Chevron 2007 Annual Report Download - page 81

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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 Chevron Board of
Directors has approved the following percentage asset-alloca-
tion ranges: equities 40–70, fixed income/cash 20–60, real
estate 0–15 and other 0–5. The significant international pen-
sion plans also have established maximum and minimum asset
allocation ranges that vary by each plan. Actual asset alloca-
tion 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 $36 and $17 at December 31, 2007
and 2006, respectively. The “Other” asset category includes
minimal investments in private-equity limited partnerships.
Cash Contributions and Benefit Payments In 2007, the com-
pany contributed $78 and $239 to its U.S. and international
pension plans, respectively. In 2008, the company expects
contributions to be approximately $300 and $200 to its U.S.
and international pension plans, respectively. Actual contri-
bution amounts are dependent upon plan-investment returns,
changes in pension obligations, 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 $207 in 2008, as compared with
$150 paid in 2007.
The following benefit payments, which include estimated
future service, are expected to be paid in the next 10 years:
Pension Benefits Other
U.S. Int’l. B e n e fi t s
2008 $ 832 $ 238 $ 207
2009 $ 841 $ 272 $ 213
2010 $ 849 $ 282 $ 219
2011 $ 856 $ 279 $ 225
2012 $ 863 $ 296 $ 228
2013–2017 $ 4,338 $ 1,819 $ 1,195
Employee Savings Investment Plan Eligible employees of
Chevron and certain of its subsidiaries participate in the
Chevron Employee Savings Investment Plan (ESIP).
Charges to expense for the ESIP represent the company’s
contributions to the plan, which are funded either through
the purchase 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 follows.
Total company matching contributions to employee accounts
within the ESIP were $206, $169 and $145 in 2007, 2006
and 2005, respectively. This cost was reduced by the value of
shares released from the LESOP totaling $33, $6 and $4 in
2007, 2006 and 2005, respectively. The remaining amounts,
totaling $173, $163 and $141 in 2007, 2006 and 2005,
respectively, represent open market purchases.
Employee Stock Ownership Plan Within the Chevron ESIP
is an employee stock ownership plan (ESOP). In 1989,
Chevron established a LESOP as a constituent part of the
ESOP. The LESOP provides partial prefunding of the com-
pany’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 Statement of Position 76-3, Accounting Practices for
Certain Employee Stock Ownership Plans, and subsequent con-
sensus of the EITF of the FASB. The debt of the LESOP is
recorded as debt, and shares pledged as collateral are reported
as “Deferred compensation and benefit plan trust” on 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 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
$(1), $(1) and $94 in 2007, 2006 and 2005, respectively,
including $16, $17 and $18 of interest expense related to
LESOP debt and a (credit) charge to compensation expense
of $(17), $(18) and $76.
Of the dividends paid on the LESOP shares, $8, $59
and $55 were used in 2007, 2006 and 2005, respectively,
to service LESOP debt. The amount in 2006 included $28
of LESOP debt service that was scheduled for payment on
the first business day of January 2007 and was paid in late
December 2006. In addition, the company made contribu-
tions in 2005 of $98 to satisfy LESOP debt service in excess
of dividends received by the LESOP. No contributions
were required in 2007 or 2006 as dividends received by the
LESOP were sufficient to satisfy LESOP debt service.
Shares held in the LESOP are released and allocated
to the accounts of plan participants based on debt service
deemed to be paid in the year in proportion to the total of
current year and remaining debt service. LESOP shares as of
December 31, 2007 and 2006, were as follows:
Thousands 2007 2006
Allocated shares 20,506 21,827
Unallocated shares 7,365 8,316
Total LESOP shares 27,871 30,143