Pension Plan and Retirement Benefits

12 Months Ended

Sep. 30, 2012

Pension Plan and Retirement Benefits

Pension Plan and Retirement Benefits

Note 8    Pension Plan and Retirement Benefits

Defined Contribution Plans

        The Company sponsors a defined contribution plan (401(k)) for substantially all U.S. employees. The Company contributes an amount equal to 50% of an employee's contribution to the plan up to a maximum contribution of 3% of the employee's salary, except for all salaried employees and certain hourly employees (those hired after June 30, 2007 that are not eligible for the U.S. pension plan). The Company contributes an amount equal to 60% of an employee's contribution to the plan up to a maximum contribution of 6% of the employee's salary for these groups. Expenses associated with this plan for the years ended September 30, 2010, 2011 and 2012 totaled $990, $1,273 and $1,374, respectively.

        The Company sponsors certain profit sharing plans for the benefit of employees meeting certain eligibility requirements. There were no contributions to these plans for the years ended September 30, 2010, 2011 and 2012.

Defined Benefit Plans

        The Company has non-contributory defined benefit pension plans which cover most employees in the U.S. and certain foreign subsidiaries. In the U.S. salaried employees hired after December 31, 2005 and hourly employees hired after June 30, 2007 are not covered by the pension plan; however, they are eligible for an enhanced matching program of the defined contribution plan (401(k)). On October 3, 2007, the U.S. pension plan was amended effective December 31, 2007 to freeze benefit accruals for all non-union employees in the U.S. and effective January 1, 2008, the pension multiplier used to calculate the employee's monthly benefit was increased from 1.4% to 1.6%. In addition, the Company will make enhanced matching contributions to its 401K plan equal to 60% of the non-union and union plan participant's salary deferrals, up to 6% of compensation. As a result of freezing the benefit accruals for all non-union employees in the U.S. in the first quarter of fiscal 2008, the Company recognized a reduction of the projected benefit obligation of $8,191, an increase to other comprehensive income (before tax) of $4,532 and a curtailment gain (before tax) of $3,659. The impact of the multiplier increase will be charged to pension expense over the estimated remaining lives of the participants. Effective September 30, 2009, the U.K. pension plan was amended to freeze benefit accruals for members of its plan. As of September 30, 2009, the company recognized a reduction of the projected benefit obligation of $392, an increase to other comprehensive income (before tax) of $392 and zero impact on the statement of operations.

        Benefits provided under the Company's domestic defined benefit pension plan are based on years of service and the employee's final compensation. The Company's funding policy is to contribute annually an amount deductible for federal income tax purposes based upon an actuarial cost method using actuarial and economic assumptions designed to achieve adequate funding of benefit obligations.

        The Company has non-qualified pensions for former executives of the Company. Non-qualified pension plan expense (income) for the years ended September 30, 2010, 2011 and 2012 was $109, $84 and $110, respectively. Accrued liabilities in the amount of $895 and $909 for these benefits are included in accrued pension and postretirement benefits liability at September 30, 2011 and 2012, respectively.

        In addition to providing pension benefits, the Company provides certain health care and life insurance benefits for retired employees. Substantially all domestic employees become eligible for these benefits, if they reach normal retirement age while working for the Company. During March 2006, the Company communicated to employees and plan participants a negative plan amendment that caps the Company's liability related to total retiree health care costs at $5,000 annually effective January 1, 2007. An updated actuarial valuation was performed at March 31, 2006, which reduced the accumulated postretirement benefit liability due to this plan amendment by $46,313 that will be amortized as a reduction to expense over an eight year period. This amortization period began in April 2006 thus reducing the amount of expense recognized for the second half of fiscal 2006 and the respective future periods.

        The Company made contributions of $12,720 and $15,900 to fund its domestic Company-sponsored pension plan for the year ended September 30, 2011 and 2012, respectively. The Company's U.K. subsidiary made contributions of $935 and $970 for the year ended September 30, 2011 and 2012, respectively, to the U.K. pension plan.

