PENSION AND POSTRETIREMENT BENEFIT PLANS

The Company has defined benefit pension plans and other postretirement benefit plans, primarily health care and life insurance. Benefits for the defined benefit pension plans are based primarily on years of service and qualifying compensation during the final years of employment. The measurement date for all plans is August 31.

A supplemental non-qualified, non-funded pension plan for certain retired officers was adopted as of January 1, 2004. Charges to earnings are provided to meet the projected benefit obligation. The pension cost for this plan is based on substantially the same actuarial methods and economic assumptions as those used for the defined benefit pension plans. In connection with this plan, the Company owns and is the beneficiary of life insurance policies that cover the estimated total cost of this plan. The cash surrender value of this insurance was $3.4 million and $3.0 million as of August 31, 2012 and 2011, respectively.

Postretirement health care and life insurance benefits are provided to certain U.S. employees if they meet certain age and length of service requirements while working for the Company. Effective January 1, 2004, the Company amended the U.S. postretirement health care and life insurance ("OPEB") plan to require co-payments and participant contribution. Effective April 1, 2007, the Company amended the plan which eliminated retiree health care benefits for certain employees and increased retiree contributions for health care benefits. Effective July 1, 2008, the Company amended the plan which eliminated retiree life insurance benefits for all nonunion employees and retirees.

In fiscal 2011, the Company amended the OPEB plan effective January 1, 2012 to limit surviving spouse coverage to two months, at which point the surviving spouse may continue coverage at full cost. The surviving spouse coverage resulted in a $2.6 million reduction in the August 31, 2011 postretirement benefit plan obligation. Subsequently, in January 2012, the Company rescinded the surviving spouse coverage amendment that limited coverage to two months. Rescinding this amendment reinstated surviving spouse coverage which increased the postretirement benefit plan obligation by $2.5 million, as of August 31, 2012.

Components of the plan obligations and assets, the recorded liability and accumulated other comprehensive income (loss) ("AOCI") as of August 31, 2012 and 2011 are as follows:



	Pension Benefits						Other Postretirement Benefits
	2012			2011			2012			2011
	(In thousands)
Benefit obligation at beginning of year	$	(113,204	)	$	(112,517	)	$	(13,929	)	$	(17,054	)
Service cost	(2,759		)	(3,521		)	(28		)	(30		)
Interest cost	(5,099		)	(4,820		)	(607		)	(746		)
Participant contributions	(253		)	(270		)	(91		)	(32		)
Actuarial gain (loss)	(18,921		)	16,900			2,819			480
Benefits paid	3,354			4,028			768			872
Settlement gain (loss)	—			(28		)	—			—
Business combinations	(710		)	—			—			—
Curtailment gain (loss)	310			(18		)	—			—
Contractual termination benefits	(79		)	—			—			—
Plan amendments	—			(7		)	(2,488		)	2,581
Translation adjustment	12,413			(12,951		)	—			—
Benefit obligation at end of year	$	(124,948	)	$	(113,204	)	$	(13,556	)	$	(13,929	)
Fair value of plan assets at beginning of year	$	26,090		$	22,259		$	—		$	—
Actual return on assets	4,518			810			—			—
Employer contributions	4,619			4,607			677			840
Participant contributions	253			270			91			32
Benefits paid	(3,354		)	(4,028		)	(768		)	(872		)
Translation adjustment	(1,936		)	2,172			—			—
Fair value of plan assets at end of year	$	30,190		$	26,090		$	—		$	—
Underfunded	$	(94,758	)	$	(87,114	)	$	(13,556	)	$	(13,929	)
Classification of net amount recognized:
Accrued payroll, taxes and related benefits	$	(2,177	)	$	(2,441	)	$	(780	)	$	(880	)
Long-term liabilities	(92,581		)	(84,673		)	(12,776		)	(13,049		)
Net amount recognized	$	(94,758	)	$	(87,114	)	$	(13,556	)	$	(13,929	)
Amounts recognized in AOCI:
Net actuarial (gain) loss	$	30,134		$	16,739		$	602		$	3,592
Net prior service cost (credit)	355			403			(3,006		)	(6,225		)
Net amount recognized in AOCI	$	30,489		$	17,142		$	(2,404	)	$	(2,633	)
Change in plan assets and benefit obligations recognized in AOCI:
Net actuarial (gain) loss	$	15,394		$	(16,445	)	$	(2,819	)	$	(480	)
Prior service cost (credit)	—			7			2,488			(2,581		)
Amortization of net actuarial loss	(468		)	(1,658		)	(171		)	(198		)
Amortization of prior service (cost) credit	(48		)	(29		)	731			542
Settlement/curtailment gain (loss)	310			2			—			—
Translation adjustment	(1,841		)	2,927			—			—
Total change in AOCI	$	13,347		$	(15,196	)	$	229		$	(2,717	)

The pension actuarial loss in fiscal 2012 as compared to the pension actuarial gain in the prior year is primarily the result of a decrease in the weighted-average discount rate to 3.8% in fiscal 2012 from 4.9% in 2011.

