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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

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

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

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

Common Stock, $1 par value — ~~353,973,089~~354,091,886 shares as of ~~July~~October 31, 2013


	Three Months Ended					Six Months Ended					Three Months Ended				Nine Months Ended
	June 30					June 30					September 30				September 30
	2013			2012		2013		2012			2013		2012		2013		2012
TRUCK, PARTS AND OTHER:
Net sales and revenues	$	4,011.7		$	4,191.1	$	7,642.9	$	8,705.8		$	4,006.6	$	3,546.7	$	11,649.5	$	12,252.5

Cost of sales and revenues		3,494.6			3,632.5		6,683.9		7,552.4			3,491.1		3,108.5		10,175.0		10,660.9
Research and development		61.8			73.8		133.9		146.1			56.6		66.8		190.5		212.9
Selling, general and administrative		112.3			122.5		230.0		248.3			111.1		113.9		341.1		362.2
Interest and other (income) expense, net		(.4	)		1.6		1.1		(.5	)
Interest and other expense (income), net												3.3		.3		4.4		(.2	)

		3,668.3			3,830.4		7,048.9		7,946.3			3,662.1		3,289.5		10,711.0		11,235.8

Truck, Parts and Other Income Before Income Taxes		343.4			360.7		594.0		759.5			344.5		257.2		938.5		1,016.7

FINANCIAL SERVICES:
Interest and fees		115.0			111.5		228.8		221.4			116.4		115.5		345.2		336.9
Operating lease, rental and other income		173.8			154.6		353.1		306.1			177.1		158.0		530.2		464.1

Revenues		288.8			266.1		581.9		527.5			293.5		273.5		875.4		801.0

Interest and other borrowing expenses		39.4			38.1		78.3		77.8			37.9		40.6		116.2		118.4
Depreciation and other expense		138.9			121.5		283.0		240.3			140.2		127.2		423.2		367.5
Selling, general and administrative		23.7			24.1		47.2		48.2			23.6		22.6		70.8		70.8
Provision for losses on receivables		5.3			5.0		11.8		12.5			3.6		2.7		15.4		15.2

		207.3			188.7		420.3		378.8			205.3		193.1		625.6		571.9

Financial Services Income Before Income Taxes		81.5			77.4		161.6		148.7			88.2		80.4		249.8		229.1
Investment income		8.0			8.2		14.5		17.1			7.3		7.8		21.8		24.9


Total Income Before Income Taxes		432.9			446.3		770.1		925.3			440.0		345.4		1,210.1		1,270.7

Income taxes		141.3			149.1		242.4		300.8			130.6		111.8		373.0		412.6


Net Income	$	291.6		$	297.2	$	527.7	$	624.5		$	309.4	$	233.6	$	837.1	$	858.1


Net Income Per Share:
Basic	$	.82		$	.83	$	1.49	$	1.75		$	.87	$	.66	$	2.36	$	2.41
Diluted	$	.82		$	.83	$	1.49	$	1.75		$	.87	$	.66	$	2.36	$	2.41


Weighted Average Common Shares Outstanding:
Basic		354.1			356.0		354.0		356.5			354.4		353.7		354.1		355.5
Diluted		355.0			356.8		354.8		357.3			355.4		354.3		355.0		356.3


Dividends declared per share	$	.20		$	.20	$	.40	$	.38		$	.20	$	.20	$	.60	$	.58


Comprehensive Income	$	220.7		$	185.2	$	377.3	$	607.6		$	428.2	$	308.9	$	805.5	$	916.5


	June 30		December 31		September 30		December 31
	2013		2012*		2013		2012*
	(Unaudited)				(Unaudited)
ASSETS

TRUCK, PARTS AND OTHER:
Current Assets
Cash and cash equivalents	$	1,341.0	$	1,203.2	$	1,630.4	$	1,203.2
Trade and other receivables, net		1,015.0		902.1		1,093.4		902.1
Marketable debt securities		1,181.8		1,192.7		1,201.1		1,192.7
Inventories, net		832.0		782.4		893.1		782.4
Other current assets		349.8		331.7		370.9		331.7

Total Truck, Parts and Other Current Assets		4,719.6		4,412.1		5,188.9		4,412.1

Equipment on operating leases, net		903.7		857.9		1,016.1		857.9
Property, plant and equipment, net		2,390.3		2,312.9		2,460.9		2,312.9
Other noncurrent assets, net		261.0		249.4		273.1		249.4

Total Truck, Parts and Other Assets		8,274.6		7,832.3		8,939.0		7,832.3


FINANCIAL SERVICES:
Cash and cash equivalents		100.9		69.2		80.0		69.2
Finance and other receivables, net		8,307.7		8,298.3		8,694.9		8,298.3
Equipment on operating leases, net		2,103.7		2,030.8		2,191.8		2,030.8
Other assets		415.1		397.2		405.9		397.2

Total Financial Services Assets		10,927.4		10,795.5		11,372.6		10,795.5

	$	19,202.0	$	18,627.8	$	20,311.6	$	18,627.8

* The December 31, 2012 consolidated balance sheet has been derived from audited financial statements.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and ~~six~~nine months ended ~~June~~September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. For further information, refer to the consolidated financial statements and footnotes included in PACCAR Inc’s (the Company) Annual Report on Form10-K for the year ended December 31, 2012.

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


	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
	June 30				June 30				September 30				September 30
	2013		2012		2013		2012		2013		2012		2013		2012
Additional shares		906,200		713,000		836,000		774,000		994,000		689,000		907,000		746,000
Antidilutive options		828,800		2,536,000		1,391,700		2,551,000		783,000		2,495,000		873,000		2,552,000

New Accounting Pronouncements: In ~~February~~July 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2013-11,Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. This ASU requires an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented in the consolidated financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward if available under the applicable tax jurisdiction. The ASU is effective for annual periods beginning after December 15, 2013 and interim periods within those annual periods. The Company does not expect the adoption of the ASU to have a material impact on its consolidated financial statements.

In July 2013, the FASB issued ASU 2013-10,Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes. The amendments in this ASU permit the Fed Funds Effective Swap Rate (OIS) to be used as a U.S. benchmark interest rate for hedge accounting purposes in addition to U.S. government and London Interbank Offered Rate. The amendments also remove the restriction on using different benchmark rates for similar hedges. The ASU is effective for qualifying new or redesignated hedging relationships entered on or after July 17, 2013. The Company adopted ASU 2013-10 in the third quarter of 2013; the implementation of this amendment did not have an impact on the Company’s consolidated financial statements.

In February 2013, the FASB issued ASU 2013-02,Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This ASU requires disclosure of additional information about reclassification adjustments from other comprehensive income. The ASU is effective for annual periods beginning on or after January 1, 2013 and interim periods within those annual periods. The Company adopted ASU 2013-02 in the first quarter of 2013; the implementation of this amendment resulted in additional disclosures (see Note F), but did not have an impact on the Company’s consolidated financial statements.

In January 2013, the FASB issued ASU 2013-01,Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, an update to ASU 2011-11,Disclosures about Offsetting Assets and Liabilities.

The ASUs require entities with derivatives, repurchase agreements and securities borrowing and lending transactions that are either offset on the balance sheet, or subject to a master netting arrangement, to provide expanded disclosures about the nature of the rights of offset. The updated ASU is effective for annual periods beginning on or after January 1, 2013 and interim periods within those annual periods. The Company adopted ASU 2013-01 in the first quarter of 2013; the implementation of this amendment resulted in additional disclosures (see Note I), but did not have an impact on the Company’s consolidated financial statements.

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 loss.

The Company utilizes third-party pricing services for all of its marketable debt security valuations. The Company reviews the pricing methodology used by thethird-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 thethird-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.

Marketable debt securities at ~~June~~September 30, 2013 and December 31, 2012 consisted of the following:


	Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized		Fair
At June 30, 2013	Cost		Gains		Losses		Value
At September 30, 2013									Cost		Gains		Losses		Value
U.S. tax-exempt securities	$	206.7	$	.9	$	.5	$	207.1	$	205.4	$	1.1	$	.1	$	206.4
U.S. corporate securities		65.6		.1				65.7		79.6		.1				79.7
U.S. government and agency securities		.6						.6		.6						.6
Non-U.S. corporate securities		492.3		.9		1.0		492.2		564.6		1.4		.4		565.6
Non-U.S. government securities		314.5		2.8		.3		317.0		243.6		1.1		.2		244.5
Other debt securities		98.7		.5				99.2		103.8		.5				104.3

	$	1,178.4	$	5.2	$	1.8	$	1,181.8	$	1,197.6	$	4.2	$	.7	$	1,201.1


	Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized		Fair
At December 31, 2012	Cost		Gains		Losses		Value		Cost		Gains		Losses		Value
U.S. tax-exempt securities	$	217.2	$	1.5	$	.1	$	218.6	$	217.2	$	1.5	$	.1	$	218.6
U.S. corporate securities		59.8		.3				60.1		59.8		.3				60.1
U.S. government and agency securities		.8						.8		.8						.8
Non-U.S. corporate securities		447.5		1.4		.2		448.7		447.5		1.4		.2		448.7
Non-U.S. government securities		349.3		5.8		.1		355.0		349.3		5.8		.1		355.0
Other debt securities		108.9		.6				109.5		108.9		.6				109.5

	$	1,183.5	$	9.6	$	.4	$	1,192.7	$	1,183.5	$	9.6	$	.4	$	1,192.7

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. The proceeds from sales and maturities of marketable securities for the ~~six~~nine months ended ~~June~~September 30, 2013 and 2012 were ~~$365.0~~$628.5 and ~~$297.5,~~$445.8, respectively. Gross realized gains were ~~$.2~~$1.7 and ~~$1.5~~$1.9 for the ~~six~~nine months ended ~~June~~September 30, 2013 and 2012, respectively, and gross realized losses were $.5 and $.1 for ~~both~~ the ~~six~~nine months ended ~~June~~September 30, 2013 and ~~2012.~~2012, respectively.

The fair value of marketable debt securities that have been in an unrealized loss position for less than 12 months at ~~June~~September 30, 2013 was ~~$413.9~~$246.1 and the associated unrealized loss was ~~$1.8.~~$.7. The fair value of marketable debt securities that have been in an unrealized loss position for less than 12 months at December 31, 2012 was $291.0 and the associated unrealized loss was $.4. The fair value of marketable debt securities that have been in an unrealized loss position for 12 months or greater at ~~June~~September 30, 2013 was $1.0 and the associated unrealized loss was less than $.1. There were no marketable debt securities that were in an unrealized loss position for 12 months or greater at December 31, 2012.

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 ~~June~~September 30, 2013 were as follows:


	Amortized		Fair		Amortized		Fair
Maturities:	Cost		Value		Cost		Value
Within one year	$	513.1	$	514.6	$	530.0	$	531.1
One to five years		665.1		667.0		667.1		669.5
Six to ten years		.1		.1		.1		.1
More than ten years		.1		.1		.4		.4

	$	1,178.4	$	1,181.8	$	1,197.6	$	1,201.1

Inventories are stated at the lower of cost or market. Cost of inventories in the U.S. is determined principally by thelast-in, first-out (LIFO) method. Cost of all other inventories is determined principally by the first-in, first-out (FIFO) method.


	June 30			December 31			September 30			December 31
	2013			2012			2013			2012
Finished products	$	460.4		$	432.0		$	480.6		$	432.0
Work in process and raw materials		541.9			519.8			583.4			519.8

		1,002.3			951.8			1,064.0			951.8
Less LIFO reserve		(170.3	)		(169.4	)		(170.9	)		(169.4	)

	$	832.0		$	782.4		$	893.1		$	782.4

Under the LIFO method of accounting (used for approximately 48% of ~~June~~September 30, 2013 inventories), an actual valuation can be made only at the end of each year based on year-end inventory levels and costs. Accordingly, interim valuations are based on management’s estimates of those year-end amounts.


	June 30			December 31			September 30			December 31
	2013			2012			2013			2012
Loans	$	3,762.1		$	3,738.2		$	3,838.1		$	3,738.2
Direct financing leases		2,488.3			2,489.3			2,621.4			2,489.3
Sales-type finance leases		871.8			916.8			875.6			916.8
Dealer wholesale financing		1,561.0			1,541.0			1,736.2			1,541.0
Operating lease and other trade receivables		105.4			112.0			118.9			112.0
Unearned interest on finance leases		(351.9	)		(369.0	)		(363.6	)		(369.0	)

	$	8,436.7		$	8,428.3		$	8,826.6		$	8,428.3
Less allowance for losses:
Loans and leases		(112.3	)		(112.6	)		(112.1	)		(112.6	)
Dealer wholesale financing		(11.0	)		(11.8	)		(10.9	)		(11.8	)
Operating lease and other trade receivables		(5.7	)		(5.6	)		(8.7	)		(5.6	)

	$	8,307.7		$	8,298.3		$	8,694.9		$	8,298.3

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 ~~June~~September 30, 2013 or December 31, 2012. 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 impaired or on non-accrual status are applied to interest and principal in accordance with the contractual terms.

The Company continuously monitors the payment performance of all 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.

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 loans and finance leases for credit reasons and grants a concession, the modifications are classified as troubled debt restructurings (TDRs). 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 ~~four~~six months in 2013 and seven months in 2012 and did not have a significant effect on the weighted average term or interest rate of the total portfolio at ~~June~~September 30, 2013 and December 31, 2012.

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 direct 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 monthly reporting of the wholesale dealer’s financial condition, conducts periodic audits of the trucks being financed and in many cases, obtains personal 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 36 to 60 months 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 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.

For finance receivables that are not individually impaired, the Company collectively evaluates and determines the general allowance for credit losses for both retail and wholesale receivables based on historical loss information, usingpast-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 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 uncollectable (generally 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 partial charge-offs. The charge-off is determined by comparing the fair value of the collateral, less cost to sell, to the recorded investment.

For the following credit quality disclosures, finance receivables are classified as dealer wholesale, dealer retail and customer retail segments. 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. Each individual class has similar measurement attributes, risk characteristics and common methods to monitor and assess credit risk.


