2004 ANNUAL REPORT – PAGE 17  2004  $_{ }$ Management’s Discussion & Analysis of Financial Condition & Results of Operations (Dollar Amounts in Millions except Per Share Information and as Otherwise Noted)  New Accounting Pronouncements  In December 2004, the Financial Accounting  Standards Board (FASB) issued Statement of  Financial Accounting Standard (SFAS) No. 123R,  Share-Based Compensation, which supersedes Accounting Principles Board (APB)  Opinion No. 25,  Accounting for Stock Issued to  Employees, and its related implementation guidance. SFAS No. 123R focuses primarily on  accounting for transactions in which an entity  obtains employee services through share-based  payment transactions. SFAS No. 123R requires  a public entity to measure the cost of employee  services received in exchange for the award of  equity investments based on the fair value of the  award at the date of grant. The cost will be  recognized over the period during which an  employee is required to provide services in  exchange for the award. SFAS No. 123R is  effective as of the beginning of the first interim  or annual reporting period that begins after June  15, 2005. The impact on net earnings as a result  of the adoption of SFAS No. 123R, from a  historical perspective, can be found in Note 1 to  the Consolidated Financial Statements of this  Annual Report. We are currently evaluating the  provisions of SFAS No. 123R and will adopt it  on July 1, 2005, as required.  In December 2004, the FASB issued SFAS No.  153,  Exchanges of Nonmonetary Assets . SFAS  No. 153 is an amendment to APB Opinion No.  29,  Accounting for Nonmonetary Transactions . SFAS No. 153 eliminates the exception for  nonmonetary exchanges of similar productive  assets and replaces it with a general exception  for exchanges of nonmonetary assets that do not  have commercial substance. We are currently  evaluating the provisions of SFAS No. 153 and  will adopt it on July 1, 2005, as required.  In November 2004, the FASB issued SFAS No. 151,  Inventory Costs , which amends  the guidance in Accounting Research Bulletin  (ARB) No. 43, Chapter 4,  Inventory Pricing , to  clarify the accounting for abnormal amounts of  idle facility expense, freight, handling costs, and  wasted material. SFAS No. 151 requires that  those items be recognized as current-period charges regardless of whether they meet the  criterion of “so abnormal.” In addition, SFAS  No. 151 requires allocation of fixed production  overheads to the costs of conversion be based on  the normal capacity of the production facilities. We do not have any idle facility expense or  wasted material expense as of December 31,  2004. We will continue to apply the requirements of SFAS No. 151 in future periods. 