Employee Benefits

Employee Plans. Employee benefit plans include:

•

A defined contribution 401(k) savings plan for hourly bargaining unit employees at seven of the Company’s production facilities based on the specific collective bargaining agreement at each facility. For active bargaining unit employees at three of these production facilities, the Company is required to make fixed rate contributions. For active bargaining unit employees at one of these production facilities, the Company is required to match certain employee contributions. For active bargaining unit employees at two of these production facilities, the Company is required to make both fixed rate contributions and concurrent matches. For active bargaining unit employees at the one remaining production facility, the Company is not required to make any contributions. Fixed rate contributions either (i) range from (in whole dollars) $800 to $2,400 per employee per year, depending on the employee’s age, or (ii) vary between 2% to 10% of the employees’ compensation depending on their age and years of service for employees hired prior to January 1, 2004 or is a fixed 2% annual contribution for employees hired on or after January 1, 2004. The Company currently estimates that contributions to such plans will range from $1.0 to $3.0 per year.

•

A defined contribution 401(k) savings plan for salaried and certain hourly employees providing for a concurrent match of up to 4% of certain contributions made by employees plus an annual contribution of between 2% and 10% of their compensation depending on their age and years of service to employees hired prior to January 1, 2004. All new hires on or after January 1, 2004 receive a fixed 2% contribution annually. The Company currently estimates that contributions to such plan will range from $5.0 to $7.0 per year.

•

A defined benefit plan for salaried employees at the Company’s London, Ontario facility, with annual contributions based on each salaried employee’s age and years of service. At December 31, 2013, approximately 65% of the plan assets were invested in equity securities, and 31% of plan assets were invested in fixed income securities. The remaining plan assets were invested in short-term securities. The Company’s investment committee reviews and evaluates the investment portfolio. The asset mix target allocation on the long-term investments is approximately 62% in equity securities, 34% in fixed income securities and the remaining assets in short-term securities. See Note 12 for additional information regarding the fair values of the Canadian pension plan assets.

•

A non-qualified, unfunded, unsecured plan of deferred compensation for key employees who would otherwise suffer a loss of benefits under the Company’s defined contribution plan as a result of the limitations imposed by the Internal Revenue Code of 1986 (the “Code”). Despite the plan being an unfunded plan, the Company makes an annual contribution to a rabbi trust to fulfill future funding obligations, as contemplated by the terms of the plan. The assets in the trust are at all times subject to the claims of the Company’s general creditors, and no participant has a claim to any assets of the trust. Plan participants are eligible to receive distributions from the trust subject to vesting and other eligibility requirements. Assets in the rabbi trust relating to the deferred compensation plan are accounted for as available for sale securities and are included as Other assets on the Consolidated Balance Sheets (see Note 2). Liabilities relating to the deferred compensation plan are included on the Consolidated Balance Sheets as Long-term liabilities (see Note 2).

•

An employment agreement with the Company’s chief executive officer extending through July 6, 2015. The Company also provides certain members of senior management, including each of the Company’s named executive officers, with benefits related to terminations of employment in specified circumstances, including in connection with a change in control, by the Company without cause and by the executive officer with good reason.

VEBA Postretirement Medical Obligations. Certain eligible retirees receive medical coverage through participation in the Union VEBA or a VEBA that provides benefits for certain other eligible retirees, their surviving spouse and eligible dependents (the “Salaried VEBA” and, together with the Union VEBA, the “VEBAs”). The Union VEBA covers certain qualifying bargaining unit retirees and future retirees. The Salaried VEBA covers certain retirees who retired prior to the 2004 termination of the prior plan and employees who were hired prior to February 2002 and subsequently retired or will retire with the requisite age and service. The Union VEBA is managed by four trustees, two of which are appointed by the Company and two of which are appointed by the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO, CLC ("USW"). Its assets are managed by an independent fiduciary. The Salaried VEBA is managed by trustees who are independent of the Company.

