PACCAR 2011 Annual Report Download - page 86

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MARKET RISKS AND DERIVATIVE INSTRUMENTS
(currencies in millions)
Interest-Rate Risks – See Note O for a description of the Company’s hedging programs and exposure to interest-rate
fluctuations. The Company measures its interest-rate risk by estimating the amount by which the fair value of interest
rate sensitive assets and liabilities, including derivative financial instruments, would change assuming an immediate
100 basis point increase across the yield curve as shown in the following table:
Fair Value Gains (Losses) 2011 2010
CONSOLIDATED:
Assets
Cash equivalents and marketable securities $ (13.8) $ (5.7)
TRUCK AND OTHER:
Liabilities
Fixed-rate long-term debt 3.5 5.2
FINANCIAL SERVICES:
Assets
Fixed-rate loans (51.5) (40.2)
Liabilities
Fixed-rate term debt 35.8 30.9
Interest-rate swaps related to financial services debt 41.2 37.0
Total $ 15.2 $ 27.2
Currency Risks – The Company enters into foreign currency exchange contracts to hedge its exposure to exchange
rate fluctuations of foreign currencies, particularly the Canadian dollar, the euro, the British pound and the
Mexican peso (See Note O for additional information concerning these hedges). Based on the Company’s sensitivity
analysis, the potential loss in fair value for such financial instruments from a 10% unfavorable change in quoted
foreign currency exchange rates would be a loss of $21.2 related to contracts outstanding at December 31, 2011,
compared to a loss of $15.0 at December 31, 2010. These amounts would be largely offset by changes in the values
of the underlying hedged exposures.
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