The components of net periodic benefit cost of the years ended August 31 are as follows:



	Pension Benefits									Other Postretirement Benefits
	2012			2011			2010			2012			2011			2010
	(In thousands)
Service cost	$	2,759		$	3,521		$	2,159		$	28		$	30		$	30
Interest cost	5,099			4,820			4,505			607			746			765
Expected return on plan assets	(1,298		)	(1,219		)	(984		)	—			—			—
Amortization of prior service cost (credit)	48			29			48			(731		)	(542		)	(557		)
Recognized gains due to plan settlements	—			(24		)	(28		)	—			—			—
Contractual termination benefits	79			—			—			—			—			—
Recognized (gains) losses due to plan curtailments	(310		)	22			267			—			—			—
Recognized net actuarial loss	468			1,658			338			171			198			—
Total net periodic benefit cost	$	6,845		$	8,807		$	6,305		$	75		$	432		$	238

Amounts expected to be amortized from AOCI and included in total net periodic benefit cost during the year ended August 31, 2013, are as follows:



	Pension Benefits		Other Postretirement Benefits
	(In thousands)
Net actuarial loss	$	1,418	$	—
Prior service cost (credit)	28		(537		)
Total	$	1,446	$	(537	)

Selected information regarding the Company’s pension and OPEB plans is as follows:



	2012		2011
	(In thousands)
Pension Plans:
All plans:
Accumulated benefit obligation	$	113,055	$	101,659
Plans with projected benefit obligations in excess of plan assets:
Projected benefit obligation	$	124,887	$	112,902
Accumulated benefit obligation	$	113,011	$	101,432
Fair value of plan assets	$	30,125	$	25,596
Plans with projected benefit obligations less than plan assets:
Projected benefit obligation	$	61	$	302
Accumulated benefit obligation	$	44	$	227
Fair value of plan assets	$	65	$	494
OPEB Plan:
Accumulated benefit obligation	$	13,556	$	13,929
Plans with projected benefit obligations in excess of plan assets:
Projected benefit obligation	$	13,556	$	13,929
Accumulated benefit obligation	$	13,556	$	13,929
Fair value of plan assets	$	—	$	—

The underfunded position of the pension plans is primarily related to the Company’s German and United Kingdom pension plans. As of August 31, 2012, the Company’s German and United Kingdom pension plans are underfunded by $76.7 million and $7.6 million, respectively. In Germany, there are no statutory requirements for funding while in the United Kingdom there are certain statutory minimum funding requirements.

Actuarial assumptions used in the calculation of the recorded liability are as follows:



Weighted — Average Assumptions as of August 31 :	2012		2011		2010
Discount rate on pension plans	3.8	%	4.9	%	4.0	%
Discount rate on postretirement obligation	3.5	%	4.5	%	4.5	%
Rate of compensation increase	2.2	%	2.5	%	2.4	%

Actuarial assumptions used in the calculation of the recorded benefit expense are as follows:



Weighted — Average Assumptions as of August 31 :	2012		2011		2010
Discount rate on pension plans	4.9	%	4.0	%	5.4	%
Discount rate on postretirement obligation	4.5	%	4.5	%	5.5	%
Return on pension plan assets	6.4	%	5.8	%	7.0	%
Rate of compensation increase	2.5	%	2.4	%	2.5	%
Projected health care cost trend rate	8.0	%	8.0	%	8.0	%
Ultimate health care rate	5.0	%	5.0	%	5.0	%
Year ultimate health care trend rate is achieved	2019		2019		2016

The Company, in consultation with its actuaries, annually, or as needed for interim remeasurements, reviews and selects the discount rates to be used in connection with its defined benefit pension plans. The discount rates used by the Company are based on the yields of various corporate bond indices with the plans' actual maturity dates that approximate the estimated benefit payment streams of the related pension plans. For countries in which there are no deep corporate bond markets, discount rates used by the Company are based on yields of various government bond indices with varying maturity dates. The discount rates are also reviewed in comparison with current benchmark indices, economic market conditions and the movement in the benchmark yield since the previous fiscal year.

The Company, in consultation with its actuaries, annually, or as needed for interim remeasurements, reviews and selects the discount rate to be used in connection with its postretirement obligation. When selecting the discount rate the Company uses a model that considers the Company’s demographics of the participants and the resulting expected benefit payment stream over the participants’ lifetime.

For fiscal 2013, the Company, in consultation with its actuaries, has selected a weighted-average discount rate of 3.8%, expected long-term return on plan assets of 5.1% and rate of compensation increase of 2.2% for its defined benefit pension plans. For its postretirement benefit plan, the Company has selected a discount rate of 3.5% for fiscal 2013.

