Retirement Plans

12 Months Ended

May 31, 2012

Retirement Plans

7. Retirement Plans

Defined Benefit Plans.    Approximately 600 employees and retirees of our subsidiary, Riverside Cement Company, are covered by a defined benefit pension plan and a postretirement health benefit plan. In addition, substantially all of our executive and certain managerial employees are covered by a series of financial security plans that are non-qualified defined benefit plans. The financial security plans require deferral of a portion of a participant’s salary and provide retirement, death and disability benefits to participants. We use a measurement date of May 31 for each of our pension and postretirement benefit plans.

The pension and other benefit obligations recognized on our consolidated balance sheets totaled $88.5 million at May 31, 2012 and $74.0 million at May 31, 2011, of which $3.7 million at May 31, 2012 and $3.1 million at May 31, 2011 were classified as current liabilities.

The cumulative postretirement benefit plan adjustment recognized as other comprehensive loss on our consolidated balance sheets totaled $24.5 million (net of tax of $6.0 million) at May 31, 2012 and $12.8 million (net of tax of $7.4 million) at May 31, 2011.

The pretax changes in accumulated other comprehensive loss consist of the following:

	Pension Benefits						Other Benefits
In thousands	2012			2011			2012			2011
Net actuarial loss at beginning of year	$	18,828		$	21,021		$	5,613		$	6,382
Amortization of actuarial loss		(1,722	)		(2,068	)		(566	)		(614	)
Current period net actuarial loss (gain)		11,862			(125	)		19			(155	)
Net actuarial loss at the end of year	$	28,968		$	18,828		$	5,066		$	5,613
Net prior service credit at beginning of year	$	—		$	—		$	(4,320	)	$	(5,095	)
Amortization of prior service credit		—			—			775			775
Net prior service credit at the end of year	$	—		$	—		$	(3,545	)	$	(4,320	)

The pretax amounts in accumulated other comprehensive loss expected to be recognized as components of net periodic postretirement benefit cost (credit) in 2013 are as follows:

In thousands	Pension Benefits		Other Benefits
Net actuarial loss	$	2,927	$	515
Prior service credit		—		(775	)
	$	2,927	$	(260	)

Riverside Defined Benefit Plans.    The amount of the defined benefit pension plan and postretirement health benefit plan expense charged to costs and expenses was as follows:

	Defined Pension Benefit									Health Benefit
In thousands	2012			2011			2010			2012			2011			2010
Service cost	$	537		$	502		$	457		$	98		$	114		$	106
Interest cost		3,040			2,951			3,166			415			425			466
Expected return on plan assets		(3,108	)		(2,740	)		(2,342	)		—			—			—
Amortization of prior service credit		—			—			—			(775	)		(775	)		(774	)
Amortization of net actuarial loss		1,722			2,068			2,000			566			614			603
	$	2,191		$	2,781		$	3,281		$	304		$	378		$	401
Weighted average assumptions used to determine net cost
Assumed discount rate		5.35	%		5.60	%		6.80	%		5.35	%		5.60	%		6.80	%
Assumed long-term rate of return on pension plan assets		7.60	%		8.25	%		8.25	%		—			—			—
Average long-term pay progression		3.00	%		3.00	%		3.00	%		—			—			—

Unrecognized prior service costs and credits and actuarial gains or losses for these plans are recognized in a systematic manner over the remaining service periods of active employees expected to receive benefits under these plans.

We contribute amounts sufficient to meet minimum funding requirements as set forth in employee benefit and tax laws plus such additional amounts as are considered appropriate. We expect to make contributions of $4.6 million in 2013.

Obligation and asset data for the defined benefit pension plan and postretirement health benefit plan at May 31 were as follows:

	Defined Pension Benefit						Health Benefit
In thousands	2012			2011			2012			2011
Change in projected benefit obligation
Benefit obligation at beginning of year	$	57,756		$	53,567		$	7,857		$	7,654
Service cost		537			502			98			114
Interest cost		3,040			2,951			415			425
Participant contributions		—			—			184			196
Benefits paid		(3,102	)		(2,924	)		(405	)		(377	)
Actuarial loss (gain)		7,890			3,660			19			(155	)
Benefit obligation at end of year	$	66,121		$	57,756		$	8,168		$	7,857
Change in plan assets
Fair value of plan assets at beginning of year	$	39,752		$	33,080		$	—		$	—
Actual return on plan assets		(864	)		6,526			—			—
Employer contributions		4,242			3,070			221			181
Benefits paid		(3,102	)		(2,924	)		(221	)		(181	)
Fair value of plan assets at end of year	$	40,028		$	39,752		$	—		$	—
Funded status at end of year	$	(26,093	)	$	(18,004	)	$	(8,168	)	$	(7,857	)
Weighted average assumptions used to determine benefit obligations
Assumed discount rate		4.35	%		5.35	%		4.35	%		5.35	%
Average long-term pay progression		3.00	%		3.00	%		—			—

Accumulated benefit obligation for the defined benefit pension plan was $64.0 million at May 31, 2012 and $56.1 million at May 31, 2011.

