XML 98 R18.htm IDEA: XBRL DOCUMENT v2.4.0.6
PENSION PLANS
12 Months Ended
May 31, 2012
PENSION PLANS

NOTE L — PENSION PLANS

We sponsor several pension plans for our employees, including our principal plan (the “Retirement Plan”), which is a non-contributory defined benefit pension plan covering substantially all domestic non-union employees. Pension benefits are provided for certain domestic union employees through separate plans. Employees of our foreign subsidiaries receive pension coverage, to the extent deemed appropriate, through plans that are governed by local statutory requirements.

The Retirement Plan provides benefits that are based upon years of service and average compensation with accrued benefits vesting after five years. Benefits for union employees are generally based upon years of service, or a combination of years of service and average compensation. Our pension funding policy is to contribute an amount on an annual basis that can be deducted for federal income tax purposes, using a different actuarial cost method and different assumptions from those used for financial reporting. For the fiscal year ending May 31, 2013, we expect to contribute approximately $29.9 million to the retirement plans in the U.S. and approximately $8.3 million to our foreign plans.

Net periodic pension cost consisted of the following for the year ended May 31:

 

     U.S. Plans     Non-U.S. Plans  
(In thousands)    2012     2011     2010     2012     2011     2010  

Service cost

   $ 19,906     $ 16,957     $ 14,020     $ 3,731     $ 3,535     $ 1,971  

Interest cost

     15,307       13,738       13,499       8,076       7,622       7,352  

Expected return on plan assets

     (17,416     (12,558     (9,795     (7,867     (7,057     (6,068

Amortization of:

            

Prior service cost

     352       358       351       10       12       9  

Net actuarial losses recognized

     8,510       7,919       6,554       2,169       2,472       963  

Curtailment/settlement (gains) losses

            83                     (26     (76
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Pension Cost

   $ 26,659     $ 26,497     $ 24,629     $ 6,119     $ 6,558     $ 4,151  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

The changes in benefit obligations and plan assets, as well as the funded status of our pension plans at May 31, 2012 and 2011, were as follows:

 

     U.S. Plans     Non-U.S. Plans  
(In thousands)    2012     2011     2012     2011  

Benefit obligation at beginning of year

   $ 288,532     $ 258,755     $ 161,632     $ 137,821  

Service cost

     19,906       16,957       3,731       3,535  

Interest cost

     15,307       13,738       8,076       7,622  

Benefits paid

     (13,467     (15,915     (6,337     (5,844

Participant contributions

         1,035       1,007  

Acquisitions

         880       60  

Plan amendments

       68         (9

Actuarial losses

     74,735       15,110       20,563       1,835  

Settlements/Curtailments

       (181       (2,409

Premiums paid

         (161     (146

Currency exchange rate changes

         (14,081     18,160  
  

 

 

   

 

 

   

 

 

   

 

 

 

Benefit Obligation at End of Year

   $ 385,013     $ 288,532     $ 175,338     $ 161,632  
  

 

 

   

 

 

   

 

 

   

 

 

 

Fair value of plan assets at beginning of year

   $ 212,215     $ 147,370     $ 141,639     $ 112,435  

Actual return on plan assets

     (14,309     30,536       3,987       11,655  

Employer contributions

     13,769       50,405       8,363       9,770  

Participant contributions

         1,035       1,007  

Benefits paid

     (13,467     (15,915     (6,337     (5,844

Premiums paid

         (161     (146

Settlements/Curtailments

       (181       (2,409

Currency exchange rate changes

         (11,208     15,171  
  

 

 

   

 

 

   

 

 

   

 

 

 

Fair Value of Plan Assets at End of Year

   $ 198,208     $ 212,215     $ 137,318     $ 141,639  
  

 

 

   

 

 

   

 

 

   

 

 

 

(Deficit) of plan assets versus benefit obligations at end of year

   $ (186,805   $ (76,317   $ (38,020   $ (19,993

Net Amount Recognized

   $ (186,805   $ (76,317   $ (38,020   $ (19,993
  

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated Benefit Obligation

   $ 324,247     $ 248,952     $ 156,663     $ 143,413  
  

 

 

   

 

 

   

 

 

   

 

 

 

The fair value of the assets held by our pension plans has decreased at May 31, 2012 since our previous measurement date at May 31, 2011, due primarily to net losses on our investments in the stock markets. At the same time, plan liabilities have increased significantly due to decreases in discount rates. As such, we have increased our recorded liability for the net underfunded status of our pension plans. Due to low interest rates, we expect pension expense in fiscal 2013 to be higher than our fiscal 2012 expense level. Any future declines in the value of our pension plan assets or increases in our plan liabilities could require us to further increase our recorded liability for the net underfunded status of our pension plans and could also require accelerated and higher cash contributions to our pension plans.