        The Company uses a September 30 measurement date for its plans. The status of employee pension benefit plans and other postretirement benefit plans are summarized below:

	Defined Benefit Pension Plans						Postretirement Health Care Benefits
	Year Ended September 30,						Year Ended September 30,
	2011			2012			2011			2012
Change in Benefit Obligation:
Projected benefit obligation at beginning of year	$	239,006		$	261,953		$	98,624		$	101,515
Service cost		3,612			4,001			266			291
Interest cost		11,383			11,623			4,688			4,581
Actuarial losses		19,833			38,147			2,662			11,974
Benefits paid		(11,881	)		(12,279	)		(4,725	)		(4,152	)
Projected benefit obligation at end of year	$	261,953		$	303,445		$	101,515		$	114,209
Change in Plan Assets:
Fair value of plan assets at beginning of year	$	144,976		$	148,931		$	—		$	—
Actual return on assets		2,181			28,489			—			—
Employer contributions		13,655			16,870			4,725			4,152
Benefits paid		(11,881	)		(12,279	)		(4,725	)		(4,152	)
Fair value of plan assets at end of year	$	148,931		$	182,011		$	—		$	—
Funded Status of Plan:
Unfunded status	$	(113,022	)	$	(121,434	)	$	(101,515	)	$	(114,209	)

Amounts recognized in the consolidated balance sheets are as follows:

	Defined Benefit Pension Plans						Postretirement Health Care Benefits						Non-Qualified Pension Plans						All Plans Combined
	September 30,						September 30,						September 30,						September 30,
	2011			2012			2011			2012			2011			2012			2011			2012
Accrued pension and postretirement benefits	$	(113,022	)	$	(121,434	)	$	(101,515	)	$	(114,209	)	$	(895	)	$	(909	)	$	(215,432	)	$	(236,552	)
Accumulated other comprehensive loss		109,221			120,794			24,983			39,948			—			—			134,204			160,742
Amounts expected to be recognized from AOCI into the statement of operations in the following year:
Amortization of net loss	$	9,031		$	10,189		$	2,799		$	3,717		$	—		$	—		$	11,830		$	13,906
Amortization of prior service cost		808			808			(5,789	)		(5,789	)		—			—			(4,981	)		(4,981	)
	$	9,839		$	10,997		$	(2,990	)	$	(2,072	)	$	—		$	—		$	6,849		$	8,925

        The accumulated benefit obligation for the pension plans was $245,197 and $281,623 at September 30, 2011 and 2012, respectively.

        The cost of the Company's postretirement benefits are accrued over the years employees provide service to the date of their full eligibility for such benefits. The Company's policy is to fund the cost of claims on an annual basis.

        The components of net periodic pension cost and postretirement health care benefit cost are as follows:

	Defined Benefit Pension Plans
	Year Ended September 30,
	2010			2011			2012
Service cost	$	3,596		$	3,612		$	4,001
Interest cost		11,600			11,383			11,623
Expected return on assets		(10,626	)		(12,023	)		(11,755	)
Amortization of prior service cost		808			808			808
Recognized actuarial loss		4,922			6,285			9,031
Net periodic cost	$	10,300		$	10,065		$	13,708

	Postretirement Health Care Benefits
	Year Ended September 30,
	2010			2011			2012
Service cost	$	206		$	266		$	291
Interest cost		4,819			4,688			4,581
Amortization of unrecognized prior service cost		(5,789	)		(5,789	)		(5,789	)
Recognized actuarial loss		1,992			2,706			2,799
Net periodic cost	$	1,228		$	1,871		$	1,882

Assumptions

        A 6.5% (7.0%-2011) annual rate of increase for the costs of covered health care benefits for ages under 65 and a 5.5% (6.0%-2011) annual rate of increase for ages over 65 were assumed for 2012, gradually decreasing for both age groups to 5.0% (5.0%-2011) by the year 2016. A one percentage point change in assumed health care cost trend rates would have the following effects in 2012:

	1-Percentage Point Increase		1-Percentage Point Decrease
Effect on total of service and interest cost components	$	0	$	0
Effect on accumulated postretirement benefit obligation		0		0

        The effect on total of service and interest cost components and the effect on accumulated postretirement benefit obligation is zero due to the plan amendment that caps the Company costs at $5,000 on an undiscounted basis per year.

        The actuarial present value of the projected pension benefit obligation and postretirement health care benefit obligation for the plans at September 30, 2011 and 2012 were determined based on the following assumptions:

	September 30, 2011			September 30, 2012
Discount rate (postretirement health care)		4.625	%		3.875	%
Discount rate (U.S. pension plan)		4.500	%		3.625	%
Discount rate (U.K. pension plan)		5.200	%		4.100	%
Rate of compensation increase (U.S. pension plan only)		3.500	%		3.500	%

        The net periodic pension and postretirement health care benefit costs for the plans were determined using the following assumptions:

	Defined Benefit Pension and Postretirement Health Care Plans
	Year Ended September 30,
	2010			2011			2012
Discount rate (postretirement health care plan)		5.500	%		4.875	%		4.625	%
Discount rate (U.S. pension plan)		5.500	%		4.875	%		4.500	%
Discount rate (U.K. pension plan)		5.500	%		5.000	%		5.200	%
Expected return on plan assets (U.S. pension plan)		8.500	%		8.500	%		8.000	%
Expected return on plan assets (U.K. pension plan)		6.200	%		5.900	%		5.900	%
Rate of compensation increase (U.S. pension plan only)		4.000	%		3.500	%		3.500	%

Plan Assets and Investment Strategy

        Our pension plan assets by level within the fair value hierarchy at September 30, 2011 and 2012, are presented in the table below. Our pension plan assets were accounted for at fair value. For more information on a description of the fair value hierarchy, see Note 16.

