11.

Pension and Other Postretirement Benefits

Carpenter provides several noncontributory defined benefit pension plans to certain employees. The plans provide defined benefits based on years of service and final average salary. Effective January 1, 2012, new employees will not be eligible to participate in the U.S. defined benefit pension plan.

Carpenter also provides other postretirement benefit plans to certain of its employees. The postretirement benefit plans consist of health care and life insurance plans. Benefit payments are currently paid from corporate assets. Plan assets are maintained in a Voluntary Employee Benefit Association Trust ("VEBA") and are principally invested in equity securities.

The following provides a reconciliation of benefit obligations, plan assets, and funded status of the plans:


	Pension Plans						Other Postretirement Plans
($ in millions)	2011			2010			2011			2010
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	957.2		$	829.9		$	224.6		$	199.8
Service cost		22.8			21.0			2.7			2.3
Interest cost		46.5			50.2			10.9			12.1
Benefits paid		(55.8	)		(58.6	)		(10.7	)		(11.1	)
Actuarial (gain) loss		(41.5	)		115.1			(23.6	)		21.0
Plan settlements		(0.3	)		—			—			—
Plan amendments		0.2			(0.4	)		—			(0.3	)
Other		0.1			—			0.3			0.8

Projected benefit obligation at end of year	$	929.2		$	957.2		$	204.2		$	224.6


Change in plan assets:
Fair value of plan assets at beginning of year	$	631.5		$	586.6		$	63.2		$	57.0
Actual return on plan assets		127.8			100.0			17.4			6.4
Benefits paid from plan assets		(55.8	)		(58.6	)		(10.7	)		(11.1	)
Contributions		7.0			3.5			10.4			10.9
Plan settlements		(0.3	)		—			—			—

Fair value of plan assets at end of year	$	710.2		$	631.5		$	80.3		$	63.2


Funded status of the plans	$	(219.0	)	$	(325.7	)	$	(123.9	)	$	(161.4	)


Amounts recognized in the Consolidated Balance Sheets:
Other assets - noncurrent	$	0.2		$	0.2		$	—		$	—
Accrued liabilities - current		(30.7	)		(3.3	)		(15.2	)		(14.7	)
Accrued pension liabilities - noncurrent		(188.5	)		(322.6	)		—			—
Accrued postretirement benefits		—			—			(108.7	)		(146.7	)

	$	(219.0	)	$	(325.7	)	$	(123.9	)	$	(161.4	)


Amounts recognized in accumulated other comprehensive loss:
Net actuarial loss	$	333.5	$	486.5	$	53.0		$	95.1
Prior service cost (credit)		4.3		5.0		(12.1	)		(20.0	)


Total	$	337.8	$	491.5	$	40.9		$	75.1


Additional information:

Accumulated benefit obligation for all pension plans	$	859.2	$	875.8		N/A			N/A

The following is additional information related to plans with projected benefit obligations in excess of plan assets as of June 30, 2011 and 2010:


	Pension Plans				Other Postretirement Plans
($ in millions)	2011		2010		2011		2010
Projected benefit obligation	$	929.2	$	957.2	$	204.2	$	224.6
Fair value of plan assets	$	710.2	$	631.5	$	80.3	$	63.2

The following additional information is for plans with accumulated benefit obligations in excess of plan assets as of June 30, 2011 and 2010:


	Pension Plans				Other Postretirement Plans
($ in millions)	2011		2010		2011		2010
Accumulated benefit obligation	$	859.2	$	875.8	$	204.2	$	224.6
Fair value of plan assets	$	710.2	$	631.5	$	80.3	$	63.2

The components of the net periodic benefit cost related to the Company's pension and other postretirement benefits for the years ended June 30, 2011, 2010 and 2009 are as follows:


	Pension Plans									Other Postretirement Plans
($ in millions)	2011			2010			2009			2011			2010			2009
Service cost	$	22.8		$	21.0		$	18.0		$	2.7		$	2.3		$	2.2
Interest cost		46.5			50.2			50.4			10.9			12.1			12.1
Expected return on plan assets		(45.4	)		(45.0	)		(60.9	)		(5.0	)		(4.6	)		(6.2	)
Amortization of net loss		29.1			27.0			9.7			6.0			5.0			2.1
Amortization of prior service cost (benefit)		1.0			1.1			1.1			(7.9	)		(7.8	)		(7.9	)
Curtailment		—			—			—			—			—			—
Plan settlement expense		0.1			—			4.4			—			—			—

Net pension expense	$	54.1		$	54.3		$	22.7		$	6.7		$	7.0		$	2.3

As discussed in Note 2, the Company closed the metal strip manufacturing facility in the U.K. In conjunction with the closure, the Company settled the defined benefit pension plan covering employees at the U.K. facility.

