interest-
rate
contracts
foreign-
exchange
contracts
interest-
rate
contracts
foreign-
exchange
contracts
$
(31.7)
$
$
(44.4)
(44.4) $
$
(31.7) $
117.1
117.1
$
$
4.5
4.5
$
(17.4)
$ (108.1)
$ (108.1) $
(17.4)
The amount of gain recorded in AOCI at December 31, 2019 that is estimated to be reclassified into earnings in the
following 12 months if interest rates and exchange rates remain unchanged is approximately $2.7, net of taxes. The
fixed interest earned on finance receivables will offset the amount recognized in interest expense, resulting in a stable
interest margin consistent with the Company’s risk management strategy.
The amount of gains or losses reclassified out of AOCI into net income based on the probability that the original
forecasted transactions would not occur was nil for the years ended December 31, 2019, 2018 and 2017.
Net Investment Hedges
Changes in the fair value of derivatives designated as net investment hedges are recorded in AOCI as an adjustment to
the Cumulative Translation Adjustment (CTA). At December 31, 2019, the notional amount of the outstanding net
investment hedges was $348.2. For the year ended December 31, 2019 the pre-tax gain recognized in OCI for the net
investment hedges was $5.3.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions)
80
Derivatives Not Designated As Hedging Instruments
For other risk management purposes, the Company enters into derivative instruments that do not qualify for hedge
accounting. These derivative instruments are used to mitigate the risk of market volatility arising from borrowings and
foreign currency denominated transactions. Changes in the fair value of derivatives not designated as hedging
instruments are recorded in earnings in the period in which the change occurs.
The expense (income) recognized in earnings related to derivatives not designated as hedging instruments was as
follows:
Year Ended December 31,
2019
2018
2017
interest-
rate
contracts
foreign-
exchange
contracts
interest-
rate
contracts
foreign-
exchange
contracts
interest-
rate
contracts
foreign-
exchange
contracts
Truck, Parts and Other:
Cost of sales and revenues
Interest and other (income), net
Financial Services:
Interest and other borrowing expenses
Selling, general and administrative
$
$
.5
5.4
(10.1)
.1
(4.1)
$
$
(.3)
6.9
$
(14.9) $
1.7
(6.6) $
(.1)
(.1) $
.3
2.1
49.1
.5
52.0
Q . F A I R VA L U E M E A S U R E M E N T S
Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Inputs to valuation techniques used to measure fair value are either
observable or unobservable. These inputs have been categorized into the fair value hierarchy described below.
Level 1 – Valuations are based on quoted prices that the Company has the ability to obtain in actively traded
markets for identical assets or liabilities. Since valuations are based on quoted prices that are readily and regularly
available in an active market or exchange traded market, valuation of these instruments does not require a
significant degree of judgment.
Level 2 – Valuations are based on quoted prices for similar instruments in active markets, quoted prices for
identical or similar instruments in markets that are not active, and model-based valuation techniques for which
all significant assumptions are observable in the market.
Level 3 – Valuations are based on model-based techniques for which some or all of the assumptions are obtained
from indirect market information that is significant to the overall fair value measurement and which require a
significant degree of management judgment.
There were no transfers of assets or liabilities between Level 1 and Level 2 of the fair value hierarchy during the year ended
December 31, 2019. The Company’s policy is to recognize transfers between levels at the end of the reporting period.
The Company uses the following methods and assumptions to measure fair value for assets and liabilities subject to
recurring fair value measurements.
Marketable Securities: The Company’s marketable debt securities consist of municipal bonds, government obligations,
investment-grade corporate obligations, commercial paper, asset-backed securities and term deposits. The fair value of
U.S. government obligations is determined using the market approach and is based on quoted prices in active markets
and are categorized as Level 1.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions)
The fair value of U.S. government agency obligations, non-U.S. government bonds, municipal bonds, corporate bonds,
asset-backed securities, commercial paper and term deposits is determined using the market approach and is primarily
based on matrix pricing as a practical expedient which does not rely exclusively on quoted prices for a specific security.
Significant inputs used to determine fair value include interest rates, yield curves, credit rating of the security and
other observable market information and are categorized as Level 2.
81
Derivative Financial Instruments: The Company’s derivative contracts consist of interest-rate swaps, cross currency
swaps and foreign currency exchange contracts. These derivative contracts are traded over the counter and their fair
value is determined using industry standard valuation models, which are based on the income approach (i.e.,
discounted cash flows). The significant observable inputs into the valuation models include interest rates, yield curves,
currency exchange rates, credit default swap spreads and forward rates and are categorized as Level 2.
