PENSION BENEFITS AND RETIREMENT HEALTH AND LIFE INSURANCE BENEFITS

12 Months Ended

Dec. 31, 2011

PENSION BENEFITS AND RETIREMENT HEALTH AND LIFE INSURANCE BENEFITS

NOTE 9 - PENSION BENEFITS AND RETIREMENT HEALTH AND LIFE INSURANCE BENEFITS

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.

In addition, we sponsor multiple fully insured or self funded medical plans and a fully insured life insurance plan for retirees.  The measurement date for all plans for 2011 and 2010 is December 31, 2011 and 2010, respectively.

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 and Retiree Medical Plan Amendments

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.  The amendment to the retiree medical plan did not impact the benefits for employees who were age 50 or older as of December 30, 2007, as long as they met certain eligibility requirements.  However, employees who were less than age 50 as of December 30, 2007 were no longer eligible to participate in the retiree medical plan.  This plan amendment resulted in a reduction to the accumulated benefit obligation, which is accounted for as a reduction to prior service cost based on a plan amendment and amortized over the expected remaining service period of the ongoing active plan participants until they became fully eligible, beginning in the third quarter of 2007.

Obligations and Funded Status

(Dollars in thousands)	Pension Benefits						Retirement Health and Life Insurance Benefits
	2011			2010			2011			2010
Change in benefit obligation:
Benefit obligation at beginning of year	$	157,340		$	145,052		$	9,149		$	9,055
Service cost		3,922			3,563			693			661
Interest cost		8,535			8,345			413			398
Actuarial (gain) loss		30,616			8,824			1,117			(34	)
Benefit payments		(6,874	)		(8,444	)		(877	)		(931	)
Special termination benefit		176			-			-			-
Benefit obligation at end of year		193,715			157,340			10,495			9,149
Change in plan assets:
Fair value of plan assets at beginning of year		125,261			114,595			-			-
Actual return on plan assets		(2,850	)		13,632			-			-
Employer contributions		5,027			5,478			877			931
Benefit payments		(6,873	)		(8,444	)		(877	)		(931	)
Fair value of plan assets at end of year		120,565			125,261			-			-
Funded status	$	(73,150	)	$	(32,079	)	$	(10,495	)	$	(9,149	)

Amounts recognized in the consolidated balance sheets consist of:
(Dollars in thousands)	Pension Benefits						Retirement Health and Life Insurance Benefits
	2011			2010			2011			2010
Noncurrent assets	$	-		$	-		$	-		$	-
Current liabilities		(4,279	)		(99	)		(1,009	)		(1,005	)
Noncurrent liabilities		(68,871	)		(31,980	)		(9,486	)		(8,144	)
Net amount recognized at end of year	$	(73,150	)	$	(32,079	)	$	(10,495	)	$	(9,149	)

(Dollars in thousands)	Pension Benefits		Retirement Health and Life Insurance Benefits
	2011		2011
Net Actuarial Loss	$	82,700	$	3,894
Prior Service Cost		2,124		(681	)
Net amount recognized at end of year	$	84,824	$	3,213

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 $193.7 million, $172.4 million and $120.6 million, respectively, as of December 31, 2011 and $157.3 million, $141.3 million and $125.3 million, respectively, as of December 31, 2010.

Components of Net Periodic Benefit Cost

										Postretirement Health and
	Pension Benefits									Life Insurance Benefits
(Dollars in thousands)	2011			2010			2009			2011			2010			2009
Service cost	$	3,922		$	3,563		$	3,137		$	693		$	661		$	571
Interest cost		8,535			8,345			8,377			413			398			541
Expected return of plan assets		(10,559	)		(9,628	)		(8,364	)		-			-			-
Amortization of prior service cost		597			600			518			(627	)		(626	)		(656	)
Amortization of net loss		2,331			1,824			2,174			421			329			298
Curtailment charge/(credit)		-			372			114			-			-			(258	)
Special termination benefit		176			-			-			-			-			-
Net periodic benefit cost	$	5,002		$	5,076		$	5,956		$	900		$	762		$	496

The estimated net loss and prior service cost for the defined benefit pension plans that will be amortized from other comprehensive income into net periodic benefit cost over the next fiscal year are $5.5 million and $0.5 million, respectively.  The estimated net loss (gain) and prior service cost for the defined benefit postretirement plans that will be amortized from other comprehensive income into net periodic benefit cost over the next fiscal year are $0.5 million and ($0.5 million).

