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Pension and Postretirement Benefits
 12 Months Ended
Dec. 03, 2011
Pension And Postretirement Benefits [Abstract]  
Pension and Postretirement Benefits Disclosure

Note 10: Pension and Postretirement Benefits

Noncontributory defined benefit pension plans cover all U.S. employees employed prior to January 1, 2007. Benefits for these plans are based primarily on each employee's years of service and average compensation. During 2011, we announced significant changes to our U.S. Pension Plan (the Plan). The changes include: benefits under the Plan will be locked-in using service and salary as of May 31, 2011, participants will no longer earn benefits for future service and salary as they had in the past, affected participants will receive a three percent increase to the locked-in benefit for every year they continue to work for us and we will begin making a retirement contribution of three percent of eligible compensation to the 401(k) Plan for those participants. These changes to the Plan represent a plan curtailment as there will no longer be a service cost component in the net periodic pension cost as all participants will be considered inactive in the Plan. The funding policy is consistent with the funding requirements of federal law and regulations. Plan assets consist principally of listed equity securities and bonds. Other U.S. postretirement benefits are funded through a Voluntary Employees' Beneficiaries Association Trust.

 

Health care and life insurance benefits are provided for eligible retired employees and their eligible dependents. These benefits are provided through various insurance companies and health care providers. Costs are accrued during the years the employee renders the necessary service.

Certain non-U.S. subsidiaries provide pension benefits for their employees consistent with local practices and regulations. These plans are primarily defined benefit plans covering substantially all employees upon completion of a specified period of service. Benefits for these plans are generally based on years of service and annual compensation.

Included in accrued pension costs shown on the Consolidated Balance Sheets are defined contribution pension liabilities of $4,084 and $7,178 in 2011 and 2010, respectively.

In fiscal 2009, we adopted new accounting guidance requiring us to change our measurement date from August 31 to our fiscal year end for plan assets of defined benefit pension and other postretirement benefit plans. The adjustments to retained earnings and accumulated other comprehensive income due to the measurement date change as of November 28, 2009 were as follows:
      Other Postretirement
  U.S. Plans Non-U.S. Plans Plans
Retained earnings, net of tax$ 167$ (178)$ 40
Retained earnings, pre-tax  274  (426)  65
Accumulated other comprehensive income, net of tax  32  180  (71)
Accumulated other comprehensive income, pre-tax  53  254  (116)

Following is a reconciliation of the beginning and ending balances of the benefit obligation and the fair
value of plan assets as of December 3, 2011 and November 27, 2010:      
  Pension Benefits Other Postretirement
  U.S. Plans Non-U.S. Plans Benefits
  2011 2010 2011 2010 2011 2010
Change in projected benefit obligation:          
Benefit obligation at beginning of year$ 315,645$302,100$ 138,046$149,492$ 55,639$56,864
Service cost  2,304 5,496 1,364 1,030  514 542
Interest cost  16,736 17,104 7,449 6,990  2,676 2,923
Participant contributions  -  -  -  169  620 661
Plan amendments  404  -  -  -  -  (326)
Actuarial (gain)/loss  18,362 5,561 (7,383) 423  (1,271) (5)
Other   -  -  3,584  -  -  -
Curtailments  (11,815)  -  -  -  -  -
Settlement  -  -  (538)  (1,195)  -  -
Benefits paid  (15,009) (14,616) (6,280) (5,757)  (4,429) (5,020)
Currency change effect  -  - 1,194 (13,106)  -  -
Benefit obligation at end of year  326,627 315,645 137,439 138,046  53,749 55,639
             
Change in plan assets:            
Fair value of plan assets at beginning of year 301,728 279,036 119,561 127,892  35,278 28,101
Actual return on plan assets 16,307 32,000 (1,014) 4,891  1,998 2,406
Employer contributions 1,514 5,308 6,515 662  3,822 9,130
Participant contributions  -  -  - 169  620 661
Benefits paid¹  (15,009) (14,616) (1,664) (1,578)  (4,429) (5,020)
Currency change effect  -  - 905 (12,475)  -  -
Fair value of plan assets at end of year 304,540 301,728 124,303 119,561  37,289 35,278
Plan assets in excess of (less than) benefit obligation as of year end$(22,087)$(13,917)$(13,136)$(18,485)$ (16,460)$(20,361)
             
