Sara Lee 2013 Annual Report Download - page 55

The Hillshire Brands Company 53
NET PERIODIC BENEFIT COST AND FUNDED STATUS
The components of the net periodic benefit cost for continuing
operations were as follows:
In millions 2013 2012 2011
Components of defined benefit
net periodic benefit cost
Service cost $«11 $÷«9 $÷«7
Interest cost 70 73 73
Expected return on assets (92) (86) (81)
Amortization of:
Prior service cost 111
Net actuarial loss 4313
Settlement loss 61–
Net periodic benefit cost $÷«– $÷«1 $«13
In 2013, the company recognized $1 million of settlement losses
associated with settlement of two of the company’s defined benefit
pension plans in Canada. The losses resulted from recognition of the
unamortized actuarial losses associated with these two plans. The
company also recognized a $4 million loss related to the payout of
the surplus assets associated with these plans, which were in an
overfunded position. The remaining $1 million of settlement losses
were associated with plan settlements resulting from the payment
of lump-sum benefits to plan participants.
In 2012, the company recognized $1 million of settlement losses
associated with plan settlements resulting from the payment of lump-
sum benefits to plan participants. In 2012, the disposition of the
North American fresh bakery business resulted in the recognition
of a $36 million net settlement loss as a result of the assumption
of the related plan liabilities by the buyer. The settlement loss was
recognized as part of the gain on disposition of this business.
In 2011, the company recognized a curtailment loss of $5 million
associated with the fresh bakery businesses as a result of the expected
decline in expected years of future service associated with the planned
disposition of this business. The amounts recognized in 2011 were
reported as part of the results of discontinued operations.
The net periodic benefit cost of the defined benefit pension plans
in 2013 was virtually unchanged from 2012 as an increase settlement
losses and amortization expense was offset by an increase in asset
returns and lower interest expense.
The net periodic benefit cost of the defined benefit pension plans
in 2012 was $12 million lower than in 2011. The decrease was pri-
marily due to a reduction in the amortization of net actuarial losses
due to actuarial gains recognized during 2011, which reduced the
amount of actuarial losses to be amortized as of the end of 2011.
The amount of prior service cost and net actuarial loss that is
expected to be amortized from accumulated other comprehensive
income and reported as a component of net periodic benefit cost
in continuing operations during 2014 is $1 million and $4 million,
respectively.
The funded status of defined benefit pension plans at the
respective year-ends was as follows:
In millions 2013 2012
Projected benefit obligation
Beginning of year $1,680 $1,377
Service cost 11 9
Interest cost 70 73
Plan amendments/other 11
Benefits paid (81) (73)
Actuarial (gain) loss (123) 294
Settlements 4–
Foreign exchange – (1)
End of year $1,562 $1,680
Fair value of plan assets
Beginning of year $1,515 $1,259
Actual return on plan assets (3) 321
Employer contributions 89
Benefits paid (81) (73)
Foreign exchange – (1)
End of year 1,439 1,515
Funded status $÷(123) $÷(165)
Amounts recognized on the
consolidated balance sheets
Noncurrent asset $÷÷÷«1 $÷÷÷«5
Accrued liabilities (5) (4)
Pension obligation (119) (166)
Net asset (liability) recognized $÷(123) $÷(165)
Amounts recognized in accumulated
other comprehensive income
Unamortized prior service cost $÷÷÷«7 $÷÷÷«7
Unamortized actuarial loss, net 228 263
Total $÷«235 $÷«270
The underfunded status of the plans decreased from $165 million
in 2012 to $123 million in 2013, due to a $118 million decrease in
plan obligations resulting from $123 million of actuarial gains driven
by an increase in the discount rate which was only partially offset by
a $76 million decrease in plan assets. The decrease in plan assets was
the result of a decline in investment performance during the year.
The accumulated benefit obligation is the present value of pension
benefits (whether vested or unvested) attributed to employee service
rendered before the measurement date and based on employee service
and compensation prior to that date. The accumulated benefit obliga-
tion differs from the projected benefit obligation in that it includes no
assumption about future compensation levels. The accumulated benefit
obligations of the company’s pension plans as of the measurement dates
in 2013 and 2012 were $1.562 billion and $1.680 billion, respectively.
The projected benefit obligation, accumulated benefit obligation
and fair value of plan assets for pension plans with accumulated
benefit obligations in excess of plan assets were:
In millions 2013 2012
Projected benefit obligation $1,555 $1,351
Accumulated benefit obligation 1,555 1,350
Fair value of plan assets 1,431 1,180