Assets and Liabilities Subject to Recurring Fair Value Measurement
The Company’s assets and liabilities subject to recurring fair value measurements are either Level 1 or Level 2 as follows:
At December 31, 2019
Assets:
Marketable debt securities
U.S. tax-exempt securities
U.S. corporate securities
U.S. government and agency securities
Non-U.S. corporate securities
Non-U.S. government securities
Other debt securities
Total marketable debt securities
Derivatives
Cross currency swaps
Interest-rate swaps
Foreign-exchange contracts
Total derivative assets
Liabilities:
Derivatives
Cross currency swaps
Interest-rate swaps
Foreign-exchange contracts
Total derivative liabilities
level 1
level 2
total
$
128.4
$
128.4
$
320.2
165.7
.9
349.8
72.4
124.7
$ 1,033.7
$
$
$
$
43.8
2.0
10.5
56.3
13.5
17.5
13.3
44.3
$
320.2
165.7
129.3
349.8
72.4
124.7
$ 1,162.1
$
$
$
$
43.8
2.0
10.5
56.3
13.5
17.5
13.3
44.3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions)
82
At December 31, 2018
Assets:
Marketable debt securities
U.S. tax-exempt securities
U.S. corporate securities
U.S. government and agency securities
Non-U.S. corporate securities
Non-U.S. government securities
Other debt securities
Total marketable debt securities
Derivatives
Cross currency swaps
Interest-rate swaps
Foreign-exchange contracts
Total derivative assets
Liabilities:
Derivatives
Cross currency swaps
Interest-rate swaps
Foreign-exchange contracts
Total derivative liabilities
level 1
level 2
total
$
97.1
$
97.1
$
$
$
$
$
$
325.1
147.4
1.6
271.3
55.9
122.0
923.3
75.4
9.1
10.2
94.7
11.2
7.3
6.1
24.6
$
325.1
147.4
98.7
271.3
55.9
122.0
$ 1,020.4
$
$
$
$
75.4
9.1
10.2
94.7
11.2
7.3
6.1
24.6
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, 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:
At December 31,
2019
2018
carrying
amount
fair
value
carrying
amount
fair
value
Assets:
Financial Services fixed rate loans
$ 4,914.4
$ 4,992.2
$ 4,265.4
$ 4,269.5
Liabilities:
Financial Services fixed rate debt
5,925.9
5,990.7
5,419.2
5,396.4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions)
R .
S T O C K C O M P E N S AT I O N P L A N S
83
PACCAR has certain plans under which officers and key employees may be granted options to purchase shares of the
Company’s authorized but unissued common stock under plans approved by stockholders. Non employee directors
and certain officers may be granted restricted shares of the Company’s common stock under plans approved by
stockholders. Options outstanding under these plans were granted with exercise prices equal to the fair market value
of the Company’s common stock at the date of grant. Options expire no later than ten years from the grant date and
generally vest after three years. Restricted stock awards generally vest over three years or earlier upon meeting certain
age and service requirements.
The Company recognizes compensation cost on these options and restricted stock awards on a straight-line basis
over the requisite period the employee is required to render service less estimated forfeitures based on historical
experience. The maximum number of shares of the Company’s common stock authorized for issuance under these
plans is 46.7 million shares, and as of December 31, 2019, the maximum number of shares available for future grants
was 12.5 million.
The estimated fair value of each option award is determined on the date of grant using the Black-Scholes-Merton
option pricing model that uses assumptions noted in the following table. The risk-free interest rate is based on the
U.S. Treasury yield curve in effect at the time of grant. Expected volatility is based on historical volatility. The
dividend yield is based on an estimated future dividend yield using projected net income for the next five years,
implied dividends and Company stock price. The expected term is based on the period of time that options granted
are expected to be outstanding based on historical experience.
Risk-free interest rate
Expected volatility
Expected dividend yield
Expected term
Weighted average grant date fair value of options per share
2019
2.55%
23%
4.9%
6 years
$ 8.26
2018
2.64%
23%
3.8%
6 years
$ 10.67
2017
1.97%
23%
3.1%
5 years
$ 10.56
The fair value of options granted was $7.3, $6.3 and $6.4 for the years ended December 31, 2019, 2018 and 2017,
respectively. The fair value of options vested during the years ended December 31, 2019, 2018 and 2017 was $5.8, $5.3
and $5.2, respectively.
