Employee Benefit Plans

12 Months Ended

Jul. 31, 2011

Employee Benefit Plans

Employee Benefit Plans

NOTE G Employee Benefit Plans

          Pension Plans The Company and certain of its international subsidiaries have defined benefit pension plans for many of their hourly and salaried employees. There are two types of U.S. plans. The first type of U.S. plan is a traditional defined benefit pension plan primarily for production employees. The second is a plan for salaried workers that provides defined benefits pursuant to a cash balance feature whereby a participant accumulates a benefit comprised of a percentage of current salary that varies with years of service, interest credits and transition credits. The international plans generally provide pension benefits based on years of service and compensation level.

          Net periodic pension costs for the Company's pension plans include the following components:

	2011			2010			2009
	(thousands of dollars)
Net periodic cost:
Service cost	$	16,148		$	13,184		$	15,385
Interest cost		19,440			19,445			18,481
Expected return on assets		(27,538	)		(28,390	)		(29,143	)
Transition amount amortization		225			226			193
Prior service cost amortization		449			293			438
Actuarial loss amortization		3,962			2,864			1,088
Curtailment loss		—			—			910
Net periodic benefit cost	$	12,686		$	7,622		$	7,352

          During Fiscal 2009, negotiations with one of our unions resulted in a freeze in pension benefits at one of our U.S. plants. In exchange for the freezing of the plan, participants were made eligible for a Company match in a defined contribution plan. The freeze in the plan resulted in a curtailment loss of $0.9 million during Fiscal 2009.

          The obligations and funded status of the Company's pension plans as of 2011 and 2010, is as follows:

	2011			2010
	(thousands of dollars)
Change in benefit obligation:
Benefit obligation, beginning of year	$	377,903		$	338,154
Service cost		16,148			13,183
Interest cost		19,440			19,445
Plan amendments		1,639			—
Participant contributions		1,058			1,043
Actuarial loss		1,034			31,918
Currency exchange rates		6,936			(6,531	)
Benefits paid		(20,146	)		(19,309	)
Benefit obligation, end of year	$	404,012		$	377,903
Change in plan assets:
Fair value of plan assets, beginning of year	$	319,734		$	297,479
Actual return on plan assets		38,758			31,013
Company contributions		27,655			15,064
Participant contributions		1,058			1,043
Currency exchange rates		6,496			(5,556	)
Benefits paid		(20,146	)		(19,309	)
Fair value of plan assets, end of year	$	373,555		$	319,734
Funded status:
Underfunded status at July 31, 2011 and 2010	$	(30,457	)	$	(58,169	)

          The net underfunded status of $30.5 million at July 31, 2011 is recognized in the accompanying Consolidated Balance Sheet as $6.4 million within Other assets for the Company's over-funded plans and $36.9 million within Other long-term liabilities for the Company's underfunded plans. Included in Accumulated other comprehensive loss at July 31, 2011 are the following amounts that have not yet been recognized in net periodic pension expense: unrecognized actuarial losses of $134.7 million, unrecognized prior service cost of $5.1 million, and unrecognized transition obligations of $3.0 million. The actuarial loss, prior service cost and unrecognized transition obligation are included in Accumulated other comprehensive loss, net of tax. The amounts expected to be recognized in net periodic pension expense during Fiscal 2012 are $5.8 million, $0.5 million and $0.2 million, respectively. The accumulated benefit obligation for all defined benefit pension plans was $365.2 million and $332.4 million at July 31, 2011 and 2010, respectively.

          The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were $294.2 million, $282.3 million and $262.4 million, respectively, as of July 31, 2011, and $282.7 million, $266.0 million, and $230.3 million, respectively, as of July 31, 2010.

          For the years ended July 31, 2011 and 2010 the U.S. pension plans represented approximately 71 percent and 73 percent, respectively, of the Company's total plan assets, and approximately 72 percent and 74 percent, respectively, of the Company's total projected benefit obligation.

