Financial Analysis

NOTE M Commitments and Contingencies On July 19, 2016, the European Commission (EC) concluded its investigation of all major European truck manufacturers and reached a settlement with DAF Trucks N.V., DAF Trucks Deutschland GmbH and PACCAR Inc (collectively the Company). Following the settlement, certain EC-related claims and lawsuits have been filed in various jurisdictions primarily in Europe against all major European truck manufacturers including the Company and certain subsidiaries. These claims and lawsuits include individual and collective proceedings seeking monetary damages, including class actions in the United Kingdom (U.K.), the Netherlands and Israel. In certain jurisdictions, additional claimants may bring EC-related claims and lawsuits. Several European courts have issued judgments; some have been favorable while others have been unfavorable and have been appealed. The Company believes it has meritorious defenses to all pending legal claims. In the first quarter 2023, the Company recorded a pre-tax charge of $ 600.0 ($ 446.4 after-tax) for the estimable total cost. The Company has settled with a significant majority of claimants and continues to pursue appropriate resolutions. Due to ongoing settlement costs, the Company updated its estimate and recorded an additional pre-tax charge of $ 350.0 ($ 264.5 after-tax) for the total estimable remaining costs in Interest and other expenses (income), net in the first quarter of 2025. PACCAR is also a defendant in vario …

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NOTE K - Fair Value Measurements 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. The Company uses the following methods and assumptions to measure fair value for assets and liabilities subject to recurring fair value measurements. Marketable Debt Securities: The Companys marketa …

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NOTE H - Income Taxes The effective tax rate for the second quarter of 2026 was 23.4 % compared to 22.3 % for the second quarter of 2025, primarily due to a higher mix of pre-tax income in foreign jurisdictions with higher tax rates. The effective tax rate for the first six months ended June 30, 2026 was 22.8 % compared to 22.0 % for the first six months ended June 30, 2025 . Included in the first quarter of 2025 was the EC-related charge of $ 350.0 , which lowered the effective tax rate.

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New Accounting Pronouncements: In November 2024, the Financial Accounting Standards Board (FASB) issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendments in this ASU expand the disclosures in the notes to the financial statements about specific cost and expense categories presented on the face of the income statement. This ASU is effective for annual periods beginning after December 15, 2026, and interim periods within annual periods beginning after December 15, 2027. Early adoption is permitted. The amendments in this ASU should be applied either (1) prospectively to financial statements issued for reporting periods after the effective date or (2) retrospectively to any or all prior periods presented. The Company is currently evaluating the impact of this update on the related notes to the financial statements. In May 2026, FASB issued ASU 2026-02, Environmental Credits and Environmental Credit Obligations (Topic 818). The amendments in this ASU establish guidance for the accounting and disclosure of environmental credits and environmental credit obligations. This ASU is effective for annual periods beginning after December 15, 2027, and interim periods within those annual periods. The amendments in this ASU require that a business entity apply the guidance on a retrospective basis through a cumulative-effect adjustment to the opening balance of re …

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NOTE L - Employee Benefit Plans The Company has several defined benefit pension plans, which cover a majority of its employees. The following information details the components of net pensi on income for the Companys defined benefit plans: Three Months Ended Six Months Ended June 30 June 30 2026 2025 2026 2025 Service cost $ 22.6 $ 23.2 $ 45.0 $ 47.4 Interest on projected benefit obligation 35.5 36.1 71.1 71.9 Expected return on assets ( 65.0 ) ( 63.1 ) ( 130.4 ) ( 125.4 ) Amortization of prior service costs .4 .4 .8 .7 Recognized actuarial loss .9 .1 2.0 .8 Net pension income $ ( 5.6 ) $ ( 3.3 ) $ ( 11.5 ) $ ( 4.6 ) The components of net pension expense other than service cost are included in Interest and other (income) expenses, net on the Consolidated Statements of Comprehensive Income. During the three and six months ended June 30, 2026, the Company contrib uted $ 3.7 and $ 7.7 to its pension plans, respectively, and $ 5.0 and $ 11.5 for the three and six months ended June 30, 2025, respectively. …

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NOTE I - Segment Information 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 segments performance is evaluated based on income before income taxes. The accounting policies of the reportable segments are the same as those applied in the consolidated financial statements as described in Note A of the Companys Annual Report on Form 10-K for the year ended December 31, 2025. 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 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 segme …

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NOTE G - Stockholders Equity Comprehensive Income The components of comprehensive income are as follows: Three Months Ended Six Months Ended June 30 June 30 2026 2025 2026 2025 Net income $ 752.0 $ 723.8 $ 1,357.3 $ 1,228.9 Other comprehensive (loss) income (OCI): Unrealized (losses) gains on derivative contracts ( 13.2 ) ( 16.7 ) .4 ( 38.6 ) Tax effect 4.3 4.5 1.8 11.0 ( 8.9 ) ( 12.2 ) 2.2 ( 27.6 ) Unrealized (losses) gains on marketable debt securities ( 7.6 ) 7.6 ( 28.9 ) 23.3 Tax effect 1.8 ( 1.5 ) 7.2 ( 5.9 ) ( 5.8 ) 6.1 ( 21.7 ) 17.4 Pension plans 1.3 ( 1.5 ) 1.6 ( 1.1 ) Tax effect ( .4 ) 1.3 ( .5 ) 1.3 .9 ( .2 ) 1.1 .2 Foreign currency translation gains .5 399.7 13.1 553.6 Net other comprehensive (loss) income ( 13.3 ) 393.4 ( 5.3 ) 543.6 Comprehensive income $ 738.7 $ 1,117.2 $ 1,352.0 $ 1,772.5 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: Three Months Ended June 30, 2026 DERIVATIVE CONTRACTS MARKETABLE DEBT SECURITIES PENSION PLANS FOREIGN CURRENCY TRANSLATION TOTAL Balance at April 1, 2026 $ 14.5 $ 3.3 $ 281.1 $ ( 627.6 ) $ ( 328.7 ) Recorded into AOCI ( 28.5 ) ( 6.0 ) .5 ( 34.0 ) Reclassified out of AOCI 19.6 .2 .9 20.7 Net other comprehensive (loss) income ( 8.9 ) ( 5.8 ) .9 .5 ( 13.3 ) Balance at June 30, 2026 $ 5.6 $ ( 2.5 ) $ 282.0 $ ( 627.1 ) $ ( 342.0 ) Three Months Ended Ju …

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