Profit Sharing, Pension and Post Retirement Medical Benefit Plans

12 Months Ended

Jun. 30, 2011

Profit Sharing, Pension and Post Retirement Medical Benefit Plans [Abstract]

Profit Sharing, Pension and Post Retirement Medical Benefit Plans

12.   Profit Sharing, Pension and Post Retirement Medical Benefit Plans

Profit Sharing Plans

We provide discretionary savings and other defined contribution plans covering substantially all of our U.S. employees and certain employees in international subsidiaries. Employer contributions to these plans of $14.5 million, $9.4 million and $2.3 million were charged to operations during fiscal 2011, 2010 and 2009, respectively. Effective January 1, 2011, U.S. defined contribution plans were merged into a 401(k) plan with a non-discretionary base company contribution and the opportunity for discretionary savings and employer matching contributions.

Pension Plans

We sponsor and/or contribute to pension plans, including defined benefit plans, covering substantially all U.S. plant hourly employees and certain employees in non-U.S. subsidiaries. The benefits are primarily based on years of service and the employees’ compensation for certain periods during their last years of employment. Our pension obligations are measured as of June 30 for all plans. We amended a defined benefit pension plan in the U.S. to close participation and freeze benefit accruals under the plan, effective December 31, 2010, reducing the pension liability by $11.8 million. Non-U.S. plans are primarily in Germany, Ireland, Japan, Korea and Taiwan.

Post Retirement Medical Benefit Plans

We have retiree health care plans that cover the majority of our U.S. employees. Employees hired before January 1, 1994 may become eligible for these benefits if they reach age 55, with age plus years of service equal to 70. Employees hired after January 1, 1994 may become eligible for these benefits if they reach age 60, with age plus years of service equal to 80. The cost of retiree health care is accrued over the period in which the employees become eligible for such benefits. We continue to fund benefit costs primarily as claims are paid. We discontinued the plans in January 2009 for all employees who were not within 10 years of qualifying. There are no significant postretirement health care benefit plans outside of the United States.

Benefit Obligation and Plan Assets

The accumulated benefit obligations as of June 30, were as follows (in thousands):

	U.S. Pension				Non-U.S. Pension				Postretirement
	Benefits				Benefits				Medical Benefits
	2011		2010		2011		2010		2011		2010
Accumulated benefit obligation	$	66,028	$	63,949	$	119,740	$	116,690	$	41,168	$	45,402

The changes in the benefit obligations and plan assets for the plans described above were as follows (in thousands):

	U.S. Pension						Non-U.S. Pension						Postretirement
	Benefits						Benefits						Medical Benefits
	2011			2010			2011			2010			2011			2010
Change in projected benefit obligation:
Beginning benefit obligation	$	71,775		$	54,500		$	127,140		$	116,781		$	45,402		$	36,781
Service cost		1,487			2,521			6,075			5,441			1,369			1,082
Interest cost		3,934			3,799			4,198			4,183			2,469			2,486
Plan participants’ contributions		—			—			—			131			848			919
Actuarial loss (gain)		2,322			13,826			(18,340	)		15,871			(7,174	)		6,179
Plan amendment		—			—			263			(217	)		—			—
Special termination benefits		—			—			—			—			23			70
Actual expenses		—			—			(77	)		(122	)		—			—
Effect of curtailment or settlement		(5,772	)		—			(2,107	)		(14,362	)		—			—
Business combination		—			—			—			5,199			—			—
Benefits paid to plan participants		(2,317	)		(2,871	)		(2,686	)		(2,043	)		(1,769	)		(2,115	)
Changes in foreign currency		—			—			16,431			(3,722	)		—			—
Ending projected benefit obligation	$	71,429		$	71,775		$	130,897		$	127,140		$	41,168		$	45,402

	U.S. Pension						Non-U.S. Pension						Postretirement
	Benefits						Benefits						Medical Benefits
	2011			2010			2011			2010			2011			2010
Change in plan assets:
Beginning fair value of plan assets	$	56,762		$	48,565		$	51,928		$	46,577		$	—		$	—
Actual return on plan assets		13,806			7,323			2,081			5,365			—			—
Employer contributions		2,510			3,745			14,072			12,099			921			1,196
Settlements		—			—			(2,107	)		(7,663	)		—			—
Actual expenses		—			—			(77	)		(122	)		—			—
Plan participants’ contributions		—			—			—						848			919
Business combination		—			—			—			1,505			—			—
Benefits paid to plan participants		(2,317	)		(2,871	)		(2,686	)		(2,043	)		(1,769	)		(2,115	)
Changes in foreign currency		—			—			8,656			(3,921	)		—			—
Ending fair value of plan assets	$	70,761		$	56,762		$	71,867		$	51,928		$	—		$	—

The funded status, the amount by which plan assets exceed (or are less than) the projected benefit obligation, was as follows (in thousands):