Amounts recognized in the Consolidated Balance Sheets for the years ended May 31, 2012 and 2011 are as follows:

 

     U.S. Plans     Non-U.S. Plans  
(In thousands)    2012     2011     2012     2011  

Noncurrent assets

   $      $      $ 42     $   

Current liabilities

     (43     (43     (492     (483

Noncurrent liabilities

     (186,762     (76,274     (37,570     (19,510
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Amount Recognized

   $ (186,805   $ (76,317   $ (38,020   $ (19,993
  

 

 

   

 

 

   

 

 

   

 

 

 

 

The following table summarizes the relationship between our plans’ benefit obligations and assets:

 

     U.S. Plans  
     2012      2011  
(In thousands)    Benefit
Obligation
     Plan
Assets
     Benefit
Obligation
     Plan
Assets
 

Plans with projected benefit obligation in excess of plan assets

   $ 385,013      $ 198,208      $ 288,532      $ 212,215  

Plans with accumulated benefit obligation in excess of plan assets

     324,247        198,208        248,952        212,215  

 

     Non-U.S. Plans  
     2012      2011  
(In thousands)    Benefit
Obligation
     Plan
Assets
     Benefit
Obligation
     Plan
Assets
 

Plans with projected benefit obligation in excess of plan assets

   $ 174,358      $ 136,296      $ 161,632      $ 141,639  

Plans with accumulated benefit obligation in excess of plan assets

     83,465        62,902        78,269        68,632  

Plans with assets in excess of projected benefit obligations

     980        1,022        

Plans with assets in excess of accumulated benefit obligations

     73,198        74,416        65,144        73,007  

The following table presents the pretax net actuarial loss, prior service (costs) and transition assets/(obligations) recognized in accumulated other comprehensive income (loss) not affecting retained earnings:

 

     U.S. Plans     Non-U.S. Plans  
(In thousands)    2012     2011     2012     2011  

Net actuarial loss(1)

   $ (205,086   $ (107,137   $ (62,750   $ (44,313

Prior service (costs)

     (1,679     (2,031     (93     (120
  

 

 

   

 

 

   

 

 

   

 

 

 

Total recognized in accumulated other comprehensive income not affecting retained earnings

   $ (206,765   $ (109,168   $ (62,843   $ (44,433
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Increases in net actuarial losses arising during 2012 were primarily attributable to a lower discount rate during 2012 versus 2011 and a lower actual return on plan assets compared with the expected return on plan assets for 2012.

The following table includes the changes recognized in other comprehensive income:

 

     U.S. Plans     Non-U.S. Plans  
(In thousands)    2012     2011     2012     2011  

Changes in plan assets and benefit obligations recognized in other comprehensive income:

        

Prior service cost

   $      $ 68     $      $ (9

Net loss (gain) arising during the year

     106,459       (2,868     24,441       (2,763

Effect of exchange rates on amounts included in AOCI

         (3,852     4,459  

Amounts recognized as a component of net periodic benefit cost:

        

Amortization or curtailment recognition of prior service credit (cost)

     (352     (358     (10     (12

Amortization or settlement recognition of net gain (loss)

     (8,510     (8,002     (2,169     (2,446
  

 

 

   

 

 

   

 

 

   

 

 

 

Total recognized in other comprehensive loss (income)

   $ 97,597     $ (11,160   $ 18,410     $ (771
  

 

 

   

 

 

   

 

 

   

 

 

 

 

The following table presents the amounts in accumulated other comprehensive income (loss) as of May 31, 2012 that have not yet been recognized in net periodic pension cost, but will be recognized in our Consolidated Statements of Income during the fiscal year ending May 31, 2013:

 

(In thousands)    U.S. Plans     Non-U.S. Plans  

Net actuarial loss

   $ (15,930   $ (2,769

Prior service (costs)

   $ (348   $ (9

In measuring the projected benefit obligation and net periodic pension cost for our plans, we utilize actuarial valuations. These valuations include specific information pertaining to individual plan participants, such as salary, age and years of service, along with certain assumptions. The most significant assumptions applied include discount rates, expected return on plan assets and rate of compensation increases. We evaluate these assumptions, at a minimum, on an annual basis, and make required changes, as applicable. In developing our expected long-term rate of return on pension plan assets, we consider the current and expected target asset allocations of the pension portfolio, as well as historical returns and future expectations for returns on various categories of plan assets. Expected return on assets is determined by using the weighted-average return on asset classes based on expected return for the target asset allocations of the principal asset categories held by each plan. In determining expected return, we consider both historical performance and an estimate of future long-term rates of return.