The Company’s only financial obligations to the VEBAs are (i) to make an annual variable cash contribution and (ii) to pay up to $0.3 of the annual administrative expenses of the VEBAs. The formula determining the annual variable contribution amount is 10% of the first $20.0 of annual cash flow (as defined; in general terms, the principal elements of cash flow are earnings before interest expense, provision for income taxes, and depreciation and amortization less cash payments for, among other things, interest, income taxes, and capital expenditures), plus 20% of annual cash flow (as defined) in excess of $20.0. Such payments may not exceed $20.0 annually, and payments are allocated between the Union VEBA and the Salaried VEBA at 85.5% and 14.5%, respectively. The variable cash contribution obligation to the Union VEBA extends through September 2017, while the obligation to the Salaried VEBA has no express termination date.

Amounts owed by the Company to the VEBAs are recorded in the Company's Consolidated Balance Sheets under Other accrued liabilities, with a corresponding increase in Net assets in respect of VEBAs. Such amounts are determined and paid on an annual basis. As of December 31, 2013, the Company determined that the variable contribution for 2013 was $16.0 (comprised of $13.7 to the Union VEBA and $2.3 to the Salaried VEBA). These amounts will be paid during the first quarter of 2014. The variable contribution relating to 2012 in the amount of $20.0 was paid in 2013.

The Company has no claim to the plan assets of the VEBAs nor any obligation to fund their liabilities. The benefits paid by the VEBAs are at the sole discretion of the respective VEBA trustees and are outside the Company's control. Nevertheless, the Company accounts for the VEBAs as defined benefit postretirement plans with the current VEBA assets and future variable contributions from the Company, and earnings thereon, operating as a cap on the benefits to be paid. Accordingly, the Company accounts for net periodic postretirement benefit costs in accordance with ASC Topic 715, Compensation — Retirement Benefits, and records any difference between the assets of each VEBA and its accumulated postretirement benefit obligation in the Company’s consolidated financial statements. Information necessary for the valuation of the net funded status of the plans must be obtained from the VEBAs on an annual basis.

While under this accounting treatment, the funding status of the VEBAs could result in a liability or asset position on the Company's Consolidated Balance Sheets, such liability or asset has no impact on the Company's cash flow or liquidity. Only the Company's obligation to make an annual variable cash contribution can have a material impact to the Company's cash flow or liquidity.

In 2011 and 2012, the Union VEBA owned shares of the Company's common stock that were subject to a stock transfer restriction agreement that limited its ability to sell such shares. In 2011, transfer restrictions were removed on a portion of the shares held by the Union VEBA, and restrictions on all remaining shares were removed in 2012. During periods when the Union VEBA's shares were subject to the stock transfer restrictions, the Company treated such shares as being similar to treasury stock (i.e. as a reduction of Stockholders' equity) on its Consolidated Balance Sheet. Refer to Statements of Consolidated Stockholders' Equity for the number of shares on which stock transfer restrictions were removed.

Key Assumptions. The following data presents the key assumptions used and the amounts reflected in the Company’s financial statements with respect to the Company’s Canadian pension plan and the VEBAs. The Company uses a December 31 measurement date for all of the plans.

Assumptions used to determine benefit obligations as of December 31 are:



	Canadian Pension Benefits				VEBA Benefits
	December 31, 2013		December 31, 2012		December 31, 2013				December 31, 2012
					Union VEBA		Salaried VEBA		Union VEBA		Salaried VEBA
Benefit obligations assumptions:
Discount rate	4.90	%	4.40	%	4.70	%	4.20	%	4.00	%	3.40	%
Rate of compensation increase	3.00	%	3.00	%	—		—		—		—
Initial medical trend rate ¹	—		—		7.50	%	—		8.00	%	—
Ultimate medical trend rate ¹	—		—		5.00	%	—		5.00	%	—

The medical trend rate assumptions used for the Union VEBA were provided by the Union VEBA and certain industry data were provided by the Company's actuaries. The trend rate is assumed to decline to 5% by 2019 at each of December 31, 2013 and December 31, 2012. A one-percentage-point increase in the assumed medical trend rates would increase the accumulated postretirement benefit obligation of the Union VEBA by $27.8 and $41.1 at December 31, 2013 and December 31, 2012, respectively. A one-percentage-point decrease in the assumed medical trend rates would decrease the accumulated postretirement benefit obligation of the Union VEBA by $22.7 and $33.4 at December 31, 2013 and December 31, 2012, respectively.

