Note 15—Retirement Plans

Defined Benefit Plans

The Company maintains defined benefit retirement plans for certain employees. Benefits are based primarily on years of service and earnings of the employee. The Company recognizes the funded status of its defined benefit pension plans in the Consolidated Balance Sheets. The funded status is the difference between the retirement plans' projected benefit obligation and the fair value of the retirement plans' assets as of the measurement date.

Included in Accumulated other comprehensive income, net of tax at December 31, 2013, are the following amounts that have not yet been recognized in net periodic pension costs: unrecognized actuarial losses of $44.3 million ($27.6 million, net of tax) and unrecognized prior service cost of $1.0 million ($0.6 million, net of tax). The prior service cost and actuarial loss included in Accumulated other comprehensive income and expected to be recognized in net periodic pension cost during the year ended December 31, 2014, are $0.2 million cost ($0.1 million cost, net of tax) and $3.7 million ($2.3 million, net of tax) respectively.

The reconciliation of the beginning and ending balances of the projected pension benefit obligation, the fair value of the plan assets and the ending accumulated benefit obligation are as follows:

In millions	2013			2012

Funded status
Projected benefit obligation
Beginning of year	$	207.3		$	214.8
Change in benefit obligation:
Service cost		5.1			4.7
Interest cost		8.1			9.8
Actuarial (gain)/loss		(5.6	)		6.5
Settlement due to divestiture		(18.6	)		—
Benefits paid		(16.6	)		(28.5	)


End of year		179.7			207.3


Fair value of plan assets
Beginning of year		209.6			211.7
Change in plan assets:
Actual return on plan assets		(0.8	)		21.2
Company contributions		1.3			5.2
Foreign Currency		(0.2	)		—
Benefits paid		(16.6	)		(28.5	)


Sub Total		193.3			209.6


Due to AIP (estimate)		(19.8	)		—


End of year		173.5			209.6


(Unfunded) funded status end of year	$	(6.2	)	$	2.3




Accumulated benefit obligation at end of year	$	175.0		$	202.3

The accumulated benefit obligation differs from the projected pension benefit obligation in that it includes no assumption about future compensation levels. The Company's projected benefit obligation at December 31, 2013 includes approximately $17.7 million related to the Company's executive supplemental and director defined benefit pension plans. The executive supplemental and director defined benefit plans have no plan assets and the Company is not required to fund the obligations. The U.S. plans required to be funded by the Company were fully funded at December 31, 2013.

The Company sold the assets of the Carlisle Transportation Products business on December 31, 2013. Under the terms of the sale agreement, the Company settled $18.6 million in pension liabilities and $1.2 million of other post employee benefit obligations related to certain unionized employees of the Transportation Products business, via the transfer of those liabilities to AIP. An estimated $19.8 million in pension assets are to be transferred from plan assets to AIP in 2014 under the terms of the sale agreement. A finalized asset transfer to the buyer will be performed during 2014 under the terms of the sale agreement. Assets to be transferred to the buyer will be adjusted, as determined by the Company's actuary, to take into account the actual investment return on such assets and benefit payments to plan participants from the closing date to the date of transfer. In regards to this settlement, the Company recorded $7.3 million in settlement costs, including recognition of $6.1 million of previously unrecognized actuarial losses, in discontinued operations.

Pension obligations associated with non-unionized current and former employees of the Transportation Products business were not settled in connection with the sale. Employees transferred with the sale, including certain unionized employees, are no longer active participants in the plan and therefore the expected years of future service of participants has been curtailed and as required under ASC 715, the Company has recognized a curtailment charge, inclusive of prior service cost, of $0.8 million in discontinued operations.

See Note 4 for further information related to the sale of the Transportation Products business.

The fair value of the plans' assets at December 31, 2013 and 2012 by asset category are as follows:

Fair Value Measurements at December 31, 2013

Asset Category (in millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total

Cash	$	0.6		$	—	$	—	$	0.6
Mutual funds :
Equity mutual funds(1)	$	23.8		$	—	$	—		23.8
Fixed income mutual funds(2)		168.9			—		—		168.9


Sub Total	$	193.3		$	—	$	—	$	193.3


Due to AIP (estimate)	$	(19.8	)	$	—	$	—		(19.8	)


Total	$	173.5		$	—	$	—	$	173.5

Fair Value Measurements at December 31, 2012

Asset Category (in millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total

Cash			$	—	$	—	$	—
Mutual funds:
Equity mutual funds(1)	$	24.6	$	1.5	$	—		26.1
Fixed income mutual funds(2)		174.3		9.2		—		183.5


Total	$	198.9	$	10.7	$	—	$	209.6

(1): This category is comprised of investments in mutual funds that invest in equity securities such as large publicly traded companies listed in the S&P 500 Index; small to medium sized companies with market capitalization in the range of the Russell 2500 Index; and foreign issuers in emerging markets.
(2): This category is comprised of investments in mutual funds that invest in U.S. corporate and government fixed income securities, including asset-backed securities; high yield fixed income securities primarily rated BB, B, CCC, CC, C and D; and US dollar denominated debt securities of government, government related and corporate issuers in emerging market countries.