A summary of activity under the Company’s stock plans is presented below:
Intrinsic value of options exercised
Cash received from stock option exercises
Tax benefit related to stock award exercises
Stock-based compensation
Tax benefit related to stock-based compensation
$
2019
31.9
60.9
3.8
15.1
1.9
$
2018
13.4
19.7
2.4
13.2
1.9
$
2017
22.0
40.0
4.9
12.7
4.6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions, except per share data)
84
The summary of options as of December 31, 2019 and changes during the year then ended are presented below:
Options outstanding at January 1
Granted
Exercised
Cancelled
Options outstanding at December 31
Vested and expected to vest
Exercisable
* Weighted Average
number
of shares
4,090,900
883,600
(1,288,800)
(197,400)
3,488,300
3,401,100
1,792,800
per share
exercise
price*
remaining
contractual
life in years*
aggregate
intrinsic
value
$
$
$
$
55.32
65.56
47.47
66.60
60.18
60.01
53.71
6.22
6.15
4.28
$ 66.0
$ 64.9
$ 45.5
The fair value of restricted shares is determined based upon the stock price on the date of grant. The summary of
nonvested restricted shares as of December 31, 2019 and changes during the year then ended is presented below:
nonvested shares
Nonvested awards outstanding at January 1
Granted
Vested
Nonvested awards outstanding at December 31
* Weighted Average
number
of shares
189,500
147,100
(186,100)
150,500
grant date
fair value*
$ 63.85
64.34
62.56
$ 65.92
As of December 31, 2019, there was $5.8 of total unrecognized compensation cost related to nonvested stock options,
which is recognized over a remaining weighted average vesting period of 1.50 years. Unrecognized compensation cost
related to nonvested restricted stock awards of $2.1 is expected to be recognized over a remaining weighted average
vesting period of 1.37 years.
The dilutive and antidilutive options are shown separately in the table below:
Year Ended December 31,
Additional shares
Antidilutive options
2019
621,300
1,489,400
2018
785,100
1,176,600
2017
1,038,400
696,400
S .
S E G M E N T A N D R E L AT E D I N F O R M AT I O N
PACCAR operates in three principal segments: Truck, Parts and Financial Services. The Company evaluates the
performance of its Truck and Parts segments based on operating profits, which excludes investment income, other
income and expense, and income taxes. The Financial Services segment’s performance is evaluated based on income
before income taxes. Geographic revenues from external customers are presented based on the country of the
customer. The accounting policies of the reportable segments are the same as those applied in the consolidated
financial statements as described in Note A.
Truck and Parts: The Truck segment includes the design and manufacture of high-quality, light-, medium- and heavy-
duty commercial trucks and the Parts segment includes the distribution of aftermarket parts for trucks and related
commercial vehicles, both of which are sold through the same network of independent dealers. These segments derive
a large proportion of their revenues and operating profits from operations in North America and Europe. The Truck
segment incurs substantial costs to design, manufacture and sell trucks to its customers. The sale of new trucks
provides the Parts segment with the basis for parts sales that may continue over the life of the truck, but are generally
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions, except per share data)
concentrated in the first five years after truck delivery. To reflect the benefit the Parts segment receives from costs
incurred by the Truck segment, certain expenses are allocated from the Truck segment to the Parts segment. The
expenses allocated are based on a percentage of the average annual expenses for factory overhead, engineering, research
and development and SG&A expenses for the preceding five years. The allocation is based on the ratio of the average
parts direct margin dollars (net sales less material and labor costs) to the total truck and parts direct margin dollars
for the previous five years. The Company believes such expenses have been allocated on a reasonable basis. Truck
segment assets related to the indirect expense allocation are not allocated to the Parts segment.
85
Financial Services: The Financial Services segment derives its earnings primarily from financing or leasing of PACCAR
products and services provided to truck customers and dealers. Revenues are primarily generated from operations in
North America and Europe.
In Europe, the Financial Services and Truck segments centralized the marketing of used trucks, including those units
sold by the Truck segment subject to an RVG. Beginning in the fourth quarter of 2019, when a customer returns the
truck at the end of the RVG contract, the Company’s Truck segment records a reduction in an RVG liability and the
Company’s Financial Services segment records a used truck asset and revenue from the subsequent sale. Certain gains
and losses from the sale of these used trucks are shared with the Truck segment. Revenue from the sale of used trucks
from the Truck segment in Europe in prior periods are immaterial.
Other: Included in Other is the Company’s industrial winch manufacturing business as well as sales, income and
expense not attributable to a reportable segment. Other also includes non-service cost components of pension expense
and a portion of corporate expenses. Intercompany interest income (expense) on cash advances to the financial
services companies is included in Other and was $.3, $(.3) and nil for 2019, 2018 and 2017, respectively.