	2013																		2013
	Dealer						Customer Retail												Dealer							Customer Retail
	Wholesale			Retail						Other*				Total				Wholesale				Retail				Customer Retail			Other*				Total
Balance at January 1	$	11.8		$	13.4		Customer Retail	$	99.2			$	5.6			$	130.0			$	11.8			$	13.4		$	99.2			$	5.6			$	130.0
Provision for losses		(.4	)		(1.0	)		12.7				.5				11.8				(.7	)			(.7	)		11.2				5.6				15.4
Charge-offs		(.1	)					(13.4	)			(.8	)			(14.3	)			(.2	)						(11.1	)			(6.7	)			(18.0	)
Recoveries								3.0				.5				3.5											4.2				1.0				5.2
Currency translation and other		(.3	)		(.1	)		(1.5	)			(.1	)			(2.0	)							(.1	)		(4.0	)			3.2				(.9	)

Balance at June 30	$	11.0		$	12.3		$	100.0			$	5.7			$	129.0
Balance at September 30																			$	10.9			$	12.6		$	99.5			$	8.7			$	131.7


	2012																		2012
	Dealer						Customer Retail												Dealer							Customer Retail
	Wholesale			Retail						Other*				Total				Wholesale				Retail				Customer Retail			Other*				Total
Balance at January 1	$	11.7		$	12.0		Customer Retail	$	106.5			$	8.8			$	139.0			$	11.7			$	11.9		$	106.6			$	8.8			$	139.0
Provision for losses		2.8			.6			6.5				2.6				12.5				2.3				1.2			9.3				2.4				15.2
Charge-offs								(11.3	)			(3.4	)			(14.7	)										(17.1	)			(4.8	)			(21.9	)
Recoveries		.1						3.1				.2				3.4				.1							4.6				.3				5.0
Currency translation and other		(1.8	)					1.6								(.2	)			(1.7	)			.1			4.0				(.6	)			1.8

Balance at June 30	$	12.8		$	12.6		$	106.4			$	8.2			$	140.0
Balance at September 30																			$	12.4			$	13.2		$	107.4			$	6.1			$	139.1

Information regarding finance receivables evaluated and determined individually and collectively is as follows:


	Dealer				Customer Retail							Dealer							Customer Retail
At June 30, 2013	Wholesale		Retail					Total
At September 30, 2013												Wholesale				Retail			Customer Retail			Customer Retail			Total
Recorded investment for impaired finance receivables evaluated individually	$	4.0			Customer Retail	$	59.7		$	63.7			$	9.1							$	Customer Retail		58.5
Allowance for impaired finance receivables determined individually		1.4				10.8			12.2				1.5							7.6			9.1
Recorded investment for finance receivables evaluated collectively		1,557.0	$	1,370.7		5,339.9			8,267.6				1,727.1			$	1,403.3			5,518.8			8,649.2
Allowance for finance receivables determined collectively		9.6		12.3		89.2			111.1				9.4				12.6			91.9			113.9

	Dealer				Customer Retail							Dealer							Customer Retail					��
At December 31, 2012	Wholesale		Retail					Total			Wholesale				Retail				Customer Retail			Total
Recorded investment for impaired finance receivables evaluated individually	$	3.6	$	.1	Customer Retail	$	67.4		$	71.1			$	3.6			$	.1		$	67.4		$	71.1
Allowance for impaired finance receivables determined individually		2.2				10.8			13.0				2.2							10.8			13.0
Recorded investment for finance receivables evaluated collectively		1,537.4		1,429.6		5,278.2			8,245.2				1,537.4				1,429.6			5,278.2			8,245.2
Allowance for finance receivables determined collectively		9.6		13.4		88.4			111.4				9.6				13.4			88.4			111.4

The recorded investment for finance receivables that are on non-accrual status is as follows:

Impaired loans with no specific reserves were ~~$4.0~~$2.3 and $6.8 at ~~June~~September 30, 2013 and December 31, 2012, respectively. Impaired loans with a specific reserve are summarized below. The impaired loans with specific reserve represent the unpaid principal balance. The recorded investment of impaired loans as of ~~June~~September 30, 2013 and December 31, 2012 was not significantly different than the unpaid principal balance.


	Dealer				Customer Retail									Dealer				Customer Retail
At June 30, 2013	Wholesale			Retail	Fleet			Owner/ Operator			Total
At September 30, 2013														Wholesale			Retail	Fleet			Owner/ Operator			Total
Impaired loans with a specific reserve	$	4.0			$	30.0		$	4.7		$	38.7		$	9.1			$	20.9		$	4.2		$	34.2
Associated allowance		(1.4	)			(4.7	)		(1.0	)		(7.1	)		(1.5	)			(2.9	)		(.8	)		(5.2	)

Net carrying amount of impaired loans	$	2.6			$	25.3		$	3.7		$	31.6		$	7.6			$	18.0		$	3.4		$	29.0


Average recorded investment*	$	3.6			$	37.1		$	6.9		$	47.6		$	4.8			$	31.4		$	6.0		$	42.2


	Dealer				Customer Retail									Dealer				Customer Retail
At December 31, 2012	Wholesale			Retail	Fleet			Owner/ Operator			Total			Wholesale			Retail	Fleet			Owner/ Operator			Total
Impaired loans with a specific reserve	$	3.6			$	43.9		$	6.8		$	54.3		$	3.6			$	43.9		$	6.8		$	54.3
Associated allowance		(2.2	)			(7.3	)		(1.2	)		(10.7	)		(2.2	)			(7.3	)		(1.2	)		(10.7	)

Net carrying amount of impaired loans	$	1.4			$	36.6		$	5.6		$	43.6		$	1.4			$	36.6		$	5.6		$	43.6


Average recorded investment*	$	17.5			$	26.4		$	10.8		$	54.7		$	12.7			$	32.7		$	10.2		$	55.6

During the period the loans above were considered impaired, interest income recognized on a cash basis is as follows:


	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
	June 30				June 30				September 30				September 30
	2013		2012		2013		2012		2013		2012		2013		2012
Interest income recognized:
Dealer wholesale	$	.1	$	.1	$	.1	$	.1					$	.1	$	.1
Customer retail - fleet		.9		.3		1.3		.7	$	.5	$	.2		1.8		.9
Customer retail - owner/operator		.2		.1		.4		.4				.2		.4		.6

	$	1.2	$	.5	$	1.8	$	1.2	$	.5	$	.4	$	2.3	$	1.6

The Company’s customers are principally concentrated in the transportation industry in North America, Europe and Australia. The Company’s portfolio is diversified over a large number of customers and dealers with no single customer or dealer balance representing over 4% of the total portfolio. 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.

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 behigh-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.


	Dealer				Customer Retail						Dealer				Customer Retail
At June 30, 2013	Wholesale		Retail		Fleet		Owner/ Operator		Total
At September 30, 2013											Wholesale		Retail		Fleet		Owner/ Operator		Total
Performing	$	1,510.5	$	1,365.8	$	4,061.1	$	1,249.3	$	8,186.7	$	1,681.4	$	1,396.3	$	4,235.2	$	1,256.7	$	8,569.6
Watch		46.5		4.9		19.4		10.1		80.9		45.7		7.0		20.0		6.9		79.6
At-risk		4.0				49.8		9.9		63.7		9.1				39.4		10.0		58.5

	$	1,561.0	$	1,370.7	$	4,130.3	$	1,269.3	$	8,331.3	$	1,736.2	$	1,403.3	$	4,294.6	$	1,273.6	$	8,707.7


	Dealer				Customer Retail						Dealer				Customer Retail
At December 31, 2012	Wholesale		Retail		Fleet		Owner/ Operator		Total		Wholesale		Retail		Fleet		Owner/ Operator		Total
Performing	$	1,479.1	$	1,423.3	$	3,878.4	$	1,365.6	$	8,146.4	$	1,479.1	$	1,423.3	$	3,878.4	$	1,365.6	$	8,146.4
Watch		58.3		6.3		23.5		10.7		98.8		58.3		6.3		23.5		10.7		98.8
At-risk		3.6		.1		54.7		12.7		71.1		3.6		.1		54.7		12.7		71.1

	$	1,541.0	$	1,429.7	$	3,956.6	$	1,389.0	$	8,316.3	$	1,541.0	$	1,429.7	$	3,956.6	$	1,389.0	$	8,316.3

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.

The balance of TDRs was ~~$29.6~~$19.1 and $38.5 at ~~June~~September 30, 2013 and December 31, 2012, respectively. At modification date, the pre-modification and post-modification recorded investment balances for finance receivables modified during the period by portfolio class are as follows:


	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
	June 30, 2013				June 30, 2013				September 30, 2013				September 30, 2013
	Recorded Investment				Recorded Investment				Recorded Investment				Recorded Investment
	Pre-Modification		Post-Modification		Pre-Modification		Post-Modification		Pre-Modification		Post-Modification		Pre-Modification		Post-Modification
Fleet	$	3.5	$	3.5	$	7.7	$	7.6	$	1.5	$	1.3	$	9.2	$	8.9
Owner / Operator		.2		.2		.7		.7		.7		.7		1.4		1.4

	$	3.7	$	3.7	$	8.4	$	8.3	$	2.2	$	2.0	$	10.6	$	10.3


	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
	June 30, 2012				June 30, 2012				September 30, 2012				September 30, 2012
	Recorded Investment				Recorded Investment				Recorded Investment				Recorded Investment
	Pre-Modification		Post-Modification		Pre-Modification		Post-Modification		Pre-Modification		Post-Modification		Pre-Modification		Post-Modification
Fleet	$	18.7	$	18.7	$	30.6	$	29.9	$	14.7	$	13.9	$	45.3	$	43.8
Owner / Operator		.5		.5		1.5		1.5		.6		.6		2.1		2.1

	$	19.2	$	19.2	$	32.1	$	31.4	$	15.3	$	14.5	$	47.4	$	45.9

The effect on the allowance for credit losses from such modifications was not significant at ~~June~~September 30, 2013 and 2012.

TDRs modified during the previous twelve months that subsequently defaulted (i.e., became more than 30 dayspast-due) during the period by portfolio class are as follows:


	Six Months Ended				Nine Months Ended
	June 30				September 30
	2013		2012		2013		2012
Fleet	$	1.4	$	4.4	$	2.5	$	7.7
Owner / Operator		.2		.4		.2		.5

	$	1.6	$	4.8	$	2.7	$	8.2

The TDRs that subsequently defaulted did not significantly impact the Company’s allowance for credit losses at ~~June~~September 30, 2013 and 2012.

When the Company determines that a customer is not likely to meet its contractual commitments, the Company repossesses the vehicles which serve as collateral for loans, finance leases and equipment under operating lease. The Company records the vehicles as used truck inventory which is included in Financial Services other assets on the Consolidated Balance Sheets. The balance of repossessed inventory at ~~June~~September 30, 2013 and December 31, 2012 was ~~$13.0~~$12.1 and $20.9, respectively. Proceeds from the sales of repossessed assets were ~~$33.1~~$44.5 and ~~$29.6~~$48.7 for the ~~six~~nine months ended ~~June~~September 30, 2013 and 2012, respectively. These amounts are included in proceeds from asset disposals in the Condensed 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 expense on the Consolidated Statements of Comprehensive Income.

Product support liabilities are estimated future payments related to product warranties, optional extended warranties and repair and maintenance (R&M) contracts. The Company generally offers one year warranties covering most of its vehicles and related aftermarket parts. 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 data regarding the source, frequency and cost of 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 from extended warranty and R&M contracts is deferred and recognized to income on a straight-line basis over the contract period. Warranty and R&M costs on these contracts are recognized as incurred.


	2013			2012			2013			2012
Balance at January 1	$	540.7		$	448.7		$	540.7		$	448.7
Cost accruals and revenue deferrals		158.3			177.9			238.0			234.6
Payments and revenue recognized		(130.3	)		(114.6	)		(195.4	)		(168.0	)
Currency translation		(9.1	)		(4.6	)		4.6			1.2

Balance at June 30	$	559.6		$	507.4
Balance at September 30							$	587.9		$	516.5


	Three Months Ended			Six Months Ended			Three Months Ended			Nine Months Ended
	June 30, 2013			June 30, 2013			September 30, 2013			September 30, 2013
Net income	$	291.6		$	527.7		$	309.4		$	837.1
Other comprehensive income (OCI):
Unrealized gains on derivative contracts		10.1			13.3
Other comprehensive income (loss) (OCI):
Unrealized (losses) gains on derivative contracts								(3.5	)		9.8
Tax effect		(3.0	)		(4.1	)		.8			(3.3	)

		7.1			9.2			(2.7	)		6.5

Unrealized losses on marketable debt securities		(5.5	)		(5.8	)
Unrealized gains (losses) on marketable debt securities								.1			(5.7	)
Tax effect		1.5			1.6						1.6

		(4.0	)		(4.2	)		.1			(4.1	)

Employee benefit plans		13.0			34.3			2.5			36.8
Tax effect		(4.4	)		(11.1	)		(1.5	)		(12.6	)

		8.6			23.2			1.0			24.2

Currency translation losses		(82.6	)		(178.6	)
Currency translation gains (losses)								120.4			(58.2	)

Net other comprehensive loss		(70.9	)		(150.4	)
Net other comprehensive income (loss)								118.8			(31.6	)

Comprehensive income	$	220.7		$	377.3		$	428.2		$	805.5


							Three Months Ended			Nine Months Ended
							September 30, 2012			September 30, 2012
Net income							$	233.6		$	858.1
Other comprehensive income:
Unrealized losses on derivative contracts								(3.3	)		(9.5	)
Tax effect								.9			2.6

								(2.4	)		(6.9	)

Unrealized gains on marketable debt securities								1.1			3.8
Tax effect								(.3	)		(1.1	)

								.8			2.7

Employee benefit plans								5.0			24.1
Tax effect								(2.0	)		(8.1	)

								3.0			16.0

Currency translation gains								73.9			46.6

Net other comprehensive income								75.3			58.4

Comprehensive income							$	308.9		$	916.5

The components of accumulated other comprehensive loss (AOCI) as of ~~June~~September 30, 2013 and December 31, 2012 and the changes in AOCI, net of tax, included in the Consolidated Balance Sheets, consisted of the following:


