EMPLOYEE BENEFIT PLANS

EMPLOYEE STOCK OWNERSHIP PLAN (“ESOP”) — Most U.S. employees may make contributions that do not exceed 25% of their eligible compensation to a tax-deferred 401(k) savings plan, subject to restrictions under tax laws. Employees generally direct the investment of their own contributions into various investment funds. An employer match benefit is provided under the plan equal to one-half of each employee’s tax-deferred contribution up to the first 7% of their compensation. Participants direct the entire employer match benefit such that no participant is required to hold the Company’s common stock in their 401(k) account. The employer match benefit totaled $28.0 million, $24.8 million and $21.9 million in 2018, 2017 and 2016, respectively. In addition to the regular employer match, $0.7 million and $4.3 million was allocated to the employee's accounts for forfeitures and a surplus resulting from appreciation of the Company's share value in 2018 and 2016, respectively. There was no additional allocation in 2017.

In addition, approximately 9,700 U.S. salaried and non-union hourly employees are eligible to receive a non-contributory benefit under the Core benefit plan. Core benefit allocations range from 2% to 6% of eligible employee compensation based on age. Allocations for benefits earned under the Core plan were $29.0 million in 2018, $25.4 million in 2017 and $17.6 million in 2016. Assets held in participant Core accounts are invested in target date retirement funds which have an age-based allocation of investments.

Shares of the Company's common stock held by the ESOP were purchased with the proceeds of borrowings from the Company in 1991 ("1991 internal loan"). Shareowners' equity reflects a reduction equal to the cost basis of unearned (unallocated) shares purchased with the internal borrowings. In 2018, 2017 and 2016, the Company made additional contributions to the ESOP for $7.0 million, $4.8 million, and $7.9 million, respectively, which were used by the ESOP to make additional payments on the 1991 internal loan. These payments triggered the release of 207,049, 133,694 and 219,492 shares of unallocated stock in 2018, 2017 and 2016, respectively.

Net ESOP activity recognized is comprised of the cost basis of shares released, the cost of the aforementioned Core and 401(k) match defined contribution benefits, less the fair value of shares released and dividends on unallocated ESOP shares. The Company’s net ESOP activity resulted in expense of $0.4 million in 2018, expense of $1.3 million in 2017 and income of $3.1 million in 2016. ESOP expense is affected by the market value of the Company’s common stock on the monthly dates when shares are released. The weighted-average market value of shares released was $139.45 per share in 2018, $138.60 per share in 2017 and $103.88 per share in 2016.

Unallocated shares are released from the trust based on current period debt principal and interest payments as a percentage of total future debt principal and interest payments. Dividends on both allocated and unallocated shares may be used for debt service and to credit participant accounts for dividends earned on allocated shares. Dividends paid on the shares acquired with the 1991 internal loan were used solely to pay internal loan debt service in all periods. Dividends on ESOP shares, which are charged to shareowners’ equity as declared, were $7.7 million in 2018, $8.4 million in 2017 and $9.0 million in 2016, net of the tax benefit which is recorded in earnings in 2018 and 2017 and within equity for 2016. Dividends on ESOP shares were utilized entirely for debt service in all years. Interest costs incurred by the ESOP on the 1991 internal loan, which have no earnings impact, were $1.6 million, $2.2 million and $3.1 million for 2018, 2017 and 2016, respectively. Both allocated and unallocated ESOP shares are treated as outstanding for purposes of computing earnings per share. As of December 29, 2018, the cumulative number of ESOP shares allocated to participant accounts was 14,973,185, of which participants held 2,186,499 shares, and the number of unallocated shares was 568,172. At December 29, 2018, there were 110,670 released shares in the ESOP trust holding account pending allocation. The Company made cash contributions totaling $2.3 million in 2018, $1.8 million in 2017 and $4.2 million in 2016 excluding additional contributions of $7.0 million, $4.8 million and $7.9 million in 2018, 2017 and 2016, respectively, as discussed previously.

PENSION AND OTHER BENEFIT PLANS — The Company sponsors pension plans covering most domestic hourly and certain executive employees, and approximately 15,500 foreign employees. Benefits are generally based on salary and years of service, except for U.S. collective bargaining employees whose benefits are based on a stated amount for each year of service.

The Company contributes to a number of multi-employer plans for certain collective bargaining U.S. employees. The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects:

a. Assets contributed to the multiemployer plan by one employer may be used to provide benefit to employees of other participating employers.

b. If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be inherited by the remaining participating employers.

c. If the Company chooses to stop participating in some of its multiemployer plans, the Company may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

In addition, the Company also contributes to a number of multiemployer plans outside of the U.S. The foreign plans are insured, therefore, the Company’s obligation is limited to the payment of insurance premiums.