Geographic Area Data
Net sales and revenues:
United States
Europe
Other
Property, plant and equipment, net:
United States
The Netherlands
Belgium
Other
Equipment on operating leases, net:
United States
Germany
Mexico
France
Spain
Poland
United Kingdom
Other
2019
2018
2017
$ 15,119.3
6,104.7
4,375.7
$ 25,599.7
$ 1,556.4
399.8
395.7
531.9
$ 2,883.8
$ 1,390.1
358.3
320.5
315.0
276.1
272.8
113.6
601.7
$ 3,648.1
$ 13,165.7
6,071.9
4,258.1
$ 23,495.7
$ 1,353.8
397.8
237.4
491.9
$ 2,480.9
$ 1,405.1
361.0
306.4
246.8
249.8
237.9
130.3
704.3
$ 3,641.6
$ 10,530.1
5,354.6
3,571.7
$ 19,456.4
$ 1,238.1
464.5
259.7
502.1
$ 2,464.4
$ 1,530.8
385.1
316.1
210.7
207.6
172.8
343.1
975.8
$ 4,142.0
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions)
86
Business Segment Data
Net sales and revenues:
Truck
Less intersegment
External customers
Parts
Less intersegment
External customers
Other
Financial Services
Income (loss) before income taxes:
Truck
Parts
Other
Financial Services
Investment income
Depreciation and amortization:
Truck
Parts
Other
Financial Services
Expenditures for long-lived assets:
Truck
Parts
Other
Financial Services
Segment assets:
Truck
Parts
Other
Cash and marketable securities
Financial Services
2019
2018
2017
$ 20,403.5
(414.0)
19,989.5
$ 18,863.1
(676.1)
18,187.0
$ 15,543.7
(768.9)
14,774.8
4,073.1
(48.2)
4,024.9
105.3
24,119.7
1,480.0
$ 25,599.7
$ 1,904.9
830.8
(17.7)
2,718.0
298.9
82.3
$ 3,099.2
$
381.9
10.2
20.3
412.4
664.9
$ 1,077.3
$
664.9
46.2
51.0
762.1
1,378.6
$ 2,140.7
$ 5,609.0
1,172.1
339.2
5,169.4
12,289.7
16,071.4
$ 28,361.1
3,896.2
(57.3)
3,838.9
3,380.2
(53.2)
3,327.0
112.7
22,138.6
1,357.1
$ 23,495.7
$ 1,672.1
768.6
2.7
2,443.4
305.9
60.9
$ 2,810.2
$
406.2
9.2
18.4
433.8
620.3
$ 1,054.1
$
778.5
29.4
38.8
846.7
1,085.1
$ 1,931.8
$ 5,347.3
1,090.9
345.0
4,299.6
11,082.8
14,399.6
$ 25,482.4
85.7
18,187.5
1,268.9
$ 19,456.4
$ 1,253.8
610.0
12.5
1,876.3
261.7
35.3
$ 2,173.3
$
468.2
8.1
18.1
494.4
613.1
$ 1,107.5
$
769.7
23.4
54.0
847.1
1,008.0
$ 1,855.1
$ 5,159.7
950.7
505.6
3,621.9
10,237.9
13,202.3
$ 23,440.2
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2019, 2018 and 2017 (currencies in millions)
M A N A G E M E N T ’ S R E P O R T O N I N T E R N A L C O N T R O L O V E R
F I N A N C I A L R E P O R T I N G
87
The management of PACCAR Inc (the Company) is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles.
Internal control over financial reporting may not prevent or detect misstatements because of its inherent
limitations. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies and
procedures may deteriorate.
Management assessed the Company’s internal control over financial reporting as of December 31, 2019, based
on criteria for effective internal control over financial reporting described in Internal Control–Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).
Based on this assessment, management concluded that the Company maintained effective internal control over
financial reporting as of December 31, 2019.
Ernst & Young LLP, the Independent Registered Public Accounting Firm that audited the financial statements
included in this Annual Report, has issued an attestation report on the Company’s internal control over financial
reporting. The attestation report is included on page 89.
R. Preston Feight
Chief Executive Officer
R E P O R T O F I N D E P E N D E N T R E G I S T E R E D P U B L I C A C C O U N T I N G F I R M
To the Stockholders and the Board of Directors of PACCAR Inc
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of PACCAR Inc (the Company) as of December 31, 2019 and
2018, the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of
the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the “consolidated
financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) and our report dated February 19, 2020, expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of
the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for
our opinion.
R E P O R T O F I N D E P E N D E N T R E G I S T E R E D P U B L I C A C C O U N T I N G F I R M
88
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relates to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective or complex judgments. The communication of the critical audit matter does not alter in any way our
opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical
audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to
which it relates.
Product Warranty
Description of
the Matter
The Company’s liability for product warranty totaled $440 million at December 31, 2019. As
discussed in Note A of the consolidated financial statements, the Company’s liability for
product warranty is estimated and recorded at the time products are sold based on historical
and current data and reasonable expectations for the future regarding the frequency and cost of
warranty claims, net of recoveries. The Company periodically assesses the adequacy of its
recorded liabilities and adjusts them as appropriate to reflect actual experience.
Auditing the Company’s liability for product warranty is complex due to the significant
measurement uncertainty associated with the estimate and the application of significant
management judgment, including the inputs used to estimate the number of and cost of future
warranty claims. In addition, management formulates an estimate of recoveries from suppliers.
How We
Addressed
the Matter
in Our Audit
To evaluate the liability for product warranty, our audit procedures included, among others,
testing the completeness and accuracy of the underlying claims, supplier recovery data and
evaluating the methodologies and assumptions used in the warranty accrual calculation. We
also assessed the historical accuracy of management’s estimates through a hindsight analysis. We
evaluated and tested the design and operating effectiveness of internal controls over the
warranty reserve process, including management’s assessment of the assumptions and data
underlying the reserve.
