Baker Hughes 2007 Annual Report Download - page 143

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60 Baker Hughes Incorporated
Funded Status
Below is the reconciliation of the beginning and ending balances of benefit obligations, fair value of plan assets and the funded
status of our plans. For our pension plans, the benefit obligation is the projected benefit obligation (“PBO”) and for our other post-
retirement benefit plan, the benefit obligation is the accumulated postretirement benefit obligation (“APBO”).
U.S. Pension Benefits Non-U.S. Pension Benefits Other Postretirement Benefits
2007 2006 2007 2006 2007 2006
Change in benefit obligation:
Benefit obligation at beginning of year $ 269.6 $ 238.8 $ 360.5 $ 287.5 $ 156.9 $ 184.5
Service cost 31.6 26.2 3.0 3.4 7.5 7.4
Interest cost 15.7 12.8 18.3 15.0 9.0 9.7
Actuarial (gain) loss (19.7) (0.1) (58.0) 24.6 (4.1) (31.8)
Benefits paid (12.6) (11.7) (16.4) (10.6) (13.5) (12.9)
Plan amendments (1.2) 6.1 – – – –
Other (3.1) (2.5) 1.4 0.1 – –
Exchange rate adjustments – – 9.9 40.5 – –
Benefit obligation at end of year 280.3 269.6 318.7 360.5 155.8 156.9
Change in plan assets:
Fair value of plan assets at beginning of year 410.2 354.1 273.3 207.6 – –
Actual return on plan assets 62.4 39.7 9.9 23.3 – –
Employer contributions 2.4 30.6 33.9 22.3 13.5 12.9
Benefits paid (12.6) (11.7) (16.4) (10.6) (13.5) (12.9)
Other (3.1) (2.5) – 0.1 – –
Exchange rate adjustments – – 5.5 30.6 – –
Fair value of plan assets at end of year 459.3 410.2 306.2 273.3 – –
Funded status over (under) at measurement date 179.0 140.6 (12.5) (87.2) (155.8) (156.9)
Employer contributions – fourth quarter 0.5 0.6 3.5 18.3 3.7 3.8
Funded status over (under) at end of year $ 179.5 $ 141.2 $ (9.0) $ (68.9) $ (152.1) $ (153.1)
The amounts recognized in the consolidated balance sheet consist of the following as of December 31:
U.S. Pension Benefits Non-U.S. Pension Benefits Other Postretirement Benefits
2007 2006 2007 2006 2007 2006
Noncurrent assets $ 197.0 $ 160.1 $ 30.6 $ – $ – $ –
Current liabilities (2.3) (2.3) (0.5) (0.6) (13.9) (13.8)
Noncurrent liabilities (15.2) (16.6) (39.1) (68.3) (138.2) (139.3)
Net amount recognized $ 179.5 $ 141.2 $ (9.0) $ (68.9) $ (152.1) $ (153.1)
The weighted average asset allocations by asset category for the plans are as follows at December 31:
Percentage of Plan Assets
U.S. Pension Benefits Non-U.S. Pension Benefits
Asset Category Target 2007 2006 Target 2007 2006
Equity securities 68% 72% 68% 54% 55% 55%
Debt securities 25% 22% 24% 30% 28% 28%
Real estate 7% 6% 8% 13% 12% 12%
Other – – – 3% 5% 5%
Total 100% 100% 100% 100% 100% 100%
We have investment committees that meet at least quarterly to review the portfolio returns and periodically to determine asset-
mix targets based on asset/liability studies. Third-party investment consultants assisted us in developing asset allocation strategies to
determine our expected rates of return and expected risk for various investment portfolios. The investment committees considered
these studies in the formal establishment of the current asset-mix targets based on the projected risk and return levels for all major
asset classes.
The accumulated benefit obligation (“ABO”) is the actuarial present value of pension benefits attributed to employee service
to date and present compensation levels. The ABO differs from the PBO in that the ABO does not include any assumptions about
future compensation levels. The ABO for all U.S. plans was $275.2 million and $260.9 million at December 31, 2007 and 2006,
respectively. The ABO for all non-U.S. plans was $309.0 million and $353.3 million at December 31, 2007 and 2006, respectively.