          The weighted-average discount rates and rates of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligation are as follows:

Weighted average actuarial assumptions	2011			2010
All U.S. plans:
Discount rate		4.91	%		5.25	%
Rate of compensation increase		4.50	%		5.00	%
Non - U.S. plans:
Discount rate		5.36	%		5.17	%
Rate of compensation increase		3.57	%		3.69	%

          The weighted-average discount rates, expected returns on plan assets and rates of increase in future compensation levels used to determine the net periodic benefit cost are as follows:

Weighted average actuarial assumptions	2011			2010			2009
All U.S. plans:
Discount rate		5.25	%		6.00	%		6.00	%
Expected return on plan assets		8.00	%		8.50	%		8.50	%
Rate of compensation increase		5.00	%		5.00	%		5.00	%
Non - U.S. plans:
Discount rate		5.17	%		5.90	%		6.30	%
Expected return on plan assets		6.17	%		6.64	%		7.14	%
Rate of compensation increase		3.69	%		3.87	%		4.48	%

          Expected Long-Term Rate of Return To develop the expected long-term rate of return on assets assumption, the Company considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio. As of our measurement date of July 31, 2011, the Company decreased its long-term rate of return for the U.S. pension plans to 7.75 percent from 8.0 percent as of July 31, 2010. The Company believes that based on the asset mix and the target asset allocation, the 7.75 percent rate is an appropriate rate. This is slightly below the Company's twenty year average but above the five and ten year averages. Thus, the Company will use the 7.75 percent rate for the calculation of its Fiscal 2012 net periodic cost. The expected long-term rate of return on assets assumption for the plans outside the U.S. reflects the investment allocation and expected total portfolio returns specific to each plan and country. The expected long-term rate of return on assets shown in the pension benefit disclosure for non-U.S. plans is an asset-based weighted average of all non-U.S. plans.

          Discount Rate The Company's objective in selecting a discount rate is to select the best estimate of the rate at which the benefit obligations could be effectively settled on the measurement date, taking into account the nature and duration of the benefit obligations of the plan. In making this best estimate, the Company looks at rates of return on high-quality fixed-income investments currently available, and expected to be available, during the period to maturity of the benefits. This process includes looking at the universe of bonds available on the measurement date with a quality rating of Aa or better. Similar appropriate benchmarks are used to determine the discount rate for the non-U.S. plans. The discount rate disclosed in the assumptions used to determine net periodic benefit cost and to determine benefit obligations is based upon a weighted average, using year-end projected benefit obligations.

          Plan Assets The fair values of the assets held by the U.S. pension plans by asset category are as follows (in millions):

Asset Category	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
2011
Cash	$	0.3	$	—	$	—	$	0.3
Global Equity Securities		64.8		56.2		0.3		121.3
Fixed Income Securities		36.6		—		—		36.6
Private Equity		—		—		17.6		17.6
Absolute Return		—		20.1		31.4		51.5
Real Assets		—		—		38.0		38.0
Total U.S. Assets at July 31, 2011	$	101.7	$	76.3	$	87.3	$	265.3
2010
Cash	$	0.9	$	—	$	—	$	0.9
Global Equity Securities		48.7		50.2		2.4		101.3
Fixed Income Securities		17.1		—		—		17.1
Private Equity		—		—		14.8		14.8
Absolute Return		—		39.4		33.1		72.5
Real Assets		—		9.6		16.3		25.9
Total U.S. Assets at July 31, 2010	$	66.7	$	99.2	$	66.6	$	232.5

         The 2010 information in the above table contains adjustments to the classifications within the fair value hierarchy from that reported in the prior year.

          Global equity consists of publicly traded U.S. and non-U.S. equities, Australasia, Far East (EAFE) index funds, equity private placement funds, and some cash and cash equivalents. Publicly traded equities are valued at the closing price reported in the active market in which the individual securities are traded. Index funds are valued at the net asset value (NAV) as determined by the custodian of the fund. The NAV is based on the fair value of the underlying assets owned by the fund, minus its liabilities then divided by the number of units outstanding.

          Fixed income consists primarily of investment grade debt securities, but may include up to 10% in high yield securities rated B or higher by Moody's or S&P. It may also include up to 20% in securities denominated in foreign currencies. Corporate and other bonds and notes are valued at either the yields currently available on comparable securities of issuers with similar credit ratings or valued under a discounted cash flows approach that maximizes observable inputs, such as current yields of similar instruments, but includes adjustments for certain risks that may not be observable such as credit and liquidity risks.

          Private equity consists of interests in partnerships that invest in U.S. and non-U.S. debt and equity securities. The portfolio is a diversified mix of partnership interests including buyouts, distressed debt, growth equity, mezzanine, real estate, and venture capital investments. Partnership interests are valued using the most recent general partner statement of fair value, updated for any subsequent partnership interests' cash flow.