The following weighted-average assumptions were used to determine our year-end benefit obligations and net periodic pension cost under the plans:

 

     U.S. Plans     Non-U.S. Plans  
Year-End Benefit Obligations    2012     2011     2012     2011  

Discount rate

     4.25     5.25     4.19     5.14

Rate of compensation increase

     3.15     3.15     3.76     3.83

 

     U.S. Plans     Non-U.S. Plans  
Net Periodic Pension Cost    2012     2011     2010     2012     2011     2010  

Discount rate

     5.25     5.75     6.90     5.14     5.26     6.96

Expected return on plan assets

     8.50     8.75     8.75     5.63     5.75     5.94

Rate of compensation increase

     3.15     3.28     3.28     3.83     3.81     3.76

The following tables illustrate the weighted-average actual and target allocation of plan assets:

 

     U.S. Plans  
     Target  Allocation
as of May 31, 2012
    Actual Asset Allocation  
(Dollars in millions)          2012              2011      

Equity securities

     55   $ 111.7      $ 107.8  

Fixed income securities

     25     64.4        50.7  

Cash

       4.5        35.0  

Other

     20     17.6        18.7  
  

 

 

   

 

 

    

 

 

 

Total assets

     100   $ 198.2      $ 212.2  
  

 

 

   

 

 

    

 

 

 

 

      Non-U.S. Plans  
      Target  Allocation
as of May 31, 2012
    Actual Asset Allocation  
(Dollars in millions)          2012              2011      

Equity securities

     42   $ 67.0      $ 66.8  

Fixed income securities

     51     43.9        44.5  

Cash

     1     0.4        0.4  

Property and other

     6     26.0        30.0  
  

 

 

   

 

 

    

 

 

 

Total assets

     100   $ 137.3      $ 141.7  
  

 

 

   

 

 

    

 

 

 

 

The following tables present our pension plan assets as categorized using the fair value hierarchy at May 31, 2012 and 2011:

 

     U.S. Plans  
(In thousands)    Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
     Significant
Other
Observable
Inputs (Level 2)
     Significant
Unobservable
Inputs (Level 3)
     Fair Value at
May 31, 2012
 

U.S. Treasury and other government

   $       $ 7,969      $       $ 7,969  

State and municipal bonds

        490           490  

Foreign bonds

        2,279           2,279  

Mortgage-backed securities

        9,169           9,169  

Corporate bonds

        14,647           14,647  

Stocks — large cap

     36,196              36,196  

Stocks — mid cap

     19,659              19,659  

Stocks — small cap

     10,413              10,413  

Stocks — international

     6,961              6,961  

Mutual funds — equity

        38,475           38,475  

Mutual funds — fixed

        29,806           29,806  

Cash and cash equivalents

     4,549              4,549  

Limited partnerships

           1,833        1,833  

Common/collective trusts

           15,762        15,762  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 77,778      $ 102,835      $ 17,595      $ 198,208  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Non-U.S. Plans  
(In thousands)    Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
     Significant
Other
Observable
Inputs

(Level 2)
     Significant
Unobservable
Inputs

(Level 3)
     Fair Value at
May 31, 2012
 

Pooled equities

   $       $ 66,212      $       $ 66,212  

Pooled fixed income

        43,446           43,446  

Foreign bonds

        433           433  

Insurance contracts

           25,974        25,974  

Mutual funds

        843           843  

Cash and cash equivalents

     410              410  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 410      $ 110,934      $ 25,974      $ 137,318  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     U.S. Plans  
(In thousands)    Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
     Significant
Other
Observable
Inputs

(Level 2)
     Significant
Unobservable
Inputs
(Level 3)
     Fair Value at
May 31, 2011
 