Weighted-average assumptions used to determine benefit obligations at year end:
	Pension Benefits						Retirement Health and Life Insurance Benefits
	2011			2010			2011			2010
Discount rate		4.50	%		5.50	%		3.50	%		4.50	%
Rate of compensation increase		4.00	%		4.00	%		-			-
Weighted-average assumptions used to determine net benefit cost for years ended:
	Pension Benefits						Retirement Health and Life Insurance Benefits
	2011			2010			2011			2010
Discount rate		4.50	%		5.50	%		3.50	%		4.50	%
Expected long-term rate of return on plan assets		7.75	%		8.50	%		-			-
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.  At December 31, 2011, this analysis resulted in a 1.0% decrease to the discount rate from 5.5% at December 31, 2010 to 4.5% at December 31, 2011.

Healthcare cost trend rates - For measurement purposes as of December 31, 2011, we assumed annual healthcare cost trend rates of 7% and 8.5% for covered healthcare benefits for retirees pre-age 65 and post-age 65, respectively.  The rates were assumed to decrease gradually to 5% and 5.5%, respectively, in 2014 and remain at those levels thereafter.  For measurement purposes as of December 31, 2010, we assumed annual healthcare cost trend rates of 8% and 9.5% for covered healthcare benefits for retirees pre-age 65 and post-age 65, respectively.  Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans.  A one-percentage point change in assumed health care cost trend rates would have the following effects:

(Dollars in thousands)	One Percentage Point
	Increase		Decrease
Effect on total of service and interest cost	$	91	$	(83	)
Effect on other postretirement benefit obligations		656		(608	)

Plan Assets

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.  We take into consideration future cash contributions to the plans, as well as mitigating the risk of under performance in the portfolio.  Overall investment risk is partially mitigated by maintaining a diversified portfolio of assets.

Asset allocation target ranges are established to meet our investment objectives.  The expected long-term rate of return on plan assets is 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.  The target allocations for plan assets were approximately 57% equity securities and 43% debt securities for 2011, and these are the target allocations for 2012.

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, at December 31, 2011 and 2010:

(Dollars in thousands)	2011		2010
Pooled separate accounts	$	32,072	$	44,857
Mutual funds		47,255		39,111
Common stock		27,804		30,802
Guaranteed deposit account		13,266		10,307
Interest bearing cash		168		184
Total investments, at fair value	$	120,565	$	125,261

The following tables sets forth by level, within the fair value hierarchy, the assetscarried at fair value as of December 31, 2011 and 2010.

	Assets at Fair Value
	as of December 31, 2011
(Dollars in thousands)	Level 1		Level 2		Level 3		Total
Pooled separate accounts	$	-	$	32,072	$	-	$	32,072
Mutual funds		47,255		-		-		47,255
Common stock		27,804		-		-		27,804
Guaranteed deposit account		-		-		13,266		13,266
Interest bearing cash		168		-		-		168
Total assets at fair value	$	75,227	$	32,072	$	13,266	$	120,565

	Assets at Fair Value
	as of December 31, 2010
(Dollars in thousands)	Level 1		Level 2		Level 3		Total
Pooled separate accounts	$	-	$	44,857	$	-	$	44,857
Mutual funds		39,111		-		-		39,111
Common stock		30,802		-		-		30,802
Guaranteed deposit account		-		-		10,307		10,307
Interest bearing cash		184		-		-		184
Total assets at fair value	$	70,097	$	44,857	$	10,307	$	125,261

The table below sets forth a summary of changes in the fair value of the guaranteed deposit account’s Level 3 assetsfor the year ended December 31, 2011.

(Dollars in thousands)	Guaranteed Deposit Account
Balance at beginning of year	$	10,307
Realized gains (losses)		-
Unrealized gains relating to instruments still held at the reporting date		917
Purchases, sales, issuances and settlements (net)		2,042
Transfers in and/or out of Level 3		-
Balance at end of year	$	13,266

Cash Flows

Contributions

At the current time, we have met the minimum funding requirements for our qualified defined benefit pension plans and were therefore not required to make a contribution to the plans in 2011 for any past years.  In 2011 and 2010, we made voluntary annual contributions to the pension plans of approximately $5.0 million and $5.5 million, respectively.  As there is no funding requirement for the nonqualified defined benefit pension plans and the Retiree Health and Life Insurance benefit plans, we contributed the amount of benefit payments made during the year consistent with past practices.

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 Retiree Health and Life Insurance benefits, for which no funding has been made, are expected to be paid from operating cash flows.  The benefit payments are based on the same assumptions used to measure our benefit obligation at the end of fiscal 2011.

(Dollars in thousands)

	Pension Benefits		Retiree Health and Life Insurance Benefits
2012	$	11,407	$	1,008
2013		7,631		967
2014		7,474		951
2015		7,723		954
2016		8,281		967
2017-2021		49,680		4,231