Kraft 2001 Annual Report Download - page 59

Kraft Foods Inc.
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The Company’s postretirement health care plans are not funded.
The changes in the benefit obligations of the plans at December 31,
2001 and 2000 were as follows:
(in millions)
2001 2000
Accumulated postretirement benefit
obligation at January 1 $2,102 $1,380
Service cost 34 23
Interest cost 168 109
Benefits paid (172) (111)
Acquisitions 8633
Plan amendments 1(7)
Actuarial losses 295 75
Accumulated postretirement benefit
obligation at December 31 2,436 2,102
Unrecognized actuarial losses (464) (159)
Unrecognized prior service cost 53 62
Accrued postretirement health care costs $2,025 $2,005
The current portion of the Company’s accrued postretirement
health care costs of $172 million and $138 million at December 31,
2001 and 2000, respectively, are included in other accrued liabilities
on the consolidated balance sheets.
The assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation for U.S. plans was
7.5% in 2000, 6.8% in 2001 and 6.2% in 2002, gradually declining to
5.0% by the year 2005 and remaining at that level thereafter. For
Canadian plans, the assumed health care cost trend rate was 8.0%
in 2000, 9.0% in 2001 and 8.0% in 2002, gradually declining to 4.0%
by the year 2006 and remaining at that level thereafter. A one-
percentage-point increase in the assumed health care cost trend
rates for each year would increase the accumulated postretirement
benefit obligation as of December 31, 2001 and postretirement
health care cost (service cost and interest cost) for the year then
ended by approximately 9.2% and 12.9%, respectively. A one-
percentage-point decrease in the assumed health care cost trend
rates for each year would decrease the accumulated postretirement
benefit obligation as of December 31, 2001 and postretirement
health care cost (service cost and interest cost) for the year then
ended by approximately 7.6% and 10.4%, respectively.
The accumulated postretirement benefit obligations for U.S. plans
at December 31, 2001 and 2000 were determined using an
assumed discount rate of 7.0% and 7.75%, respectively. The
accumulated postretirement benefit obligations for Canadian plans
at December 31, 2001 and 2000 were determined using assumed
discount rates of 6.75% and 7.0%, respectively.
Postemployment Benefit Plans: The Company and certain
of its affiliates sponsor postemployment benefit plans covering
substantially all salaried and certain hourly employees. The cost of
these plans is charged to expense over the working lives of the
covered employees. Net postemployment costs consisted of the
following for the years ended December 31, 2001, 2000 and 1999:
(in millions)
2001 2000 1999
Service cost $20 $13 $12
Amortization of unrecognized
net gains (8) (4) (8)
Other expense 19
Net postemployment costs $12 $ 9 $23
The Company instituted a workforce reduction program in its North
American food business in 1999. This action resulted in incremental
postemployment costs, which are shown as other expense above.
The Company’s postemployment plans are not funded. The
changes in the benefit obligations of the plans at December 31,
2001 and 2000 were as follows:
(in millions)
2001 2000
Accumulated benefit obligation at January 1 $ 373 $333
Service cost 20 13
Benefits paid (156) (76)
Acquisitions 269 74
Actuarial losses 14 29
Accumulated benefit obligation
at December 31 520 373
Unrecognized experience gains 52 22
Accrued postemployment costs $ 572 $395
The accumulated benefit obligation was determined using an
assumed ultimate annual turnover rate of 0.3% in 2001 and 2000,
assumed compensation cost increases of 4.5% in 2001 and
2000, and assumed benefits as defined in the respective plans.
Postemployment costs arising from actions that offer employees
benefits in excess of those specified in the respective plans are
charged to expense when incurred.
Note 15. Additional Information:
(in millions)
For the Years Ended December 31, 2001 2000 1999
Research and development
expense $ 358 $ 270 $ 262
Advertising expense $1,190 $1,198 $1,272
Interest and other debt
expense, net:
Interest expense, parent
and affiliates $1,103 $ 531 $ 458
Interest expense, external debt 349 84 89
Interest income (15) (18) (8)
$1,437 $ 597 $ 539
Rent expense $ 372 $ 277 $ 285