Financial Review 2004 Management's Discussion and Analysis of Fi n an c i al Condition and Results of Operations our discount rate was 6.0 percent. The expected long-term rate of  return on plan assets and health care cost trend rates are based upon  several factors, including our historical assumptions compared with  actual results, an analysis of current market conditions, asset alloca-  tions, and the views of leading financial advisers and economists.  Based on our analysis during fiscal 2003, we lowered our defined  benefit plans' expected long-term rate of return on plan assets for  fiscal 2004 from 10.4 percent to 9.0 percent. The change in our  defined benefit plans' expected long-term rate of return on plan  assets decreased earnings before income taxes by approximately  $2 million in fiscal 2004. At May 30,2004, our expected health care  cost trend rates ranged from 11.0 percent to 12.0 percent for fiscal  2005, depending on the medical service category. The rates gradu-  ally decrease to 5.0 percent through fiscal 2010 and remain at that  level thereafter. Net cash flows used in financing activities included our repurchase  of 10.7 million shares of our common stock for $235 million in fis-  cal 2004, compared to 10.7 million shares for $213 million in fiscal  2003, and 9.0 million shares for $209 million in fiscal 2002. Our  Board of Directors has authorized us to repurchase up to 115.4 mil-  lion shares of our common stock. At May 30, 2004, a total of  109.2 million shares have been repurchased under the authoriza-  tion. The repurchased common stock is reflected as a reduction of  stockholders' equity. Net cash flows used in financing activities also  included dividends paid to stockholders of $13 million, $14 million,  and $9 million in fiscal 2004, 2003, and 2002, respectively. Net cash flows used in investing activities included capital expen-  ditures incurred principally for building new restaurants, replacing  equipment, and remodeling existing restaurants. Capital expendi-  tures were $354 million in fiscal 2004, compared to $423 million in  fiscal 2003, and $318 million in fiscal 2002. The decreased expen-  ditures in fiscal 2004 resulted primarily from decreased spending  associated with building fewer new restaurants and fewer remodels.  The increased expenditures in fiscal 2003 resulted primarily from  increased spending associated with building more new restaurants  and replacing equipment. We estimate that our fiscal 2005 capital  expenditures will approximate $360 million. The expected long-term rate of return on plan assets component  of our net periodic benefit cost is calculated based on the market-  related value of plan assets. Our target asset allocation is 35 percent  U.S. equities, 30 percent high-quality, long-duration fixed-incom e  securities, 15 percent international equities, 10 percent private  equities, and 10 percent real assets. We monitor our actual asset  allocation to ensure that it approximates our target allocation and  believe that our long-term asset allocation will continue to approxi-  mate our target allocation. Our historical ten-year rate of return  on plan assets, calculated using the geometric method average of  returns, is approximately 10.5 percent as of May 30,2004. Net cash flows provided by operating activities for fiscal 2003  included a $20 million contribution to our defined benefit pension  plans, which enabled the plans to maintain a fully funded status  as of the plans' February 28,2003 annual valuation date. Less than  $0.1 million was required to fund our defined benefit pension  plans in fiscal 2004 and fiscal 2002. Our defined benefit and other  postretirement benefit costs and liabilities are calculated using  various actuarial assumptions and methodologies prescribed under  the Financial Accounting Standards Board's (FASB) Statement  of Financial Accounting Standards (SFAS) No. 87, "Employers'  Accounting for Pensions" and No. 106, "Employers' Accounting  for Postretirement Benefits Other Than Pensions". We use certain  assumptions including, but not limited to, the selection of a dis-  count rate, expected long-term rate of return on plan assets, and  expected health care cost trend rates. We set the discount rate  assumption annually for each plan at  its valuation date to reflect the  yield of high quality fixed-income debt instruments, with lives that  a pproximate the maturity of the plan benefits. At May 30, 2004,  We have an unrecognized net actuarial loss for the defined ben-  efit plans and postretirement benefit plan as of May 30, 2004, of  $62 million and $6 million, respectively. The unrecognized net  actuarial loss represents changes in the amount of the projected  benefit obligation and plan assets resulting from differences in the  assumptions used and actual experience. The amortization of the  unrecognized net actuarial loss component of our fiscal 2005 net  periodic benefit cost for the defined benefit plans and postretire-  ment benefit plan is expected to be approximately $5 million and  $0.3 million, respectively. We believe our defined benefit and postretirement benefit plan  assumptions are appropriate based upon the factors discussed above.  However, other assumptions could also be reasonably applied that 30  Darden Restaurants 