	U.S. Pension						Non-U.S. Pension						Postretirement
	Benefits						Benefits						Medical Benefits
	2011			2010			2011			2010			2011			2010
Funded Status	$	(668	)	$	(15,013	)	$	(59,030	)	$	(75,212	)	$	(41,168	)	$	(45,402	)

The amounts recognized in the consolidated balance sheets were as follows (in thousands):

	U.S. Pension						Non-U.S. Pension						Postretirement
	Benefits						Benefits						Medical Benefits
	2011			2010			2011			2010			2011			2010
Accrued pension and other post retirement benefits	$	(668	)	$	(15,013	)	$	(59,030	)	$	(75,212	)	$	(41,168	)	$	(45,402	)
Accumulated other comprehensive income		9,843			22,798			30,889			45,271			(1,571	)		4,869
Net amount recognized	$	9,175		$	7,785		$	(28,141	)	$	(29,941	)	$	(42,739	)	$	(40,533	)

The amounts comprising accumulated other comprehensive income before taxes were as follows (in thousands):

	U.S. Pension				Non-U.S. Pension				Postretirement
	Benefits				Benefits				Medical Benefits
	2011		2010		2011		2010		2011			2010
Net transition liability	$	—	$	—	$	99	$	126	$	—		$	—
Net actuarial (gain) loss		—		22,787		2,474		43,099		(8,347	)		15,280
Net prior service costs		9,843		11		28,316		2,046		6,776			(10,411	)
Defined benefit plans, net	$	9,843	$	22,798	$	30,889	$	45,271	$	(1,571	)	$	4,869

The net gain recognized in other comprehensive income was $33.8 million in fiscal 2011.

Assumptions

Weighted average actuarial assumptions used to determine benefit obligations for the plans were as follows:

	U.S. Pension						Non-U.S. Pension						Postretirement
	Benefits						Benefits						Medical Benefits
	2011			2010			2011			2010			2011			2010
Discount rate		5.9	%		5.7	%		3.5	%		3.1	%		5.8	%		5.5	%
Rate of compensation increase		3.5	%		3.5	%		3.1	%		3.1	%		—			—
Health care cost trend		—			—			—			—			8.5	%		8.5	%
Ultimate health care cost trend		—			—			—			—			5.0	%		5.0	%
Years of ultimate rate		—			—			—			—			2018			2017

For the postretirement medical benefit plan, a one-percentage point change in the assumed health care cost trend rates would have the following effect (in thousands):

	2011			2010			2009
Effect on total service and interest cost:
Increase 100 basis points	$	676		$	539		$	708
Decrease 100 basis points		(553	)		(449	)		(588	)
Effect on benefit obligation:
Increase 100 basis points	$	6,827		$	6,778		$	4,882
Decrease 100 basis points		(5,621	)		(5,955	)		(4,095	)

Weighted-average actuarial assumptions used to determine costs for the plans were as follows:

	U.S. Pension						Non-U.S. Pension						Postretirement
	Benefits						Benefits						Medical Benefits
	2011			2010			2011			2010			2011			2010
Discount rate		5.7	%		7.0	%		3.1	%		3.8	%		5.5	%		6.9	%
Expected return on plan assets		8.3	%		8.3	%		4.6	%		5.6	%		—			—
Rate of compensation increase		3.5	%		3.5	%		3.1	%		3.4	%		—			—
Health care cost trend		—			—			—			—			8.5	%		8.5	%
Ultimate health care cost trend		—			—			—			—			5.0	%		5.0	%
Years of ultimate rate		—			—			—			—			2018			2017

The discount rate is determined based on high-quality fixed income investments that match the duration of expected benefit payments. The discount rate used to determine the present value of our future U.S. pension obligations is based on a yield curve constructed from a portfolio of high quality corporate debt securities with various maturities. Each year’s expected future benefit payments are discounted to their present value at the appropriate yield curve rate, thereby generating the overall discount rate for U.S. pension obligations. The discount rates for our foreign pension plans are selected by using a yield curve approach or by reference to high quality corporate bond rates in those countries that have developed corporate bond markets. In those countries where developed corporate bond markets do not exist, the discount rates are selected by reference to local government bond rates with a premium added to reflect the additional risk for corporate bonds. The expected return on plan assets noted above represents a forward projection of the average rate of earnings expected on the pension assets. We estimated this rate based on historical returns of similarly diversified portfolios. The rate of compensation increase represents the long-term assumption for expected increases to salaries for pay-related plans.