          Absolute return consists primarily of private partnership interests in hedge funds of funds. Partnership interests are valued using the NAV as determined by the administrator or custodian of the fund.

          Real Assets consist of commodity funds, Real Estate Investment Trusts (REITS), and interests in partnerships that invest in private real estate, commodity, and timber investments. Private investments are valued using the most recent partnership statement of fair value, updated for any subsequent partnership interests' cash flows. Commodity funds and REITS are valued at the closing price reported in the active market in which they are traded.

          The following table sets forth a summary of changes in the fair values of the U.S. pension plans' Level 3 assets for the years ended July 31, 2011 and 2010 (in millions):

	Global Equity			Private Equity		Absolute Return			Real Assets		Total
Beginning balance at August 1, 2009	$	2.7		$	11.4	$	41.4		$	15.5	$	71.0
Unrealized gains		0.1			1.8		2.8			0.1		4.8
Realized gains		—			—		0.7			—		0.7
Purchases, sales, issuances and settlements, net		(0.4	)		1.6		(11.8	)		0.7		(9.9	)
Ending balance at July 31, 2010	$	2.4		$	14.8	$	33.1		$	16.3	$	66.6
Unrealized gains		—			1.5		2.1			3.4		7.0
Realized gains		—			1.0		—			—		1.0
Purchases, sales, issuances and settlements, net		(2.1	)		0.3		(3.8	)		18.3		12.7
Ending balance at July 31, 2011	$	0.3		$	17.6	$	31.4		$	38.0	$	87.3

          Fair values of the assets held by the international pension plans by asset category are as follows (in millions):

Asset Category	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
2011
Global Equity Securities	$	33.5	$	—	$	—	$	33.5
Fixed Income Securities		—		26.5		—		26.5
Equity/Fixed Income		15.4		—		26.3		41.7
Real Assets		—		6.5		—		6.5
Total International Assets at July 31, 2011	$	48.9	$	33.0	$	26.3	$	108.2
2010
Global Equity Securities	$	26.8	$	—	$	—	$	26.8
Fixed Income Securities		—		20.7		—		20.7
Equity/Fixed Income		12.5		—		21.7		34.2
Real Assets		—		5.5		—		5.5
Total International Assets at July 31, 2010	$	39.3	$	26.2	$	21.7	$	87.2

          Global equity consists of a fixed weights index fund, used to maintain a fixed 50/50 distribution between UK and overseas assets. Publicly traded equities are valued at the closing price reported in the active market in which the individual securities are traded.

          Fixed income consists of corporate bond funds with the investment objective to achieve active corporate bond returns which are inflation linked and paid as a single payment in 2055. Corporate bonds and notes are valued at either the closing price reported if traded on an active market or at yields currently available on comparable securities of issuers with similar credit ratings or valued under a discounted cash flows approach that maximizes observable inputs, such as current yields of similar instruments, but includes adjustments for certain risks that may not be observable such as credit and liquidity risks.

          Equity/Fixed Income consists of Level 1 assets that are part of a unit linked fund with a strategic asset allocation of 40% fixed income products and 60% equity type products. Assets are valued at either the closing price reported if traded on an active market or at yields currently available on comparable securities of issuers with similar credit ratings. Index funds are valued at the net asset value as determined by the custodian of the fund. The Level 3 assets are composed of mathematical reserves on individual contracts and the Company does not have any influence on the investment decisions as made by the insurer due to the specific minimum guaranteed return characteristics of this type of contract. European insurers in general, broadly have a strategic asset allocation with 80%-90% fixed income products and 20%-10% equity type products (including real estate).

          Real Assets consists of property funds. Property funds are valued using the most recent partnership statement of fair value, updated for any subsequent partnership interests' cash flows.