The Company has assessed and determined that none of the multiemployer plans to which it contributes are individually significant to the Company’s financial statements. The Company does not expect to incur a withdrawal liability or expect to significantly increase its contributions over the remainder of the contract period.

In addition to the multiemployer plans, various other defined contribution plans are sponsored worldwide.

The expense for such defined contribution plans, aside from the earlier discussed ESOP plans, is as follows:



(Millions of Dollars)	2018		2017		2016
Multi-employer plan expense	$	7.3	$	7.2	$	5.1
Other defined contribution plan expense	$	12.9	$	27.5	$	15.4

The components of net periodic pension (benefit) expense are as follows:



	U.S. Plans									Non-U.S. Plans
(Millions of Dollars)	2018			2017			2016			2018			2017			2016
Service cost	$	7.5		$	8.7		$	9.4		$	15.2		$	13.7		$	12.5
Interest cost	42.8			43.2			45.3			28.6			29.1			37.0
Expected return on plan assets	(68.7		)	(64.4		)	(67.9		)	(46.5		)	(45.5		)	(44.5		)
Amortization of prior service cost (credit)	1.1			1.1			5.2			(1.3		)	(1.2		)	0.3
Actuarial loss amortization	7.8			8.3			7.1			8.5			9.4			5.9
Settlement / curtailment loss	—			2.9			—			0.7			12.7			0.7
Net periodic pension (benefit) expense	$	(9.5	)	$	(0.2	)	$	(0.9	)	$	5.2		$	18.2		$	11.9

The Company provides medical and dental benefits for certain retired employees in the United States and Canada. Approximately 15,000 participants are covered under these plans. Net periodic post-retirement benefit expense was comprised of the following elements:



	Other Benefit Plans
(Millions of Dollars)	2018			2017			2016
Service cost	$	0.5		$	0.6		$	0.6
Interest cost	1.6			1.7			1.7
Amortization of prior service credit	(1.3		)	(1.4		)	(1.2		)
Net periodic post-retirement expense	$	0.8		$	0.9		$	1.1

In accordance with the adoption of ASU 2017-07, the components of net periodic pension (benefit) expense, other than the service cost component, are included in Other, net in the Consolidated Statements of Operations.

For the year ended December 30, 2017, the Company recorded pre-tax charges of approximately $12.2 million, reflecting losses previously reported in accumulated other comprehensive loss, related to a non-U.S. pension plan for which the Company settled its obligation by purchasing an annuity and making lump sum payments to participants. Also, in accordance with policy, $2.9 million and $0.5 million in pre-tax settlement and curtailment losses were recorded for other U.S. and non-U.S. plans, respectively, in December 2017 due to standard lump sum benefit payments elected exceeding the sum of service cost and interest cost.

Changes in plan assets and benefit obligations recognized in accumulated other comprehensive loss in 2018 are as follows:



(Millions of Dollars)	2018
Current year actuarial loss	$	10.6
Amortization of actuarial loss	(14.8		)
Prior service cost from plan amendments	16.3
Settlement / curtailment loss	(0.7		)
Currency / other	(14.8		)
Total decrease recognized in accumulated other comprehensive loss (pre-tax)	$	(3.4	)

The amounts in Accumulated other comprehensive loss expected to be recognized as components of net periodic benefit costs during 2019 total $15.3 million, representing amortization of actuarial losses.

The changes in the pension and other post-retirement benefit obligations, fair value of plan assets, as well as amounts recognized in the Consolidated Balance Sheets, are shown below.



