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On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Medicare Act) was signed into law. The Medicare Act introduces a prescription drug benefit under Medicare (Medicare Part D) as well as a federal subsidy to sponsors of retiree health care benefit plans that pro- vide a benefit that is at least actuarially equivalent to Medicare Part D. In accordance with FSP No. 106-2, the effects of the federal subsidy resulted in a $21,400 reduction of the accumulated postretirement benefit obligation for benefits attributed to past service, which is being recognized prospectively beginning July 1, 2004. During the last half of 2004, this recognition resulted in a $1,550 reduction of the net periodic postre- tirement benefit cost, which consisted of $880 amortiza- 

## NOTE 8—LONG-TERM DEBT 

tion of the actuarial experience gain, a $640 reduction in interest cost and a $30 reduction in service cost. 

The Company expects to make gross postretirement benefit cash payments and to receive Medicare Part D prescription cash reimbursements as follows: 

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Maturities of long-term debt are as follows for the next five years: $11,214 in 2005; $962 in 2006; $197,043 in 2007; $73 in 2008, and $73 in 2009. 

Interest expense on long-term debt was $37,315, $37,460 and $37,029 for 2004, 2003 and 2002, respectively. 

Among other restrictions, the Company’s Notes, Debentures and revolving credit agreement contain cer- tain covenants relating to liens, ratings changes, merger and sale of assets, consolidated leverage and change of control as defined in the agreements. In the event of default under any one of these arrangements, accelera- tion of the maturity of any one or more of these bor- rowings may result. The Company was in compliance with all covenants for all years presented. 

During 2003, the Company entered into two sepa- rate interest rate swap contracts. Both interest rate swap contracts were with a bank to hedge against changes in the fair value of a portion of the Company’s 6.85% 

Notes. Each interest rate swap contract had a notional amount of $25,000. The Company agreed to receive interest at a fixed rate of 6.85% and pay interest at six- month London Interbank Offered Rates plus points that varied by contract. These contracts were designated as perfect fair value hedges of the 6.85% Notes. Accord- ingly, changes in the fair value of these contracts were recorded as assets or liabilities and offset changes in the carrying value of the 6.85% Notes. During 2004, the Company unwound all of the interest rate swap con- tracts and paid $1,084 to the bank for discontinuation of the contracts. The net payment decreased the carrying amount of the 6.85% Notes and is being amortized to expense over the remaining maturity of the Notes. At December 31, 2003, the fair value of the two separate interest rate swap contracts represented unrealized loss- es of $819, which was included in Other long term lia- bilities. The weighted average interest rate on these contracts was 5.35 percent at December 31, 2003. 

