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Postretirement Benefits
12 Months Ended
May 31, 2014
Postretirement Benefits

NOTE N – POSTRETIREMENT BENEFITS

We sponsor several unfunded-health-care-benefit plans for certain of our retired employees as well as post-retirement life insurance for certain key employees. Eligibility for these benefits is based upon various requirements. The following table illustrates the effect on operations of these plans for the three years ended May 31, 2014:

 

     U.S. Plans     Non-U.S. Plans  

(In thousands)

   2014     2013     2012     2014      2013      2012  

Service cost - Benefits earned during the period

   $ —       $  —       $  —       $ 1,264      $ 1,185      $ 745  

Interest cost on the accumulated obligation

     297       349       416       1,225        1,188        968  

Amortization of:

              

Prior service (credit)

     (153     (86     (86        

Net actuarial (gains) losses

     (144     16       (58     516        470        72  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Net Periodic Postretirement Expense

   $ —       $ 279     $ 272     $ 3,005      $ 2,843      $ 1,785  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

The changes in benefit obligations of the plans at May 31, 2014 and 2013 were as follows:

 

     U.S. Plans     Non-U.S. Plans  

(In thousands)

   2014     2013     2014     2013  

Accumulated postretirement benefit obligation at beginning of year

   $ 8,514     $ 9,677     $ 28,415     $ 24,517  

Service cost

     —           1,264       1,185  

Interest cost

     297       349       1,225       1,188  

Benefit payments

     (362     (572     (421     (441

Medicare subsidy received

     37       74      

Plan amendments

     (1,471      

Actuarial (gains) losses

     (228     (1,014     (766     1,988  

Currency exchange rate changes

         (1,462     (22
  

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated and accrued postretirement benefit obligation at end of year

   $ 6,787     $ 8,514     $ 28,255     $ 28,415  
  

 

 

   

 

 

   

 

 

   

 

 

 

In determining the postretirement benefit amounts outlined above, measurement dates as of May 31 for each period were applied.

Amounts recognized in the Consolidated Balance Sheets for the years ended May 31, 2014 and 2013 are as follows:

 

     U.S. Plans     Non-U.S. Plans  

(In thousands)

   2014     2013     2014     2013  

Current liabilities

   $ (410   $ (642   $ (522   $ (486

Noncurrent liabilities

     (6,377     (7,872     (27,733     (27,929
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Amount Recognized

   $ (6,787   $ (8,514   $ (28,255   $ (28,415
  

 

 

   

 

 

   

 

 

   

 

 

 

The following table presents the pretax net actuarial gain (loss) and prior service credits recognized in accumulated other comprehensive income (loss) not affecting retained earnings:

 

     U.S. Plans      Non-U.S. Plans  

(In thousands)

   2014      2013      2014     2013  

Net actuarial gain (loss)

   $ 1,080      $ 996      $ (9,136   $ (10,950

Prior service credits

     1,834        516       
  

 

 

    

 

 

    

 

 

   

 

 

 

Total recognized in accumulated other comprehensive income not affecting retained earnings

   $ 2,914      $ 1,512      $ (9,136   $ (10,950
  

 

 

    

 

 

    

 

 

   

 

 

 

The following table includes the changes recognized in other comprehensive income:

 

     U.S. Plans     Non-U.S. Plans  

(In thousands)

   2014     2013     2014     2013  

Changes in plan assets and benefit obligations recognized in other comprehensive income:

        

Prior service cost

   $ (1,471   $ —       $ —       $ —    

Net loss (gain) arising during the year

     (228     (1,014     (766     1,988  

Effect of exchange rates on amounts included in AOCI

         (532     (9

Amounts recognized as a component of net periodic benefit cost:

        

Amortization or curtailment recognition of prior service credit (cost)

     153       86      

Amortization or settlement recognition of net gain (loss)

     144       (16     (516     (470
  

 

 

   

 

 

   

 

 

   

 

 

 

Total recognized in other comprehensive loss (income)

   $ (1,402   $ (944   $ (1,814   $ 1,509  
  

 

 

   

 

 

   

 

 

   

 

 

 

The following weighted-average assumptions were used to determine our year-end benefit obligations and net periodic postretirement benefit costs under the plans:

 

     U.S. Plans          Non-U.S. Plans  

Year-End Benefit Obligations

   2014     2013          2014     2013  

Discount rate

     4.00     3.95        4.40     4.50

Current healthcare cost trend rate

     12.28     7.54        6.31     6.43

Ultimate healthcare cost trend rate

     4.50     4.50        4.20     4.20

Year ultimate healthcare cost trend rate will be realized

     2029       2029          2030       2030  

 

     U.S. Plans     Non-U.S. Plans  

Net Periodic Postretirement Cost

   2014     2013     2012     2014     2013     2012  

Discount rate

     3.95     3.75     4.75     4.50     4.75     5.75

Healthcare cost trend rate

     7.54     7.70     7.87     6.43     6.92     7.00

Ultimate healthcare cost trend rate

     4.50     4.50     4.50     4.20     4.20     4.50

Year ultimate healthcare cost trend rate will be realized

     2029       2029       2029       2030       2030       2030  

Increasing or decreasing current healthcare cost trend rates by 1% would affect our accumulated postretirement benefit obligation and net postretirement expense by the following amounts for the years ended May 31, 2014 and 2013:

 

     U.S. Plans     Non-U.S. Plans  

(In thousands)

   2014     2013     2014     2013  

1% Increase in trend rate

        

Accumulated Benefit Obligation

   $ 239     $ 296     $ 6,502     $ 9,080  

Postretirement Cost

     11       15       727       647  
  

 

 

   

 

 

   

 

 

   

 

 

 

1% Decrease in trend rate

        

Accumulated Benefit Obligation

   $ (209   $ (265   $ (5,011   $ (3,802

Postretirement Cost

     (10     (13     (534     (481
  

 

 

   

 

 

   

 

 

   

 

 

 

We expect to pay approximately $0.9 million to $1.3 million in estimated postretirement benefits in each of the next five years. In the five years thereafter (2020-2024) we expect to pay a cumulative total of $8.2 million.

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”), was signed into law on December 8, 2003. The Act provides for prescription drug benefits under Medicare Part D and contains a subsidy to plan sponsors who provide “actuarially equivalent” prescription drug plans. Our actuary has determined that the prescription drug benefit provided by our postretirement plan is considered to be actuarially equivalent to the benefits provided under the Act for all years since inception. However, effective January 1, 2014, we changed our retiree medical offering to a Medicare Advantage Plan. Under the Medicare Advantage Plan, any Part D subsidy belongs to the insurance carrier. Our results reflect this change.

We have included the impact of our portion of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 subsidy in the determination of accumulated postretirement benefit obligation for the U.S. nonpension postretirement benefit plan for the periods ended May 31, 2014 and 2013. For the fiscal years ended May 31, 2014 and 2013, we received reimbursements from Medicare related to this law amounting to approximately $37,000 and $74,000, respectively.