We have served as the Company’s auditor since 1945
Seattle, Washington
February 19, 2020
R E P O R T O F I N D E P E N D E N T R E G I S T E R E D P U B L I C A C C O U N T I N G F I R M
To the Stockholders and the Board of Directors of PACCAR Inc
89
Opinion on Internal Control Over Financial Reporting
We have audited PACCAR Inc’s internal control over financial reporting as of December 31, 2019, based on criteria
established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) (the COSO criteria). In our opinion, PACCAR Inc (the Company)
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019,
based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2019 and 2018, the
related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of
the three years in the period ended December 31, 2019, and the related notes and our report dated February 19,
2020, expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion
on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design
and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as
we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Seattle, Washington
February 19, 2020
S E L E C T E D F I N A N C I A L D A T A
90
2019
2018
2017
2016
2015
(millions except per share data)
Truck, Parts and Other Net Sales and Revenues
Financial Services Revenues
Total Revenues
$ 24,119.7
1,480.0
$ 25,599.7
$ 22,138.6
1,357.1
$ 23,495.7
$ 18,187.5
1,268.9
$ 19,456.4
$ 15,846.6
1,186.7
$ 17,033.3
$ 17,942.8
1,172.3
$ 19,115.1
Net Income
Adjusted Net Income*
Net Income Per Share:
Basic
Diluted
Adjusted Diluted*
Cash Dividends Declared Per Share
Total Assets:
Truck, Parts and Other
Financial Services
Financial Services Debt
Stockholders’ Equity
$ 2,387.9
$ 2,195.1
$ 1,675.2
1,501.8
$
521.7
1,354.7
$ 1,604.0
6.88
6.87
3.58
6.25
6.24
3.09
4.76
4.75
4.26
2.19
1.49
1.48
3.85
1.56
4.52
4.51
2.32
12,289.7
16,071.4
11,222.7
9,706.1
11,082.8
14,399.6
9,950.5
8,592.9
10,237.9
13,202.3
8,879.4
8,050.5
8,444.1
12,194.8
8,475.2
6,777.6
8,855.2
12,254.6
8,591.5
6,940.4
*
See Reconciliation of GAAP to Non-GAAP Financial Measures.
R E C O N C I L I AT I O N O F G A A P T O N O N - G A A P F I N A N C I A L M E A S U R E S :
This annual report includes “adjusted net income (non-GAAP)” and “adjusted net income per diluted share (non-
GAAP)”, which are financial measures that are not in accordance with U.S. generally accepted accounting principles
(“GAAP”), since they exclude the one-time tax benefit from the Tax Cuts and Jobs Act (“the Tax Act”) in 2017 and the
non-recurring European Commission charge in 2016. 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.
Management utilizes these non-GAAP measures to evaluate the Company’s performance and believes these measures
allow investors and management to evaluate operating trends by excluding significant non-recurring items that are not
representative of underlying operating trends.
Reconciliations from the most directly comparable GAAP measures of adjusted net income (non-GAAP) and adjusted
net income per diluted share (non-GAAP) are as follows:
($ in millions, except per share amounts)
Year Ended December 31,
Net income
One-time tax benefit from the Tax Act
Non-recurring European Commission charge
Adjusted net income (non-GAAP)
Per diluted share:
Net income
One-time tax benefit from the Tax Act
Non-recurring European Commission charge
Adjusted net income (non-GAAP)
2017
$ 1,675.2
(173.4)
$ 1,501.8
2016
521.7
$
833.0
$ 1,354.7
$
$
4.75
(.49)
$
1.48
4.26
$
2.37
3.85
Q U A R T E R L Y R E S U L T S ( U N A U D I T E D )
quarter
first
second
third
fourth
91
(millions except per share data)
2019
Truck, Parts and Other:
Net sales and revenues
Cost of sales and revenues
Research and development
Financial Services:
Revenues
Interest and other borrowing expenses
Depreciation and other expenses
Net Income
Net Income Per Share:
Basic
Diluted
2018
Truck, Parts and Other:
Net sales and revenues
Cost of sales and revenues
Research and development
Financial Services:
Revenues
Interest and other borrowing expenses
Depreciation and other expenses
Net Income
Net Income Per Share:
Basic
Diluted
$ 6,138.1
$ 6,266.5
$ 6,004.2
$ 5,710.9
5,217.1
5,341.7
5,106.8
4,890.0
78.3
82.5
82.2
83.6
349.5
53.4
177.4
629.0
361.4
60.0
183.6
619.7
362.8
59.6
195.3
607.9
406.3
57.5
241.9
531.3
$
1.81
1.81
$
$
1.79
1.78
1.75
1.75
$
1.53
1.53
$ 5,321.8
$ 5,467.2
$ 5,416.9
$ 5,932.7
4,535.5
76.0
4,647.3
76.7
4,653.6
72.9
5,088.6
80.5
332.2
41.3
186.4
512.1
338.0
45.7
185.5
559.6
339.9
49.0
178.5
545.3
347.0
50.9
177.6
578.1
$
$
1.45
1.45
$
1.59
1.59
1.55
1.55
$
1.66
1.65
M A R K E T R I S K S A N D D E R I V A T I V E I N S T R U M E N T S
(currencies in millions)
