Pension Benefit and Other Postretirement Benefit Plans

6 Months Ended

Jun. 30, 2013

Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract]

Pension Benefit and Other Postretirement Benefit Plans

Pension Benefits and Other Postretirement Benefit Plans

We have two qualified noncontributory defined benefit pension plans. One plan covers our U.S. unionized hourly employees and the other plan covers all other U.S. employees hired through December 30, 2007. We also have established a nonqualified unfunded noncontributory defined benefit pension plan to restore certain retirement benefits that might otherwise be lost due to limitations imposed by federal law on qualified pension plans, as well as to provide supplemental retirement benefits, for certain senior executives of the Company.

We are required, as an employer, to: (a) recognize in our statement of financial position an asset for a plan's overfunded status or a liability for a plan's underfunded status; (b) measure a plan's assets and our obligations that determine our funded status as of the end of the fiscal year; and (c) recognize changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur and report these changes in accumulated other comprehensive income. In addition, actuarial gains and losses that are not immediately recognized as net periodic pension cost are recognized as a component of accumulated other comprehensive income and amortized into net periodic pension cost in future periods.

Defined Benefit Pension Plan Amendments

In the second quarter of 2013, we made changes to our retirement plans in order to better plan and manage related expenses which have a significant and variable impact on earnings. Effective June 30, 2013 for salaried and non-union hourly employees in the U.S. and effective December 31, 2013 for union employees in the U.S., benefits under our defined benefit pension plans will no longer accrue. The freeze of the defined benefit pension plan for salaried and non-union hourly employees was approved by the Board of Directors on May 3, 2013. The freeze of the union employees' defined benefit pension plan was effective upon ratification of the labor agreement on April 14, 2013. These changes resulted in a remeasurement event requiring us to remeasure the plan asset and liabilities, as well as the expense related to the plans, as of April 30, 2013. This date was considered the accounting date, per the related accounting guidance, for purposes of this analysis as it was reasonably close to the approval dates of these changes for both the union and salaried plans.

On July 16, 2007, we announced to our employees and retirees that the defined benefit pension plan for non-union employees and the retiree medical plans would be amended effective January 1, 2008. As of January 1, 2008, newly hired and rehired employees were no longer eligible to participate in the defined benefit pension plan. However, the amendment to the defined benefit pension plan did not impact the benefits to existing plan participants as of December 30, 2007.

Obligations and Funded Status

(Dollars in thousands)	Pension Benefits
Change in benefit obligation:	June 30, 2013
Benefit obligation at beginning of year	$	209,844
Service cost	2,210
Interest cost	4,015
Actuarial (gain) loss	1,658
Benefit payments	(3,642		)
Curtailment charge	(22,649		)
Special termination benefit	—
Benefit obligation at end of the period	$	191,436

(Dollars in thousands)	Pension Benefits
Change in plan assets:	June 30, 2013
Fair value of plan assets at the beginning of the year	$	143,540
Actual return on plan assets	10,981
Employer contributions	6,500
Benefit payments	(3,642		)
Settlement charge	—
Fair value of plan assets at the end of the period	157,379
Funded status	$	(34,057	)

Amounts recognized in the consolidated balance sheet consist of:

(Dollars in thousands)	Pension Benefits
	June 30, 2013
Noncurrent assets	$	—
Current liabilities	(49		)
Noncurrent liabilities	(34,008		)
Net amount recognized at end of period	$	(34,057	)

(Dollars in thousands)	Pension Benefits
	June 30, 2013
Net actuarial loss	$	58,860
Prior service cost	—
Net amount recognized at end of period	$	58,860

The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plans with an accumulated benefit obligation in excess of plan assets were $191.4 million, $191.4 million and $157.4 million, respectively, as of June 30, 2013.

Components of Net Periodic Benefit Cost

The components of net periodic benefit cost for the periods indicated are:

(Dollars in thousands)	Pension Benefits												Retirement Health and Life Insurance Benefits
	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
Change in benefit obligation:	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012
Service cost	$	956		$	1,108		$	2,210		$	2,297		$	170		$	149		$	341		$	331
Interest cost	1,954			2,124			4,015			4,242			71			92			141			180
Expected return on plan assets	(2,731		)	(2,495		)	(5,447		)	(4,903		)	—			—			—			—
Amortization of prior service cost	31			116			124			232			(58		)	(113		)	(115		)	(226		)
Amortization of net loss	1,049			1,442			2,525			2,791			83			66			165			181
Special termination benefit	—			—			—			—			—			(707		)	—			1,593
Curtailment charge	1,537			—			1,537			—			—			—			—			—
Net periodic benefit cost	$	2,796		$	2,295		$	4,964		$	4,659		$	266		$	(513	)	$	532		$	2,059

The decisions made in the second quarter of 2013 related to the defined benefit pension plans resulted in a curtailment charge of $1.5 million that was recognized in the second quarter of 2013 in "Restructuring and impairment charges" in our condensed consolidated statements of income (loss). 

As a result of the early retirement program that we offered in the first quarter of 2012, we incurred a charge of $1.6 million related to a special termination benefit in the first half of 2012 associated with our retirement health and life insurance benefits program, as we extended eligibility in the benefits to certain individuals who participated in the early retirement program. Note that a charge of $2.3 million was recognized in the first quarter of 2012 related to this event that was adjusted in the second quarter of 2012, as the final calculation resulted in a total charge of $1.6 million, resulting in us recognizing income in the second quarter of 2012 of $0.7 million.