	Gains and (Losses) on Derivative Contracts			Unrealized Gains and (Losses) on Marketable Debt Securities			Defined Benefit Pension Plans			Foreign Currency Translation			Total			Gains and (Losses) on Derivative Contracts			Unrealized Gains and (Losses) on Marketable Debt Securities			Defined Benefit Pension Plans			Foreign Currency Translation			Total
Balance at December 31, 2012	$	(27.2	)	$	6.6		$	(496.5	)	$	357.6		$	(159.5	)	$	(27.2	)	$	6.6		$	(496.5	)	$	357.6		$	(159.5	)
Amounts recorded in AOCI		54.1			(4.2	)		8.5			(176.6	)		(118.2	)		27.3			(5.1	)		2.1			(56.2	)		(31.9	)
Amounts reclassified out of AOCI		(44.9	)					14.7			(2.0	)		(32.2	)		(20.8	)		1.0			22.1			(2.0	)		.3

Net other comprehensive income (loss)		9.2			(4.2	)		23.2			(178.6	)		(150.4	)		6.5			(4.1	)		24.2			(58.2	)		(31.6	)

Balance at June 30, 2013	$	(18.0	)	$	2.4		$	(473.3	)	$	179.0		$	(309.9	)
Balance at September 30, 2013																$	(20.7	)	$	2.5		$	(472.3	)	$	299.4		$	(191.1	)

Reclassifications out of AOCI during the ~~six~~nine months ended ~~June~~September 30, 2013 are as follows:

**~~Amounts in parentheses indicate reductions in expenses, and amounts without parenthesis indicate expenses.~~


AOCI Components	Line Item in the Consolidated Statement of Comprehensive Income	Amount Reclassified Out of AOCI
Gains and losses on cash flow hedges:
*Truck, Parts and Other*
Foreign-exchange contracts	Cost of sales and revenues	$	(.5	)
	Interest and other expense (income), net		(.2	)

*Financial Services*
Interest-rate contracts	Interest and other borrowing expenses		(29.1	)

	Pre-tax expense reduction		(29.8	)
	Tax expense		9.0

	After-tax expense reduction		(20.8	)

Unrealized gains and losses on marketable debt securities:
Marketable debt securities	Investment income		1.4
	Tax expense		(.4	)

	After-tax income increase		1.0

Defined benefit pension plans:
*Truck, Parts and Other*
Prior service costs	Cost of sales and revenues $.8, SG&A $.1		.9
Actuarial loss	Cost of sales and revenues $17.4, SG&A $14.2, R&D $.1		31.7

*Financial Services*
Actuarial loss	SG&A		1.3

	Pre-tax expense increase		33.9
	Tax benefit		(11.8	)

	After-tax expense increase		22.1

Foreign Currency Translation:
*Truck, Parts and Other*	Interest and other expense (income), net		(1.1	)
*Financial Services*	Interest and other borrowing expenses		(.9	)

	Expense reduction		(2.0	)

Total reclassifications out of AOCI		$	.3

Stock-based compensation expense was $2.7 and ~~$8.5~~$11.2 for the three and ~~six~~nine months ended ~~June~~September 30, 2013, respectively, and ~~$2.5~~$2.6 and ~~$8.4~~$11.0 for the three and ~~six~~nine months ended ~~June~~September 30, 2012, respectively. Realized tax benefits related to the excess of deductible amounts over expense recognized amounted to ~~$1.0~~$1.1 and ~~$1.6~~$2.7 for the three and ~~six~~nine months ended ~~June~~September 30, 2013, respectively, and nil and $.8 for the three and ~~six~~nine months ended ~~June~~September 30, 2012, respectively, and have been classified as a financing cash flow.

During the first ~~half~~three quarters of 2013, the Company issued ~~627,691~~858,515 common shares under deferred and stock compensation arrangements.

The effective income tax rate in the ~~second~~third quarter of 2013 of ~~32.6%~~29.7% decreased from ~~33.4%~~32.4% in the same period of 2012. For the first ~~half~~nine months of 2013, the effective income tax rate of ~~31.5%~~30.8% decreased from 32.5% in the first ~~half~~nine months of 2012. The decrease in the effective tax rate in both periods of 2013 was primarily due to a higher proportion of income generated in lower taxed jurisdictions.

PACCAR operates in three principal segments: Truck, Parts and Financial Services.


	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	June 30						June 30						September 30						September 30
	2013			2012			2013			2012			2013			2012			2013			2012
Net sales and revenues:
Truck
Total	$	3,432.2		$	3,722.1		$	6,508.0		$	7,693.8		$	3,416.6		$	3,016.3		$	9,924.6		$	10,710.1
Less intersegment		(162.2	)		(238.4	)		(304.7	)		(415.7	)		(155.4	)		(156.4	)		(460.1	)		(572.1	)

External customers		3,270.0			3,483.7			6,203.3			7,278.1			3,261.2			2,859.9			9,464.5			10,138.0

Parts
Total		721.4			678.6			1,399.8			1,369.7			726.2			661.4			2,126.0			2,031.1
Less intersegment		(11.9	)		(12.4	)		(22.9	)		(23.1	)		(10.9	)		(11.3	)		(33.8	)		(34.4	)

External customers		709.5			666.2			1,376.9			1,346.6			715.3			650.1			2,092.2			1,996.7

Other		32.2			41.2			62.7			81.1			30.1			36.7			92.8			117.8

		4,011.7			4,191.1			7,642.9			8,705.8			4,006.6			3,546.7			11,649.5			12,252.5
Financial Services		288.8			266.1			581.9			527.5			293.5			273.5			875.4			801.0

	$	4,300.5		$	4,457.2		$	8,224.8		$	9,233.3		$	4,300.1		$	3,820.2		$	12,524.9		$	13,053.5

Income (loss) before income taxes:
Truck	$	238.4		$	272.1		$	403.4		$	572.4		$	242.5		$	170.2		$	645.9		$	742.6
Parts		109.4			89.9			204.7			191.5			106.5			88.7			311.2			280.2
Other		(4.4	)		(1.3	)		(14.1	)		(4.4	)		(4.5	)		(1.7	)		(18.6	)		(6.1	)

		343.4			360.7			594.0			759.5			344.5			257.2			938.5			1,016.7
Financial Services		81.5			77.4			161.6			148.7			88.2			80.4			249.8			229.1
Investment income		8.0			8.2			14.5			17.1			7.3			7.8			21.8			24.9

	$	432.9		$	446.3		$	770.1		$	925.3		$	440.0		$	345.4		$	1,210.1		$	1,270.7

Depreciation and amortization:
Truck	$	84.0		$	80.6		$	161.7		$	158.3		$	89.2		$	75.1		$	250.9		$	233.4
Parts		1.4			1.5			2.7			3.1			1.2			1.4			3.9			4.5
Other		2.4			2.5			4.9			5.1			2.5			2.6			7.4			7.7

		87.8			84.6			169.3			166.5			92.9			79.1			262.2			245.6
Financial Services		109.8			91.0			213.0			179.7			113.5			97.1			326.5			276.8

	$	197.6		$	175.6		$	382.3		$	346.2		$	206.4		$	176.2		$	588.7		$	522.4

The Truck segment includes the manufacture of trucks, and the Parts segment includes the distribution of related aftermarket parts, 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 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 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.

Included in Other is the Company’s industrial winch manufacturing business and other sales, income and expense not attributable to a reportable segment, including a portion of corporate expenses.

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 Company’s Annual Report on Form10-K for the year ended December 31, 2012.

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 either cash flow hedges or fair value hedges are subject to hedge accounting. Derivative instruments that are not subject to hedge accounting are held as economic hedges. 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 contracts 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 agreement 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 had no material exposures to default at ~~June~~September 30, 2013.

The Company uses regression analysis to assess effectiveness of interest-rate contracts 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. Gains or losses on the ineffective portion of cash flow hedges are recognized currently in earnings. Hedge accounting is discontinued prospectively when the Company determines that a derivative financial instrument has ceased to be a highly effective hedge.

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 ~~June~~September 30, 2013, the notional amount of the Company’s interest-rate contracts was ~~$3,060.0.~~$3,597.0. Notional maturities for all interest-rate contracts are ~~$262.5~~$217.7 for the remainder of 2013, ~~$1,318.0~~$1,227.9 for 2014, ~~$938.2~~$1,146.5 for 2015, ~~$304.2~~$760.0 for 2016, ~~$209.5~~$217.2 for 2017 and ~~$27.6~~$27.7 thereafter. The majority of these contracts are floating to fixed swaps that effectively convert an equivalent amount of commercial paper and other variable rate debt to fixed rates.

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. At ~~June~~September 30, 2013, the notional amount of the outstanding foreign-exchange contracts was ~~$459.6.~~$451.7. Foreign-exchange contracts mature within one year.

The following table presents the balance sheet classification and fair value of derivative financial instruments:


	June 30, 2013				December 31, 2012				September 30, 2013				December 31, 2012
	Assets		Liabilities		Assets		Liabilities		Assets		Liabilities		Assets		Liabilities
Derivatives designated under hedge accounting:
Interest-rate contracts:
Financial Services:
Other assets	$	42.4			$	4.6			$	30.3			$	4.6
Deferred taxes and other liabilities			$	56.7			$	111.7			$	71.0			$	111.7
Foreign-exchange contracts:
Truck, Parts and Other:
Other current assets		.6				.2				.2				.2
Accounts payable, accrued expenses and other				.1				.1				2.6				.1

Total	$	43.0	$	56.8	$	4.8	$	111.8	$	30.5	$	73.6	$	4.8	$	111.8

Economic hedges:
Interest-rate contracts:
Financial Services:
Deferred taxes and other liabilities							$	.6							$	.6
Foreign-exchange contracts:
Truck, Parts and Other:
Other current assets	$	.9			$	.3			$	.2			$	.3
Accounts payable, accrued expenses and other			$	.6				.2			$	.5				.2
Financial Services:
Other assets		3.5								.2
Deferred taxes and other liabilities				.1				.4				1.4				.4

Total	$	4.4	$	.7	$	.3	$	1.2	$	.4	$	1.9	$	.3	$	1.2

The following tables present the balance sheet classification of the gross and pro forma net amounts of derivative financial instruments:


As of June 30, 2013	Gross Amount Recognized in Balance Sheet		Amount Not Offset in Financial Instruments			Pro Forma Net Amount
As of September 30, 2013								Gross Amount Recognized in Balance Sheet		Amount Not Offset in Financial Instruments			Pro Forma Net Amount
Assets:
*Truck, Parts and Other*
Foreign-exchange contracts	$	1.5				$	1.5	$	.4	$	(.1	)	$	.3
*Financial Services*
Interest-rate contracts		42.4	$	(9.9	)		32.5		30.3		(12.3	)		18.0
Foreign-exchange contracts		3.5					3.5		.2					.2

Total derivative assets	$	47.4	$	(9.9	)	$	37.5	$	30.9	$	(12.4	)	$	18.5

Liabilities:
*Truck, Parts and Other*
Foreign-exchange contracts	$	.7				$	.7	$	3.1	$	(.1	)	$	3.0
*Financial Services*
Interest-rate contracts		56.7	$	(9.9	)		46.8		71.0		(12.3	)		58.7
Foreign-exchange contracts		.1					.1		1.4					1.4

Total derivative liabilities	$	57.5	$	(9.9	)	$	47.6	$	75.5	$	(12.4	)	$	63.1


As of December 31, 2012	Gross Amount Recognized in Balance Sheet		Amount Not Offset in Financial Instruments			Pro Forma Net Amount		Gross Amount Recognized in Balance Sheet		Amount Not Offset in Financial Instruments			Pro Forma Net Amount
Assets:
Truck, Parts and Other
Foreign-exchange contracts	$	.5				$	.5	$	.5				$	.5
Financial Services
Interest-rate contracts		4.6	$	(2.6	)		2.0		4.6	$	(2.6	)		2.0

Total derivative assets	$	5.1	$	(2.6	)	$	2.5	$	5.1	$	(2.6	)	$	2.5

Liabilities:
Truck, Parts and Other
Foreign-exchange contracts	$	.3				$	.3	$	.3				$	.3
Financial Services
Interest-rate contracts		112.3	$	(2.6	)		109.7		112.3	$	(2.6	)		109.7
Foreign-exchange contracts		.4					.4		.4					.4

Total derivative liabilities	$	113.0	$	(2.6	)	$	110.4	$	113.0	$	(2.6	)	$	110.4

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 expense or (income) recognized in earnings related to fair value hedges was included in interest and other borrowing expenses in the Financial Services segment of the Consolidated Statements of Comprehensive Income as follows:


	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	June 30						June 30						September 30						September 30
	2013			2012			2013			2012			2013			2012			2013			2012
Interest-rate swaps	$	.1		$	(3.7	)	$	.3		$	(1.6	)	$	.2		$	(2.4	)	$	.5		$	(4.0	)
Term notes		(.2	)		3.7			(.4	)		1.5			(.2	)		3.2			(.6	)		4.7

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 accumulated other comprehensive loss to the extent such hedges are considered effective. The maximum length of time over which the Company is hedging its exposure to the variability in future cash flows is ~~6.9~~6.6 years.

Amounts in accumulated other comprehensive loss are reclassified into net income in the same period in which the hedged transaction affects earnings. Net realized gains and losses from interest-rate contracts are recognized as an adjustment to interest expense. Net realized gains and losses from foreign-exchange contracts are recognized as an adjustment to cost of sales or to Financial Services interest expense, consistent with the hedged transaction. The ineffective portions were nil and a gain of $.2 during the ~~second~~third quarter of ~~both~~ 2013 and 2012, and were gains of $.1 and ~~$.2~~$.4 during the first ~~six~~nine months of 2013 and 2012, respectively.