92
Interest-Rate Risks - See Note P for a description of the Company’s hedging programs and exposure to interest rate
fluctuations. The Company measures its interest-rate risk by estimating the amount by which the fair value of
interest-rate sensitive assets and liabilities, including derivative financial instruments, would change assuming
an immediate 100 basis point increase across the yield curve as shown in the following table:
Fair Value (Losses) Gains
C O N S O L I D AT E D :
Assets
Cash equivalents and marketable debt securities
F I N A N C I A L S E RV I C E S:
Assets
Fixed rate loans
Liabilities
Fixed rate term debt
Interest-rate swaps
Total
2019
2018
$
(19.5)
$
(15.9)
(94.4)
(79.2)
113.3
13.9
13.3
$
95.7
16.3
16.9
$
Currency Risks - The Company enters into foreign currency exchange contracts to hedge its exposure to exchange rate
fluctuations of foreign currencies, particularly the Canadian dollar, the euro, the British pound, the Australian dollar,
the Brazilian real and the Mexican peso (see Note P for additional information concerning these hedges). Based on the
Company’s sensitivity analysis, the potential loss in fair value for such financial instruments from a 10% unfavorable
change in quoted foreign currency exchange rates would be a loss of $128.0 related to contracts outstanding at
December 31, 2019, compared to a loss of $101.2 at December 31, 2018. These amounts would be largely offset by
changes in the values of the underlying hedged exposures.
C O M M O N S T O C K M A R K E T P R I C E S A N D D I V I D E N D S
Common stock of the Company is traded on the NASDAQ Global Select Market under the symbol PCAR. The table
below reflects the range of trading prices as reported by The NASDAQ Stock Market LLC and cash dividends declared.
There were 1,474 record holders of the common stock at December 31, 2019.
quarter
First
Second
Third
Fourth
Year-End Extra
2019
stock price
high
$70.35
73.00
72.86
83.41
low
$55.84
65.78
62.13
65.17
dividends
declared
$ .32
.32
.32
.32
2.30
2018
stock price
high
$79.69
71.58
72.89
70.76
low
$62.82
60.36
59.82
53.43
dividends
declared
$ .25
.28
.28
.28
2.00
The Company expects to continue paying regular cash dividends, although there is no assurance as to future dividends
because they are dependent upon future earnings, capital requirements and financial conditions.
93
O F F I C E R S A N D D I R E C T O R S
O F F I C E R S
Mark C. Pigott
Executive Chairman
R. Preston Feight
Chief Executive Officer
Kevin D. Baney
Vice President
David J. Danforth
Vice President
Harrie C.A.M. Schippers
President and Chief Financial Officer
Marco A. Davila
Vice President
Jason P. Skoog
Vice President
Landon J. Sproull
Vice President
George E. West, Jr.
Vice President
Gary L. Moore
Executive Vice President
Douglas S. Grandstaff
Vice President and General Counsel
Harry M.B. Wolters
Vice President
Michael T. Barkley
Senior Vice President and Controller
Craig R. Gryniewicz
Vice President
Michael K. Kuester
Assistant Vice President
C. Michael Dozier
Senior Vice President
T. Kyle Quinn
Senior Vice President and
Chief Technology Officer
Darrin C. Siver
Senior Vice President
Ronald R. Augustyn
Vice President
Todd R. Hubbard
Vice President
Jack K. LeVier
Vice President
A. Lily Ley
Vice President and
Chief Information Officer
Debra E. Poppas
Vice President
Ulrich Kammholz
Treasurer
Irene E. Song
Corporate Secretary
D I R E C T O R S
Mark C. Pigott
Executive Chairman
PACCAR Inc (3)
R. Preston Feight
Chief Executive Officer
PACCAR Inc
Dame Alison J. Carnwath
Senior Adviser
Evercore Partners (1, 4)
Franklin L. Feder
Former Chief Executive Officer
Alcoa Latin America & Caribbean
of Alcoa Inc. (1)
Beth E. Ford
President and Chief Executive Officer
Land O’Lakes, Inc. (2)
Kirk S. Hachigian
Former Non-Executive Chairman
JELD-WEN Holding, Inc. (2)
Roderick C. McGeary
Former Vice Chairman
KPMG LLP (1, 4)
John M. Pigott
Partner
Beta Business Ventures LLC (3)
Mark A. Schulz (Lead Director)
Retired President,
International Operations
Ford Motor Company (2, 4)
Gregory M. E. Spierkel
Former Chief Executive Officer
Ingram Micro Inc. (1, 2)
Charles R. Williamson
Former Chairman
Weyerhaeuser Company and
Former Chairman
Talisman Energy Inc. (3, 4)
C O M M I T T E E S O F T H E B O A R D
(1) Audit Committee
(2) Compensation Committee
(3) Executive Committee
(4) Nominating and Governance Committee
94
T R U C K S
Kenworth Truck Company
Division Headquarters:
10630 N.E. 38th Place
Kirkland, Washington 98033
Factories:
Chillicothe, Ohio
Renton, Washington
Peterbilt Motors Company
Division Headquarters:
1700 Woodbrook Street
Denton, Texas 76205
Factory:
Denton, Texas
PACCAR of Canada Ltd.