Assumed health care cost trend rates have a significant effect on the amounts reported for the OPEB plan. A one-percentage point change in assumed health care cost trend rates would have the following effects as of August 31, 2012:



	One-Percentage - Point Increase		One-Percentage - Point Decrease
	(In thousands)
Effect on aggregate of service and interest cost components of net periodic postretirement benefit cost	$	62	$	(55	)
Effect on accumulated postretirement benefit obligation	$	1,428	$	(1,231	)

The Company’s pension plan weighted-average asset allocation as of August 31, 2012 and 2011, and target allocation, by asset category are as follows:



	Plan Assets				Target Allocation
Asset Category	2012		2011		2012		2011
Equity securities	27	%	37	%	22	%	45	%
Debt securities	21	%	18	%	13	%	15	%
Fixed insurance contracts	40	%	37	%	43	%	35	%
Cash	12	%	8	%	22	%	5	%
Total	100	%	100	%	100	%	100	%

The Company’s principal objective is to ensure that sufficient funds are available to provide benefits as and when required under the terms of the plans. The Company utilizes investments that provide benefits and maximizes the long-term investment performance of the plans without taking on undue risk while complying with various legal funding requirements. The Company, through its investment advisors, has developed detailed asset and liability models to aid in implementing optimal asset allocation strategies. The equity securities are invested in equity indexed funds, which minimizes concentration risk while offering market returns. The debt securities are invested in a long-term bond indexed fund which provides a stable low risk return. The fixed insurance contracts allow the Company to closely match a portion of the liability to the expected payout of benefit with little risk. The Company, in consultation with its actuaries, analyzes current market trends, the current plan performance and expected market performance of both the equity and bond markets to arrive at the expected return on each asset category over the long term. The Company’s plan assets which are invested in equity and debt securities are valued utilizing Level 1 inputs while plan assets invested in fixed insurance contracts are valued utilizing Level 3 inputs which are unobservable and reflect the Company’s own assumptions. The Company believes there is not a significant concentration of risk within its plan assets.

The fair values of the Company’s pension plan assets as of August 31, 2012 and 2011, all of which are for foreign plans, are as follows:



	2012										2011
	Total			Level 1			Level 2		Level 3		Total		Level 1		Level 2		Level 3
	(In thousands)
Equity securities	$	8,217	—	$	8,217		$	—	$	—	$	9,650	$	9,650	$	—	$	—
Debt securities	6,388			6,388			—		—		4,673		4,673		—		—
Fixed insurance contracts	11,946			—			—		11,946		9,536		—		—		9,536
Cash	3,572			3,572			—		—		2,098		2,098		—		—
Other	67			—		—	—		67		133		—		—		133
Total	$	30,190		$	18,177		$	—	$	12,013	$	26,090	$	16,421	$	—	$	9,669

The change in fair value of the Company’s pension plan assets classified as Level 3 for the years ended August 31, 2012 and 2011, all of which are for foreign plans, is as follows:



	2012			2011
	(In thousands)
Balance, beginning of fiscal year	$	9,669		$	8,378
Actual return on plan assets	3,007			(880		)
Purchases, sales, issuances, and settlements, net	743			1,002
Foreign currency translation	(1,406		)	1,169
Balance, end of fiscal year	$	12,013		$	9,669

The Company expects to contribute $4.7 million for its pension obligations and $0.8 million to its other postretirement plan in 2013. The benefit payments, which reflect expected future service, are as follows:



	Pension Benefits		OPEB Benefits
	(In thousands)
2013	$	3,366	$	791
2014	3,625		815
2015	4,187		836
2016	5,005		852
2017	4,572		840
Years 2018 — 2022	24,783		4,257

The Company has agreements with two individuals that upon retirement, death or disability prior to retirement, it shall make ten payments of $0.1 million each to the two individuals or their beneficiaries for a ten-year period and are 100% vested. The liability required for these agreements is included in other long-term liabilities as of August 31, 2012 and 2011. In connection with these agreements, the Company owns and is the beneficiary of life insurance policies amounting to $2.0 million.

The Company maintains several defined contribution plans that cover domestic and foreign employees. The plan in which each employee is eligible to participate depends upon the subsidiary for which the employee works. Certain plans have eligibility requirements related to age and period of service with the Company. Certain plans have salary deferral features that enable participating employees to contribute up to a certain percentage of their earnings, subject to statutory limits and certain foreign plans require the Company to match employee contributions in cash. Employee contributions to the Company’s U.S. 401(k) plans have matching features whereas the Company will match a participant’s contribution up to a pre-approved amount of the participant’s annual salary. The total expense for defined contribution plans was $3.4 million, $2.8 million and $1.9 million in 2012, 2011 and 2010, respectively.