	September 30, 2011
	Level 1 Active Markets for Identical Assets		Level 2 Other Observable Inputs		Level 3 Significant Unobservable Inputs		Total
U.S. Plan Assets:
Mutual fund	$	17,607	$	—	$	—	$	17,607
Common /collective funds
Bonds		—		57,883		—		57,883
Short-term money market		—		2,418		—		2,418
U.S. common stock		—		51,753		—		51,753
International equity		—		6,062		—		6,062
Total U.S.	$	17,607	$	118,116	$	—	$	135,723
U.K. Plan Assets:
Equities	$	6,076	$	—	$	—	$	6,076
Bonds		5,547		—		—		5,547
Other		1,585		—		—		1,585
Total U.K.	$	13,208	$	—	$	—	$	13,208
Total pension plan	$	30,815	$	118,116	$	—	$	148,931

	September 30, 2012
	Level 1 Active Markets for Identical Assets		Level 2 Other Observable Inputs		Level 3 Significant Unobservable Inputs		Total
U.S. Plan Assets:
Mutual fund	$	22,836	$	—	$	—	$	22,836
Common /collective funds
Bonds		—		62,554		—		62,554
Short-term money market		—		6,762		—		6,762
U.S. common stock		7,402		59,678		—		67,080
International equity		—		7,053		—		7,053
Total U.S.	$	30,238	$	136,047	$	—	$	166,285
U.K. Plan Assets:
Equities	$	6,322	$	—	$	—	$	6,322
Bonds		7,297		—		—		7,297
Other		2,107		—		—		2,107
Total U.K.	$	15,726	$	—	$	—	$	15,726
Total pension plan	$	45,964	$	136,047	$	—	$	182,011

        The primary financial objectives of the Plan's are to minimize cash contributions over the long term and preserve capital while maintaining a high degree of liquidity. A secondary financial objective is, where possible, to avoid significant downside risk in the short run. The objective is based on a long-term investment horizon so that interim fluctuations should be viewed with appropriate perspective.

        The selection of the Plan's assumption for the expected long-term rate of return on plan assets is based upon the Plan's target allocation of 60% equities and 40% bonds, and the expected rate of return for each equity/bond asset class. Based upon the target allocation and each asset class's expected return, the Plan's return on assets assumption of 7.50% is reasonable, and represents a decrease from last year's assumption of 8.00%. The Company also realizes that historical performance is no guarantee of future performance.

        In determining the expected rate of return on plan assets, the Company takes into account the plan's allocation at September 30, 2012 of 58% equities, 38% fixed income and 4% other. The Company assumes an approximately 3.00% to 4.00% equity risk premium above the broad bond market yields of 5.00% to 7.00%. Note that over very long historical periods the realized risk premium has been higher. The Company believes that its assumption of an 7.5% long-term rate of return on plan assets is comparable to other companies, given the target allocation of the plan assets; however, there exists the potential for the use of a lower rate in the future.

        It is the policy of the Plan to invest assets with an allocation to equities as shown below. The balance of the assets are maintained in fixed income investments, and in cash holdings, to the extent permitted by the plan documents.

        Asset classes as a percent of total assets:

Asset Class	Target(1)
Equity		60	%
Fixed Income		40	%
Real Estate and Other		0	%

⁽¹⁾

From time to time the Company may adjust the target allocation by an amount not to exceed 10%.

        The U.K. pension plan assets use a similar strategy and investment objective.

Contributions and Benefit Payments

        The Company expects to contribute approximately $15,000 to its domestic pension plans, $5,000 to its domestic other postretirement benefit plans, and $970 to the U.K. pension plan in fiscal 2013.

        Pension and postretirement health care benefits (which include expected future service) are expected to be paid out of the respective plans as follows:

Fiscal Year Ending September 30	Pension		Postretirement Health Care
2013	$	13,052	$	5,000
2014		13,346		5,000
2015		13,700		5,000
2016		14,098		5,000
2017		14,560		5,000
2018-2022 (in total)		80,615		25,000