Markborough Place I
6711 Mississauga Road N.
Mississauga, Ontario
L5N 4J8 Canada
Factory:
Ste.-Thérèse, Quebec, Canada
Canadian Kenworth
Company
Division Headquarters:
Markborough Place I
6711 Mississauga Road N.
Mississauga, Ontario
L5N 4J8 Canada
Peterbilt of Canada
Division Headquarters:
Markborough Place I
6711 Mississauga Road N.
Mississauga, Ontario
L5N 4J8 Canada
DAF Caminhões Brasil
Indústria Ltda.
Avenida Senador Flávio
Carvalho Guimarães, 6000
Bairro Boa Vista
CEP 84072-190
Ponta Grossa, Paraná, Brasil
Factory:
Ponta Grossa, Paraná, Brasil
DAF Trucks N.V.
Hugo van der Goeslaan 1
P.O. Box 90065
5600 PT Eindhoven
The Netherlands
Factories:
Eindhoven, The Netherlands
Westerlo, Belgium
D I V I S I O N S A N D S U B S I D I A R I E S
Leyland Trucks Ltd.
Croston Road
Leyland, Preston
Lancashire PR26 6LZ
United Kingdom
Factory:
Leyland, Lancashire,
United Kingdom
Kenworth Mexicana,
S.A. de C.V.
Calzada Gustavo Vildósola
Castro 2000
Mexicali, Baja California
Mexico
Factory:
Mexicali, Baja California
Mexico
PACCAR
Australia Pty. Ltd.
Kenworth Trucks
Division Headquarters:
64 Canterbury Road
Bayswater, Victoria 3153
Australia
Factory:
Bayswater, Victoria, Australia
T R U C K P A R T S
A N D S U P P L I E S
PACCAR Engine Company
1000 PACCAR Drive
Columbus, Mississippi 39701
Factory:
Columbus, Mississippi
PACCAR Parts
Division Headquarters:
750 Houser Way N.
Renton, Washington 98057
Distribution Centers:
Atlanta, Georgia
Bayswater, Australia
Brisbane, Australia
Budapest, Hungary
Eindhoven, The Netherlands
Lancaster, Pennsylvania
Las Vegas, Nevada
Leyland, United Kingdom
Madrid, Spain
Montreal, Canada
Moscow, Russia
Oklahoma City, Oklahoma
Panama City, Panama
Ponta Grossa, Brasil
Renton, Washington
Rockford, Illinois
San Luis Potosí, Mexico
Toronto, Canada
Dynacraft
Division Headquarters:
3490 Redbud Blvd,
McKinney, TX 75069
Factories:
Algona, Washington
Louisville, Kentucky
McKinney, Texas
W I N C H E S
PACCAR Winch Division
Division Headquarters:
800 E. Dallas Street
Broken Arrow, Oklahoma
74012
Factories:
Broken Arrow, Oklahoma
Okmulgee, Oklahoma
P R O D U C T T E S T I N G ,
R E S E A R C H A N D
D E V E L O P M E N T
PACCAR Technical Center
12479 Farm to Market Road
Mount Vernon, Washington
98273
DAF Trucks Test Center
Weverspad 2
5491 RL St. Oedenrode
The Netherlands
PACCAR Innovation Center
1277 Reamwood Ave
Sunnyvale, CA 94089
PACCAR India Technical
Center
IT3, 3rd Floor,
Blue Ridge SEZ, S 123,
Rajiv Gandhi Info Tech Park
Hinjewadi, Phase -1, Pune
Maharashtra, 411057 India
P A C C A R F I N A N C I A L
S E R V I C E S G R O U P
PACCAR Financial Corp.
PACCAR Building
777 106th Avenue N.E.
Bellevue, Washington 98004
PACCAR Leasing Company
Division of PACCAR
Financial Corp.
PACCAR Building
777 106th Avenue N.E.
Bellevue, Washington 98004
PACCAR Financial
Europe B.V.
Hugo van der Goeslaan 1
P.O. Box 90065
5600 PT Eindhoven
The Netherlands
PACCAR Financial
México, S.A. de C.V.
Calzada Gustavo Vildósola
Castro 2000
Mexicali, Baja California
Mexico
PacLease Mexicana
S.A. de C.V.
Calzada Gustavo Vildósola
Castro 2000
Mexicali, Baja California
Mexico
PACCAR Financial
Services Ltd.