The following table presents the pre-tax effects of derivative instruments recognized in OCI:


	Three Months Ended						Six Months Ended
	June 30, 2013						June 30, 2013
	Interest-Rate			Foreign-Exchange			Interest-Rate			Foreign-Exchange
	Contracts			Contracts			Contracts			Contracts
Gain recognized in OCI:
Truck, Parts and Other				$	(1.3	)				$	(2.9	)
Financial Services	$	(54.7	)				$	(74.4	)

	$	(54.7	)	$	(1.3	)	$	(74.4	)	$	(2.9	)


	Three Months Ended						Six Months Ended						Three Months Ended				Nine Months Ended
	June 30, 2012						June 30, 2012						September 30, 2013				September 30, 2013
	Interest-Rate			Foreign-Exchange			Interest-Rate			Foreign-Exchange			Interest-Rate		Foreign-Exchange		Interest-Rate			Foreign-Exchange
	Contracts			Contracts			Contracts			Contracts			Contracts		Contracts		Contracts			Contracts
Loss (gain) recognized in OCI:
Truck, Parts and Other				$	(.3	)				$	.9				$	4.6				$	1.7
Financial Services	$	18.2					$	23.7					$	33.1			$	(41.3	)

	$	18.2		$	(.3	)	$	23.7		$	.9		$	33.1	$	4.6	$	(41.3	)	$	1.7


													Three Months Ended				Nine Months Ended
													September 30, 2012				September 30, 2012
													Interest-Rate		Foreign-Exchange		Interest-Rate			Foreign-Exchange
													Contracts		Contracts		Contracts			Contracts
Loss recognized in OCI:
Truck, Parts and Other															$	1.3				$	2.2
Financial Services													$	5.7			$	29.4

													$	5.7	$	1.3	$	29.4		$	2.2

Expense (income) reclassified out of accumulated other comprehensive loss into income:


	Three Months Ended June 30, 2013						Six Months Ended June 30, 2013						Three Months Ended September 30, 2013					Nine Months Ended September 30, 2013
	Interest-Rate			Foreign-Exchange			Interest-Rate			Foreign-Exchange			Interest-Rate		Foreign-Exchange			Interest-Rate			Foreign-Exchange
	Contracts			Contracts			Contracts			Contracts			Contracts		Contracts			Contracts			Contracts
Truck, Parts and Other:
Cost of sales and revenues										$	(2.3	)			$	1.8					$	(.5	)
Interest and other (income) expense, net				$	.5						.3
Interest and other expense (income), net																(.5	)					(.2	)
Financial Services:
Interest and other borrowing expenses	$	(46.3	)				$	(61.9	)				$	32.8				$	(29.1	)

	$	(46.3	)	$	.5		$	(61.9	)	$	(2.0	)	$	32.8	$	1.3		$	(29.1	)	$	(.7	)


	Three Months Ended						Six Months Ended						Three Months Ended					Nine Months Ended
	June 30, 2012						June 30, 2012						September 30, 2012					September 30, 2012
	Interest-Rate			Foreign-Exchange			Interest-Rate			Foreign-Exchange			Interest-Rate		Foreign-Exchange			Interest-Rate			Foreign-Exchange
	Contracts			Contracts			Contracts			Contracts			Contracts		Contracts			Contracts			Contracts
Truck, Parts and Other:
Cost of sales and revenues				$	.1					$	2.7				$	1.6					$	4.3
Interest and other (income) expense, net					(.4	)
Interest and other expense (income), net																.4						.4
Financial Services:
Interest and other borrowing expenses	$	13.3					$	16.1					$	1.6				$	17.7

	$	13.3		$	(.3	)	$	16.1		$	2.7		$	1.6	$	2.0		$	17.7		$	4.7

The amount of loss recorded in accumulated other comprehensive loss at ~~June~~September 30, 2013 that is estimated to be reclassified to interest expense or cost of sales in the following 12 months if interest rates and exchange rates remain unchanged is approximately ~~$18.9,~~$23.8, 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.

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 economic hedges are recorded in earnings in the period in which the change occurs.

The expense (income) recognized in earnings related to economic hedges is as follows:


	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	June 30, 2013						June 30, 2013						September 30, 2013						September 30, 2013
	Interest-Rate			Foreign-Exchange			Interest-Rate			Foreign-Exchange			Interest-Rate			Foreign-Exchange			Interest-Rate			Foreign-Exchange
	Contracts			Contracts			Contracts			Contracts			Contracts			Contracts			Contracts			Contracts
Truck, Parts and Other:
Cost of sales and revenues				$	.5					$	.4					$	(1.3	)				$	(.9	)
Interest and other (income) expense, net					(1.3	)					.4
Interest and other expense (income), net																	.4						.8
Financial Services:
Interest and other borrowing expenses	$	(.1	)		(4.9	)	$	(1.4	)		(4.6	)	$	(.1	)		(4.3	)	$	(1.5	)		(8.9	)

	$	(.1	)	$	(5.7	)	$	(1.4	)	$	(3.8	)	$	(.1	)	$	(5.2	)	$	(1.5	)	$	(9.0	)


	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	June 30, 2012						June 30, 2012						September 30, 2012						September 30, 2012
	Interest-Rate			Foreign-Exchange			Interest-Rate			Foreign-Exchange			Interest-Rate			Foreign-Exchange			Interest-Rate			Foreign-Exchange
	Contracts			Contracts			Contracts			Contracts			Contracts			Contracts			Contracts			Contracts
Truck, Parts and Other:
Cost of sales and revenues				$	(.3	)				$	(.3	)										$	(.3	)
Interest and other (income) expense, net					(1.8	)					(2.4	)
Interest and other expense (income), net																$	2.0						(.4	)
Financial Services:
Interest and other borrowing expenses	$	(1.1	)		1.4		$	(.1	)		1.1		$	1.6			(.5	)	$	1.5			.6

	$	(1.1	)	$	(.7	)	$	(.1	)	$	(1.6	)	$	1.6		$	1.5		$	1.5		$	(.1	)

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 ~~six~~nine months ended ~~June~~September 30, 2013. 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 Debt 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.

The fair value of 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.

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 spot rates and are categorized as Level 2.

The Company’s assets and liabilities subject to recurring fair value measurements are either Level 1 or Level 2 as follows:


At June 30, 2013	Level 1		Level 2		Total
At September 30, 2013							Level 1		Level 2		Total
Assets:
Marketable debt securities
U.S. tax-exempt securities			$	207.1	$	207.1			$	206.4	$	206.4
U.S. corporate securities				65.7		65.7				79.7		79.7
U.S. government and agency securities	$	.4		.2		.6	$	.4		.2		.6
Non-U.S. corporate securities				492.2		492.2				565.6		565.6
Non-U.S. government securities				317.0		317.0				244.5		244.5
Other debt securities				99.2		99.2				104.3		104.3

Total marketable debt securities	$	.4	$	1,181.4	$	1,181.8	$	.4	$	1,200.7	$	1,201.1


Derivatives
Cross currency swaps			$	38.1	$	38.1			$	26.8	$	26.8
Interest-rate swaps				4.3		4.3				3.5		3.5
Foreign-exchange contracts				5.0		5.0				.6		.6

Total derivative assets			$	47.4	$	47.4			$	30.9	$	30.9


Liabilities:
Derivatives
Cross currency swaps			$	28.6	$	28.6			$	42.9	$	42.9
Interest-rate swaps				28.1		28.1				28.1		28.1
Foreign-exchange contracts				.8		.8				4.5		4.5

Total derivative liabilities			$	57.5	$	57.5			$	75.5	$	75.5

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.

Financial Services Net Receivables: For floating-rate loans, wholesale financings, 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 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 at ~~June~~September 30, 2013 and December 31, 2012 was as follows:


	June 30, 2013				December 31, 2012				September 30, 2013				December 31, 2012
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets:
Financial Services fixed-rate loans	$	3,412.0	$	3,454.3	$	3,361.7	$	3,434.8	$	3,482.6	$	3,537.4	$	3,361.7	$	3,434.8

Liabilities:
Truck, Parts and Other fixed-rate debt		150.0		155.9		150.0		160.6		150.0		153.5		150.0		160.6
Financial Services fixed-rate debt		3,494.7		3,533.6		3,277.2		3,350.5		4,029.0		4,076.6		3,277.2		3,350.5

The Company has several defined benefit pension plans, which cover a majority of its employees. The following information details the components of net pension expense for the Company’s defined benefit plans:


	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	June 30						June 30						September 30						September 30
	2013			2012			2013			2012			2013			2012			2013			2012
Service cost	$	17.8		$	14.9		$	36.7		$	32.0		$	18.3		$	16.0		$	55.0		$	48.0
Interest on projected benefit obligation		20.1			20.7			40.4			40.7			20.2			20.3			60.6			61.0
Expected return on assets		(29.7	)		(27.8	)		(59.6	)		(55.2	)		(29.8	)		(27.6	)		(89.4	)		(82.8	)
Amortization of prior service costs		.3			.4			.6			.8			.3			.3			.9			1.1
Recognized actuarial loss		11.1			11.0			22.0			21.6			11.0			10.8			33.0			32.4

Net pension expense	$	19.6		$	19.2		$	40.1		$	39.9		$	20.0		$	19.8		$	60.1		$	59.7

During the three and ~~six~~nine months ended ~~June~~September 30, 2013, the Company contributed ~~$2.7~~$5.9 and ~~$6.1~~$12.0 to its pension plans, respectively, and ~~$2.7~~$8.3 and ~~$85.4~~$93.7 for the three and ~~six~~nine months ended ~~June~~September 30, 2012, respectively.

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 (PFS) derives its earnings primarily from financing or leasing PACCAR products in North America, Europe and Australia. The Company’s Other business is the manufacturing and marketing of industrial winches.

Consolidated net sales and revenues in the ~~second~~third quarter and first ~~six~~nine months of 2013 were $4.30 billion and ~~$8.22~~$12.52 billion compared to ~~$4.46~~$3.82 billion and ~~$9.23~~$13.05 billion from the same periods in 2012. Truck unit sales increased in the third quarter of 2013 to 35,400 units from 31,100 units in the third quarter of 2012 primarily due to higher industry retail sales in the U.S., Canada and Europe, partially offset by lower retail sales in Mexico and South America. Truck unit sales decreased in the ~~second quarter and~~ first ~~half~~nine months of 2013 to ~~34,700 units and 65,300~~100,700 units from ~~37,800 units and 77,600~~108,700 units in the ~~second quarter and first six months of 2012,~~same period last year, primarily due to lower industry retail sales in the U.S., Canada and ~~Canada.~~South America, partially offset by higher industry retail sales in Europe. Aftermarket parts sales in the ~~second~~third quarter of 2013 were ~~$709.5~~a record $715.3 million compared to ~~$666.2~~$650.1 million in the ~~second~~third quarter in 2012 primarily due to strong demand worldwide. Aftermarket parts sales in the first ~~half~~nine months of 2013 were ~~$1,376.9 million~~$2.09 billion compared to ~~$1,346.6 million~~$2.00 billion in the same period of 2012.

~~Second~~Third quarter 2013 net income was ~~$291.6~~$309.4 million ($~~.82~~.87 per diluted share) compared to ~~$297.2~~$233.6 million ($~~.83~~.66 per diluted share) in the ~~second~~third quarter of 2012. The third quarter 2013 results reflect higher Truck segment sales, record Parts sales and record Financial Services segment pre-tax income. For the first ~~six~~nine months of 2013, net income was ~~$527.7~~$837.1 million ($~~1.49~~2.36 per diluted share) compared to ~~$624.5~~$858.1 million ($~~1.75~~2.41 per diluted share) in the first ~~six~~nine months of 2012. The year-to-date 2013 results reflect lower sales in the Truck segment ~~compared to~~in the ~~same period in 2012,~~first half of 2013, partially offset by ~~improved~~record Parts sales and record Financial Services ~~and Parts~~ segment ~~results.~~pre-tax income.

~~Construction~~In October 2013, PACCAR began production of ~~PACCAR’s~~DAF trucks at its new DAF assembly plant in Ponta Grossa, Brasil. The new 300,000 square foot facility on 569 acres is a high-technology, environmentally friendly plant that will assemble premium-quality DAF XF, CF and LF vehicles. The factory ~~in Ponta Grossa, Brasil began in January 2012. Construction is progressing on schedule with production of~~will build DAF trucks ~~scheduled~~for Brasil and the rest of the South American market. The above six tonne truck market in Brasil is projected to be over 145,000 units in 2013, with steady growth expected in future years.

PACCAR completed a new parts distribution center in Brasil and an expansion of the Lancaster, Pennsylvania distribution center that doubled its warehouse space.

Kenworth and Peterbilt continue to launch new products, and in November 2013, production will begin ~~in late 2013.~~on the Kenworth T880 and the Peterbilt Model 567 trucks, which are designed for the vocational market.

In the ~~second~~third quarter and first ~~half~~nine months of 2013, the Company’s research and development expenses (R&D) were ~~$61.8~~$56.6 million and ~~$133.9~~$190.5 million compared to ~~$73.8~~$66.8 million and ~~$146.1~~$212.9 million in the ~~second~~third quarter and first ~~half~~nine months of 2012, respectively. R&D ~~costs~~ declined as new truck models and engines began production. R&D is focused on engine and ~~other~~ new vehicle development.

Truck industry Class 8 retail sales in the U.S. and Canada in 2013 are expected to be ~~210,000-230,000~~205,000-215,000 units compared to 224,900 units in 2012, reflecting the ongoing replacement of the aging truck population and an improving housing sector. Estimates for the U.S. and Canada truck industry Class 8 retail sales for 2014 are in the range of 210,000-240,000 units, driven primarily by ongoing fleet replacement and some expansion of industry fleet ~~and some anticipated improvement in~~capacity reflecting modest overall economic growth.

In Europe, the ~~economy. The~~ 2013 truck industry registrations for over 16-tonne vehicles ~~in Europe~~ are expected to be ~~210,000-230,000~~215,000-225,000 units compared to 221,500 units in ~~2012 as some~~2012. Some customers are purchasing Euro 5 vehicles ahead of the introduction of the Euro 6 emission requirement in 2014. Estimates for 2014 over 16-tonne truck industry registrations in Europe are in the range of 200,000-230,000 units reflecting the impact of the pull-forward of industry truck purchases in 2013.

In 2014, Parts industry aftermarket sales ~~in 2013~~are expected to grow 3-7%, reflecting modest economic growth in the U.S. and Canada ~~are expected to modestly increase due to some economic growth~~ and ~~an aging truck fleet. Parts industry aftermarket sales in Europe in 2013 are expected to be comparable to 2012, reflecting uneven economic conditions in the Eurozone.~~Europe.

Capital investments in 2013 are expected to be $425 to $475 million ~~focused on~~and include the completion of the truck factory in Brasil and the development of new products and services worldwide. R&D in 2013 is expected to be $250 to ~~$275~~$260 million, focused on comprehensive product development programs and enhanced manufacturing operating efficiency.

In 2014, capital investments are expected to be $350 to $400 million and R&D is expected to be $225 to $275 million, as PACCAR ~~Inc - Form 10-Q~~

will continue to focus on enhanced manufacturing operating efficiencies and investing in new products and services.

