Chevron 2004 Annual Report Download - page 75

CHEVRONTEXACO CORPORATION 2004 ANNUAL REPORT 73
Pension Benefits Other
U.S. Int’l. Benefits
2005 $ 489 $ 144 $ 217
2006 $ 507 $ 150 $ 186
2007 $ 524 $ 160 $ 190
2008 $ 540 $ 171 $ 193
2009 $ 553 $ 180 $ 197
2010–2014 $ 2,912 $ 1,038 $ 1,028
Employee฀Savings฀Investment฀Plan฀ Eligible฀employees฀of฀
ChevronTexaco฀and฀certain฀of฀its฀subsidiaries฀participate฀in฀the฀
ChevronTexaco฀Employee฀Savings฀Investment฀Plan฀(ESIP).฀In฀
2002,฀the฀Employees฀Thrift฀Plan฀of฀Texaco฀Inc.,฀Employees฀Sav-
ings฀Plan฀of฀ChevronTexaco฀Global฀Energy฀Inc.฀(formerly฀Caltex฀
Corporation),฀Stock฀Plan฀of฀ChevronTexaco฀Global฀Energy,฀Inc.,฀
and฀Employees฀Thrift฀Plan฀of฀Fuel฀and฀Marine฀Marketing฀LLC฀
were฀merged฀into฀the฀ChevronTexaco฀ESIP.
Charges฀to฀expense฀for฀the฀ESIP฀represent฀the฀company’s฀
contributions฀to฀the฀plan,฀which฀are฀funded฀either฀through฀the฀pur-
chase฀of฀shares฀of฀common฀stock฀on฀the฀open฀market฀or฀through฀
the฀release฀of฀common฀stock฀held฀in฀the฀leveraged฀employee฀stock฀
ownership฀plan฀(LESOP),฀which฀is฀discussed฀below.฀Total฀company฀
matching฀contributions฀to฀employee฀accounts฀within฀the฀ESIP฀were฀
$139,฀$136฀and฀$136฀in฀2004,฀2003฀and฀2002,฀respectively.฀This฀cost฀
was฀reduced฀by฀the฀value฀of฀shares฀released฀from฀the฀LESOP฀total-
ing฀$(138),฀$(23)฀and฀$(73)฀in฀2004,฀2003฀and฀2002,฀respectively.฀
The฀remaining฀amounts,฀totaling฀$1,฀$113฀and฀$63฀in฀2004,฀2003฀
and฀2002,฀respectively,฀represent฀open฀market฀purchases.
Employee฀Stock฀Ownership฀Plan฀ Within฀the฀ChevronTexaco฀
Employee฀Savings฀Investment฀Plan฀(ESIP)฀is฀an฀employee฀stock฀
ownership฀plan฀(ESOP).฀In฀1989,฀Chevron฀established฀a฀leveraged฀
employee฀stock฀ownership฀plan฀(LESOP)฀as฀a฀constituent฀part฀of฀
the฀ESOP.฀The฀LESOP฀provides฀partial฀prefunding฀of฀the฀company’s฀
future฀commitments฀to฀the฀ESIP.
As฀permitted฀by฀American฀Institute฀of฀Certified฀Public฀
Accountants฀(AICPA)฀Statement฀of฀Position฀93-6,฀“Employers’฀
Accounting฀for฀Employee฀Stock฀Ownership฀Plans,”฀the฀company฀
has฀elected฀to฀continue฀its฀practices,฀which฀are฀based฀on฀AICPA฀
76-3,฀“Accounting฀Practices฀for฀Certain฀Employee฀Stock฀Ownership฀
Plans,”฀and฀subsequent฀consensus฀of฀the฀EITF฀of฀the฀FASB.฀The฀
debt฀of฀the฀LESOP฀is฀recorded฀as฀debt,฀and฀shares฀pledged฀as฀col-
lateral฀are฀reported฀as฀“Deferred฀compensation฀and฀benefit฀plan฀
trust”฀in฀the฀Consolidated฀Balance฀Sheet฀and฀the฀Consolidated฀
Statement฀of฀Stockholders’฀Equity.
