Raytheon 2003 Annual Report Download - page 58

RAYTHEON COMPANY 333
Notes to Consolidated Financial Statements (Continued) 33333333333333333333333333333333333333333333
Change in Benefit Obligation
Pension Benefits Other Benefits
(In millions) 2003 2002 2003 2002
Benefit obligation at
beginning of year $12,023 $11,460 $1,579 $1,547
Service cost 271 279 15 21
Interest cost 799 792 106 105
Plan participants’
contributions 29 27 ——
Amendments 63(46) (348)
Actuarial loss 1,225 315 122 430
Curtailments ———(41)
Foreign exchange 52 32 ——
Benefits paid (909) (885) (119) (135)
Benefit obligation at
end of year $13,496 $12,023 $1,657 $1,579
In 2002, the Company recorded a $41 million Other Benefits
curtailment gain, which is included in discontinued operations, as a
result of the sale of AIS.
Change in Plan Assets
Pension Benefits Other Benefits
(In millions) 2003 2002 2003 2002
Fair value of plan assets at
beginning of year $9,156 $10,429 $ 353 $ 410
Actual return on plan assets 1,629 (487) 25 (22)
Divestitures (10) ———
Company contributions 69 51 133 100
Plan participants’
contributions 29 27 ——
Transfers between plans (10) —8—
Foreign exchange 32 21 ——
Benefits paid (909) (885) (119) (135)
Fair value of plan assets at
end of year $9,986 $ 9,156 $400 $ 353
The fair value of plan assets for the Company’s domestic and
foreign plans was $9,661 million and $325 million, respectively, at
December 31, 2003 and $8,898 million and $258 million, respec-
tively, at December 31, 2002.
Funded Status – unrecognized components
Pension Benefits Other Benefits
(In millions) December 31: 2003 2002 2003 2002
Funded status $(3,510) $(2,867) $(1,257) $(1,226)
Unrecognized actuarial loss 5,265 4,859 797 723
Unrecognized transition
(asset) obligation —(1) 160 185
Contributions ————
Unrecognized prior
service cost 170 184 (348) (347)
Prepaid (accrued)
benefit cost $ 1,925 $2,175 $(648) $ (665)
The table above reconciles the difference between the benefit obli-
gation and the fair value of plan assets to the amounts recorded on
the Company’s balance sheet due to certain items that are amortized
over future periods rather than recognized in the current period.
Funded Status – amounts recognized on the Balance Sheet
Pension Benefits Other Benefits
(In millions) December 31: 2003 2002 2003 2002
Prepaid benefit cost $ 669 $661 $34 $15
Accrued benefit liability (2,384) (1,963) (682) (680)
Intangible asset 199 217 ——
Employer contributions 66——
Accumulated other
comprehensive income 3,435 3,254 ——
Prepaid (accrued)
benefit cost $ 1,925 $ 2,175 $(648) $(665)
Weighted-Average Year-End Benefit Obligation Assumptions
Pension Benefits Other Benefits
December 31: 2003 2002 2003 2002
Discount rate 6.22% 6.95% 6.25% 7.00%
Rate of compensation increase 4.49% 4.46% 4.50% 4.50%
Health care trend rate in
the next year 13.50% 13.50%
Gradually declining to a trend
rate of 5.75% 5.75%
In the years beyond 2014 2013
The Company’s foreign pension plan assumptions have been
included in the table above.
The tables below outline the components of net periodic benefit
cost and related actuarial assumptions of the Company’s domestic
and foreign Pension Benefits and Other Benefits plans.
Components of Net Periodic Benefit Cost
Pension Benefits
(In millions) 2003 2002 2001
Service cost $271 $ 279 $ 258
Interest cost 799 792 797
Expected return on plan assets (970) (1,194) (1,249)
Amortization of transition asset —(4) (5)
Amortization of prior service cost 19 20 19
Recognized net actuarial loss (gain) 196 20 (113)
Loss due to curtailments/settlements —99
Net periodic benefit cost (income) $ 315 $ (78) $ (284)