The estimated future benefit payments under the defined benefit pension plan for each of the five succeeding years are $3.2 million, $3.4 million, $3.5 million, $3.6 million and $3.7 million and for the five-year period thereafter an aggregate of $20.2 million.

Authoritative accounting guidance for fair value measures provides a framework for measuring fair value. The framework establishes a three-level value hierarchy based on the nature of the information used to measure fair value. The fair value of all the defined benefit pension plan assets is based on quoted prices in active markets for identical assets which are considered Level 1 inputs within the hierarchy. The total estimated fair value of the plan assets at May 31 were as follows:

In thousands	2012		2011
Cash and cash equivalents	$	882	$	715
Mutual funds
Equity		23,782		24,343
Fixed income		15,364		14,694
Fair value of plan assets at end of year	$	40,028	$	39,752

The plan fiduciaries set the long-term strategic investment objectives for the defined benefit pension plan assets. The objectives include preserving the funded status of the trust and balancing risk and return. Investment performance and plan asset mix are periodically reviewed with external consultants. Plan assets are currently allocated to the fixed income and equity categories of investments in a manner that varies in the short term, but has a long term objective of averaging approximately 60% in equity securities and 40% in fixed income securities. Within these categories, investments are allocated to multiple asset classes. The expected long-term rate of return on plan assets of 7.60% for 2012 was determined by considering historical and expected returns for each asset class and the effect of periodic asset rebalancing and, for underperforming assets, reallocations. The current allocation of plan assets has a long-term historical rate of return that exceeds the plan objectives. While historical returns are not guarantees of future performance, these allocations are expected to meet the objectives of the plan.

The actual defined benefit pension plan asset allocation at May 31, 2012 and 2011, and the target asset allocation for 2013, by asset category were as follows

% of Plan Assets	2012			2011			Target 2013
Equity securities		59	%		61	%		60	%
Fixed income securities		41	%		39	%		40	%
		100	%		100	%		100	%

The assumed health care cost trend rate for the next year attributed to all participant age groups is 9% declining to an ultimate trend rate of 5% in 2017. The effect of increasing or decreasing the health care cost trend rates by one percentage point would increase the health benefit obligation by approximately $377,000 or decrease the health benefit obligation by approximately $388,000 and increase or decrease the plan expense by approximately $26,000.

The estimated future benefit payments under the postretirement health benefit plan for each of the five succeeding years are $0.4 million, $0.4 million, $0.4 million, $0.4 million and $0.5 million and for the five-year period thereafter an aggregate of $2.7 million.

Financial Security Defined Benefit Plans.    The amount of financial security plan benefit expense and the projected financial security plan benefit obligation are determined using assumptions as of the end of the year. The weighted-average discount rate used was 4.30% in 2012 and 5.15% in 2011. Actuarial gains or losses are recognized when incurred, and therefore, the end of year benefit obligation is the same as the accrued benefit costs recognized in the consolidated balance sheet.

In 2010, it was discovered that our actuarial assumptions for certain participants failed to consider that these participants will receive their defined benefit for a minimum of 15 years or life. Previously, our calculations had incorrectly assumed that the payments to these participants ceased after 15 years. We recomputed the defined benefit liability for these participants and recognized a charge of $4.4 million in 2010 to record the additional liability. Management estimated that $3.4 million of this additional liability related to years prior to 2010. This $3.4 million would have accumulated over time since the year 2000. The $1.0 million increase related to 2010 was primarily a function of the decreased discount rate in 2010 compared to the discount rate in 2009. Management determined that the amount related to prior years was not material to the financial statements and the entire charge was recognized in selling, general and administrative expense in 2010.

The amount of financial security plan benefit expense charged to costs and expenses was as follows:

In thousands	2012		2011		2010
Service cost	$	2,147	$	2,213	$	1,673
Interest cost		2,517		2,311		2,289
Recognized actuarial loss		4,366		2,347		3,854
Recognized actuarial loss adjustment		—		—		4,441
	$	9,030	$	6,871	$	12,257

The following provides a reconciliation of the financial security plan benefit obligation.

In thousands	2012			2011
Change in projected benefit obligation
Benefit obligation at beginning of year	$	48,091		$	43,959
Service cost		2,147			2,213
Interest cost		2,517			2,311
Recognized actuarial loss (gain)		4,366			2,347
Benefits paid		(2,891	)		(2,739	)
Benefit obligation at end of year	$	54,230		$	48,091
Funded status at end of year	$	(54,230	)	$	(48,091	)

The financial security plans are unfunded and benefits are paid as they become due. The estimated future benefit payments under the plans for each of the five succeeding years are $3.3 million, $3.5 million, $3.9 million, $4.4 million and $4.5 million and for the five-year period thereafter an aggregate of $21.6 million.

Defined Contribution Plans.    Substantially all of our employees are covered by a series of defined contribution retirement plans. The amount of pension expense charged to costs and expenses for these plans was $1.2 million in 2012, $2.8 million in 2011 and $2.8 million in 2010. It is our policy to fund the plans to the extent of charges to income.