The service cost component of Carpenter's net pension expense, which represents the estimated cost of future pension liabilities earned associated with active employees, is included in the operating income of the business segments. The residual net pension expense, which is comprised of the expected return on plan assets, interest costs on the projected benefit obligations of the plans, and amortization of actuarial gains and losses and prior service costs, is included under the heading "Pension earnings, interest & deferrals" in the segment data presented in Note 20.

Principal actuarial assumptions at June 30:


	Pension Plans									Other Postretirement Plans
	2011			2010			2009			2011			2010			2009
Weighted-average assumptions used to determine benefit obligations at fiscal year end
Discount rate		5.50	%		5.00	%		6.25	%		5.50	%		5.00	%		6.25	%
Rate of compensation increase		3.66	%		3.66	%		3.65	%		N/A			N/A			N/A

	Pension Plans									Other Postretirement Plans
	2011			2010			2009			2011			2010			2009
Weighted-average assumptions used to determine net periodic benefit cost for the fiscal year
Discount rate		5.00	%		6.25	%		6.75	%		5.00	%		6.25	%		6.75	%
Expected long-term rate of return on plan assets		7.50	%		8.00	%		8.00	%		8.00	%		8.00	%		8.00	%
Long-term rate of compensation increase		3.66	%		3.65	%		3.65	%		N/A			N/A			N/A

The following table shows the expected health care rate increase and the future rate and time at which it is expected to remain constant.


	June 30,
	2011			2010
Assumed health care cost trend rate		8.5	%		9	%
Rate to which the cost trend rate is assumed to decline and remain (the ultimate trend rate)		5	%		5	%
Year that the rate reaches the ultimate trend rate		2018			2018

Assumed health care cost trend rates have an effect on the amounts reported for other postretirement benefits. A one percentage point increase in the assumed health care cost trend rate would increase service and interest cost by $0.4 million and increase the postretirement benefit obligation by $6.9 million. A one percentage point decrease in the assumed health care cost trend rate would decrease service and interest cost by $0.4 million and decrease the postretirement benefit obligation by $6.1 million.

Net pension expense, which we define to include the net periodic benefit costs of both the pension and other postretirement plans, is estimated to be $39.4 million for the year ended June 30, 2012, comprised of $37.5 million of net periodic benefit costs for pension plans and $1.9 million of net periodic benefit costs for other post-retirement benefit plans. The discount rate and expected long-term rate of return on plan assets used to calculate the net periodic benefit costs for pension plans for the year ended June 30, 2012 were 5.5 percent and 7.5 percent, respectively. The discount rate and expected long-term rate of return on plan assets used to calculate the net periodic benefits costs for other post-retirement benefit plans for the year ended June 30, 2012 were 5.5 percent and 8.0 percent, respectively.

Amounts in other comprehensive loss that are expected to be recognized as components of net periodic benefit cost in the year ended June 30, 2012 are:


($ in millions)	Pension Plans		Other Postretirement Plans			Total
Amortization of prior service cost (credit)	$	0.7	$	(7.9	)	$	(7.2	)
Amortization of net actuarial loss		17.5		2.6			20.1

Amortization of accumulated other comprehensive loss	$	18.2	$	(5.3	)	$	12.9

Carpenter's U.S. pension plans' weighted-average asset allocations at June 30, 2011 and 2010, by asset category are as follows:


	2011			2010
Equity securities		66.1	%		49.1	%
Fixed income securities		32.3			33.0
Cash and cash equivalents		1.6			17.9

Total		100.0	%		100.0	%

Carpenter's policy for developing a pension plan investment strategy includes the periodic development of an asset and liability study by an independent investment consultant. Management considers this study in establishing an asset allocation that is presented to and approved by the Company's Plan Committee.

