Employee Benefits

9 Months Ended

Sep. 30, 2011

Compensation and Retirement Disclosure [Abstract]

Employee Benefits

Employee Benefits

Pension and Similar Plans. Pensions and similar plans include:

• Monthly contributions of (in whole dollars) $1.00 per hour worked by each bargaining unit employee to the appropriate multi-employer pension plans sponsored by the United Steel, Paper and Foresting, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union AFL-CIO, CLC (“USW”) and International Association of Machinists and certain other unions at certain of the Company’s production facilities, except that (i) the monthly contributions per hour worked by each bargaining unit employee to a pension plan sponsored by the USW at the Company’s Newark, Ohio and Spokane, Washington facilities increased to (in whole dollars) $1.25 starting July 2010 and will increase to (in whole dollars) $1.50 in July 2015 and (ii) monthly contributions to a pension plan sponsored by the USW at the Florence, Alabama facility are (in whole dollars) $1.25 per hour worked by each bargaining unit employee. The Company currently estimates that contributions will range from $2.0 to $4.0 per year through 2015.

• A defined contribution 401(k) savings plan for hourly bargaining unit employees at seven of the Company’s production facilities based on the specific collective bargaining agreement at each facility. For active bargaining unit employees at three of these production facilities, the Company is required to make fixed rate contributions. For active bargaining unit employees at one of these production facilities, the Company is required to match certain employee contributions. For active bargaining unit employees at two of these production facilities, the Company is required to make both fixed rate contributions and concurrent matches. For active bargaining unit employees at the one remaining production facility, the Company is not required to make any contributions. Fixed rate contributions either (i) range from (in whole dollars) $800 to $2,400 per employee per year, depending on the employee’s age, or (ii) vary between 2% to 10% of the employees’ compensation depending on their age and years of service for employees hired prior to January 1, 2004 or is a fixed 2% annual contribution for employees hired on or after January 1, 2004. The Company currently estimates that contributions to such plans will range from $1.0 to $3.0 per year.

• A defined contribution 401(k) savings plan for salaried and certain hourly employees providing for a concurrent match of up to 4% of certain contributions made by employees plus an annual contribution of between 2% and 10% of their compensation depending on their age and years of service to employees hired prior to January 1, 2004. All new hires on or after January 1, 2004 receive a fixed 2% contribution annually. The Company currently estimates that contributions to such plan will range from $4.0 to $6.0 per year.

• A defined benefit plan for salaried employees at the Company’s London, Ontario facility, with annual contributions based on each salaried employee’s age and years of service. At December 31, 2010, approximately 62% of the plan assets were invested in equity securities and 36% of plan assets were invested in debt securities. The remaining plan assets were invested in short-term securities. The Company’s investment committee reviews and evaluates the investment portfolio. The asset mix target allocation on the long-term investments is approximately 60% in equity securities and 36% in debt securities with the remaining assets in short-term securities. See Note 12 for additional information regarding the fair values of the Canadian pension plan assets.

• A non-qualified, unfunded, unsecured plan of deferred compensation for key employees who would otherwise suffer a loss of benefits under the Company’s defined contribution plan, as a result of the limitations imposed by the Internal Revenue Code. Despite the plan being an unfunded plan, the Company makes an annual contribution to a rabbi trust to fulfill future funding obligations, as contemplated by the terms of the plan. The assets in the trust are at all times subject to the claims of the Company’s general creditors, and no participant has a claim to any assets of the trust. Plan participants are eligible to receive distributions from the trust subject to vesting and other eligibility requirements. Assets in the rabbi trust relating to the deferred compensation plan are accounted for as available for sale securities and are included as Other assets on the Consolidated Balance Sheets (see Note 2). Liabilities relating to the deferred compensation plan are included on the Consolidated Balance Sheets as Long-term liabilities (see Note 2).

• An employment agreement with the Company’s chief executive officer extending through July 6, 2015. The Company also provides certain members of senior management, including each of the Company’s named executive officers, with benefits related to terminations of employment in specified circumstances, including in connection with a change in control, by the Company without cause and by the executive officer with good reason.

Postretirement Medical Obligations. The Company’s postretirement medical plan was terminated in 2004. Certain eligible retirees receive medical coverage, however, through participation in the Union VEBA or the VEBA that provides benefits for certain other eligible retirees, their surviving spouse and eligible dependents (the “Salaried VEBA”). The Union VEBA covers qualifying bargaining unit employees who do not, or are not eligible to, elect coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985. The Salaried VEBA covers certain retirees who retired prior to the 2004 termination of the prior plan and employees who were hired prior to February 2002 and subsequently retired or will retire with the requisite age and service. The Union VEBA is managed by four trustees (two appointed by the Company and two appointed by the USW) and the assets are managed by an independent fiduciary. The Salaried VEBA is managed by trustees who are independent of the Company. The benefits paid by the VEBAs are at the sole discretion of the respective VEBA trustees and are outside the Company’s control.