The฀company฀reports฀compensation฀expense฀equal฀to฀
LESOP฀debt฀principal฀repayments฀less฀dividends฀received฀and฀
used฀by฀the฀LESOP฀for฀debt฀service.฀Interest฀accrued฀on฀the฀
LESOP฀debt฀is฀recorded฀as฀interest฀expense.฀Dividends฀paid฀on฀
LESOP฀shares฀are฀reflected฀as฀a฀reduction฀of฀retained฀earnings.฀
All฀LESOP฀shares฀are฀considered฀outstanding฀for฀earnings-per-
share฀computations.฀฀
Total฀(credits)฀expenses฀recorded฀for฀the฀LESOP฀were฀$(29),฀
$24฀and฀$98฀in฀2004,฀2003฀and฀2002,฀respectively,฀including฀$23,฀
$28฀and฀$32฀of฀interest฀expense฀related฀to฀LESOP฀debt฀and฀a฀
(credit)฀charge฀to฀compensation฀expense฀of฀$(52),฀$(4)฀and฀$66.฀
Of฀the฀dividends฀paid฀on฀the฀LESOP฀shares,฀$52,฀$61฀and฀
$49฀were฀used฀in฀2004,฀2003฀and฀2002,฀respectively,฀to฀service฀
LESOP฀debt.฀Included฀in฀the฀2004฀amount฀was฀a฀repayment฀of฀
debt฀entered฀into฀in฀1999฀to฀pay฀interest฀on฀the฀ESOP฀debt.฀Inter-
est฀expense฀on฀this฀debt฀was฀recognized฀and฀reported฀as฀LESOP฀
interest฀expense฀in฀1999.฀In฀addition,฀the฀company฀made฀no฀
contributions฀in฀2004฀and฀contributions฀of฀$26฀and฀$102฀in฀2003฀
1 Percent 1 Percent
Increase Decrease
Effect on total service and interest
cost components $ 18 $ (15)
Effect on postretirement benefit
obligation $ 86 $ (98)
Plan฀Assets฀and฀Investment฀Strategy฀ The฀company’s฀pension฀
plan฀weighted-average฀asset฀allocation฀at฀December฀31฀by฀asset฀
category฀is฀as฀follows:
U.S. International
Asset Category  2003  2003
Equities  70%  55%
Fixed Income  21%  43%
Real Estate  8%  2%
Other  1%  –
Total  100%  100%
The฀pension฀plans฀invest฀primarily฀in฀asset฀categories฀with฀
sufficient฀size,฀liquidity฀and฀cost฀efficiency฀to฀permit฀investments฀
of฀reasonable฀size.฀The฀pension฀plans฀invest฀in฀asset฀categories฀
that฀provide฀diversification฀benefits฀and฀are฀easily฀measured.฀
To฀assess฀the฀plans’฀investment฀performance,฀long-term฀asset฀
allocation฀policy฀benchmarks฀have฀been฀established.฀฀
For฀the฀primary฀U.S.฀pension฀plan,฀the฀ChevronTexaco฀
Board฀of฀Directors฀has฀established฀the฀following฀approved฀asset฀
allocation฀ranges:฀Equities฀40–70฀percent,฀Fixed฀Income฀20–65฀
percent,฀Real฀Estate฀0–15฀percent.฀The฀significant฀international฀
pension฀plans฀also฀have฀established฀maximum฀and฀minimum฀
asset฀allocation฀ranges฀that฀vary฀by฀each฀plan.฀Actual฀asset฀allo-
cation฀within฀approved฀ranges฀is฀based฀on฀a฀variety฀of฀current฀
economic฀and฀market฀conditions฀and฀consideration฀of฀specific฀
asset฀category฀risk.
Equities฀include฀investments฀in฀the฀company’s฀common฀
stock฀in฀the฀amount฀of฀$8฀and฀$6฀at฀December฀31,฀2004฀and฀2003,฀
respectively.฀The฀“Other”฀asset฀category฀includes฀investments฀in฀
private฀equity฀limited฀partnerships.
Cash฀Contributions฀and฀Benefit฀Payments฀ In฀2004,฀the฀company฀
contributed฀$1,332฀and฀$311฀to฀its฀U.S.฀and฀international฀pension฀
plans,฀respectively.฀In฀2005,฀the฀company฀expects฀contributions฀
to฀be฀approximately฀$250฀and฀$150฀to฀its฀U.S.฀and฀international฀
pension฀plans,฀respectively.฀Actual฀contribution฀amounts฀are฀
dependent฀upon฀investment฀returns,฀changes฀in฀pension฀obli-
gations,฀regulatory฀environments฀and฀other฀economic฀factors.฀
Additional฀funding฀may฀ultimately฀be฀required฀if฀investment฀
returns฀are฀insufficient฀to฀offset฀increases฀in฀plan฀obligations.
The฀company฀anticipates฀paying฀other฀postretirement฀
benefits฀of฀approximately฀$220฀in฀2005,฀as฀compared฀with฀
$199฀in฀2004.
The฀following฀benefit฀payments,฀which฀include฀estimated฀
future฀service,฀are฀expected฀to฀be฀paid฀by฀the฀company฀in฀the฀
next฀10฀years:
 EMPLOYEE BENEFIT PLANS – Continued