Management determines an asset allocation that will provide the highest level of return for an acceptable level of risk. Accordingly, Carpenter invests in different asset classes including large-, mid- and small-cap growth and value funds, index and international equity funds, short-term and medium-term duration fixed-income funds and high yield funds. The plan's current allocation policy is to have approximately 60 percent U.S. and international equities and 40 percent fixed income securities. The Company may vary the actual asset mix based on the ratio of the plan assets and liabilities. Management reviews the asset allocation on a quarterly basis and makes revisions as deemed necessary. The assets related to Carpenter's other postretirement benefit plans were invested 100 percent in equity securities as of June 30, 2011 and 2010.

The fair values of the Company's pension plan assets as of June 30, 2011 and 2010, by asset category and by the levels of inputs used to determine fair value were as follows:


	June 30, 2011						June 30, 2010
	Fair Value						Fair Value
($ in millions)	Level 1		Level 2		Total		Level 1		Level 2		Total
Short-term investments	$	—	$	10.5	$	10.5	$	—	$	121.5	$	121.5
Domestic and international equities		252.0		0.7		252.7		253.8		0.9		254.7
Commingled funds		40.6		246.2		286.8		—		112.7		112.7
Government agency bonds		65.6		—		65.6		65.0		—		65.0
Corporate bonds		76.0		—		76.0		—		63.0		63.0
Mortgage backed securities		—		17.6		17.6		—		13.5		13.5
Asset backed securities and other		—		1.0		1.0		—		1.1		1.1


	$	434.2	$	276.0	$	710.2	$	318.8	$	312.7	$	631.5

The fair values of the Company's other postretirement benefit plans as of June 30, 2011 and 2010, by asset category and by the level of inputs used to determine fair value, were as follows:


	June 30, 2011						June 30, 2010
	Fair Value						Fair Value
($ in millions)	Level 1		Level 2		Total		Level 1		Level 2		Total
Commingled fund	$	—	$	43.9	$	43.9	$	—	$	34.9	$	34.9
Short-term investments		—		14.5		14.5		—		4.3		4.3
Government agency bonds		16.0		—		16.0		—		—		—
Corporate bonds and other		5.9		—		5.9		—		—		—
Domestic and international equities		—		—		—		23.6		0.4		24.0


	$	21.9	$	58.4	$	80.3	$	23.6	$	4.7	$	28.3

A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Investments in domestic and international equities are generally valued at the closing price reported on the active market on which they are traded. Commingled funds are valued based on the net asset value ("NAV") established for the fund at each valuation date. The NAV is based on the value of the underlying assets owned by the fund, minus its liabilities, and then divided by the number of shares outstanding. Corporate and government agency bonds and other fixed income securities are valued using closing bid prices on an active market when possible, otherwise using evaluated bid prices.

Management establishes the expected long-term rate of return assumption by reviewing historical trends and analyzing the current and projected market conditions in relation to the plan's asset allocation and risk management objectives. In determining the expected long-term rate of return, Carpenter considered historical returns for individual asset classes and the impact of active portfolio management.

Cash Flows – Employer Contributions

The Company made a contribution of $3.9 million to its US pension plan during fiscal year 2011 but was not required to make contributions to the plans during fiscal years 2010 and 2009. The Company currently expects to make approximately $27.7 million in required contributions to the Company's US pension plan during fiscal year 2012 During the years ended June 30, 2011, 2010 and 2009, the Company made contributions of $3.1 million, $3.5 million and $8.0 million to other pension plans, respectively.

Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid. Pension Benefits are currently paid from plan assets and Other Benefits are currently paid from corporate assets:


($ in millions)	Pension Benefits		Other Benefits
2012	$	59.6	$	12.8
2013	$	60.4	$	13.2
2014	$	62.3	$	13.7
2015	$	64.3	$	14.1
2016	$	65.2	$	14.4
2017-2021	$	353.2	$	75.6

Other Benefit Plans

Carpenter also maintains defined contribution retirement and savings plans for substantially all domestic employees. Company contributions were $5.2 million in fiscal year 2011, $4.0 million in fiscal year 2010 and $4.9 million in fiscal year 2009.