Markborough Place I
6711 Mississauga Road N.
Mississauga, Ontario
L5N 4J8 Canada
PACCAR Financial
Pty. Ltd.
64 Canterbury Road
Bayswater, Victoria 3153
Australia
Banco PACCAR S.A.
Avenida Senador Flávio
Carvalho Guimarães, 6000
Bairro Boa Vista
CEP 84072-190
Ponta Grossa, Paraná, Brasil
P A C C A R G L O B A L S A L E S
Division Headquarters:
10630 N.E. 38th Place
Kirkland, Washington 98033
Offices:
Beijing, People’s Republic
of China
Manama, Bahrain
Moscow, Russia
Shanghai, People’s Republic
of China
S T A T E M E N T O F C O M P A N Y B U S I N E S S
S T O C K H O L D E R S ’
I N F O R M A T I O N
PACCAR is a global technology company that designs and manufactures premium
quality light, medium and heavy duty commercial vehicles sold worldwide under
the Kenworth, Peterbilt and DAF nameplates. PACCAR designs and manufactures
diesel engines and other powertrain components for use in its own products and for
sale to third party manufacturers of trucks and buses. PACCAR distributes
aftermarket truck parts to its dealers through a worldwide network of Parts
Distribution Centers. Finance and leasing subsidiaries facilitate the sale of
PACCAR products in many countries worldwide. PACCAR manufactures and
markets industrial winches under the Braden, Carco and Gearmatic nameplates.
PACCAR maintains exceptionally high standards of quality for all of its products:
they are well engineered, highly customized for specific applications and sell in
the premium segments of their markets, where they have a reputation for superior
performance and pride of ownership.
CONTENTS
1
Financial Highlights
87
Management’s Report on Internal Control
3 Message from the Executive Chairman
Over Financial Reporting
4 Message from the Chief Executive Officer
87
Report of Independent Registered
8 PACCAR Operations
26 Financial Charts
Public Accounting Firm- Opinion
on Financial Statements
27 Stockholder Return Performance Graph
89
Report of Independent Registered
28 Management’s Discussion and Analysis
Public Accounting Firm- Opinion
44 Consolidated Statements of Income
on Internal Control Over Financial Reporting
45 Consolidated Statements
of Comprehensive Income
46 Consolidated Balance Sheets
90 Selected Financial Data
91 Quarterly Results
92 Market Risks and Derivative Instruments
48 Consolidated Statements of Cash Flows
92 Common Stock Market Prices and Dividends
49 Consolidated Statements
of Stockholders’ Equity
50 Notes to Consolidated Financial Statements
93 Officers and Directors
94 Divisions and Subsidiaries
Corporate Offices
PACCAR Building
777 106th Avenue N.E.
Bellevue, Washington
98004
Mailing Address
P.O. Box 1518
Bellevue, Washington
98009
Telephone
425.468.7400
Facsimile
425.468.8216
Website
www.paccar.com
Stock Transfer
and Dividend
Dispersing Agent
Equiniti Trust Company
Shareowner Services
P.O. Box 64854
St. Paul, Minnesota
55164-0854
800.468.9716
www.shareowneronline.com
PACCAR’s transfer agent
maintains the company’s
shareholder records, issues
stock certificates and
distributes dividends and
IRS Forms 1099. Requests
concerning these matters
should be directed to
Equiniti.
Online Delivery of
Annual Report and Proxy
Statement
PACCAR’s 2019 Annual
Report and the 2020 Proxy
Statement are available
on PACCAR’s website at
www.paccar.com/
2020annualmeeting
Stockholders who hold
PACCAR stock in street
name may inquire of their
bank or broker about the
availability of electronic
delivery of annual
meeting documents.
Trademarks Owned by
PACCAR Inc and its
Subsidiaries
DAF, EPIQ, Kenmex,
Kenworth, Leyland,
PACCAR, PACCAR MX-11,
PACCAR MX-13, PACCAR
PX, PacFuel, PacLease,
PacLink, PacTax, PacTrac,
PacTrainer, Peterbilt,
The World’s Best, TRP,
TruckTech+, SmartNav, and
SmartLINQ
Independent Auditors
Ernst & Young LLP
Seattle, Washington
SEC Form 10-K
PACCAR’s annual report
to the Securities and
Exchange Commission
will be furnished to
stockholders on request
to the Corporate
Secretary, PACCAR Inc,
P.O. Box 1518, Bellevue,
Washington 98009. It is
also available online at
www.paccar.com/investors/
investor_resources.asp,
under SEC Filings or
on the SEC’s website at
www.sec.gov.
Annual Stockholders’
Meeting
April 21, 2020, 10:30 a.m.
Meydenbauer Center
11100 N.E. 6th St.
Bellevue, Washington
98004
An Equal Opportunity
Employer
This report was printed
on recycled paper.
2 0 1 9 A N N U A L R E P O R T