	U.S. Plans						Non-U.S. Plans						Other Benefits
(Millions of Dollars)	2018			2017			2018			2017			2018			2017
Change in benefit obligation
Benefit obligation at end of prior year	$	1,365.3		$	1,359.0		$	1,446.1		$	1,359.8		$	52.3		$	54.2
Service cost	7.5			8.7			15.2			13.7			0.5			0.6
Interest cost	42.8			43.2			28.6			29.1			1.6			1.7
Settlements/curtailments	—			(16.7		)	(4.3		)	(35.9		)	—			—
Actuarial (gain) loss	(106.2		)	98.1			(64.1		)	11.4			(6.2		)	(2.1		)
Plan amendments	0.2			0.5			16.0			—			0.1			—
Foreign currency exchange rates	—			—			(77.0		)	136.0			(1.0		)	0.7
Participant contributions	—			—			0.3			0.3			—			—
Acquisitions, divestitures, and other	34.0			(7.0		)	3.4			(11.6		)	1.9			2.1
Benefits paid	(82.7		)	(120.5		)	(58.9		)	(56.7		)	(4.4		)	(4.9		)
Benefit obligation at end of year	$	1,260.9		$	1,365.3		$	1,305.3		$	1,446.1		$	44.8		$	52.3
Change in plan assets
Fair value of plan assets at end of prior year	$	1,114.1		$	1,067.1		$	1,099.2		$	1,015.3		$	—		$	—
Actual return on plan assets	(52.9		)	153.5			(18.6		)	63.5			—			—
Participant contributions	—			—			0.3			0.3			—			—
Employer contributions	19.4			37.6			20.9			24.0			4.4			4.9
Settlements	—			(16.7		)	(4.2		)	(35.9		)	—			—
Foreign currency exchange rate changes	—			—			(61.5		)	96.4			—			—
Acquisitions, divestitures, and other	22.8			(6.9		)	(2.9		)	(7.7		)	—			—
Benefits paid	(82.7		)	(120.5		)	(58.9		)	(56.7		)	(4.4		)	(4.9		)
Fair value of plan assets at end of plan year	$	1,020.7		$	1,114.1		$	974.3		$	1,099.2		$	—		$	—
Funded status — assets less than benefit obligation	$	(240.2	)	$	(251.2	)	$	(331.0	)	$	(346.9	)	$	(44.8	)	$	(52.3	)
Unrecognized prior service cost (credit)	4.3			5.2			(18.2		)	(37.0		)	(3.4		)	(4.8		)
Unrecognized net actuarial loss	272.0			264.9			270.8			294.7			(7.6		)	(1.7		)
Net amount recognized	$	36.1		$	18.9		$	(78.4	)	$	(89.2	)	$	(55.8	)	$	(58.8	)



	U.S. Plans						Non-U.S. Plans						Other Benefits
(Millions of Dollars)	2018			2017			2018			2017			2018			2017
Amounts recognized in the Consolidated Balance Sheets
Prepaid benefit cost (non-current)	$	—		$	—		$	1.0		$	1.8		$	—		$	—
Current benefit liability	(7.7		)	(8.2		)	(9.1		)	(8.9		)	(4.8		)	(5.2		)
Non-current benefit liability	(232.5		)	(243.0		)	(322.9		)	(339.8		)	(40.0		)	(47.1		)
Net liability recognized	$	(240.2	)	$	(251.2	)	$	(331.0	)	$	(346.9	)	$	(44.8	)	$	(52.3	)
Accumulated other comprehensive loss (pre-tax):
Prior service cost (credit)	$	4.3		$	5.2		$	(18.2	)	$	(37.0	)	$	(3.4	)	$	(4.8	)
Actuarial loss (gain)	272.0			264.9			270.8			294.7			(7.6		)	(1.7		)
	$	276.3		$	270.1		$	252.6		$	257.7		$	(11.0	)	$	(6.5	)
Net amount recognized	$	36.1		$	18.9		$	(78.4	)	$	(89.2	)	$	(55.8	)	$	(58.8	)

The accumulated benefit obligation for all defined benefit pension plans was $2.513 billion at December 29, 2018 and $2.754 billion at December 30, 2017. Information regarding pension plans in which accumulated benefit obligations exceed plan assets follows:



	U.S. Plans				Non-U.S. Plans
(Millions of Dollars)	2018		2017		2018		2017
Projected benefit obligation	$	1,260.9	$	1,365.3	$	1,275.7	$	1,415.9
Accumulated benefit obligation	$	1,257.6	$	1,358.4	$	1,228.6	$	1,368.7
Fair value of plan assets	$	1,020.7	$	1,114.1	$	945.0	$	1,068.5

Information regarding pension plans in which projected benefit obligations (inclusive of anticipated future compensation increases) exceed plan assets follows:



	U.S. Plans				Non-U.S. Plans
(Millions of Dollars)	2018		2017		2018		2017
Projected benefit obligation	$	1,260.9	$	1,365.3	$	1,301.7	$	1,445.1
Accumulated benefit obligation	$	1,257.6	$	1,358.4	$	1,252.7	$	1,395.1
Fair value of plan assets	$	1,020.7	$	1,114.1	$	969.7	$	1,096.5

The major assumptions used in valuing pension and post-retirement plan obligations and net costs were as follows:



	Pension Benefits
	U.S. Plans						Non-U.S. Plans						Other Benefits
	2018		2017		2016		2018		2017		2016		2018		2017		2016
Weighted-average assumptions used to determine benefit obligations at year end:
Discount rate	4.20	%	3.53	%	3.95	%	2.62	%	2.24	%	2.38	%	4.03	%	3.53	%	3.51	%
Rate of compensation increase	3.00	%	3.00	%	3.00	%	3.44	%	3.45	%	3.63	%	3.50	%	3.50	%	3.50	%
Weighted-average assumptions used to determine net periodic benefit cost:
Discount rate - service cost	3.72	%	4.10	%	4.32	%	2.15	%	2.27	%	2.54	%	5.11	%	4.53	%	4.27	%
Discount rate - interest cost	3.16	%	3.30	%	3.39	%	2.20	%	2.31	%	2.94	%	3.77	%	2.93	%	2.94	%
Rate of compensation increase	3.00	%	3.00	%	6.00	%	3.45	%	3.63	%	3.24	%	3.50	%	3.50	%	3.50	%
Expected return on plan assets	6.25	%	6.25	%	6.50	%	4.37	%	4.41	%	4.68	%	—		—		—

The expected rate of return on plan assets is determined considering the returns projected for the various asset classes and the relative weighting for each asset class. The Company will use a 5.51% weighted-average expected rate of return assumption to determine the 2019 net periodic benefit cost.

