PACCAR 2012 Annual Report Download - page 77

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N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
December 31, 2012, 2011 and 2010 (currencies in millions)
N. STOC K H OL D E RS ’ EQU I T Y
Accumulated Other Comprehensive (Loss) Income: Following are the components of accumulated other
comprehensive (loss) income:
At December 31, 2012 2011 2010
Unrealized gain on investments $ 9.2 $ 9.4 $ .8
Tax effect (2.6) (2.8) (.3)
6.6 6.6 .5
Unrealized loss on derivative contracts (39.0) (32.3) (27.1)
Tax effect 11.8 10.3 9.2
(27.2) (22.0) (17.9)
Pension and postretirement:
Unrecognized:
Actuarial loss (751.9) (722.5) (465.1)
Prior service cost (8.6) (12.3) (13.9)
Net initial obligation (.6) (.6) (.7)
Tax effect 264.6 257.3 167.3
(496.5) (478.1) (312.4)
Currency translation adjustment 357.6 274.5 371.1
Accumulated other comprehensive (loss) income $ (159.5) $ (219.0) $ 41.3
Other Capital Stock Changes: In 2012 and 2011, the Company purchased and retired 4.2 million and 9.2 million
treasury shares, respectively. In 2010, the Company retired .4 million of its common shares held as treasury stock.
O. D ER I VAT I V E FINA N C IA L IN S T R UM E N TS
As part of its risk management strategy, the Company enters into derivative contracts to hedge against interest rate
and foreign currency risk.
Interest-Rate Contracts: The Company enters into various interest-rate contracts, including interest-rate swaps and
cross currency interest-rate swaps. Interest-rate swaps involve the exchange of fixed for floating rate or floating for
fixed rate interest payments based on the contractual notional amounts in a single currency. Cross currency
interest-rate swaps involve the exchange of notional amounts and interest payments in different currencies. The
Company is exposed to interest-rate and exchange-rate risk caused by market volatility as a result of its borrowing
activities. The objective of these contracts is to mitigate the fluctuations on earnings, cash flows and fair value of
borrowings. Net amounts paid or received are reflected as adjustments to interest expense.
At December 31, 2012, the notional amount of the Company’s interest-rate contracts was $3,196.1. Notional
maturities for all interest-rate contracts are $716.3 for 2013, $1,364.1 for 2014, $863.8 for 2015, $39.5 for 2016,
$209.8 for 2017 and $2.6 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.