Baker Hughes 2004 Annual Report Download - page 111

The฀expected฀benefit฀payments฀related฀to฀postretirement฀welfare฀benefits฀are฀as฀follows฀for฀the฀years฀ending฀December฀31:
฀ 2005฀ 2006฀ 2007฀ 2008฀ 2009฀ 2010฀–฀2014
Gross฀benefit฀payments฀ $฀ 16.3฀ $฀ 16.8฀ $฀ 17.4฀ $฀ 18.1฀ $฀ 18.5฀ $฀102.4฀
Expected฀Medicare฀subsidies฀ ฀ –฀ ฀ (1.8)฀ ฀ (1.9)฀ ฀ (2.1)฀ ฀ (2.1)฀ ฀ (11.5)
Net฀benefit฀payments฀฀ $฀ 16.3฀ $฀ 15.0฀ $฀ 15.5฀ $฀ 16.0฀ $฀ 16.4฀ $฀ 90.9
Defined฀Contribution฀Plans
During฀the฀periods฀reported,฀generally฀all฀of฀our฀U.S.฀
employees฀were฀eligible฀to฀participate฀in฀our฀sponsored฀Thrift฀
Plan,฀which฀is฀a฀401(k)฀plan฀under฀the฀Internal฀Revenue฀Code฀
of฀1986,฀as฀amended.฀The฀Thrift฀Plan฀allows฀eligible฀employees฀
to฀elect฀to฀contribute฀from฀1%฀to฀50%฀of฀their฀salaries฀to฀an฀
investment฀trust.฀Employee฀contributions฀are฀matched฀in฀cash฀
by฀us฀at฀the฀rate฀of฀$1.00฀per฀$1.00฀employee฀contribution฀for฀
the฀first฀3%฀and฀$0.50฀per฀$1.00฀employee฀contribution฀for฀
the฀next฀2%฀of฀the฀employee’s฀salary.฀Such฀contributions฀vest฀
immediately.฀In฀addition,฀we฀make฀cash฀contributions฀for฀all฀
eligible฀employees฀between฀2%฀and฀5%฀of฀their฀salary฀
depending฀on฀the฀employee’s฀age.฀Such฀contributions฀become฀
fully฀vested฀to฀the฀employee฀after฀five฀years฀of฀employment.฀
The฀Thrift฀Plan฀provides฀for฀ten฀different฀investment฀options,฀
for฀which฀the฀employee฀has฀sole฀discretion฀in฀determining฀
how฀both฀the฀employer฀and฀employee฀contributions฀are฀
invested.฀Our฀contributions฀to฀the฀Thrift฀Plan฀and฀several฀฀
other฀non-U.S.฀defined฀contribution฀plans฀amounted฀to฀
$75.5฀million,฀$67.7฀million฀and฀$62.8฀million฀in฀2004,฀
2003฀and฀2002,฀respectively.
For฀certain฀non-U.S.฀employees฀who฀are฀not฀eligible฀to฀
participate฀in฀the฀Thrift฀Plan,฀we฀provide฀a฀non-qualified฀
defined฀contribution฀plan฀that฀provides฀basically฀the฀same฀ben-
efits฀as฀the฀Thrift฀Plan.฀In฀addition,฀we฀provide฀a฀non-qualified฀
supplemental฀retirement฀plan฀(“SRP”)฀for฀certain฀officers฀and฀
employees฀whose฀benefits฀under฀both฀the฀Thrift฀Plan฀and฀the฀
Pension฀Plan฀are฀limited฀by฀federal฀tax฀law.฀The฀SRP฀also฀allows฀
the฀eligible฀employees฀to฀defer฀a฀portion฀of฀their฀eligible฀com-
pensation฀and฀provides฀for฀employer฀matching฀and฀base฀con-
tributions฀pursuant฀to฀limitations.฀Both฀non-qualified฀plans฀are฀
fully฀funded฀and฀invested฀through฀trusts,฀and฀the฀assets฀and฀
corresponding฀liabilities฀are฀included฀in฀our฀consolidated฀bal-
ance฀sheet.฀Our฀contributions฀to฀these฀non-qualified฀plans฀
were฀$6.1฀million,฀$5.5฀million฀and฀$6.0฀million฀for฀2004,฀
2003฀and฀2002,฀respectively.
Postemployment฀Benefits
We฀provide฀certain฀postemployment฀disability฀income,฀฀
medical฀and฀other฀benefits฀to฀substantially฀all฀qualifying฀for-
mer฀or฀inactive฀U.S.฀employees.฀Income฀benefits฀for฀long-term฀
disability฀are฀provided฀through฀a฀fully-insured฀plan.฀The฀฀
continuation฀of฀medical฀and฀other฀benefits฀while฀on฀disability฀
(“Continuation฀Benefits”)฀are฀provided฀through฀a฀qualified฀
self-insured฀plan.฀The฀accrued฀postemployment฀liability฀for฀฀
Continuation฀Benefits฀at฀December฀31,฀2004฀and฀2003฀was฀
$20.2฀million฀and฀$27.2฀million,฀respectively,฀and฀is฀included฀
in฀other฀liabilities฀in฀our฀consolidated฀balance฀sheet.