Key assumptions made in computing the net asset/obligation of each VEBA and in total include:

With respect to VEBA assets:


•	Based on the information received from the VEBAs, at December 31, 2013 and December 31, 2012 both the Salaried VEBA and Union VEBA assets were invested in various managed proprietary funds. VEBA plan assets are managed by various investment advisors selected by the VEBA trustees, and are not under the control of the Company.


•	The Company's variable payment, if any, is treated as a funding/contribution policy and not counted as a VEBA asset at December 31 for actuarial purposes.

With respect to VEBA obligations:


•	The accumulated postretirement benefit obligation (“APBO”) for each VEBA was computed based on the level of benefits being provided by it at December 31, 2013 and December 31, 2012.


•	Since the Salaried VEBA was paying a fixed annual amount to its constituents at both December 31, 2013 and December 31, 2012, no future cost trend rate increase has been assumed in computing the APBO for the Salaried VEBA.

Assumptions used to determine net periodic benefit cost (income) for the years ended December 31 are:



	Canadian Pension Benefits						VEBA Benefits
	2013		2012		2011		2013				2012				2011
							Union VEBA		Salaried VEBA		Union VEBA		Salaried VEBA		Union VEBA		Salaried VEBA
Net periodic benefit cost assumptions:
Discount rate	4.40	%	5.60	%	5.70	%	4.00	%	3.40	%	4.20	%	3.75	%	5.25	%	4.70	%
Expected long-term return on plan assets ¹	4.50	%	4.60	%	5.40	%	6.25	%	7.25	%	7.25	%	7.25	%	6.00	%	7.25	%
Rate of compensation increase	3.00	%	3.00	%	3.50	%	—		—		—		—		—		—
Initial medical trend rate²	—		—		—		8.00	%	—		8.50	%	—		9.00	%	—
Ultimate medical trend rate²	—		—		—		5.00	%	—		5.00	%	—		5.00	%	—

_____________________


¹	The expected long-term rate of return assumption is based on the targeted investment portfolios provided to the Company by the VEBAs’ trustees.

The medical trend rate assumptions used for the Union VEBA, which is currently paying certain prescription drug benefits, were provided by the Union VEBA and certain industry data were provided by the Company's actuaries. The trend rate is assumed to decline to 5% by 2019 for each of 2013, 2012 and 2011. A one-percentage-point increase in the assumed medical trend rates would increase the aggregate of the service and interest cost components of net periodic benefit costs by $2.0, $2.5 and $2.7 for 2013, 2012 and 2011, respectively. A one-percentage-point decrease in the assumed medical trend rates would decrease the aggregate of the service and interest cost components of net periodic benefit costs by $1.5, $2.0, and $2.1 for 2013, 2012 and 2011, respectively.

Benefit Obligations and Funded Status — The following table presents the benefit obligations and funded status of the Company’s Canadian pension and the VEBAs as of December 31, 2013 and December 31, 2012, and the corresponding amounts that are included in the Company’s Consolidated Balance Sheets.



	Canadian Pension Benefits						VEBA Benefits
	2013			2012			2013			2012
Change in Benefit Obligation:
Obligation at beginning of year	$	7.0		$	5.4		$	384.1		$	446.9
Foreign currency translation adjustment	(0.5		)	0.2			—			—
Service cost	0.3			0.2			2.5			3.4
Interest cost	0.3			0.3			14.6			17.9
Actuarial (gain) loss¹	(0.2		)	1.1			(7.3		)	(66.2		)
Plan participant contributions	—			0.1			—			—
Benefits paid by Company	(0.3		)	(0.3		)	—			—
Benefits paid by VEBA	—			—			(21.5		)	(20.8		)
Reimbursement from retiree drug subsidy²	—			—			2.3			2.9
Obligation at end of year	6.6			7.0			374.7			384.1



Change in Plan Assets:
FMV of plan assets at beginning of year	5.7			4.9			744.7			571.0
Foreign currency translation adjustment	(0.4		)	0.2			—			—
Actual return on assets	0.7			0.3			39.2			63.0
Plan participant contributions	—			0.1			—			—
Sale of Company's common stock by Union VEBA	—			—			—			108.6
Employer/Company contributions ⁴	0.5			0.5			16.0			20.0
Benefits paid by Company	(0.3		)	(0.3		)	—			—
Benefits paid by VEBA	—			—			(21.5		)	(20.8		)
Reimbursement from retiree drug subsidy²	—			—			2.3			2.9
FMV of plan assets at end of year	6.2			5.7			780.7			744.7
Net Funded Status ³	$	(0.4	)	$	(1.3	)	$	406.0		$	360.6