Net Periodic Benefit Cost

The components of net periodic benefit cost for our plans consist of the following for the years ended June 30 (in thousands):

																			Postretirement
	U.S. Pension Benefits									Non-U.S. Pension Benefits									Medical Benefits
	2011			2010			2009			2011			2010			2009			2011			2010			2009
Service cost	$	1,487		$	2,521		$	2,404		$	6,075		$	5,441		$	5,872		$	1,369		$	1,082		$	1,741
Interest cost		3,934			3,799			3,612			4,198			4,183			4,319			2,469			2,486			2,883
Expected return on plan assets		(5,057	)		(4,497	)		(4,789	)		(2,738	)		(2,627	)		(3,345	)		—			—			—
Amortization of prior service cost		1			3			4			244			224			257			(2,065	)		(2,065	)		(1,354	)
Amortization of unrecognized transition obligation		—			—			—			40			37			40			—			—			—
Recognized actuarial losses		745			1,010			—			2,172			1,691			647			1,331			702			818
Curtailment or settlement loss (gain)		10			82			158			419			(2,006	)		3,606			23			70			(3,702	)
Net periodic benefit cost	$	1,120		$	2,918		$	1,389		$	10,410		$	6,943		$	11,396		$	3,127		$	2,275		$	386

The amount of accumulated other comprehensive income that was reclassified as a component of net period benefit cost in fiscal 2011 was $8.7 million. The amount in accumulated other comprehensive income that is expected to be recognized as a component of net periodic benefit cost in fiscal 2012 is $0.2 million.

Plan Assets

Our overall investment strategy for the assets in the pension funds is to achieve a balance between the goals of growing plan assets and keeping risks at a reasonable level over a long-term investment horizon. In order to reduce unnecessary risk, the pension funds are diversified across several asset classes with a focus on total return. The target U.S. pension asset allocation is 67% public equity investments and 33% fixed income investments. The fair value of our pension plan assets at June 30, 2011 by asset category are as follows:

			Quoted Prices
			in Active		Significant
	Total		Markets for		Other		Significant
	Measured		Identical		Observable		Unobservable
	at Fair		Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
U.S. Plans:
Cash and marketable securities	$	307	$	307	$	—	$	—
Equity
Domestic large-cap		14,672		14,672		—		—
Domestic mid-cap growth		15,653		15,653		—		—
International large-cap		16,767		16,767		—		—
Emerging markets growth		2,218		2,218		—		—
Fixed Income
Domestic bond funds		21,144		21,144		—		—
Non-U.S. Plans:
Cash and marketable securities	$	5,131	$	5,131	$	—	$	—
Equity
Domestic large-cap		12,064		12,064		—		—
International large-cap		16,635		16,635		—		—
Other		3,883		3,883		—		—
Fixed Income
International government bond funds		23,265		23,625		—		—
Other		778		778		—		—
Real estate		1,687		—		1,687		—
Other		8,424		24		8,400		—

The following table summarizes the changes in Level 3 pension benefits plan assets measured at fair value on a recurring basis for the period ended June 30, 2011 (in thousands):

							Net
	Fair Value at		Return		Net		Transfers			Fair Value at
	July 1,		on Plan		Purchases/		Into/(Out of)			June 30,
	2010		Assets		Sales		Level 3			2011
Asset Category Insurance contracts	$	1,553	$	—	$	—	$	(1,553	)	$	—

Funding Expectations

Expected funding for the U.S. pension plan and other postretirement benefit plans for fiscal 2012 is approximately $1.0 million and $1.2 million, respectively. Expected funding for the non-U.S. plans during fiscal 2012 is approximately $14.6 million.

Estimated Future Benefit Payments

The total benefits to be paid from the U.S. and non-U.S. pension plans and other postretirement benefit plans are not expected to exceed $19.0 million in any year through 2021.

Significant Concentrations of Risk.

Significant concentrations of risk in our plan assets relate to equity and interest rate risk. In order to ensure assets are sufficient to pay benefits, a portion of plan assets is allocated to equity investments that are expected over time to earn higher returns with more volatility than fixed income investments which more closely match pension liabilities. Within equities, risk is mitigated by constructing a portfolio that is broadly diversified by geography, market capitalization, manager mandate size, investment style and process.

In order to minimize asset volatility relative to the liabilities, a portion of plan assets are allocated to fixed income investments that are exposed to interest rate risk. Rate increases generally will result in a decline in fixed income assets while reducing the present value of the liabilities. Conversely, rate decreases will increase fixed income assets, partially offsetting the related increase in the liabilities.

Remeasurement/Curtailment

In fiscal 2011, we amended a defined benefit pension plan in the U.S. and remeasured the pension liability, resulting in an $11.8 million reduction in the liability as recorded in other comprehensive income.

In fiscal 2010, we recognized a $3.8 million pension curtailment gain related to a plant closing in Europe and $1.8 million pension curtailment expenses related to a plant closing in Japan.

In fiscal 2009, we recognized a $1.6 million reduction in cost of sales and a $2.1 million reduction in selling, general and administrative expense due mainly to a curtailment adjustment in our postretirement benefit plan as a result of reducing the number of employees eligible for retiree medical coverage. Separately, we also recognized in fiscal 2009 $3.8 million for restructuring costs resulting from curtailment and settlement adjustments for the early termination of participants in connection with the restructuring plan.