Based on the ~~2013~~ truck market outlook, average earning assets ~~this year~~in the fourth quarter are expected to ~~increase approximately 5% as new business financing from~~be slightly higher than current levels, and in 2014 may grow further based on truck ~~sales exceeds customer collections.~~industry forecasts. Current levels of freight tonnage, freight rates and fleet utilization are contributing to customers’ profitability and cash flow. If current freight transportation conditions decline due to weaker economic conditions, past due accounts, truck repossessions and credit losses would likely increase from the current low levels.

See the Forward Looking Statement section of Management’s Discussion and Analysis for factors that may affect the Truck, Parts and Financial Services outlook.


														Three Months Ended						Nine Months Ended
		Three Months Ended						Six Months Ended						September 30						September 30
($ in millions, except per share amounts)		June 30						June 30						2013			2012			2013			2012
Six Months Ended June 30,		2013			2012			2013			2012
Net sales and revenues:
Truck		$	3,270.0		$	3,483.7		$	6,203.3		$	7,278.1		$	3,261.2		$	2,859.9		$	9,464.5		$	10,138.0
Parts			709.5			666.2			1,376.9			1,346.6			715.3			650.1			2,092.2			1,996.7
Other			32.2			41.2			62.7			81.1			30.1			36.7			92.8			117.8

Truck, Parts and Other			4,011.7			4,191.1			7,642.9			8,705.8			4,006.6			3,546.7			11,649.5			12,252.5
Financial Services			288.8			266.1			581.9			527.5			293.5			273.5			875.4			801.0

		$	4,300.5		$	4,457.2		$	8,224.8		$	9,233.3		$	4,300.1		$	3,820.2		$	12,524.9		$	13,053.5

Income (loss) before taxes:
Truck		$	238.4		$	272.1		$	403.4		$	572.4		$	242.5		$	170.2		$	645.9		$	742.6
Parts			109.4			89.9			204.7			191.5			106.5			88.7			311.2			280.2
Other			(4.4	)		(1.3	)		(14.1	)		(4.4	)		(4.5	)		(1.7	)		(18.6	)		(6.1	)

Truck, Parts and Other	��		343.4			360.7			594.0			759.5			344.5			257.2			938.5			1,016.7
Financial Services			81.5			77.4			161.6			148.7			88.2			80.4			249.8			229.1
Investment income			8.0			8.2			14.5			17.1			7.3			7.8			21.8			24.9
Income taxes			(141.3	)		(149.1	)		(242.4	)		(300.8	)		(130.6	)		(111.8	)		(373.0	)		(412.6	)

Net income		$	291.6		$	297.2		$	527.7		$	624.5		$	309.4		$	233.6		$	837.1		$	858.1

Diluted earnings per share		$	.82		$	.83		$	1.49		$	1.75		$	.87		$	.66		$	2.36		$	2.41

Return on Revenues			6.8	%		6.7	%		6.4	%		6.8	%		7.2	%		6.1	%		6.7	%		6.6	%

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 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.

The Company’s Truck segment accounted for ~~76.0%~~75.8% and ~~75.4%~~75.6% of revenues in the ~~second~~third quarter and first ~~six~~nine months of 2013 compared to ~~78.2%~~74.9% and ~~78.8%~~77.7% in the ~~second~~third quarter and first ~~six~~nine months of 2012.


($ in millions)	Three Months Ended June 30									Six Months Ended June 30									Three Months Ended September 30									Nine Months Ended September 30
	2013			2012			% Change			2013			2012			% Change			2013			2012			% Change			2013			2012			% Change
Truck net sales and revenues:
U.S. and Canada	$	1,842.3		$	2,053.2			(10	)	$	3,452.5		$	4,429.6			(22	)	$	1,880.8		$	1,431.2			31		$	5,333.3		$	5,860.8			(9	)
Europe		829.1			790.7			5			1,680.5			1,612.7			4			876.1			755.9			16			2,556.6			2,368.6			8
Mexico, South America, Australia and Other		598.6			639.8			(6	)		1,070.3			1,235.8			(13	)		504.3			672.8			(25	)		1,574.6			1,908.6			(17	)

	$	3,270.0		$	3,483.7			(6	)	$	6,203.3		$	7,278.1			(15	)	$	3,261.2		$	2,859.9			14		$	9,464.5		$	10,138.0			(7	)

Truck income before income taxes	$	238.4		$	272.1			(12	)	$	403.4		$	572.4			(30	)	$	242.5		$	170.2			42		$	645.9		$	742.6			(13	)

Pre-tax return on revenues		7.3	%		7.8	%					6.5	%		7.9	%					7.4	%		6.0	%					6.8	%		7.3	%

The Company’s worldwide truck net sales and revenues in the ~~second~~third quarter of 2013 of ~~$3.27~~$3.26 billion ~~decreased~~increased from the ~~second~~third quarter of 2012 due to ~~lower~~higher truck deliveries in the U.S. and Canada ($~~210.9~~449.6 million) and ~~Colombia~~Europe ($~~103.5~~120.2 million), partially offset by ~~higher~~lower truck deliveries in Mexico ($~~46.7~~70.1 million), Australia ($63.7 million) and ~~Europe~~South America ($~~38.4~~51.0 million). In the first ~~six~~nine months of 2013, the Company’s worldwide truck sales and revenues decreased compared to the same period in 2012, due to lower market demand in the U.S. and Canada ($527.5 million) and ~~Colombia.~~South America ($355.8 million), partially offset by higher market demand in Europe ($188.0 million).

For the ~~second~~third quarter of 2013, Truck segment income before income taxes reflects higher truck unit deliveries in the U.S. and Canada and Europe. For the first ~~half~~nine months of 2013, Truck segment income before income taxes reflects lower truck unit deliveries and price realization due to slower economic growth.

The ~~second~~third quarter and first ~~six~~nine months of 2013 Truck income before income taxes was also affected by the translation of weaker foreign currencies, primarily the ~~British pound.~~Australian and Canadian dollars, partially offset by a stronger euro. Truck income before income taxes decreased by ~~$7.1~~$.5 million and ~~$7.5~~$8.0 million, respectively, due to the translation effect of currencies in the ~~second~~third quarter and first ~~six~~nine months of 2013.


	Three Months Ended June 30							Six Months Ended June 30							Three Months Ended September 30							Nine Months Ended September 30
	2013		2012		% Change			2013		2012		% Change			2013		2012		% Change			2013		2012		% Change
U.S.		15,300		17,500		(13	)		28,000		36,800		(24	)		15,700		12,200		29			43,700		49,000		(11	)
Canada		2,600		3,100		(16	)		5,300		6,700		(21	)		2,500		2,100		19			7,800		8,800		(11	)

U.S. and Canada		17,900		20,600		(13	)		33,300		43,500		(23	)		18,200		14,300		27			51,500		57,800		(11	)
Europe		11,100		11,000		1			21,700		22,000		(1	)		12,000		10,200		18			33,700		32,200		5
Mexico, South America, Australia and Other		5,700		6,200		(8	)		10,300		12,100		(15	)		5,200		6,600		(21	)		15,500		18,700		(17	)

Total units		34,700		37,800		(8	)		65,300		77,600		(16	)		35,400		31,100		14			100,700		108,700		(7	)

The truck markets in the U.S. and Canada and ~~South America declined~~Europe improved in the ~~second~~third quarter of 2013 compared to 2012, partially offset by ~~slightly higher deliveries~~the impact of lower markets in Mexico, South America and ~~Europe.~~Australia.

~~Industry~~In the first nine months of 2013, industry retail sales in the heavy-duty market in the U.S. and Canada decreased to ~~99,600~~153,000 units ~~in the first six months of 2013~~ compared to ~~114,900~~169,600 units in the same period of 2012. The Company’s heavy-duty truck retail market share was ~~27.6%~~27.9% in the first ~~six~~nine months of 2013 compared to ~~29.9%~~29.0% in the same period of 2012. The medium-duty market was ~~32,800~~48,800 units in the first ~~six~~nine months of 2013 compared to ~~34,800~~48,900 units in the same period of 2012. The Company’s medium-duty market share was ~~14.1%~~14.9% in both the first ~~six~~nine months of 2013 ~~compared to 14.5% in the same period of~~and 2012.

The over16-tonne truck market in Western and Central Europe was ~~103,400~~157,200 units in the first ~~six~~nine months of 2013 compared to ~~116,800~~168,200 units in the same period of 2012. The Company’s market share was ~~15.8%~~15.9% in the first ~~six~~nine months of 2013 ~~a decrease from 15.9%~~compared to 16.0% in the same period of 2012. The6- to16-tonne market in the first ~~six~~nine months of 2013 was ~~25,600~~39,200 units compared to ~~28,700~~42,400 units in the same period of 2012. DAF market share in the6- to16-tonne market in the first ~~six~~nine months of 2013 was ~~11.5%~~11.3% compared to 11.6% in the same period of 2012.

The major factors for the change in net sales and revenues, cost of sales and revenues, and gross margin for the three months ended ~~June~~September 30, 2013 for the Truck segment are as follows:


($ in millions)	Net Sales			Cost of Sales			Gross Margin			Net Sales			Cost of Sales			Gross Margin
Three Months Ended June 30, 2012	$	3,483.7		$	3,100.9		$	382.8
Three Months Ended September 30, 2012										$	2,859.9		$	2,592.2		$	267.7
Increase (decrease)
Truck delivery volume		(173.6	)		(146.9	)		(26.7	)		329.1			286.1			43.0
Average truck sales prices		(57.6	)					(57.6	)		(18.6	)					(18.6	)
Average per truck material, labor and other direct costs					(40.1	)		40.1						(48.4	)		48.4
Factory overhead and other indirect costs					5.9			(5.9	)					17.4			(17.4	)
Operating lease income and depreciation expense		21.3			21.2			.1			70.5			66.2			4.3
Currency translation		(3.8	)		2.3			(6.1	)		20.3			18.6			1.7

Total decrease		(213.7	)		(157.6	)		(56.1	)
Total increase											401.3			339.9			61.4

Three Months Ended June 30, 2013	$	3,270.0		$	2,943.3		$	326.7
Three Months Ended September 30, 2013										$	3,261.2		$	2,932.1		$	329.1

The major factors for the change in net sales and revenues, cost of sales and revenues, and gross margin for the ~~six~~nine months ended ~~June~~September 30, 2013 for the Truck segment are as follows:


	Net Sales			Cost of Sales			Gross Margin
($ in millions)	Net Sales						Gross Margin			Net Sales				Cost of Sales				Gross Margin
Six Months Ended June 30, 2012	$	7,278.1		Cost of Sales	$	6,486.0		$	792.1
Nine Months Ended September 30, 2012											$	10,138.0			$	9,078.2			$	1,059.8
Increase (decrease)
Truck delivery volume		(1,042.6	)		(877.8	)		(164.8	)			(713.5	)			(591.7	)			(121.8	)
Average truck sales prices		(68.4	)					(68.4	)			(87.0	)							(87.0	)
Average per truck material, labor and other direct costs					(28.9	)		28.9								(77.3	)			77.3
Factory overhead and other indirect costs					(13.2	)		13.2								4.2				(4.2	)
Operating lease income and depreciation expense		41.9			41.0			.9				112.4				107.2				5.2
Currency translation		(5.7	)		2.5			(8.2	)			14.6				21.1				(6.5	)

Total decrease		(1,074.8	)		(876.4	)		(198.4	)			(673.5	)			(536.5	)			(137.0	)

Six Months Ended June 30, 2013	$	6,203.3		$	5,609.6		$	593.7
Nine Months Ended September 30, 2013											$	9,464.5			$	8,541.7			$	922.8

Truck SG&A of ~~$50.4~~$51.1 million in the ~~second~~third quarter of 2013 decreased from ~~$60.3~~$53.4 million in the ~~second~~third quarter of 2012. The lower spending for the ~~second~~third quarter of 2013 is primarily due to lower sales and marketing expenses of ~~$7.5~~$2.4 million. In the first ~~six~~nine months of 2013, Truck SG&A was ~~$103.5~~$154.6 million compared to ~~$121.3~~$174.7 million in the first ~~six~~nine months of 2012. The lower spending for the first ~~six~~nine months of 2013 was primarily due to lower sales and marketing expenses of ~~$10.6~~$13.0 million and ongoing cost controls.

As a percentage of sales, Truck SG&A decreased to ~~1.5%~~1.6% in the ~~second~~third quarter of 2013 ~~from 1.7%~~compared to 1.9% for the same period in 2012 and decreased to 1.6% in the ~~second quarter of 2012. For the~~ first ~~six~~nine months of 2013 ~~Truck SG&A~~ as ~~a percentage of sales was~~compared to 1.7%~~, unchanged from~~ for the ~~first six months of~~same period in 2012.

The Company’s Parts segment accounted for ~~16.5%~~16.6% and 16.7% of revenues in the ~~second~~third quarter and first ~~six~~nine months of 2013 compared to ~~14.9%~~17.0% and ~~14.6%~~15.3% in the ~~second~~third quarter and first ~~six~~nine months of 2012.


($ in millions)	Three Months Ended June 30								Six Months Ended June 30									Three Months Ended September 30								Nine Months Ended September 30
	2013			2012			% Change		2013			2012			% Change			2013			2012			% Change		2013			2012			% Change
Parts net sales and revenues:
U.S. and Canada	$	408.7		$	388.6			5	$	791.4		$	768.1			3		$	424.1		$	388.8			9	$	1,215.5		$	1,156.9			5
Europe		204.6			194.5			5		404.6			411.0			(2	)		202.7			174.5			16		607.3			585.5			4
Mexico, South America, Australia and Other		96.2			83.1			16		180.9			167.5			8			88.5			86.8			2		269.4			254.3			6

	$	709.5		$	666.2			6	$	1,376.9		$	1,346.6			2		$	715.3		$	650.1			10	$	2,092.2		$	1,996.7			5

Parts income before income taxes	$	109.4		$	89.9			22	$	204.7		$	191.5			7		$	106.5		$	88.7			20	$	311.2		$	280.2			11


Pre-tax return on revenues		15.4	%		13.5	%				14.9	%		14.2	%					14.9	%		13.6	%				14.9	%		14.0	%

The Company’s worldwide parts net sales and revenues increased in the ~~second~~third quarter and the first nine months of 2013 primarily due to higher aftermarket demand worldwide. ~~For the first half of 2013, parts net sales and revenues increased due to higher market demand in all markets except Europe.~~ The increase in Parts segment income before taxes and ~~pretax~~pre-tax return on revenues in the ~~second~~third quarter and first ~~half~~nine months of 2013 was primarily due to higher sales, gross margins and cost control.