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The actuarial gain relating to the VEBA plans in 2013 was primarily comprised of (i) a gain of $54.9 due to projected lower drug claim cost in the future because of lower than expected drug claim costs in 2013 in the Union VEBA, (ii) a gain of $30.5 due to a decrease in discount rates used to determine benefit obligations for both VEBAs, (iii) a gain of $8.0 primarily due to a higher than expected mortality rate in the Union VEBA, partially offset by (iv) a loss of $63.8 due to the addition of a new healthcare premium reimbursement benefit starting in 2014 in the Union VEBA, (v) a loss of $20.8 resulting from an increase in the existing benefits reimbursement rates starting in 2014 for plan participants in both VEBAs, and (vi) a loss of $2.7 primarily due to an increase in administrative cost in the Union VEBA.

The actuarial gain relating to the VEBA plans in 2012 was primarily comprised of (i) a gain of $42.2 due to lower than expected prescription drug claim cost and a change in retiree drug subsidy assumption in 2012 in the Union VEBA, (ii) a gain of $16.2 due to changes in census data for both VEBA plans, (iii) a gain of $9.6 relating to a change in the participant marital status assumption in the Union VEBA and (iv) a gain of $11.0 relating to a change in the assumption for annual benefit utilization per participant in the Salaried VEBA, partially offset by a loss of $9.7 due to a decrease in discount rates used to determine benefit obligations for both VEBA plans.


²	The Union VEBA is eligible for the retiree drug subsidy of the Medicare Modernization Act that went into effect January 1, 2006 equal to 28% of allowable drug costs. As a result, the Company has measured the Union VEBA’s obligations and costs to take into account this subsidy.


³	Prepaid benefit of $406.0 relating to the VEBAs at December 31, 2013 was presented as Net asset in respect of VEBAs on the Consolidated Balance Sheet. With respect to the Prepaid benefit of $360.6 relating to the VEBAs at December 31, 2012, $365.9 was included in Net asset in respect of VEBA and $5.3 was included in Net liability in respect of VEBA on the Consolidated Balance Sheets.


⁴	The Company accrued a liability for a variable cash contribution of $16.0 to the VEBAs with respect to calendar year 2013, which will be paid in the first quarter of 2014. The Company accrued a liability for a variable cash contribution of $20.0 to the VEBAs with respect to calendar year 2012, which was paid in the first quarter of 2013.

With respect to the VEBAs, the Company has no claim to the plan assets nor obligation to fund the liability. The Company's only financial obligations to the VEBAs are the variable cash contribution and reimbursement of certain administrative fees discussed previously. The following table presents the net assets of each VEBA as of December 31, 2013 and December 31, 2012 (such information is also included in the tables required under GAAP above which roll forward the assets and obligations):



	December 31, 2013									December 31, 2012
	Union VEBA			Salaried VEBA			Total			Union VEBA			Salaried VEBA			Total
Accumulated plan benefit obligation	$	(312.7	)	$	(62.0	)	$	(374.7	)	$	(319.4	)	$	(64.7	)	$	(384.1	)
Plan assets	717.5			63.2			780.7			685.3			59.4			744.7
Net Funded Status	$	404.8		$	1.2		$	406.0		$	365.9		$	(5.3	)	$	360.6

The accumulated benefit obligation for the Canadian defined benefit pension plan was $5.8 and $6.2 at December 31, 2013 and December 31, 2012, respectively. The Company expects to contribute $0.5 to the Canadian pension plan in 2014.

As of December 31, 2013, the net benefits expected to be paid in each of the next five fiscal years and in aggregate for the five fiscal years thereafter are as follows:



	Benefit Payments Due by Period
	2014			2015			2016			2017			2018			2019-2023
Canadian pension plan benefit payments	$	0.2		$	0.3		$	0.3		$	0.3		$	0.3		$	2.0
VEBA benefit payments¹	30.5			30.5			30.3			30.1			29.8			142.5
Anticipated retiree drug subsidy¹	(3.1		)	(3.3		)	(3.4		)	(3.5		)	(3.5		)	(18.6		)
Total net benefits	$	27.6		$	27.5		$	27.2		$	26.9		$	26.6		$	125.9

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¹ Such amounts were obtained from the VEBAs. The Company's only financial obligations to the VEBAs are to pay the variable contributions, which may not exceed $20.0 annually, and certain administrative fees.