PENSION PLAN ASSETS — Plan assets are invested in equity securities, government and corporate bonds and other fixed income securities, money market instruments and insurance contracts. The Company’s worldwide asset allocations at December 29, 2018 and December 30, 2017 by asset category and the level of the valuation inputs within the fair value hierarchy established by ASC 820 are as follows:



Asset Category (Millions of Dollars)	2018		Level 1		Level 2
Cash and cash equivalents	$	139.5	$	113.6	$	25.9
Equity securities
U.S. equity securities	248.7		83.4		165.3
Foreign equity securities	220.0		85.2		134.8
Fixed income securities
Government securities	642.3		205.5		436.8
Corporate securities	656.6		—		656.6
Insurance contracts	37.1		—		37.1
Other	50.8		—		50.8
Total	$	1,995.0	$	487.7	$	1,507.3



Asset Category (Millions of Dollars)	2017		Level 1		Level 2
Cash and cash equivalents	$	42.0	$	19.5	$	22.5
Equity securities
U.S. equity securities	342.8		103.5		239.3
Foreign equity securities	329.3		111.8		217.5
Fixed income securities
Government securities	707.8		213.3		494.5
Corporate securities	698.3		—		698.3
Insurance contracts	39.2		—		39.2
Other	53.9		—		53.9
Total	$	2,213.3	$	448.1	$	1,765.2

U.S. and foreign equity securities primarily consist of companies with large market capitalizations and to a lesser extent mid and small capitalization securities. Government securities primarily consist of U.S. Treasury securities and foreign government securities with de minimus default risk. Corporate fixed income securities include publicly traded U.S. and foreign investment grade and to a small extent high yield securities. Assets held in insurance contracts are invested in the general asset pools of the various insurers, mainly debt and equity securities with guaranteed returns. Other investments include diversified private equity holdings. The level 2 investments are primarily comprised of institutional mutual funds that are not publicly traded; the investments held in these mutual funds are generally level 1 publicly traded securities.

The Company's investment strategy for pension assets focuses on a liability-matching approach with gradual de-risking taking place over a period of many years. The Company utilizes the current funded status to transition the portfolio toward investments that better match the duration and cash flow attributes of the underlying liabilities. Assets approximating 50% of the Company's current pension liabilities have been invested in fixed income securities, using a liability / asset matching duration strategy, with the primary goal of mitigating exposure to interest rate movements and preserving the overall funded status of the underlying plans. Plan assets are broadly diversified and are invested to ensure adequate liquidity for immediate and medium term benefit payments. The Company’s target asset allocations include approximately 20%-40% in equity securities, approximately 50%-70% in fixed income securities and approximately 10% in other securities. In 2018, the funded status percentage (total plan assets divided by total projected benefit obligation) of all global pension plans was 78%, which is consistent with 79% in 2017 and 77% in 2016.

CONTRIBUTIONS — The Company’s funding policy for its defined benefit plans is to contribute amounts determined annually on an actuarial basis to provide for current and future benefits in accordance with federal law and other regulations. The Company expects to contribute approximately $44 million to its pension and other post-retirement benefit plans in 2019.

EXPECTED FUTURE BENEFIT PAYMENTS — Benefit payments, inclusive of amounts attributable to estimated future employee service, are expected to be paid as follows over the next 10 years:



(Millions of Dollars)	Total		Year 1		Year 2		Year 3		Year 4		Year 5		Years 6-10
Future payments	$	1,400.2	$	136.1	$	137.6	$	139.3	$	139.5	$	141.4	$	706.3

These benefit payments will be funded through a combination of existing plan assets, the returns on those assets, and amounts to be contributed in the future by the Company.

HEALTH CARE COST TRENDS — The weighted average annual assumed rate of increase in the per-capita cost of covered benefits (i.e., health care cost trend rate) is assumed to be 6.7% for 2019, reducing gradually to 4.6% by 2028 and remaining at that level thereafter. A one percentage point change in the assumed health care cost trend rate would affect the post-retirement benefit obligation as of December 29, 2018 by approximately $1.4 million to $1.6 million, and would have an immaterial effect on the net periodic post-retirement benefit cost.