Employee and Retiree Benefit Plans

9 Months Ended

Sep. 30, 2012

Employee and Retiree Benefit Plans

Note G – Employee and Retiree Benefit Plans

The Company has defined benefit pension plans that are principally noncontributory and cover most full-time employees. All pension plans are funded except for the U.S. and Canadian nonqualified supplemental plans and the U.S. directors’ plan. All U.S. tax qualified plans meet the funding requirements of federal laws and regulations. Contributions to foreign plans are based on local laws and tax regulations. The Company also sponsors health care and life insurance benefit plans, which are not funded, that cover most retired U.S. employees. The health care benefits are contributory; the life insurance benefits are noncontributory.

The table that follows provides the components of net periodic benefit expense for the three-month and nine-month periods ended September 30, 2012 and 2011.

	Three Months Ended September 30,
	Pension Benefits						Other Postretirement Benefits
(Thousands of dollars)	2012			2011			2012			2011
Service cost	$	6,030			5,915			1,049			1,289
Interest cost		7,549			7,919			1,342			1,719
Expected return on plan assets		(6,520	)		(6,840	)		0			0
Amortization of prior service cost		313			337			(42	)		(66	)
Amortization of transitional asset		112			(51	)		2			3
Recognized actuarial loss		3,846			2,543			453			786
		11,330			9,823			2,804			3,731
Special termination benefits		0			700			0			0
Curtailment expense (gain)		0			1,105			0			(605	)
Net periodic benefit expense	$	11,330			11,628			2,804			3,126

	Nine Months Ended September 30,
	Pension Benefits						Other Postretirement Benefits
(Thousands of dollars)	2012			2011			2012			2011
Service cost	$	17,953			17,763			3,139			3,803
Interest cost		22,386			23,855			4,133			5,084
Expected return on plan assets		(19,345	)		(20,634	)		0			0
Amortization of prior service cost		938			1,020			(131	)		(196	)
Amortization of transitional asset		339			(155	)		6			7
Recognized actuarial loss		11,460			7,661			1,394			2,326
		33,731			29,510			8,541			11,024
Special termination benefits		6,170			700			0			0
Curtailment expense (gain)		0			1,105			0			(605	)
Net periodic benefit expense	$	39,901			31,315			8,541			10,419

During the nine-month period ended September 30, 2012, the Company made contributions of $37.9 million to its defined benefit pension and postretirement benefit plans. Remaining funding in 2012 for the Company’s defined benefit pension and postretirement plans is anticipated to be $7.5 million.

In March 2010, the United States Congress enacted a health care reform law. Along with other provisions, the law (a) eliminates the tax free status of federal subsidies to companies with qualified retiree prescription drug plans that are actuarially equivalent to Medicare Part D plans beginning in 2013; (b) imposes a 40% excise tax on high-cost health plans as defined in the law beginning in 2018; (c) eliminates lifetime or annual coverage limits and required coverage for preventative health services beginning in September 2010; and (d) imposed a fee of $2 (subsequently adjusted for inflation) for each person covered by a health insurance policy beginning in September 2010. In June 2012, the U.S. Supreme Court upheld the constitutionality of the health care reform law. The Company provides a health care benefit plan to eligible U.S. employees and most U.S. retired employees. The law did not significantly affect the Company’s consolidated financial statements as of September 30, 2012 and 2011 and for the three-month and nine-month periods then ended. The Company continues to evaluate the various components of the law as further guidance is issued and cannot predict with certainty all the ways it may impact the Company. However, based on the evaluation performed to date, the Company currently believes that the health care reform law will not have a material effect on its financial condition, net income or cash flow in future periods.