The Company employs a liability driven investment approach whereby plan assets are invested primarily in fixed income investments to match the changes in the projected benefit obligation of funded plans that occur as a result of changes in the discount rate. Risk tolerance is established through careful consideration of projected benefit obligations, plan funded status, and the Company's other obligations and strategic investments. The established target allocation is 88% fixed income securities and 12% equity securities. Fixed income investments are diversified across core fixed income, long duration and high yield bonds. Equity investments are diversified across large capitalization U.S. and international stocks. Investment risk is measured and monitored on an ongoing basis through investment portfolio reviews, annual projected benefit liability measurements and asset/liability studies. Transfer of assets related to the sale of the Transportation Products business is not expected to impact the allocation of plan assets.

The net asset (liability) consists of the following amounts recorded on the Company's balance sheet at December 31, 2013 and 2012:

In millions	2013			2012

Noncurrent assets	$	11.4		$	22.6
Current liabilities		(1.0	)		(1.0	)
Noncurrent liabilities		(16.6	)		(19.3	)


Asset (liability) at end of year	$	(6.2	)	$	2.3

The Company made contributions of $1.3 million to the pension plans during 2013, of which $1.0 million was contributed to the Company's executive supplemental and director defined benefit pension plans to pay current participant benefits as these plans have no plan assets. No minimum contributions to the pension plans were required in 2013. During 2014 the Company expects to pay approximately $1.0 million in participant benefits under the executive supplemental and director plans. In light of the plans' funded status, the Company does not expect to make discretionary contributions to its other pension plans in 2014.

Components of net periodic benefit cost for the years ended December 31 are as follows:

In millions	2013			2012			2011

Service cost	$	5.1		$	4.7		$	5.2
Interest cost		8.1			9.8			10.7
Expected return on plan assets		(12.2	)		(14.1	)		(14.7	)
Settlement cost		8.9			5.6			—
Foreign Currency		—			—			(0.1	)
Amortization of unrecognized net loss		6.5			4.9			4.6
Amortization of unrecognized prior service credit		0.3			0.1			(0.1	)


Net periodic benefit cost	$	16.7		$	11.0		$	5.6

Settlement and curtailment costs totaling $8.1 million relate to the sale of the Transportation Products business on December 31, 2013 and are included in income from discontinued operations. This total consists of $7.3 million in settlement costs, including recognition of $6.1 million of previously unrecognized actuarial losses, and a $0.8 million curtailment charge, inclusive of prior service cost. See Note 4 for further information related to the sale of the Transportation Products business.

During the fourth quarter 2012, the Company offered certain former employees who participate in the Company's core pension plan the option to receive a one-time lump sum payment equal to the present value of the participant's pension benefit. A total of $15.0 million in lump sum distributions were paid under this offer, which ended during the fourth quarter of 2012. Under Financial Accounting Standards Board ("FASB") Accounting Standard Codification ("ASC") 715, Compensation—Retirement Benefits, a portion of the unrecognized actuarial loss in Accumulated Other Comprehensive Income was recognized into earnings as the amount of total lump sum payments from the Company's core pension plan during 2012 exceeded the plan's service and interest cost during the year. As a result, the Company remeasured the plan assets and projected benefit obligation of its core plan on December 3, 2012. The assumptions that were used for the remeasurement were a discount rate of 3.75%, rate of compensation increase of 4.29%, and expected return on plan assets of 6.50%. The settlement expense of $5.6 million was included in net periodic benefit cost for the year ended December 31, 2012. An additional settlement expense of $0.7 million was recognized in 2013 related to the settlement.

Weighted-average assumptions for benefit obligations at December 31 are as follows:



Discount rate	4.43	%	4.02	%
Rate of compensation increase	3.46	%	3.46	%
Expected long-term return on plan assets	6.45	%	6.53	%

Weighted-average assumptions for net periodic benefit cost for the years ended December 31 were as follows:



Discount rate	3.77	%	4.77	%	5.14	%
Rate of compensation increase	4.29	%	4.29	%	4.29	%
Expected long-term return on plan assets	6.50	%	7.00	%	7.00	%

The Company considers several factors in determining the long-term rate of return for plan assets. Current market factors such as inflation and interest rates are evaluated and consideration is given to the diversification and rebalancing of the portfolio. The Company also looks to peer data and historical returns for reasonability and appropriateness.