Weighted-average assumptions used to determine benefit obligations:

	Pension Benefits
	April 30, 2013		December 31, 2012
Discount rate	4.00	%	4.00	%
Rate of compensation increase	4.00	%	4.00	%
Expected long-term rate of return on plan assets	7.50	%	7.50	%

Weighted-average assumptions used to determine net benefit cost for the period ended:

	Pension Benefits
	April 30, 2013		December 31, 2012
Discount rate	4.00	%	4.50	%
Expected long-term rate of return on plan assets	7.50	%	7.75	%
Rate of compensation increase	4.00	%	4.00	%

Long-term rate of return on assets - To determine the expected long-term rate of return on plan assets, we review historical and projected portfolio performance, the historical long-term rate of return, and how any change in the allocation of the assets could affect the anticipated returns. Adjustments are made to the projected rate of return if it is deemed necessary based on those factors and other current market trends.

Discount rate - To determine the discount rate, we review current market indices, particularly the Citigroup bond index, to ensure that the rate used in our calculations is consistent and within an acceptable range based on these indices, which reflect current market conditions.

Our defined benefit pension assets are invested with the objective of achieving a total rate of return over the long-term that is sufficient to fund future pension obligations. In managing these assets and our investment strategy, we take into consideration future cash contributions to the plans, as well as the potential of the portfolio underperforming the market, which is partially mitigated by maintaining a diversified portfolio of assets.

In order to meet our investment objectives, we set asset allocation target ranges based on current funding status and future projections in order to mitigate the risk in the plan while maintaining its funded status. At April 30, 2013, we held approximately 57% equity securities and 43% debt securities in our portfolio, which is consistent with our allocation targets. In order to further mitigate risk, in the future we plan to migrate to a portfolio more heavily weighted toward debt securities as our plan assets approach the projected benefit obligation.

In determining our investment strategy and calculating our plan liability and related expense, we utilize an expected long-term rate of return on plan assets. This rate is developed based on several factors, including the plans' asset allocation targets, the historical and projected performance on those asset classes, and on the plans' current asset composition. To justify our assumptions, we analyze certain data points related to portfolio performance. For example, we analyze the actual historical performance of our total plan assets, which has generated a return of approximately 8.6% over the past 16 year period (earliest data available for our analysis was 1996). Also, we analyze hypothetical rates of return for plan assets based on our current asset allocation mix, which we estimate would have generated a return of approximately 10.2% over the last 30 years, 8.1% over the last 20 years, and 8.0% over the last 10 years. Further, based on the hypothetical historic returns, we estimated the potential return associated with the plan asset portfolio over the next 10 to 15 year period based on the portfolio mix, which we determined to be approximately 7.3% to 7.8% (approximately 9.5% to 11.0% on equity securities and 3.50% to 4.50% on fixed income securities).

Investments are stated at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price).

Securities traded on a national securities exchange are valued at the last reported sales price on the last business day of the plan year. The fair value of the guaranteed deposit account is determined through discounting expected future investment cash flow from both investment income and repayment of principal for each investment purchased.

The estimated fair values of the participation units owned by the Plan in pooled separate accounts are based on quoted redemption values and adjusted for management fees and asset charges, as determined by the record keeper, on the last business day of the Plan year. Pooled separate accounts are accounts established solely for the purpose of investing the assets of one or more plans. Funds in a separate account are not commingled with other assets of the Company for investment purposes.

The following table presents the fair value of the net assets by asset category:

(Dollars in thousands)	April 30, 2013		December 31, 2012
Pooled separate accounts	$	33,530	$	29,869
Mutual funds	106,619		98,269
Guaranteed deposit account	16,592		15,402
Total investments at fair value	$	156,741	$	143,540

The following tables set forth by level, within the fair value hierarchy, the assetscarried at fair value:

	Assets at Fair Value as of April 30, 2013
(Dollars in thousands)	Level 1		Level 2		Level 3		Total
Pooled separate accounts	$	—	$	33,530	$	—	$	33,530
Mutual funds	106,619		—		—		106,619
Guaranteed deposit account	—		—		16,592		16,592
Total assets at fair value	$	106,619	$	33,530	$	16,592	$	156,741
	Assets at Fair Value as of December 31, 2012
(Dollars in thousands)	Level 1		Level 2		Level 3		Total
Pooled separate accounts	$	—	$	29,869	$	—	$	29,869
Mutual funds	98,269		—		—		98,269
Guaranteed deposit account	—		—		15,402		15,402
Total assets at fair value	$	98,269	$	29,869	$	15,402	$	143,540

The table below sets forth a summary of changes in the fair value of the guaranteed deposit account's Level 3 assetsfor the period ended April 30,2013.

(Dollars in thousands)	Guaranteed Deposit Account
Balance at December 31, 2012	$	15,402
Realized gains (losses)	—
Unrealized gains relating to instruments still held at the reporting date	1,177
Purchases, sales, issuances and settlements (net)	13
Transfers in and/or out of Level 3	—
Balance at April 30, 2013	$	16,592

Employer Contributions

In the first half of 2013 and 2012, we made voluntary contributions of $6.5 million and $16.0 million, respectively, to our qualified defined benefit pension plans. We made no payments under our non-qualified defined benefit pension plan in the first half of 2013 or 2012.

Estimated Future Payments

The following pension benefit payments, which reflect expected future employee service, as appropriate, are expected to be paid through the utilization of plan assets for the funded plans and from operating cash flows for the unfunded plans. The benefit payments are based on the same assumptions used to measure our benefit obligation at April 30, 2013.

	Pension Benefits
2014	$	8,441
2015	8,029
2016	8,209
2017	8,303
2018	8,595
2019-2023	48,629