NOTE 11. RETIREMENT BENEFITS

We sponsor a number of defined benefit and defined contribution pension plans which cover substantially all U.S. employees, other than union employees covered by multiemployer defined benefit pension plans under collective bargaining agreements. Pension benefits are provided based on either a career average, final pay or years of service formula. With respect to certain hourly employees, pension benefits are provided based on stated amounts for each year of service. Our U.S. salaried pension plans are closed to new employees.

We also sponsor other postretirement benefits plans, including unfunded defined benefit health care and life insurance plans, that provide postretirement benefits to certain employees. The plans are contributory, with retiree contributions adjusted annually, and contain cost sharing features including deductibles and coinsurance. Retiree health care benefits are paid as covered expenses are incurred.

The changes in benefit obligations and plan assets as well as the funded status of our retirement plans at December 31 are as follows:


	Pension Benefits						Other Postretirement Benefits
	2011			2010			2011			2010
	(Dollars in thousands)
Change in benefit obligation
Obligation at beginning of year	$	541,443		$	491,642		$	54,452		$	51,170
Service cost		13,857			13,428			862			918
Interest cost		28,519			28,200			2,441			2,782
Actuarial losses (gains)		52,417			35,243			(703	)		3,566
Plan amendments		(144	)		125			(408	)		—
Benefits paid		(24,973	)		(23,515	)		(4,436	)		(4,887	)
Curtailment gain		(449	)		—			(1,909	)		—
Participants’ contributions		—			—			832			903
Foreign currency exchange rate changes		(932	)		(3,680	)		—			—

Obligation at end of year		609,738			541,443			51,131			54,452


Change in plan assets
Fair value of plan assets at beginning of year		494,181			362,793			—			—
Actual return on plan assets		39,782			61,844			—			—
Employer contributions		887			93,059			3,604			3,984
Participants’ contributions		—			—			832			903
Benefits paid		(24,973	)		(23,515	)		(4,436	)		(4,887	)

Fair value of plan assets at end of year		509,877			494,181			—			—

Funded status	$	(99,861	)	$	(47,262	)	$	(51,131	)	$	(54,452	)


Amounts recognized in the consolidated balance sheets
Non-current asset	$	—		$	2,487		$	—		$	—
Current liabilities		(916	)		(839	)		(4,311	)		(4,629	)
Non-current liabilities		(98,945	)		(48,910	)		(46,820	)		(49,823	)

Net amount recognized	$	(99,861	)	$	(47,262	)	$	(51,131	)	$	(54,452	)

Amounts recognized in accumulated other comprehensive (loss) income
Net actuarial loss	$	166,722		$	121,334		$	6,304		$	9,254
Prior service cost (credit)		6,203			9,170			(17,688	)		(19,864	)

Net amount recognized	$	172,925		$	130,504		$	(11,384	)	$	(10,610	)


	Pension Benefits		Other Postretirement Benefits
	(Dollars in thousands)
Items to be recognized in 2012 as a component of net periodic cost
Net actuarial loss	$	12,351	$	278
Prior service cost (credit)		1,906		(2,616	)

Net periodic cost (credit) to be recorded in 2012	$	14,257	$	(2,338	)

The accumulated benefit obligation for all pension benefit plans at December 31, 2011 and 2010 was $565.3 million and $510.5 million, respectively. For pension plans with accumulated benefit obligations in excess of plan assets, the projected benefit obligation, accumulated benefit obligation and fair value of plan assets were $520.7 million, $495.5 million and $429.9 million, respectively, at December 31, 2011 and $208.5 million, $204.0 million and $165.9 million, respectively, at December 31, 2010.

The benefits expected to be paid from our pension and other postretirement benefit plans, which reflect future years of services and the Medicare subsidy expected to be received, are as follows (dollars in thousands):


	Pension Benefits		Other Postretirement Benefits
2012	$	27,363	$	4,311
2013		28,769		4,380
2014		30,096		4,157
2015		31,480		3,837
2016		32,616		3,772
2017 — 2021		180,587		17,529

	$	330,911	$	37,986

Our principal domestic pension and other postretirement benefit plans used the following weighted average actuarial assumptions to determine the benefit obligations at December 31:


	2011			2010
Discount rate		4.6	%		5.4	%
Expected return on plan assets		8.5	%		8.5	%
Rate of compensation increase		3.1	%		3.2	%
Health care cost trend rate:
Assumed for next year		7.8	%		8.0	%
Ultimate rate		5.0	%		4.5	%
Year that the ultimate rate is reached		2045			2027

Our expected return on plan assets is determined by current and expected asset allocation of plan assets, estimates of future long-term returns on those types of plan assets and historical long-term investment performance.

Our international pension benefit plans used a discount rate of 4.9 percent and 5.5 percent as of December 31, 2011 and 2010, respectively, and a rate of compensation increase of 3.5 percent to determine the benefit obligation at December 31, 2011 and 2010. The projected benefit obligation for these plans was $42.0 million and $38.1 million at December 31, 2011 and 2010, respectively. Our international pension benefit plans are not funded.

