Kraft 2004 Annual Report Download - page 77

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The accumulated benefit obligation for the U.S. pension plans was $5,327 million and $4,898 million
at December 31, 2004 and 2003, respectively. The accumulated benefit obligation for the non-U.S.
pension plans was $3,251 million and $2,708 million at December 31, 2004 and 2003, respectively.
At December 31, 2004 and 2003, certain of the Company’s U.S. pension plans were underfunded,
with projected benefit obligations, accumulated benefit obligations and the fair value of plan assets of
$260 million, $188 million and $11 million, respectively, in 2004, and $261 million, $208 million and
$14 million, respectively, in 2003. The majority of these relate to plans for salaried employees that cannot
be funded under IRS regulations. For certain non-U.S. plans, which have accumulated benefit
obligations in excess of plan assets, the projected benefit obligation, accumulated benefit obligation and
fair value of plan assets were $2,012 million, $1,877 million and $950 million, respectively, as of
December 31, 2004, and $1,648 million, $1,532 million and $588 million, respectively, as of
December 31, 2003.
The following weighted-average assumptions were used to determine the Company’s benefit
obligations under the plans at December 31:
U.S. Plans Non-U.S. Plans
2004 2003 2004 2003
Discount rate ...................................... 5.75% 6.25% 5.18% 5.41%
Rate of compensation increase ......................... 4.00 4.00 3.11 3.11
Components of Net Periodic Benefit Cost
Net periodic pension cost (income) consisted of the following for the years ended December 31,
2004, 2003 and 2002:
U.S. Plans Non-U.S. Plans
2004 2003 2002 2004 2003 2002
(in millions)
Service cost .............................. $141 $135 $120 $67 $58 $49
Interest cost .............................. 347 338 339 156 136 120
Expected return on plan assets ................. (575) (587) (631) (178) (146) (134)
Amortization:
Unrecognized net loss from experience differences . 89 15 8 32 18 5
Prior service cost ......................... 3 2 1987
Other expense ............................. 41 51 130 7
Net pension cost (income) .................. $ 46 $(46) $ (33) $ 93 $ 74 $ 47
Retiring employees elected lump-sum payments, resulting in settlement losses of $41 million,
$51 million and $21 million in 2004, 2003 and 2002, respectively. In addition, 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 2004, a non-U.S. plant closure and early retirement benefits resulted in
curtailment and settlement losses of $7 million.
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