The amount of loss which is recognized in the Consolidated Balance Sheets (in Accumulated other comprehensive income (loss)) associated with the Company’s Canadian defined benefit pension plan and the VEBAs (before tax) that have not yet been reflected in net periodic benefit cost as of December 31, 2013 and December 31, 2012 were as follows:



	Canadian Pension Benefits						VEBA Benefits
	December 31, 2013			December 31, 2012			December 31, 2013			December 31, 2012
Accumulated net actuarial losses	$	(1.8	)	$	(2.8	)	$	(0.5	)	$	(3.2	)
Transition assets	0.2			0.3			—			—
Prior service cost	—			—			(32.7		)	(36.9		)
Loss recognized in Accumulated other comprehensive (loss)	$	(1.6	)	$	(2.5	)	$	(33.2	)	$	(40.1	)

The amounts in Accumulated other comprehensive income (loss) that have not yet been recognized as components of net periodic pension benefit costs at December 31, 2013 that are expected to be recognized in 2014 are $0.1 for the Canadian pension plan relating to prior service cost and $5.2 for the VEBAs. Of the $5.2 relating to the VEBAs, $4.1 is related to amortization of prior service cost and $1.1 is related to amortization of net actuarial loss. See the Statement of Comprehensive Income (Loss) for reclassification adjustments of other comprehensive income that were recognized as components of net periodic benefit costs for 2013, 2012 and 2011.

Fair Value of Plan Assets. See Note 12 for the fair values of the assets of the Canadian pension plan and the VEBAs.

Components of Net Periodic Benefit Cost (Income) — The Company’s results of operations included the following impacts associated with the Canadian defined benefit plan and the VEBAs: (a) charges for service rendered by employees; (b) a charge for accretion of interest; (c) a benefit for the return on plan assets; and (d) amortization of net gains or losses on assets, prior service costs associated with plan amendments and actuarial differences. The following table presents the components of net periodic benefit cost (income) for 2013, 2012 and 2011:



	Canadian Pension Benefits									VEBA Benefits
	2013			2012			2011			2013			2012			2011
Service cost	$	0.3		$	0.2		$	0.2		$	2.5		$	3.4		$	2.2
Interest cost	0.3			0.3			0.3			14.6			17.9			17.4
Expected return on plan assets	(0.3		)	(0.2		)	(0.3		)	(45.1		)	(40.4		)	(30.4		)
Amortization of prior service cost¹	—			—			—			4.2			4.2			4.2
Amortization of net actuarial loss	0.2			0.1			0.1			1.3			3.0			0.6
Net periodic benefit costs (income)	$	0.5		$	0.4		$	0.3		$	(22.5	)	$	(11.9	)	$	(6.0	)

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¹	The Company amortizes prior service cost on a straight-line basis over the average remaining years of service to full eligibility for benefits of the active plan participants.

The following tables present the total (income) charges related to all benefit plans for 2013, 2012 and 2011:



	Year Ended December 31,
	2013			2012			2011
Canadian pension plan	$	0.5		$	0.4		$	0.3
VEBAs	(22.5		)	(11.9		)	(6.0		)
Deferred compensation plan	1.2			0.9			0.2
Defined contribution plans	7.9			7.6			7.1
Total	$	(12.9	)	$	(3.0	)	$	1.6

The following tables present the allocation of these (income) charges:



	Year Ended December 31,
	2013			2012			2011
Fabricated Products	$	8.0		$	7.4		$	6.4
All Other	(20.9		)	(10.4		)	(4.8		)
Total	$	(12.9	)	$	(3.0	)	$	1.6

For all periods presented, the net periodic benefits relating to the VEBAs are included as a component of Selling, administrative, research and development and general expense within All Other and substantially all of the Fabricated Products segment’s related charges are in Cost of products sold, excluding depreciation and amortization and other items with the balance in Selling, administrative, research and development and general.