1 Amount excludes benefit payments made from sources other than plan assets.     

           Other Postretirement
Amounts in accumulated other comprehensive income that have not been recognized as components of net periodic benefit cost: Pension Benefits   
 U.S. Plans Non-U.S. Plans Benefits
 2011 2010 2011 2010 2011 2010
Unrecognized actuarial loss$ 125,367$ 113,377$ 60,910$ 59,790$ 48,761$ 54,875
Unrecognized prior service cost (benefit)  346  68  (30)  (34)  (15,145)  (19,838)
Ending balance$ 125,713$ 113,445$ 60,880$ 59,756$ 33,616$ 35,037

           Other Postretirement
  Pension Benefits   
  U.S. Plans Non-U.S. Plans Benefits
  2011 2010 2011 2010 2011 2010
Statement of financial position as of fiscal year-end:            
Non-current assets$ -$ 5,386$ 4,147$ -$ -$ -
Accrued benefit cost            
Current liabilities  (1,500)  (1,497)  (733)  (681)  (313)  (279)
Non-current liabilities  (20,587)  (17,806)  (16,549)  (17,804)  (16,147)  (20,082)
Ending balance$ (22,087)$ (13,917)$ (13,135)$ (18,485)$ (16,460)$ (20,361)

The accumulated benefit obligation of the U.S. pension and other postretirement plans was $365,117 at December 3, 2011 and $347,648 at November 27, 2010. The accumulated benefit obligation of the non-U.S. pension plans was $129,166 at December 3, 2011 and $132,953 at November 27, 2010.

The following amounts relate to pension plans with accumulated benefit obligations in excess of plan assets as of December 3, 2011 and November 27, 2010:
         
  Pension Benefits and Other Postretirement Benefits
  U.S. Plans Non-U.S. Plans
  2011 2010 2011 2010
Accumulated benefit obligation$ 72,775$ 74,340$ 19,773$ 66,363
Fair value of plan assets  37,289  35,278  7,424  51,517
         
The following amounts relate to pension plans with projected benefit obligations in excess of plan assets as of December 3, 2011 and November 27, 2010:
         
  Pension Benefits and Other Postretirement Benefits
  U.S. Plans Non-U.S. Plans
  2011 2010 2011 2010
Projected benefit obligation$ 380,377$ 74,942$ 32,070$ 138,046
Fair value of plan assets  341,830  35,278  14,787  119,561

Information about the expected cash flows follows:   
        
  Pension Benefits Other 
  U.S. Plans Non-U.S. Plans Postretirement Benefits 
Employer contributions       
2012$ 1,500$ 671$ 4,132 
Expected benefit payments       
2012$ 15,930$ 6,330$ 4,132 
2013  16,311  6,481  4,089 
2014  16,779  6,738  4,075 
2015  17,309  6,987  4,065 
2016  17,893  7,182  4,054 
2017-2021  98,815  39,832  19,940 

Components of net periodic benefit cost and other supplemental information for the years ended December 3, 2011, November 27, 2010, and November 28, 2009 follow:
                   
  Pension Benefits Other
  U.S. Plans Non-U.S. Plans Postretirement Benefits
Net periodic cost (benefit): 2011 2010 2009 2011 2010 2009 2011 2010 2009
Service cost$ 2,304$ 5,496$ 4,422$ 1,364$ 1,030$ 942$ 514$ 542$ 415
Interest cost  16,736  17,104  17,038  7,449  6,990  7,679  2,676  2,923  3,150
Expected return on assets  (25,438)  (26,231)  (22,770)  (7,881)  (7,833)  (7,406)  (3,087)  (2,734)  (3,361)
Amortization:                  
Prior service cost  24  66  103  (4)  (4)  (4)  (4,693)  (4,636)  (4,636)
Actuarial (gain)/ loss  3,689  2,467  110  2,723  2,525  1,008  5,932  6,332  4,172
Transition amount  -  -  -  -  -  20  -  -  -
Curtailment (gain)/loss  101  -  -  -  -  -  -  -  -
Settlement charge/(credit)  -  -  -  -  928  -  -  -  -
Net periodic benefit cost (benefit)$ (2,584)$ (1,098)$ (1,097)$ 3,651$ 3,636$ 2,239$ 1,342$ 2,427$ (260)

  Pension Benefits
  U.S. Plans Non-U.S. Plans  Postretirement benefits
Amounts expected to be amortized from accumulated other comprehensive income into net periodic benefit costs over next fiscal year as of December 3, 2011      
Amortization of prior service cost (benefit)$ 48$ (5)$ (4,693)
Amortization of net actuarial (gain) loss  3,858  2,665  5,177
 $ 3,906$ 2,660$ 484