Note฀16.฀Commitments฀and฀Contingencies
Leases
At฀December฀31,฀2004,฀we฀had฀long-term฀non-cancelable฀
operating฀leases฀covering฀certain฀facilities฀and฀equipment.฀
The฀minimum฀annual฀rental฀commitments,฀net฀of฀amounts฀
due฀under฀subleases,฀for฀each฀of฀the฀five฀years฀in฀the฀period฀
ending฀December฀31,฀2009฀are฀$74.0฀million,฀$50.4฀million,฀
$34.8฀million,฀$25.0฀million฀and฀$17.2฀million,฀respectively,฀
and฀$126.3฀million฀in฀the฀aggregate฀thereafter.฀We฀have฀not฀
entered฀into฀any฀significant฀capital฀leases.
Litigation
We฀are฀involved฀in฀litigation฀or฀proceedings฀that฀have฀
arisen฀in฀our฀ordinary฀business฀activities.฀We฀insure฀against฀
these฀risks฀to฀the฀extent฀deemed฀prudent฀by฀our฀management฀
and฀to฀the฀extent฀insurance฀is฀available,฀but฀no฀assurance฀can฀
be฀given฀that฀the฀nature฀and฀amount฀of฀such฀insurance฀will฀be฀
sufficient฀to฀fully฀indemnify฀us฀against฀liabilities฀arising฀out฀of฀
pending฀and฀future฀legal฀proceedings.฀Many฀of฀these฀insur-
ance฀policies฀contain฀deductibles฀or฀self-insured฀retentions฀in฀
amounts฀we฀deem฀prudent,฀and฀for฀which฀we฀are฀responsible฀
for฀payment.฀In฀determining฀the฀amount฀of฀self-insurance,฀it฀
is฀our฀policy฀to฀self-insure฀those฀losses฀that฀are฀predictable,฀
measurable฀and฀recurring฀in฀nature,฀such฀as฀claims฀for฀auto-
mobile฀liability,฀general฀liability฀and฀workers฀compensation.฀We฀
record฀accruals฀for฀the฀uninsured฀portion฀of฀losses฀related฀to฀
these฀types฀of฀claims.฀The฀accruals฀for฀losses฀are฀calculated฀by฀
estimating฀losses฀for฀claims฀using฀historical฀claim฀data,฀specific฀
loss฀development฀factors฀and฀other฀information฀as฀necessary.
On฀March฀29,฀2002,฀we฀announced฀that฀we฀had฀been฀
advised฀that฀the฀Securities฀and฀Exchange฀Commission฀(“SEC”)฀
and฀the฀Department฀of฀Justice฀(“DOJ”)฀are฀conducting฀investi-
gations฀into฀allegations฀of฀violations฀of฀law฀relating฀to฀Nigeria฀
and฀other฀related฀matters.฀The฀SEC฀has฀issued฀a฀formal฀order฀
of฀investigation฀into฀possible฀violations฀of฀provisions฀under฀the฀
Foreign฀Corrupt฀Practices฀Act฀(“FCPA”)฀regarding฀anti-bribery,฀
books฀and฀records฀and฀internal฀controls.฀On฀August฀6,฀2003,฀
the฀SEC฀issued฀a฀subpoena฀seeking฀information฀about฀our฀
operations฀in฀Angola฀and฀Kazakhstan฀as฀part฀of฀its฀ongoing฀
investigation.฀We฀are฀providing฀documents฀to฀and฀cooperating฀
fully฀with฀the฀SEC฀and฀DOJ.฀The฀DOJ฀and฀the฀SEC฀have฀issued฀
subpoenas฀to,฀or฀otherwise฀asked฀for฀interviews฀with,฀current฀
and฀former฀employees฀in฀connection฀with฀the฀investigations฀
regarding฀Nigeria,฀Angola฀and฀Kazakhstan.฀In฀addition,฀we฀
have฀conducted฀internal฀investigations฀into฀these฀matters.
Our฀internal฀investigations฀have฀identified฀issues฀regarding฀
the฀propriety฀of฀certain฀payments฀and฀apparent฀deficiencies฀in฀
our฀books฀and฀records฀and฀internal฀controls฀with฀respect฀to฀
certain฀operations฀in฀Nigeria,฀Angola฀and฀Kazakhstan,฀as฀well฀
2004฀Form฀10-K฀฀฀฀฀61