The major factors for the change in net sales and revenues, cost of sales and revenues, and gross margin for the three months ended ~~June~~September 30, 2013 for the Parts segment are as follows:


($ in millions)	Net Sales			Cost of Sales		Gross Margin			Net Sales			Cost of Sales		Gross Margin
Three Months Ended June 30, 2012	$	666.2		$	499.5	$	166.7
Three Months Ended September 30, 2012									$	650.1		$	487.7	$	162.4
Increase (decrease)
Aftermarket parts volume		16.6			12.0		4.6			62.0			39.5		22.5
Average aftermarket parts sales prices		27.1					27.1			(2.8	)				(2.8	)
Average aftermarket parts direct costs					10.5		(10.5	)					3.1		(3.1	)
Warehouse and other indirect costs					2.2		(2.2	)					.5		(.5	)
Currency translation		(.4	)		.4		(.8	)		6.0			3.6		2.4

Total increase		43.3			25.1		18.2			65.2			46.7		18.5

Three Months Ended June 30, 2013	$	709.5		$	524.6	$	184.9
Three Months Ended September 30, 2013									$	715.3		$	534.4	$	180.9

The major factors for the change in net sales and revenues, cost of sales and revenues, and gross margin for the ~~six~~nine months ended ~~June~~September 30, 2013 for the Parts segment are as follows:


($ in millions)	Net Sales			Cost of Sales		Gross Margin			Net Sales		Cost of Sales		Gross Margin
Six Months Ended June 30, 2012	$	1,346.6		$	1,004.0	$	342.6
Nine Months Ended September 30, 2012									$	1,996.7	$	1,491.7	$	505.0
Increase (decrease)
Aftermarket parts volume		3.4			.9		2.5			65.4		40.4		25.0
Average aftermarket parts sales prices		27.3					27.3			24.5				24.5
Average aftermarket parts direct costs					12.6		(12.6	)				15.7		(15.7	)
Warehouse and other indirect costs					4.0		(4.0	)				4.5		(4.5	)
Currency translation		(.4	)		.7		(1.1	)		5.6		4.3		1.3

Total increase		30.3			18.2		12.1			95.5		64.9		30.6

Six Months Ended June 30, 2013	$	1,376.9		$	1,022.2	$	354.7
Nine Months Ended September 30, 2013									$	2,092.2	$	1,556.6	$	535.6

Parts SG&A was ~~$51.0~~$51.1 million in the ~~second~~third quarter of 2013 compared to ~~$52.5~~$51.2 million in the ~~second~~third quarter of 2012. In the first ~~six~~nine months of 2013, Parts SG&A was ~~$101.8~~$152.9 million compared to ~~$104.7~~$155.9 million in the first ~~six~~nine months of 2012. ~~The lower spending for the first six months of 2013 is primarily due to lower sales and marketing expenses of $2.8 million.~~

As a percentage of sales, Parts SG&A decreased to ~~7.2%~~7.1% in the ~~second~~third quarter of 2013 from 7.9% in the ~~second~~third quarter of 2012, reflecting higher sales ~~volumes and lower spending.~~volumes. For the first ~~six~~nine months of 2013, Parts SG&A as a percentage of sales was ~~7.4%~~7.3%, down from 7.8% in the first ~~six~~nine months of 2012, due to lower sales and marketing expenses.

The Company’s Financial Services segment accounted for ~~6.7%~~6.8% and ~~7.1%~~7.0% of revenues in the ~~second~~third quarter and first ~~six~~nine months of 2013 compared to ~~6.0%~~7.2% and ~~5.7%~~6.1% in the ~~second~~third quarter and first ~~six~~nine months of 2012.


($ in millions)	Three Months Ended June 30							Six Months Ended June 30								Three Months Ended September 30							Nine Months Ended September 30
	2013		2012		% Change			2013			2012		% Change			2013		2012		% Change			2013		2012		% Change
New loan and lease volume:
U.S. and Canada	$	704.2	$	836.9		(16	)	$	1,181.0		$	1,388.6		(15	)	$	666.2	$	735.5		(9	)	$	1,847.2	$	2,124.1		(13	)
Europe		199.2		220.4		(10	)		390.5			443.7		(12	)		196.2		202.3		(3	)		586.7		646.0		(9	)
Mexico and Australia		243.0		191.3		27			436.9			346.4		26			213.9		224.1		(5	)		650.8		570.5		14

	$	1,146.4	$	1,248.6		(8	)	$	2,008.4		$	2,178.7		(8	)	$	1,076.3	$	1,161.9		(7	)	$	3,084.7	$	3,340.6		(8	)
New loan and lease volume by product:
Loans and finance leases	$	894.5	$	945.0		(5	)	$	1,575.1		$	1,718.9		(8	)	$	842.0	$	902.2		(7	)	$	2,417.1	$	2,621.1		(8	)
Equipment on operating leases		251.9		303.6		(17	)		433.3			459.8		(6	)		234.3		259.7		(10	)		667.6		719.5		(7	)

	$	1,146.4	$	1,248.6		(8	)	$	2,008.4		$	2,178.7		(8	)	$	1,076.3	$	1,161.9		(7	)	$	3,084.7	$	3,340.6		(8	)
New loan and lease unit volume:
Loans and finance leases		8,420		9,120		(8	)		15,120			16,970		(11	)		8,240		8,970		(8	)		23,360		25,940		(10	)
Equipment on operating leases		2,440		2,680		(9	)		4,240			4,230					2,190		2,600		(16	)		6,430		6,830		(6	)

		10,860		11,800		(8	)		19,360			21,200		(9	)		10,430		11,570		(10	)		29,790		32,770		(9	)
Average earning assets:
U.S. and Canada	$	6,299.5	$	5,908.1		7		$	6,221.6		$	5,630.6		10		$	6,385.6	$	6,109.7		5		$	6,277.0	$	5,791.4		8
Europe		2,384.1		2,286.6		4			2,380.3			2,296.0		4			2,457.2		2,197.7		12			2,406.1		2,263.8		6
Mexico and Australia		1,781.8		1,470.3		21			1,758.4			1,456.6		21			1,786.5		1,613.7		11			1,767.1		1,510.1		17

	$	10,465.4	$	9,665.0		8		$	10,360.3		$	9,383.2		10		$	10,629.3	$	9,921.1		7		$	10,450.2	$	9,565.3		9
Average earning assets by product:
Loans and finance leases	$	6,790.5	$	6,064.8		12		$	6,788.3		$	5,956.3		14		$	6,883.2	$	6,323.0		9		$	6,820.9	$	6,080.5		12
Dealer wholesale financing		1,493.6		1,715.9		(13	)		1,417.8			1,576.9		(10	)		1,491.4		1,600.5		(7	)		1,441.3		1,585.0		(9	)
Equipment on lease and other		2,181.3		1,884.3		16			2,154.2			1,850.0		16			2,254.7		1,997.6		13			2,188.0		1,899.8		15

	$	10,465.4	$	9,665.0		8		$	10,360.3		$	9,383.2		10		$	10,629.3	$	9,921.1		7		$	10,450.2	$	9,565.3		9
Revenue:
U.S. and Canada	$	153.5	$	141.9		8		$	314.3		$	278.4		13		$	156.5	$	149.5		5		$	470.8	$	427.9		10
Europe		73.9		70.5		5			146.2			142.9		2			75.7		67.2		13			221.9		210.1		6
Mexico and Australia		61.4		53.7		14			121.4	��		106.2		14			61.3		56.8		8			182.7		163.0		12

	$	288.8	$	266.1		9		$	581.9		$	527.5		10		$	293.5	$	273.5		7		$	875.4	$	801.0		9
Revenue by product:
Loans and finance leases	$	101.6	$	95.1		7		$	202.8		$	190.1		7		$	102.4	$	100.2		2		$	305.2	$	290.3		5
Dealer wholesale financing		13.4		16.4		(18	)		26.0			31.3		(17	)		14.0		15.3		(8	)		40.0		46.6		(14	)
Equipment on lease and other		173.8		154.6		12			353.1			306.1		15			177.1		158.0		12			530.2		464.1		14

	$	288.8	$	266.1		9		$	581.9		$	527.5		10		$	293.5	$	273.5		7		$	875.4	$	801.0		9

Income before income taxes	$	81.5	$	77.4		5		$	161.6		$	148.7		9		$	88.2	$	80.4		10		$	249.8	$	229.1		9

In the ~~second~~third quarter and first ~~half of 2013,~~nine months, new loan and lease volume decreased 7% and 8% to ~~$1.1~~$1.08 billion and ~~$2.0~~$3.08 billion, respectively, compared to the ~~second~~third quarter and first ~~half~~nine months of 2012. The ~~decrease reflects~~ lower ~~new PACCAR truck sales. In~~volume in the ~~second~~third quarter and first ~~six~~nine months of 2013 primarily reflects lower market shares. In the third quarter of 2013, PFS market share on new PACCAR trucks ~~increased~~decreased to ~~30.5% and 29.7%~~29.0% from ~~30.2% and 28.4%~~33.1% for the same period in 2012, primarily due to lower market share in the U.S. and Canada and Europe. For the first nine months of 2013, PFS market share was 29.0% compared to 29.8% for the same ~~periods~~period in 2012.

The increase in PFS revenues in the ~~second~~third quarter and ~~for the six~~first nine months ended ~~June~~September 30, 2013 primarily resulted from higher average earning asset balances, partially offset by lower yields. PFS income before income taxes increased to ~~$81.5~~$88.2 million and ~~$161.6~~$249.8 million in the ~~second~~third quarter and first ~~half~~nine months of 2013 compared to ~~$77.4~~$80.4 million and ~~$148.7~~$229.1 million in the same periods in 2012 primarily due to higher finance and lease margin.

The major factors for the change in interest and fees, interest and other borrowing expenses and finance margin for the three months ended ~~June~~September 30, 2013 are outlined in the table below:


($ in millions)	Interest and Fees			Interest and Other Borrowing Expenses			Finance Margin			Interest and Fees			Interest and Other Borrowing Expenses			Finance Margin
Three Months Ended June 30, 2012	$	111.5		$	38.1		$	73.4
Three Months Ended September 30, 2012										$	115.5		$	40.6		$	74.9
Increase (decrease)
Average finance receivables		6.4						6.4			8.7						8.7
Average debt balances					3.2			(3.2	)					2.5			(2.5	)
Yields		(2.4	)					(2.4	)		(6.0	)					(6.0	)
Borrowing rates					(2.0	)		2.0						(5.7	)		5.7
Currency translation		(.5	)		.1			(.6	)		(1.8	)		.5			(2.3	)

Total increase		3.5			1.3			2.2
Total increase (decrease)											.9			(2.7	)		3.6

Three Months Ended June 30, 2013	$	115.0		$	39.4		$	75.6
Three Months Ended September 30, 2013										$	116.4		$	37.9		$	78.5

The major factors for the change in interest and fees, interest and other borrowing expenses and finance margin for the ~~six~~nine months ended ~~June~~September 30, 2013 are outlined in the table below:


($ in millions)	Interest and Fees			Interest and Other Borrowing Expenses			Finance Margin			Interest and Fees			Interest and Other Borrowing Expenses			Finance Margin
Six Months Ended June 30, 2012	$	221.4		$	77.8		$	143.6
Nine Months Ended September 30, 2012										$	336.9		$	118.4		$	218.5
Increase (decrease)
Average finance receivables		17.6						17.6			26.3						26.3
Average debt balances					8.2			(8.2	)					10.7			(10.7	)
Yields		(9.5	)					(9.5	)		(15.5	)					(15.5	)
Borrowing rates					(7.7	)		7.7						(13.4	)		13.4
Currency translation		(.7	)					(.7	)		(2.5	)		.5			(3.0	)

Total increase		7.4			.5			6.9
Total increase (decrease)											8.3			(2.2	)		10.5

Six Months Ended June 30, 2013	$	228.8		$	78.3		$	150.5
Nine Months Ended September 30, 2013										$	345.2		$	116.2		$	229.0

The following table summarizes operating lease, rental and other income and depreciation and other expense:


	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
($ in millions)	June 30				June 30				September 30				September 30
	2013		2012		2013		2012		2013		2012		2013		2012
Operating lease revenues	$	163.1	$	144.6	$	320.5	$	284.9	$	168.3	$	146.9	$	488.8	$	431.8
Used truck sales and other		10.7		10.0		32.6		21.2		8.8		11.1		41.4		32.3

Operating lease, rental and other income	$	173.8	$	154.6	$	353.1	$	306.1	$	177.1	$	158.0	$	530.2	$	464.1


Depreciation on operating lease	$	105.8	$	89.1	$	207.1	$	175.5	$	110.3	$	94.5	$	317.4	$	270.0
Vehicle operating expenses		24.3		24.7		47.6		49.1		24.0		23.3		71.6		72.4
Cost of used truck sales and other		8.8		7.7		28.3		15.7		5.9		9.4		34.2		25.1

Depreciation and other expense	$	138.9	$	121.5	$	283.0	$	240.3	$	140.2	$	127.2	$	423.2	$	367.5

The major factors for the change in operating lease, rental and other income, depreciation and other expense and lease margin for the three months ended ~~June~~September 30, 2013 are outlined in the table below:


($ in millions)	Operating Lease, Rental and Other Income		Depreciation and Other Expense			Lease Margin			Operating Lease, Rental and Other Income			Depreciation and Other Expense			Lease Margin
Three Months Ended June 30, 2012	$	154.6	$	121.5		$	33.1
Three Months Ended September 30, 2012									$	158.0		$	127.2		$	30.8
Increase (decrease)
Operating lease impairments				(.3	)		.3						(.1	)		.1
Used truck sales and other		.7		1.1			(.4	)		(2.3	)		(3.5	)		1.2
Gains on returned lease assets				3.8			(3.8	)
Results on returned lease assets													(.4	)		.4
Average operating lease assets		15.5		12.1			3.4			15.6			12.2			3.4
Revenue and cost per asset		2.7		.5			2.2			3.8			3.0			.8
Currency translation		.3		.2			.1			2.0			1.8			.2

Total increase		19.2		17.4			1.8			19.1			13.0			6.1

Three Months Ended June 30, 2013	$	173.8	$	138.9		$	34.9
Three Months Ended September 30, 2013									$	177.1		$	140.2		$	36.9