 Pension BenefitsOther
Weighted-average assumptions used toU.S. PlansNon-U.S. PlansPostretirement Benefits
Determine benefit obligations201120102009201120102009201120102009
Discount rate 5.05%5.46%5.69%5.36%5.09%5.16%4.73%4.96%5.30%
Rate of compensation increase15.00%4.17%4.19%2.14%2.15%2.21%N/AN/AN/A
          
Weighted-average assumptions used to         
Determine net costs for years ended201120102009201120102009201120102009
Discount rate 5.46%5.69%6.93%5.10%5.18%5.82%4.96%5.30%6.79%
Expected return on plan assets8.00%7.90%8.75%6.18%6.68%8.40%8.75%8.75%8.75%
Rate of compensation increase4.17%4.19%4.18%2.13%2.15%2.21%NAN/AN/A

1 Benefits under the U.S. Pension Plan were locked-in as of May 31, 2011 and no longer include compensation increases. The 5.00 percent rate for 2011 is for the supplemental executive retirement plan only.

 

The expected return on assets assumption on the investment portfolios for the pension and other postretirement benefit plans is based on the long-term expected returns for the investment mix of assets currently in the portfolio. Management uses historic return trends of the asset portfolio combined with recent market conditions to estimate the future rate of return. The discount rate is determined using a yield curve approach which enables us to select a discount rate that reflects the characteristics of the plan. This approach identifies a broad universe of corporate bonds that meet the quality and size criteria for the particular plan.

Assumed health care trend rates201120102009
Health care cost trend rate assumed for next year7.25%7.00%7.50%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)5.00%5.00%5.00%
Fiscal year that the rate reaches the ultimate trend rate201820152015

The rate of increase in health care cost levels is expected to be 7.25 percent in the year 2012.

Sensitivity Information: A one-percentage point change in the health care cost trend rate would have the following effects on the December 3, 2011 service and interest cost and the accumulated postretirement benefit obligation at December 3, 2011:

 One-Percentage Point
  Increase Decrease
Effect on service and interest cost components – annual$ 5$ (5)
Effect on accumulated postretirement benefit obligation$ 64$ (61)

The asset allocation for the company’s U.S. and non-U.S. pension plans at the end of 2011 and 2010 follows.
                  
 U.S. Pension Plans Non-U.S. Pension Plans Other Postretirement Plans
 Target  Percentage of Plan Assets at Year-End Target  Percentage of Plan Assets at Year-End Target  Percentage of Plan Assets at Year-End
Asset Category2011 2011 2010 2011 2011 2010 2011 2011 2010
Equities60.0% 56.4% 59.7% 46.6% 44.8% 46.6% 0.0% 0.0% 0.0%
Fixed income40.0% 42.6% 39.2% 53.4% 52.6% 53.1% 0.0% 0.0% 0.0%
Insurance0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 100.0% 98.5% 98.1%
Cash0.0% 1.0% 1.1% 0.0% 2.6% 0.3% 0.0% 1.5% 1.9%
Total100% 100% 100% 100% 100% 100% 100% 100% 100%

Plan Asset Management

 

Plan assets are held in trust and invested in mutual funds, separately managed accounts and other commingled investment vehicles holding U.S. and non-U.S. equity securities, fixed income securities and other investment classes. We employ a total return approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for a prudent level of risk. Futures and options may also be used to enhance risk-adjusted long-term returns while improving portfolio diversification and duration. Risk management is accomplished through diversification across asset classes, utilization of multiple investment managers and general plan-specific investment policies. Risk tolerance is established through careful consideration of the plan liabilities, plan funded status and our assessment of our overall liquidity position. This asset allocation policy mix is reviewed annually and actual versus target allocations are monitored regularly and rebalanced on an as-needed basis. Plan assets are invested using a combination of active and passive investment strategies. Passive, or “indexed” strategies, attempt to mimic rather than exceed the investment performance of a market benchmark. The plans' active investment strategies employ multiple investment management firms which in aggregate cover a range of investment styles and approaches. Performance is monitored and compared to relevant benchmarks on a regular basis.

 

The U.S. pension plans consist of two plans: a pension plan and a supplemental executive retirement plan (SERP). There were no assets in the SERP in 2011 and 2010. Consequently, all of the data disclosed in the asset allocation table for the U.S. pension plans pertain to our U.S. pension plan.