U.S. Treasury and other government

   $       $ 2,691      $       $ 2,691  

State and municipal bonds

        439           439  

Foreign bonds

        1,566           1,566  

Mortgage-backed securities

        6,531           6,531  

Corporate bonds

        12,653           12,653  

Stocks — large cap

     44,926              44,926  

Stocks — mid cap

     16,040              16,040  

Stocks — small cap

     4,754              4,754  

Stocks — international

     7,514              7,514  

Mutual funds — equity

        34,515           34,515  

Mutual funds — fixed

        26,873           26,873  

Cash and cash equivalents

     35,040              35,040  

Limited partnerships

           2,470        2,470  

Common/collective trusts

           16,203        16,203  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 108,274      $ 85,268      $ 18,673      $ 212,215  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

    Non-U.S. Plans  
(In thousands)   Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
    Significant
Other
Observable
Inputs

(Level 2)
    Significant
Unobservable
Inputs

(Level 3)
    Fair Value at
May 31, 2011
 

Pooled equities

  $      $ 65,698     $      $ 65,698  

Pooled fixed income

      44,012         44,012  

Foreign bonds

      402         402  

Insurance contracts

        30,043       30,043  

Mutual funds

      1,110         1,110  

Cash and cash equivalents

    374           374  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 374     $ 111,222     $ 30,043     $ 141,639  

The following table includes the activity that occurred during the years ended May 31, 2012 and 2011 for our Level 3 assets:

 

(In thousands)   Balance at
Beginning of Period
    Actual Return on Plan Assets For:     Purchases,
Sales and
Settlements, net(1)
    Transfers
In/Out of
Level 3
    Balance at
End of Period
 
    Assets Still Held
at Reporting Date
    Assets Sold
During Year
       

Year ended May 31, 2012

  $ 48,716       231       (619     (3,998     (761   $ 43,569  

Year ended May 31, 2011

    33,337       197       1,750       5,606       7,826       48,716  

 

(1) Includes the impact of exchange rate changes during the year.

The primary objective for the investments of the Retirement Plan is to provide for long-term growth of capital without undue exposure to risk. This objective is accomplished by utilizing a strategy of equities, fixed income securities and cash equivalents in a mix that is conducive to participation in a rising market, while allowing for adequate protection in a falling market. Our Investment Committee oversees the investment allocation process, which includes the selection and evaluation of investment managers, the determination of investment objectives and risk guidelines, and the monitoring of actual investment performance. In order to manage investment risk properly, Plan policy prohibits short selling, securities lending, financial futures, options and other specialized investments except for certain alternative investments specifically approved by the Investment Committee. The Investment Committee reviews, on a quarterly basis, reports of actual Plan investment performance provided by independent third parties, in addition to its review of the Plan investment policy on an annual basis. The investment objectives are similar for our plans outside of the U.S., subject to local regulations. In general, investments for all plans are managed by private investment managers, reporting to our Investment Committee on a regular basis.

The goals of the investment strategy for pension assets include: The total return of the funds shall, over an extended period of time, surpass an index composed of the Standard & Poor’s 500 Stock Index (equity), the Barclays Aggregate Bond Index (fixed income), and 30-day Treasury Bills (cash); weighted appropriately to match the asset allocation of the plans. The equity portion of the funds shall surpass the Standard & Poor’s 500 Stock Index over a full market cycle, while the fixed income portion shall surpass Barclays Aggregate Bond Index over a full market cycle. The purpose of the core fixed income fund is to increase return in the form of cash flow, provide a hedge against inflation and to reduce the volatility of the fund overall. Therefore, the primary objective of the core fixed income portion is to match the Barclays Aggregate Bond Index. The purpose of including opportunistic fixed income assets such as, but not limited to, global and high yield securities in the portfolio is to enhance the overall risk-return characteristics of the Fund.

In addition to the defined benefit pension plans discussed above, we also sponsor employee savings plans under Section 401(k) of the Internal Revenue Code, which cover most of our employees in the U.S. We record expense for defined contribution plans for any employer matching contributions made in conjunction with services rendered by employees. The majority of our plans provide for matching contributions made in conjunction with services rendered by employees. Matching contributions are invested in the same manner that the participants invest their own contributions. Matching contributions charged to income were $11.9 million, $10.9 million and $10.4 million for the years ending May 31, 2012, 2011 and 2010, respectively.

We expect to pay the following estimated pension benefit payments in the next five years (in millions): $24.3 in 2013; $26.0 in 2014; $28.8 in 2015; $29.2 in 2016; and $31.9 in 2017. In the five years thereafter (2018-2022) we expect to pay $185.6 million.