The major factors for the change in operating lease, rental and other income, depreciation and other expense and lease margin for the ~~six~~nine months ended ~~June~~September 30, 2013 are outlined in the table below:


($ in millions)	Operating Lease, Rental and Other Income		Depreciation and Other Expense			Lease Margin			Operating Lease, Rental and Other Income		Depreciation and Other Expense			Lease Margin
Six Months Ended June 30, 2012	$	306.1	$	240.3		$	65.8
Nine Months Ended September 30, 2012									$	464.1	$	367.5		$	96.6
Increase (decrease)
Operating lease impairments				(.3	)		.3					(.4	)		.4
Used truck sales and other		11.4		12.6			(1.2	)		9.1		9.1
Gains on returned lease assets				3.6			(3.6	)
Results on returned lease assets												3.2			(3.2	)
Average operating lease assets		28.1		22.2			5.9			43.7		34.4			9.3
Revenue and cost per asset		6.9		4.1			2.8			10.7		7.1			3.6
Currency translation		.6		.5			.1			2.6		2.3			.3

Total increase		47.0		42.7			4.3			66.1		55.7			10.4

Six Months Ended June 30, 2013	$	353.1	$	283.0		$	70.1
Nine Months Ended September 30, 2013									$	530.2	$	423.2		$	107.0

The following tables summarize the provision for losses on receivables and net charge-offs:


	Three Months Ended				Six Months Ended				Three Months Ended					Nine Months Ended
($ in millions)	June 30, 2013				June 30, 2013				September 30, 2013					September 30, 2013
	Provision For Losses on Receivables		Net Charge-Offs		Provision For Losses on Receivables		Net Charge-Offs		Provision For Losses on Receivables			Net Charge-Offs		Provision For Losses on Receivables		Net Charge-Offs
U.S. and Canada	$	2.1	$	.8	$	4.0	$	2.4	$	1.7		$	1.3	$	5.7	$	3.7
Europe		2.6		6.5		5.7		8.0		1.5			1.6		7.2		9.6
Mexico and Australia		.6				2.1		.4		.4			.2		2.5		.6

	$	5.3	$	7.3	$	11.8	$	10.8	$	3.6		$	3.1	$	15.4	$	13.9


($ in millions)	Three Months Ended June 30, 2012				Six Months Ended June 30, 2012				Three Months Ended September 30, 2012					Nine Months Ended September 30, 2012
	Provision For Losses on Receivables		Net Charge-Offs		Provision For Losses on Receivables		Net Charge-Offs		Provision For Losses on Receivables			Net Charge-Offs		Provision For Losses on Receivables		Net Charge-Offs
U.S. and Canada	$	1.1	$	.3	$	3.0	$	3.0	$	(.4	)	$	2.7	$	2.6	$	5.7
Europe		2.5		2.0		5.7		4.1		1.9			1.4		7.6		5.5
Mexico and Australia		1.4		1.6		3.8		4.2		1.2			1.5		5.0		5.7

	$	5.0	$	3.9	$	12.5	$	11.3	$	2.7		$	5.6	$	15.2	$	16.9

The provision for losses on receivables was ~~$5.3~~$3.6 million for the ~~second~~third quarter of 2013, an increase of ~~$.3~~$.9 million compared to the same period in 2012, reflecting higher provisions in the U.S. and Canada due to portfolio ~~growth.~~growth, partially offset by lower provisions in Mexico and Australia due to fewer units with losses. The provision for losses on receivables was ~~$11.8~~$15.4 million for the first ~~six~~nine months of 2013, ~~a decrease~~an increase of ~~$.7~~$.2 million compared to the same period in 2012, due to higher provisions in the U.S. and Canada due to portfolio growth, partially offset by lower provisions in Mexico and Australia reflecting ~~lower charge-offs and~~ improved portfolio ~~quality since March 2012.~~quality.

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 loans and finance leases for credit reasons and grants a concession, the modifications are classified as troubled debt restructurings (TDR).

The post-modification balance of accounts modified during the ~~six~~nine months ended ~~June~~September 30, 2013 and 2012 are summarized below:


($ in millions)
Six Months Ended June 30,	2013					2012
Nine Months Ended September 30,											2013					2012
	Recorded Investment		% of Total Portfolio*			Recorded Investment		% of Total Portfolio*			Recorded Investment		% of Total Portfolio*			Recorded Investment		% of Total Portfolio*
Commercial	$	139.0		4.1	%	$	118.0		4.0	%	$	205.5		3.9	%	$	168.0		3.5	%
Insignificant delay		69.1		2.0	%		36.8		1.2	%		96.7		1.9	%		46.4		1.0	%
Credit - no concession		15.0		.5	%		25.2		.8	%		20.9		.4	%		30.9		.6	%
Credit - TDR		8.3		.2	%		31.4		1.1	%		10.3		.2	%		45.9		.9	%

	$	231.4		6.8	%	$	211.4		7.1	%	$	333.4		6.4	%	$	291.2		6.0	%

During the first ~~six~~nine months of 2013 total modification activity increased slightly compared to 2012 due to higher modifications for commercial reasons and insignificant delays, partially offset by lower credit modifications. The ~~higher~~increase in commercial modifications primarily ~~reflected growth in the portfolio.~~reflect higher levels of additional equipment financed and end-of-contract modifications. The higher modifications for insignificant delays were mainly due to granting ~~one large fleet customer in the U.S. a one-month extension and~~ two customers in Australia extensions primarily due to business disruptions arising from ~~flooding.~~flooding and granting one large fleet customer in the U.S. a one-month extension.


	June 30 2013			December 31 2012			June 30 2012			September 30 2013			December 31 2012			September 30 2012
Percentage of retail loan and lease accounts
30+ days past due:
U.S. and Canada		.3	%		.3	%		.8	%		.4	%		.3	%		.7	%
Europe		1.8	%		1.0	%		.9	%		1.1	%		1.0	%		1.0	%
Mexico and Australia		1.4	%		1.5	%		3.3	%		1.6	%		1.5	%		1.8	%

Worldwide		.7	%		.6	%		1.2	%		.7	%		.6	%		.9	%

Worldwide PFS accounts 30+ days past due were .7% at ~~June~~September 30, 2013 and have increased .1% from December 31, ~~2012 due to higher past dues in Europe primarily from one large customer.~~2012. The Company continues to focus on maintaining low past-due balances.

When the Company modifies a 30+ dayspast-due account, the customer is then generally considered current under the revised contractual terms. The Company modified ~~$10.9~~$8.1 million of accounts worldwide during the ~~second~~third quarter of 2013, $11.5 million during the fourth quarter of 2012 and ~~$10.2~~$10.5 million during the ~~second~~third quarter of 2012 that 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:


	June 30 2013			December 31 2012			June 30 2012			September 30 2013			December 31 2012			September 30 2012
Pro forma percentage of retail loan and lease accounts
30+ days past due:
U.S. and Canada		.3	%		.4	%		.8	%		.4	%		.4	%		.7	%
Europe		2.0	%		1.3	%		1.1	%		1.2	%		1.3	%		1.0	%
Mexico and Australia		2.1	%		1.9	%		3.9	%		2.2	%		1.9	%		2.8	%

Worldwide		.9	%		.8	%		1.4	%		.8	%		.8	%		1.1	%

Modifications of accounts in prior quarters that were more than 30 days past due at the time of modification are included inpast-dues if they were not performing under the modified terms at ~~June~~September 30, 2013, December 31, 2012 and ~~June~~September 30, 2012. The effect on the allowance for credit losses from such modifications was not significant at ~~June~~September 30, 2013, December 31, 2012 and ~~June~~September 30, 2012.

For the ~~second~~third quarter and first ~~six~~nine months of 2013, the Company’s 2013 ~~pretax~~pre-tax return on revenue for Financial Services was ~~28.2%~~30.1% and ~~27.8%~~28.5% compared to ~~29.1%~~29.4% and ~~28.2%~~28.6% for the same periods of 2012.

Other includes the winch business as well as sales, income and expenses not attributable to a reportable segment, including a portion of corporate expense. Other sales represent approximately 1% of consolidated net sales and revenues for the ~~second~~third quarter and first ~~six~~nine months of 2013 and 2012. Other SG&A was ~~$10.7~~$9.0 million and ~~$24.6~~$33.6 million in the ~~second~~third quarter and first ~~six~~nine months of 2013 compared to ~~$9.7~~$9.4 million and ~~$22.3~~$31.6 million in the ~~second~~third quarter and first ~~six~~nine months of 2012, respectively. Other income (loss) before tax was a loss of ~~$4.4~~$4.5 million and a loss of ~~$14.1~~$18.6 million in the ~~second~~third quarter and first ~~six~~nine months of 2013 compared to a loss of ~~$1.3~~$1.7 million and a loss of ~~$4.4~~$6.1 million in the same periods of 2012. The higher loss was primarily due to lower income before tax from the winch business.

Investment income was ~~$8.0~~$7.3 million and ~~$14.5~~$21.8 million in the ~~second~~third quarter and first ~~six~~nine months of 2013 compared to ~~$8.2~~$7.8 million and ~~$17.1~~$24.9 million, respectively, in the same time period of 2012. The lower investment income in the ~~second~~third quarter and first ~~six~~nine months of 2013 primarily reflects lower yields on investments from lower market interest rates.


	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
($ in millions)	June 30						June 30						September 30						September 30
	2013			2012			2013			2012			2013			2012			2013			2012
Domestic income before taxes	$	194.2		$	211.4		$	341.4		$	470.8		$	226.9		$	137.5		$	568.3		$	608.3
Foreign income before taxes		238.7			234.9			428.7			454.5			213.1			207.9			641.8			662.4

Total income before taxes	$	432.9		$	446.3		$	770.1		$	925.3		$	440.0		$	345.4		$	1,210.1		$	1,270.7

Domestic pre-tax return on revenues		9.2	%		9.5	%		8.7	%		10.0	%		10.4	%		7.9	%		9.3	%		9.4	%
Foreign pre-tax return on revenues		10.9	%		10.6	%		10.0	%		10.1	%		10.0	%		10.0	%		10.0	%		10.1	%

Total pre-tax return on revenues		10.1	%		10.0	%		9.4	%		10.0	%		10.2	%		9.0	%		9.7	%		9.7	%

~~For~~During the ~~second~~third quarter of 2013, improvements in truck and parts sales in the ~~decrease in~~U.S. contributed to higher third quarter domestic income before ~~income~~ taxes ~~for domestic operations~~ and ~~the increase in income before income taxes for foreign operations compared to the second quarter of 2012 were primarily due to Truck segment operations. The second quarter of 2013~~pre-tax return on revenues for domestic operations of 9.2% declined from 9.5% in 2012, and the second quarter of 2013 return on revenues for foreign operations of 10.9% increased from 10.6% in 2012. Both results primarily reflect changes in Truck segment operations.revenues.

~~For~~During the first ~~six~~nine months of 2013, ~~the decrease in income before taxes for~~ domestic and ~~foreign operations compared to the first six months of 2012 were primarily due to Truck segment operations. The decrease in~~ foreign income before taxes ~~for Truck operations was~~were lower than the same period in 2012 primarily due to lower ~~truck sales~~first half 2013 Truck segment operations, which were partially off-set by improvements in ~~Latin America, partially offset by higher sales in Europe and Australia. The 2013 return on revenues for~~the third quarter, primarily domestic ~~operations of 8.7% declined from 10.0% in 2012, and the 2013 return on revenues in foreign operations of 10.0% declined from 10.1% in 2012. Both results primarily reflect lower returns on~~ Truck segment operations.


	June 30		December 31		September 30		December 31
($ in millions)	2013		2012		2013		2012
Cash and cash equivalents	$	1,441.9	$	1,272.4	$	1,710.4	$	1,272.4
Marketable debt securities		1,181.8		1,192.7		1,201.1		1,192.7

	$	2,623.7	$	2,465.1	$	2,911.5	$	2,465.1

The Company’s total cash and marketable debt securities at ~~June~~September 30, 2013 increased ~~$158.6~~$446.4 million from the balances at December 31, 2012 due primarily to an increase in cash and cash equivalents.


($ in millions)
Six Months Ended June 30,	2013			2012
Nine Months Ended September 30,							2013			2012
Operating activities:
Net income	$	527.7		$	624.5		$	837.1		$	858.1
Net income items not affecting cash		407.2			370.0			658.4			595.7
Pension contributions		(6.1	)		(85.4	)		(12.0	)		(93.7	)
Changes in operating assets and liabilities		223.8			(465.1	)		216.8			(443.5	)

Net cash provided by operating activities		1,152.6			444.0			1,700.3			916.6
Net cash used in investing activities		(938.0	)		(1,080.4	)		(1,464.1	)		(1,662.2	)
Net cash (used in) provided by financing activities		(2.0	)		264.2
Net cash provided by financing activities								219.9			380.0
Effect of exchange rate changes on cash		(43.1	)		(14.6	)		(18.1	)		9.4

Net increase (decrease) in cash and cash equivalents		169.5			(386.8	)		438.0			(356.2	)
Cash and cash equivalents at beginning of the period		1,272.4			2,106.7			1,272.4			2,106.7

Cash and cash equivalents at end of the period	$	1,441.9		$	1,719.9		$	1,710.4		$	1,750.5

Operating ~~activities~~:activities: Cash provided by operations increased ~~$708.6~~$783.7 million to ~~$1,152.6~~$1,700.3 million in the first ~~half~~nine months of ~~2013. The higher~~2013, primarily due to an improvement in working capital and $81.7 million in lower pension contributions. Higher operating cash flow ~~was primarily due to a $262.1 million lower increase in Financial Services segment wholesale receivables, sales-type leases and dealer direct loans and $212.5~~reflects $497.1 million higher inflow for purchases of goods and services in accounts payable and accrued expenses in excess of ~~payments.~~payments and a lower

increase in inventories of $83.7 million. In addition, there was a $63.4 million lower increase in ~~inventories~~Financial Services segment wholesale receivables, sales-type leases and dealer direct loans, and depreciation of ~~$106.3~~equipment on operating leases was higher by $60.5 million. These cash inflows were partially offset by $21.0 million ~~pension contributions were $79.3~~of lower net income and a $91.5 million ~~lower, an increase~~decrease in cash receipts for sales of goods and services in accounts receivable exceeding ~~sales of $75.1 million, and depreciation of equipment on operating leases was higher by $36.7 million. These cash inflows were partially offset by $96.8 million of lower net income.~~sales.