 

During 2011 we maintained our assets within the allowed ranges of the target asset allocation mix of 60 percent equities and 40 percent fixed income plus or minus 5% and continued our focus to reduce volatility of plan assets in future periods and to more closely match the duration of the assets with the duration of the liabilities of the plan. We plan to maintain the portfolio at this target allocation in 2012.

 

The non-U.S. pension plans consist of all the pension plans administered by us outside the U.S., principally consisting of plans in Germany, the United Kingdom and Canada. During 2011 we maintained our assets for the non-U.S. pension plans at the specific target asset allocation mix determined for each plan plus or minus the allowed rate to reduce volatility of plan assets in future periods and to more closely match the duration of the assets with the duration of the liabilities of the individual plans. We plan to maintain the portfolios at their respective target asset allocations in 2012.

 

Other postretirement benefits plans consist of two U.S. plans: a retiree medical health care plan and a group term life insurance plan. There were no assets in the group term life insurance plan for 2011 and 2010. Consequently, all of the data disclosed in the asset allocation table for other postretirement plans pertain to our retiree medical health care plan. Our investment strategy for other postretirement benefit plans is to own insurance policies that maintain an asset allocation nearly completely in equities. These equities are invested in a passive portfolio indexed to the S&P 500. Our large weighting to equities in these plans is driven by the investment options available and the relative underfunded status of the plans.

 

Fair Value of Plan Assets

 

In fiscal 2010 we adopted new accounting guidance requiring additional disclosures for plan assets of defined benefit pension and other postretirement benefit plans. This guidance requires that we categorize plan assets within a three-level fair value hierarchy as described in Note 13 to the Consolidated Financial Statements.

U.S. Pension Plans  Level 1    Level 2    Level 3   Total Assets
Equities$ 98,086 $ 73,648 $ - $ 171,734
Fixed income  55,466   73,595   591   129,652
Cash  3,154   -   -   3,154
Total$ 156,706 $ 147,243 $ 591 $ 304,540
            
Non-U.S. Pension Plans  Level 1    Level 2    Level 3   Total Assets
Equities$ 26,134 $ 29,650 $ - $ 55,784
Fixed income  40,659   24,891   -   65,550
Cash  3,249   1   -   3,250
Total$ 70,042 $ 54,542 $ - $ 124,584
            
Other Postretirement Benefits  Level 1    Level 2    Level 3   Total Assets
Insurance$ - $ - $ 36,715 $ 36,715
Cash  574   -   -   574
Total$ 574 $ - $ 36,715 $ 37,289

The definitions of fair values of our pension and other postretirement benefit plan assets at December 3, 2011 by asset category are as follows:

 

Equities—Primarily publicly traded common stock for purposes of total return and to maintain equity exposure consistent with policy allocations. Investments include: i) U.S. and non-U.S. equity securities and mutual funds valued at closing prices from national exchanges; and ii) commingled funds valued at unit values or net asset values provided by the investment managers, which are based on the fair value of the underlying investments.

 

Fixed income—Primarily corporate and government debt securities for purposes of total return and managing fixed income exposure to policy allocations. Investments include i) mutual funds valued at closing prices from national exchanges, ii) corporate and government debt securities valued at closing prices from national exchanges, iii) commingled funds valued at unit values or net asset value provided by the investment managers, which are based on the fair value of the underlying investments, and iv) an annuity contract, the value of which is determined by the provider and represents the amount the plan would receive if the contract were cashed out at year-end.

 

Insurance—Insurance contracts for purposes of funding postretirement medical benefits. Fair values are the cash surrender values as determined by the providers which are the amounts the plans would receive if the contracts were cashed out at year end.

 

Cash–Cash balances on hand, accrued income and pending settlements of transactions for purposes of handling plan payments. Fair values are the cash balances as reported by the Trustees of the plans.

 

The following is a roll forward of the Level 3 investments of our pension and postretirement benefit plan assets during the year ended December 3, 2011:

U.S. Pension Plans Equity  Fixed Income  Insurance  Total
Level 3 balance at beginning of year$ - $ 688 $ - $ 688
Purchases, sales, issuances and settlements, net  -   (97)   -   (97)
Level 3 balance at end of year$ - $ 591 $ - $ 591
            
Other Postretirement Benefits Equity  Fixed Income  Insurance  Total
Level 3 balance at beginning of year$ - $ - $ 34,599 $ 34,599
Net transfers into / (out of) level 3  -   -   (199)   (199)
Purchases, sales, issuances and settlements, net  -   -   (267)   (267)
Net gains/(losses)  -   -   2,582   2,582
Level 3 balance at end of year$ - $ - $ 36,715 $ 36,715