The Company’s only financial obligations to the VEBAs are (i) an annual variable cash contribution payable to the Union VEBA and the Salaried VEBA and (ii) an obligation to pay 50% of the administrative expenses of the VEBAs, up to $0.3 per year. The obligation to the Union VEBA with respect to the annual variable cash contribution extends through September 30, 2017, while the obligation to the Salaried VEBA has no termination date. The amount to be contributed to the VEBAs through September 2017 pursuant to the Company’s obligation is 10% of the first $20.0 of annual cash flow (as defined; in general terms, the principal elements of cash flow are earnings before interest expense, provision for income taxes, and depreciation and amortization less cash payments for, among other things, interest, income taxes, and capital expenditures), plus 20% of annual cash flow, as defined, in excess of $20.0. Such annual payments may not exceed $20.0 and are also limited (with no carryover to future years) to the extent that the payments would cause the Company’s liquidity to be less than $50.0. Such amounts are determined and paid on an annual basis. At December 31, 2010, the Company had preliminarily determined that the contribution for 2010 was $2.1 (comprised of $1.8 to the Union VEBA and $0.3 to the Salaried VEBA). These amounts were paid during the first quarter of 2011, along with an additional payment of $0.1, based on the final computation of the 2010 results. See Note 11 of Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2010 for additional information with respect to the VEBAs.

The Company has no control over the plan assets of the VEBAs nor the benefits paid by the VEBAs, and its only finanical obligations to the VEBAs are to pay the annual variable contributions and certain administrative fees. Nevertheless, based on discussions with the staff of the SEC, for accounting purposes the Company treats the postretirement medical benefits to be paid by the VEBAs and the Company’s related annual variable contribution obligations as defined benefit postretirement plans with the current VEBA assets and future variable contributions described above, and earnings thereon, operating as a cap on the benefits to be paid. Accordingly, the Company includes net periodic postretirement benefit expense or income and any difference between the fair value of the assets of each VEBA and its accumulated postretirement benefit obligation in the Company’s consolidated financial statements. Information necessary for the valuation of the net funded status of the plans must be obtained from the Salaried VEBA and Union VEBA on an annual basis. While the funding status of the VEBAs could in the future result in a liability position on the Company’s Consolidated Balance Sheets, the Company has no obligation to fund either the Salaried VEBA or the Union VEBA beyond the annual variable cash contributions and administrative fees as determined.

Components of Net Periodic Benefit Cost (Income). Net periodic benefit costs consisted of the following, for each period presented:

	Quarter Ended						Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
VEBAs:
Service cost	$	0.7		$	0.7		$	2.2		$	2.2
Interest cost	3.9			4.0			11.6			12.0
Expected return on plan assets	(7.6		)	(5.2		)	(22.8		)	(15.7		)
Amortization of prior service cost	1.1			1.0			3.1			3.1
Amortization of net gain	(0.2		)	(0.1		)	(0.6		)	(0.3		)
Total (income) cost relating to VEBAs	(2.1		)	0.4			(6.5		)	1.3
Deferred compensation plan	(0.3		)	0.2			(0.1		)	1.1
Defined contribution plans	1.2			1.1			5.9			5.5
Multiemployer pension plans	0.8			0.7			2.3			2.1
Total	$	(0.4	)	$	2.4		$	1.6		$	10.0

The following tables present the allocation of the charges detailed above, by segment (see Note 14):

	Quarter Ended					Nine Months Ended
	September 30,					September 30,
	2011			2010		2011			2010
Fabricated Products	$	1.7		$	1.8	$	7.4		$	7.0
All Other	(2.1		)	0.6		(5.8		)	3.0
Total	$	(0.4	)	$	2.4	$	1.6		$	10.0

For all periods presented, the net periodic benefits relating to the VEBAs are included as a component of Selling, administrative, research and development and general expense within All Other. Further, substantially all of the Fabricated Products segment’s employee benefits related charges are in Cost of products sold, excluding depreciation, amortization and other items with the balance in Selling, administrative, research and development and general.

As of September 30, 2011, the Union VEBA owned approximately 11% of the Company’s issued and outstanding shares of common stock, or 2,202,495 common shares. A stock transfer restriction agreement between the Union VEBA and the Company restricts the number of shares of the Company’s common stock that generally may be sold by the Union VEBA during any 12-month period without further approval of our Board of Directors to 1,321,485. Shares owned by the Union VEBA that are subject to the stock transfer restriction agreement are treated as being similar to treasury stock (i.e. as a reduction of Stockholders’ equity) in the Company’s Consolidated Balance Sheets.

The following table presents the sale of Union VEBA shares by the Union VEBA and the effect on the Consolidated Balance Sheets due to these share sales:

	Nine Months Ended
	September 30,
	2011			2010
Common stock sold by Union VEBA	1,321,485			1,321,485
Increase in Union VEBA assets 1	$	65.5		$	52.0
Reduction in Common stock owned by Union VEBA 2	$	(31.7	)	$	(31.7	)
Increase in Additional paid in capital	$	(9.1	)	$	(0.7	)
Decrease in Deferred tax assets	$	(24.7	)	$	(19.6	)

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¹ At a weighted-average price of $49.58 and $39.38 per share realized by the Union VEBA for the nine month periods ended September 30, 2011 and September 30, 2010, respectively.

²     At $24.02 per share reorganization value.

See Note 11 of Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 for additional information with respect to the VEBAs and key assumptions used with respect to the Company’s pension plans and key assumptions made in computing the net obligation of each VEBA.