Investing ~~activities~~:activities: Cash used in investing activities of ~~$938.0~~$1,464.1 million in the first ~~half~~nine months of 2013 decreased ~~$142.4~~$198.1 million from the cash used in the first ~~half~~nine months of 2012. Net new loan and lease originations in the Financial Services segment in the first ~~half~~nine months of 2013 were ~~$189.1~~$261.0 million lower, partially offset by ~~$61.0~~$43.2 million of higher cash used for acquisitions of property, plant and equipment.

Financing activities: Cash ~~used in financing activities in the first half of 2013 was $2.0 million as compared to cash~~ provided by financing activities decreased to $219.9 million from $380.0 million in the first ~~half~~nine months of ~~2012 of $264.2 million.~~2012. In the first ~~half~~nine months of 2013, the Company issued ~~$1.35~~$1.88 billion of medium-term debt, ~~$229.4~~$67.0 million less than the first ~~half~~nine months of 2012. The proceeds were used to repay medium-term debt of $565.5 million and to reduce outstanding balances on commercial paper and bank loans by ~~$657.7~~$912.1 million, resulting in cash provided by borrowing activities of ~~$121.9~~$406.5 million, ~~$661.8~~$584.1 million lower than the cash provided by borrowing activities of ~~$783.7~~$990.6 million in the first ~~half~~nine months of 2012. In both periods, cash provided by net borrowings was used to fund growth in the Financial Services portfolios. These lower amounts of cash provided by borrowing activities were partially offset by no purchases of treasury stock in the first ~~half~~nine months of 2013, compared to ~~$139.5~~$162.1 million purchased in the first ~~half~~nine months of 2012. In addition, the Company paid ~~$141.4~~$212.3 million of dividends in the first ~~half~~nine months of 2013, a decrease of ~~$244.3~~$243.6 million compared to ~~$385.7~~$455.9 million in the same period of 2012; the higher dividends paid in 2012 reflect a special dividend declared in 2011 and paid in early 2012.

The Company has line of credit arrangements of ~~$3.66~~$3.67 billion, of which ~~$3.45~~$3.42 billion were unused at ~~June~~September 30, 2013. Included in these arrangements are $3.0 billion of syndicated bank facilities, of which $1.0 billion matures in June 2014, $1.0 billion matures in June 2017 and $1.0 billion matures in June 2018. The Company intends to replace these credit facilities as they expire 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 syndicated bank facilities for the ~~six~~nine months ended ~~June~~September 30, 2013.

In December 2011, PACCAR Inc filed a shelf registration under the Securities Act of 1933. The current registration expires in the fourth quarter of 2014 and does not limit the principal amount of debt securities that may be issued during the period. The total amount of medium-term notes outstanding for PACCAR Inc as of ~~June~~September 30, 2013 was $500.0 million.

In December 2011, PACCAR’s Board of Directors approved the repurchase of $300.0 million of the Company’s common stock, and as of ~~June~~September 30, 2013, $192.0 million of shares have been repurchased pursuant to the authorization.

The Company provides funding for working capital, capital expenditures, R&D, dividends, stock repurchases and other business initiatives and commitments primarily from cash provided by operations. Management expects this method of funding to continue in the future. The current portion of long-term debt ~~totaled~~was $150.0 million as of ~~June~~September 30, 2013.

~~Expenditures~~Investments for property, plant and equipment in the first ~~half~~nine months of 2013 totaled ~~$268.3~~$294.8 million compared to ~~$208.2~~$353.1 million in the first ~~half~~nine months of 2012 as the Company invested in new products and building a new DAF factory in Brasil. Capital ~~spending~~investments in 2013 isare expected to be approximately $425 to $475 million. Spending on R&D in 2013 is expected to be $250 to ~~$275~~$260 million. PACCAR will continue to focus on new product programs, engine development and manufacturing efficiency improvements. In 2014, capital investments are expected to be $350 to $400 million and R&D is expected to be $225 to $275 million, as PACCAR will continue to focus on enhanced manufacturing operating efficiencies and investing in new products and services.

The Company conducts business in the countries of Spain, Italy, Portugal, Ireland and Greece, which have been experiencing significant financial stress. As of ~~June~~September 30, 2013, the Company had finance and trade receivables in these countries of approximately 1% of consolidated total assets. As of ~~June~~September 30, 2013, the Company did not have any marketable debt security investments in corporate or sovereign government securities in these countries. In addition, the Company had no derivative counterparty credit exposures in these countries as of ~~June~~September 30, 2013.

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.

The Company issues commercial paper for a portion of its funding in its Financial Services segment. Some of this commercial paper is converted to fixed interest rate debt through the use of interest rate swaps, which are used to manage interest rate risk. In the event of a future significant disruption in the financial markets, the Company may not be able to issue replacement commercial paper. As a result, the Company is exposed to liquidity risk from the shorter maturity of short-term borrowings paid to lenders compared to the longer timing of receivable collections from customers. The Company believes its cash balances and investments, collections on existing finance receivables, syndicated bank lines 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. A decrease in these credit ratings could negatively impact the Company’s ability to access capital markets at competitive interest rates and the Company’s ability to maintain liquidity and financial stability.

In November 2012, the Company’s U.S. finance subsidiary, PACCAR Financial Corp. (PFC), filed a shelf registration statement under the Securities Act of 1933 effective for a three year period. The total amount of medium-term notes outstanding for PFC as of ~~June~~September 30, 2013 was ~~$3.10~~$3.6 billion. The registration expires in the fourth quarter of 2015 and does not limit the principal amount of debt securities that may be issued during that period.

As of ~~June~~September 30, 2013, the Company’s European finance subsidiary, PACCAR Financial Europe, had ~~€418.7~~€418.3 million available for issuance under a €1.50 billion medium-term note program registered with the London Stock Exchange. The program was renewed in the second quarter of 2013 and is renewable annually through the filing of a new prospectus.

In April 2011, 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 2016 and limits the amount of commercial paper (up to one year) to 5.00 billion pesos. At ~~June~~September 30, 2013, ~~6.92~~7.64 billion pesos remained available for issuance.

PACCAR believes its Financial Services companies will be able to continue funding receivables, servicing debt and paying dividends through internally generated funds, access to public and private debt markets and lines of credit.

Certain information presented in this report contains forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995, which 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 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; changes affecting the profitability of truck owners and operators; price changes impacting equipment costs and residual values; insufficient supplier capacity or access to raw materials; labor disruptions; shortages of commercial truck drivers; increased warranty costs or litigation; 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” in the Company’s Annual Report onForm 10-K for the year ended December 31, 2012.

There were no material changes in the Company’s market risk during the ~~six~~nine months ended ~~June~~September 30, 2013. For additional information, refer to Item 7A as presented in the 2012 Annual Report on Form10-K.

The Company’s management, with the participation of the Principal Executive Officer and Principal Financial Officer, conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the period covered by this report. Based on that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.

There have been no significant changes in the Company’s internal controls over financial reporting that occurred during the fiscal quarter covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

For Items 3, 4 and 5, there was no reportable information for the ~~six~~nine months ended ~~June~~September 30, 2013.

The Company and its subsidiaries are parties to various lawsuits incidental to the ordinary course of business. Management believes that the disposition of such lawsuits will not materially affect the Company’s business or financial condition.

On June 3, 2013, the Company and PFC entered into a settlement with the United States Securities and Exchange Commission (“SEC”) that fully resolves the previously reported SEC investigation into the Company’s financial reporting from 2008 to 2011. ~~The Company cooperated fully with~~SeeLegal Proceedings in the SEC’s investigation. The Company and PFC settled without admitting or denying the SEC’s allegations and agreed to pay a $225 thousand civil penalty. The Company began reporting the aftermarket parts business as a separate segment and implemented additional procedures and controlsCompany’s Form 10-Q for the ~~finance business. The resolution does not require a restatement~~second quarter of ~~the Company’s or PFC’s financial results~~2013 for ~~any period.~~additional details.

The National Labor Relations Board (“NLRB”) proceeding concerning compensation of former employees of the Peterbilt plant in Madison, Tennessee has been finally resolved in favor of the Company. SeeLegal Proceedings in the Company’s Form 10-Q for the first quarter of 2013 for additional details.

In January 2011, the European Union (EU) Competition Commission commenced an investigation of all major European commercial vehicle manufacturers, including subsidiaries of the Company, concerning whether such companies participated in agreements or concerted practices to coordinate their commercial policy in the EU. The Company’s subsidiaries are cooperating fully with the EU Competition Commission.

For information regarding risk factors, refer to Part I, Item 1A as presented in the 2012 Annual Report on Form 10-K. There have been no material changes in the Company’s risk factors during the ~~six~~nine months ended ~~June~~September 30, 2013.

For items 2(a) and (b), there was no reportable information for the ~~six~~nine months ended ~~June~~September 30, 2013.

On December 6, 2011, the Company’s Board of Directors approved a plan to repurchase up to $300 million of the Company’s outstanding common stock. As of ~~June~~September 30, 2013, $192.0 million of shares have been repurchased under this plan. There were no repurchases made under this plan during the first ~~half~~nine months of 2013.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


777 - ~~106~~^th106th Ave. N.E., Bellevue, WA		98004
(Address of principal executive offices)		(Zip Code)


Large accelerated filer x		Accelerated filer ¨		Non-accelerated filer ¨		Smaller reporting company ¨


		Page

PART I. FINANCIAL INFORMATION:

ITEM 1.	FINANCIAL STATEMENTS:

Consolidated Statements of Comprehensive ~~Income—~~Income — Three and ~~Six~~Nine months ended ~~June~~September 30, 2013 and 2012 (Unaudited)			3

Consolidated Balance ~~Sheets—~~Sheets — ~~June~~September 30, 2013 (Unaudited) and December 31, 2012			4

Condensed Consolidated Statements of Cash ~~Flows—~~Flows — ~~Six~~Nine months ended ~~June~~September 30, 2013 and 2012 (Unaudited)			6

Notes to Consolidated Financial Statements (Unaudited)			7

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		3031

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		4647

ITEM 4.	CONTROLS AND PROCEDURES		4647

PART II. OTHER INFORMATION:

ITEM 1.	LEGAL PROCEEDINGS		47

ITEM 1A.	RISK FACTORS		4748

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		4748

ITEM 6.	EXHIBITS		4748

SIGNATURE			4849

INDEX TO EXHIBITS			4950


	June 30			December 31
	2013			2012*
	(Unaudited)
LIABILITIES AND STOCKHOLDERS’ EQUITY

TRUCK, PARTS AND OTHER:
Current Liabilities
Accounts payable, accrued expenses and other	$	2,422.7		$	2,168.3
Current portion of long-term debt		150.0

Total Truck, Parts and Other Current Liabilities		2,572.7			2,168.3

Long-term debt					150.0
Residual value guarantees and deferred revenues		952.1			903.5
Other liabilities		626.8			579.5

Total Truck, Parts and Other Liabilities		4,151.6			3,801.3


FINANCIAL SERVICES:
Accounts payable, accrued expenses and other		285.8			309.5
Commercial paper and bank loans		2,823.2			3,562.7
Term notes		4,937.5			4,167.4
Deferred taxes and other liabilities		892.3			940.0

Total Financial Services Liabilities		8,938.8			8,979.6

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 353.8 and 353.4 million shares		353.8			353.4
Additional paid-in capital		84.7			56.6
Retained earnings		5,983.0			5,596.4
Accumulated other comprehensive loss		(309.9	)		(159.5	)

Total Stockholders’ Equity		6,111.6			5,846.9

	$	19,202.0		$	18,627.8


	September 30			December 31
	2013			2012*
	(Unaudited)
LIABILITIES AND STOCKHOLDERS’ EQUITY

TRUCK, PARTS AND OTHER:
Current Liabilities
Accounts payable, accrued expenses and other	$	2,518.7		$	2,168.3
Current portion of long-term debt		150.0

Total Truck, Parts and Other Current Liabilities		2,668.7			2,168.3

Long-term debt					150.0
Residual value guarantees and deferred revenues		1,070.4			903.5
Other liabilities		671.8			579.5

Total Truck, Parts and Other Liabilities		4,410.9			3,801.3


FINANCIAL SERVICES:
Accounts payable, accrued expenses and other		346.4			309.5
Commercial paper and bank loans		2,642.8			3,562.7
Term notes		5,493.6			4,167.4
Deferred taxes and other liabilities		937.0			940.0

Total Financial Services Liabilities		9,419.8			8,979.6

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 354.1 and 353.4 million shares		354.1			353.4
Additional paid-in capital		96.4			56.6
Retained earnings		6,221.5			5,596.4
Accumulated other comprehensive loss		(191.1	)		(159.5	)

Total Stockholders’ Equity		6,480.9			5,846.9

	$	20,311.6		$	18,627.8


Notes to Consolidated Financial Statements (Unaudited)		(Millions, Except Share Amounts)


AOCI Components	Line Item in the Consolidated Statement of Comprehensive Income	Amount Reclassified Out of AOCI**
Gains and losses on cash flow hedges:
*Truck, Parts and Other*
Foreign-exchange contracts	Cost of sales and revenues	$	(2.3	)
	Interest and other (income) expense, net		.3

*Financial Services*
Interest-rate contracts	Interest and other borrowing expenses		(61.9	)

	Pre-tax expense reduction		(63.9	)
	Tax expense		19.0

	After-tax expense reduction		(44.9	)

Defined benefit pension plans:
*Truck, Parts and Other*
Prior service costs	Cost of sales and revenues		.6
Actuarial loss	Cost of sales and revenues $11.5, SG&A $9.6, R&D $.1		21.2

*Financial Services*
Actuarial loss	SG&A		.8

	Pre-tax expense		22.6
	Tax benefit		(7.9	)

	After-tax expense		14.7

Foreign Currency Translation:
*Truck, Parts and Other*	Interest and other (income) expense, net		(1.1	)
*Financial Services*	Interest and other borrowing expenses		(.9	)

	Expense reduction		(2.0	)

Total reclassifications out of AOCI		$	(32.2	)


	PACCAR Inc
		(Registrant)

Date~~August~~November 7, 2013	By	/s/ M. T. Barkley
		M. T. Barkley
		Vice President and Controller
		(Authorized Officer and Chief Accounting Officer)