Post-retirement Welfare Plans

The Company also has a limited number of unfunded post-retirement welfare programs. The Company's liability for post-retirement medical benefits is limited to a maximum obligation; therefore, the Company's liability is not materially affected by an assumed health care cost trend rate.

Included in Accumulated other comprehensive income, net of tax at December 31, 2013, are the following amounts that have not yet been recognized in net periodic retiree medical costs: unrecognized prior service cost of $0.2 million ($0.1 million, net of tax) and unrecognized net obligation of $0.3 million ($0.2 million, net of tax). The prior service cost and net obligation included in accumulated other comprehensive income and expected to be recognized in net periodic benefit cost during the year ended December 31, 2014, are $0.1 million ($0.1 million, net of tax) and $0.1 million ($0.1 million, net of tax) respectively.

Under the terms of the sale agreement, the Company settled $1.2 million of other post employee benefit obligations, consisting primarily of post-employment life insurance benefits, by transferring those obligations to AIP. Costs in connection with this settlement consisted of $0.3 million of previously unrecognized actuarial loss in Accumulated Other Comprehensive Income recognized into earnings due to the settlement of the liability.

The reconciliation of the beginning and ending balances of the projected post-retirement benefit obligation is as follows:

In millions	2013			2012			2011

Benefit obligation at beginning of year	$	4.5		$	4.0		$	3.9
Interest cost		0.2			0.2			0.2
Participant contributions		—			0.1			0.2
Actuarial loss		(0.9	)		0.7			0.1
Benefits paid		(0.1	)		(0.5	)		(0.4	)
Settlement due to divestiture		(1.2	)		—			—


Benefit obligation at end of year	$	2.5		$	4.5		$	4.0

The Company's 2013 disclosures for its post-retirement medical benefit programs are determined based on a December 31 measurement date. The net liability consists of the following amounts recorded on the Company's balance sheet at December 31, 2013 and 2012:

In millions	2013			2012

Current liabilities	$	(0.2	)	$	(0.4	)
Noncurrent liabilities		(2.3	)		(4.1	)


Liability at end of year	$	(2.5	)	$	(4.5	)

Company contributions in 2014 are expected to be approximately $0.2 million.

The Company's post-retirement medical benefit obligations were determined using a weighted-average assumed discount rate of 4.51% and 3.77% at December 31, 2013 and 2012, respectively. The Company bases its discount rate assumptions on a yield curve which provides better matching of the expected future retirement plan cash flows with projected yields. The Company also utilized a weighted-average health care cost trend rate in determining the post-retirement medical benefit obligation. For the 2013 valuation, the assumed health care cost trend rate was an initial rate of 7.0% trending to an ultimate rate of 5.0% by 2017.

Components of net periodic post-retirement benefit costs for the years ended December 31 are as follows:

In millions	2013		2012		2011

Interest cost	$	0.2	$	0.2	$	0.2
Amortization of prior service cost		0.1		0.1		0.1
Amortization of unrecognized net obligation		0.1		0.2		0.1
Settlement/Curtailment expense		0.3		—		—


Net periodic benefit cost	$	0.7	$	0.5	$	0.4

The Company's post-retirement medical benefit cost for 2013, 2012, and 2011 was determined using a weighted-average assumed discount rate of 3.77%, 4.73%, and 5.17%, respectively.

The following is a summary of estimated future benefits to be paid for the Company's defined benefit pension plans and post-retirement medical plans at December 31, 2013. Benefit payments are estimated based on the same assumptions used in the valuation of the projected benefit obligation.

	Defined Benefit Retirement Plan		Post-Retirement Medical Plan

In millions
Year
2014	$	17.2	$	0.2
2013		16.1		0.2
2012		15.1		0.2
2011		15.0		0.2
2010		14.7		0.2
2019 - 2023		67.5		0.9

Defined Contribution and ESOP Plan

Additionally, the Company maintains defined contribution plans covering a significant portion of its employees. Expenses for the plans were approximately $11.4 million in 2013, $11.3 million in 2012 and $10.7 million in 2011. The Company also sponsors an employee stock ownership plan ("ESOP") as part of one of its existing savings plans. Costs for the ESOP are included in the previously stated expenses. The ESOP is available to eligible domestic employees and includes a match of contributions made by plan participants to the savings plan up to a maximum of 4.00% of a participant's eligible compensation, divided between cash and an employee-directed election of the Company's common stock, not to exceed 50% of the total match, for non-union employees. Union employees' match may vary and is based on negotiated union agreements. Participants are not allowed to direct their contributions to the savings plan to an investment in the Company's common stock. A breakdown of shares held by the ESOP at December 31 is as follows:

In millions

Shares held by the ESOP	1.7	1.8	1.9