          The following table sets forth a summary of changes in the fair values of the International pension plans' Level 3 assets for the year ended July 31, 2011 and 2010 (in millions):

	Equity/Fixed Income
Beginning balance at August 1, 2009	$	23.1
Unrealized gains		0.3
Foreign currency exchange		(1.9	)
Purchases, sales, issuances and settlements, net		0.2
Ending balance at July 31, 2010	$	21.7
Unrealized gains		0.9
Foreign currency exchange		2.5
Purchases, sales, issuances and settlements, net		1.2
Ending balance at July 31, 2011	$	26.3

          Investment Policies and Strategies. For the Company's U.S. plans, the Company uses a total return investment approach to achieve a long-term return on plan assets, with a prudent level of risk for the purpose of meeting its retirement income commitments to employees. The plan's investments are diversified to assist in managing risk. The Company's asset allocation guidelines target an allocation of 45 percent equity securities, 30 percent alternative investments (funds of hedge funds), 10 percent real assets (investments into funds containing commodities and real estate), 10 percent fixed income and 5 percent private equity. Within equity securities, the Company will target an allocation of 15 percent international, 15 percent equity long/short, 10 percent small cap and 5 percent large cap. These target allocation guidelines are determined in consultation with the Company's investment consultant, and through the use of modeling the risk/return trade-offs among asset classes utilizing assumptions about expected annual return, expected volatility/standard deviation of returns and expected correlations with other asset classes.

          For the Company's non-U.S. plans, the general investment objectives are to maintain a suitably diversified portfolio of secure assets of appropriate liquidity which will generate income and capital growth to meet, together with any new contributions from members and the Company, the cost of current and future benefits. Investment policy and performance is measured and monitored on an ongoing basis by the Company's investment committee through its use of an investment consultant and through quarterly investment portfolio reviews.

          Estimated Contributions and Future Payments The Company's general funding policy for its pension plans is to make at least the minimum contributions as required by applicable regulations. Additionally, the Company may elect to make additional contributions up to the maximum tax deductible contribution. As such, the Company made contributions of $20.6 million to its U.S. pension plans in Fiscal 2011. There is no minimum funding request for the Company's U.S. plans for Fiscal 2012. The Company is currently evaluating whether or not a U.S. pension contribution will be made in Fiscal 2012. The Company made contributions of $7.1 million to its non-U.S. pension plans in Fiscal 2011 and estimates that it will contribute approximately $4.7 million in Fiscal 2012 based upon the local government prescribed funding requirements. Future estimates of the Company's pension plan contributions may change significantly depending on the actual rate of return on plan assets, discount rates and regulatory requirements.

          Estimated future benefit payments for the Company's U.S. and non-U.S. plans are as follows (thousands of dollars):

Fiscal Year
2012	$	25,769
2013	$	23,314
2014	$	25,648
2015	$	26,242
2016	$	25,323
2017-2021	$	148,290

          Postemployment and Postretirement Benefit Plans The Company provides certain postemployment and postretirement health care benefits for certain U.S. employees for a limited time after termination of employment. The Company has recorded a liability for its postretirement benefit plan in the amount of $1.5 million and $1.6 million as of July 31, 2011 and July 31, 2010, respectively. The annual cost resulting from these benefits is not material. For measurement purposes, a 7.4 percent annual rate of increase in the per capita cost of covered health care benefits was assumed for Fiscal 2011. The Company has assumed that the long-term rate of increase will decrease gradually to an ultimate annual rate of 4.5 percent. A one-percentage point increase in the health care cost trend rate would increase the Fiscal 2011 and 2010 liability by $0.1 million.

          Retirement Savings and Employee Stock Ownership Plan The Company provides a contributory employee savings plan to U.S. employees that permits participants to make contributions by salary reduction pursuant to section 401(k) of the Internal Revenue Code. Employee contributions of up to 25 percent of compensation are matched at a rate equaling 100 percent of the first 3 percent contributed and 50 percent of the next 2 percent contributed. The Company's contributions under this plan are based on the level of employee contributions as well as a discretionary contribution based on performance of the Company. Total contribution expense for these plans was $9.1 million, $4.5 million, and $5.1 million for the years ended July 31, 2011, 2010, and 2009, respectively. This plan also includes shares from an Employee Stock Ownership Plan ("ESOP"). As of July 31, 2011, all shares of the ESOP have been allocated to participants. Total ESOP shares are considered to be shares outstanding for earnings per share calculations.

          Deferred Compensation and Other Benefit Plans The Company provides various deferred compensation and other benefit plans to certain executives. The deferred compensation plan allows these employees to defer the receipt of all of their bonus and other stock related compensation and up to 75 percent of their salary to future periods. Other benefit plans are provided to supplement the benefits for a select group of highly compensated individuals which are reduced because of compensation limitations set by the Internal Revenue Code. The Company has recorded a liability in the amount of $9.2 million and $8.8 million as of the year ended July 31, 2011 and July 31, 2010, respectively, related primarily to its deferred compensation plans.