PACCAR 2011 Annual Report Download - page 73

Download and view the complete annual report

Please find page 73 of the 2011 PACCAR annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 90

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90

N. STOCKHOLDERS’ EQUITY
Accumulated Other Comprehensive (Loss) Income: Following are the components of accumulated other
comprehensive income:
At December 31, 2011 2010 2009
Unrealized gain on investments $ 9.4 $ .8 $ 1.4
Tax effect (2.8) (.3) (.5)
6.6 .5 .9
Unrealized loss on derivative contracts (32.3) (27.1) (73.4)
Tax effect 10.3 9.2 25.0
(22.0) (17.9) (48.4)
Pension and postretirement:
Unrecognized:
Actuarial loss (722.5) (465.1) (444.7)
Prior service cost (12.3) (13.9) (14.7)
Net initial obligation (.6) (.7) (.6)
Tax effect 257.3 167.3 159.9
(478.1) (312.4) (300.1)
Currency translation adjustment 274.5 371.1 383.8
Accumulated other comprehensive (loss) income $ (219.0) $ 41.3 $ 36.2
Other Capital Stock Changes: In 2011, the Company purchased and retired 9.2 million treasury shares. In April
2010, the Company retired .4 million of its common shares held as treasury stock.
O. D ERIVATIVE FINANCIAL INSTRUMENTS
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, 2011, the notional amount of the Company’s interest-rate contracts was $2,914.1. Notional
maturities for all interest-rate contracts are $705.6 for 2012, $708.9 for 2013, $1,037.2 for 2014, $387.2 for 2015,
$39.1 for 2016 and $36.1 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 and the Mexican peso. The objective is to reduce fluctuations in
earnings and cash flows associated with changes in foreign currency exchange rates. At December 31, 2011, the
notional amount of the outstanding foreign-exchange contracts was $185.7. Foreign-exchange contracts mature
within one year.

NOTES TO CONSOLIDATED FINANCIAL STATEMEN T S
December 31, 2011, 2010 and 2009 (currencies in millions)