Kraft 2002 Annual Report Download - page 62

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kraft foods inc. notes to consolidated financial statements
Note 14. Benefit Plans:
The Company sponsors noncontributory defined benefit pension
plans covering substantially all U.S. employees. Pension
coverage for employees of Kraft’s non-U.S. subsidiaries is
provided, to the extent deemed appropriate, through separate
plans, many of which are governed by local statutory
requirements. In addition, Kraft’s U.S. and Canadian subsidiaries
provide health care and other benefits to substantially all retired
employees. Health care benefits for retirees outside the United
States and Canada are generally covered through local
government plans.
Pension Plans: Net pension (income) cost consisted of the
following for the years ended December 31, 2002, 2001 and 2000:
(in millions) U.S. Plans Non-U.S. Plans
2002 2001 2000 2002 2001 2000
Service cost $ 120 $ 107 $ 69 $49 $45 $37
Interest cost 339 339 213 120 112 98
Expected return on
plan assets (631) (648) (523) (134) (126) (103)
Amortization:
Net gain on adoption
of SFAS No. 87 (11) (1)
Unrecognized net
loss (gain)
from experience
differences 8(21) (36) 5(1) (1)
Prior service cost 187754
Other expense (income) 130 (12) (34)
Net pension
(income) cost $ (33) $(227) $(315) $47 $35 $34
During 2002, certain salaried employees in the United States
left the Company under a voluntary early retirement program
instituted in 2001. This resulted in special termination benefits
and curtailment and settlement losses of $109 million in 2002.
In addition, retiring employees elected lump-sum payments,
resulting in settlement losses of $21 million in 2002 and
settlement gains of $12 million and $34 million in 2001
and 2000, respectively.
The changes in benefit obligations and plan assets, as well
as the funded status of the Company’s pension plans at
December 31, 2002 and 2001, were as follows:
(in millions) U.S. Plans Non-U.S. Plans
2002 2001 2002 2001
Benefit obligation at
January 1 $4,964 $4,327 $2,021 $1,915
Service cost 120 107 49 45
Interest cost 339 339 120 112
Benefits paid (624) (403) (115) (108)
Acquisitions 71 (22)
Settlements 127 14
Actuarial losses 367 500 85 22
Currency 144 18
Other (48) 913 39
Benefit obligation at
December 31 5,245 4,964 2,317 2,021
Fair value of plan assets at
January 1 6,359 7,039 1,329 1,589
Actual return on plan assets (914) (386) (56) (227)
Contributions 26 37 81 63
Benefits paid (636) (394) (87) (76)
Acquisitions (45) (41)
Currency 70 18
Actuarial gains 130 108 3
Fair value of plan assets at
December 31 4,965 6,359 1,337 1,329
(Deficit) excess of plan assets
versus benefit obligations at
December 31 (280) 1,395 (980) (692)
Unrecognized actuarial
losses 2,487 756 394 226
Unrecognized prior
service cost 13 56 50 49
Unrecognized net transition
obligation (1) 77
Net prepaid pension
asset (liability) $2,220 $2,206 $ (529) $ (410)
The combined U.S. and non-U.S. pension plans resulted in
a net prepaid asset of $1,691 million and $1,796 million at
December 31, 2002 and 2001, respectively. These amounts
were recognized in the Company’s consolidated balance sheets
at December 31, 2002 and 2001, as prepaid pension assets
of $2,814 million and $2,675 million, respectively, for those
plans in which plan assets exceeded their accumulated benefit
obligations and as other liabilities of $1,123 million and
$879 million at December 31, 2002 and 2001, respectively, for
plans in which the accumulated benefit obligations exceeded
their plan assets.