The components of the net periodic benefit cost for each of the years ended December 31 are as follows:


	Pension Benefits									Other Postretirement Benefits
	2011			2010			2009			2011			2010			2009
	(Dollars in thousands)
Service cost	$	13,857		$	13,428		$	13,634		$	862		$	918		$	781
Interest cost		28,519			28,200			27,657			2,441			2,782			2,916
Expected return on plan assets		(40,817	)		(35,524	)		(25,254	)		—			—			—
Amortization of prior service cost (credit)		2,042			2,065			2,221			(2,582	)		(2,567	)		(2,564	)
Amortization of actuarial losses		8,171			8,400			9,410			134			287			182
Net curtailment gain		(449	)		—			—			—			—			—

Net periodic benefit cost	$	11,323		$	16,569		$	27,668		$	855		$	1,420		$	1,315

Our principal domestic pension and other postretirement benefit plans used the following weighted average actuarial assumptions to determine net periodic benefit cost for the years ended December 31:


	2011			2010			2009
Discount rate		5.4	%		5.9	%		6.3	%
Expected return on plan assets		8.5	%		8.5	%		8.5	%
Rate of compensation increase		3.2	%		3.4	%		3.4	%
Health care cost trend rate		8.0	%		8.0	%		7.9	%

Our international pension benefit plans used a discount rate of 5.5 percent, 5.9 percent and 5.9 percent for the years ended December 31, 2011, 2010 and 2009, respectively. Our international pension benefit plans used a rate of compensation increase of 3.5 percent for each of the years ended December 31, 2011, 2010 and 2009.

The assumed health care cost trend rates affect the amounts reported for our health care plans. A one percentage point change in the assumed health care cost trend rates would have the following effects:


	1-Percentage Point Increase		1-Percentage Point Decrease
	(Dollars in thousands)
Effect on service and interest cost	$	138	$	(118	)
Effect on postretirement benefit obligation		1,740		(1,524	)

MULTIEMPLOYER PENSION PLANS

We participate in four multiemployer pension plans which provide defined benefits to certain of our union employees. The aggregate amount contributed to these plans and charged to pension cost in 2011, 2010 and 2009 was $6.0 million, $6.1 million and $6.0 million, respectively.

The risks of participating in multiemployer plans are different from the risks of single-employer plans in the following respects:

Assets contributed to a multiemployer plan by one employer may be used to provide benefits to employees of other participating employers.

If a participating employer ceases to contribute to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.

If we cease to have an obligation to contribute to the multiemployer plan in which we had been a contributing employer, we may be required to pay to the plan an amount based on the underfunded status of the plan and on our historical participation in the plan prior to the cessation of our obligation to contribute. This amount is referred to as a withdrawal liability.

Based on the latest information available, we participate in two multiemployer plans with a funded status less than 65 percent. Further information on these multiemployer plans for the years ended December 31, 2011, 2010 and 2009 is as follows:

Pension Fund

EIN/Pension Plan
Number

Pension
Protection
Act Zone
Status

FIP / RP
Status
Pending /
Implemented

Contributions

Surcharge
Imposed

Expiration
Dates of
Collective
Bargaining
Agreements

2011

2010

2011

2010

2009

(Dollars in thousands)

Central States, Southeast & Southwest Areas Pension Fund

36-6044243/001

Red

Implemented

1,724

1,848

1,775

4/30/2013,

12/31/2013,
8/31/2014

United Food & Commercial
Workers – Local 1 Pension Fund

16-6144007/001

Red

Pending

107

102

12/31/2011

All Other

4,196

4,175

4,152

Total Contributions

6,027

6,125

6,029

The “EIN/Pension Plan Number” column provides the Employer Identification Number and the three digit plan number assigned to a plan by the Internal Revenue Service. The most recent Pension Protection Act Zone Status available for 2011 and 2010 is for plan years that ended in each of those years. The zone status is based on information provided to us and other participating employers by each plan and is certified by the plan’s actuary. A plan in the “red” zone has been determined to be in “critical status,” based on criteria established under the Internal Revenue Code (“Code”), and is generally less than 65 percent funded. The “FIP/RP Status Pending/Implemented” column indicates whether a rehabilitation plan, as required under the Code to be adopted by plans in the “red” zone, is pending or has been implemented as of the end of the 2011 plan year. The “Surcharge Imposed” column indicates whether our contribution rate for 2011 included an amount in addition to the contribution rate specified in the applicable collective bargaining agreement, as imposed by a plan in “critical status” in accordance with the requirements of the Code. The last column lists the expiration dates of the collective bargaining agreements under which we contribute to the plans.

Our contributions to each of these respective plans were less than five percent of total contributions made by all employers to each of these respective plans, as reported by these plans for the year ended December 31, 2010, the most recent plan year available. We expect our contributions for the year ended December 31, 2012 to these plans to be at the same level as the year ended December 31, 2011.

DEFINED CONTRIBUTION PLANS

We also sponsor defined contribution plans covering substantially all employees. Our contributions to these plans are based upon employee contributions and operating profitability. Contributions charged to expense for these plans for the years ended December 31, 2011, 2010 and 2009 were $8.0 million, $8.3 million and $7.3 million, respectively.

PLAN ASSETS

INVESTMENT STRATEGY

Our investment strategy is based on an expectation that equity securities will outperform debt securities over the long term. Accordingly, the composition of our plan assets is broadly characterized as a 58 percent/42 percent allocation between equity and debt securities. This strategy utilizes indexed U.S. equity securities (which constitutes approximately 85 percent of equity securities), with a lesser allocation to indexed international equity securities, and indexed investment grade U.S. debt securities. We attempt to mitigate investment risk by regularly rebalancing between equity and debt securities as contributions and benefit payments are made.

The weighted average asset allocation for our pension plans at December 31, 2011 and 2010 and target allocation for 2011 was as follows:


	Target		Actual Allocation
	Allocation		2011		2010
Equity securities—U.S.		49%		47%		52%
Equity securities—International		9%		10%		10%
Debt securities		42%		42%		37%
Cash and cash equivalents		0%		1%		1%

		100%		100%		100%

FAIR VALUE MEASUREMENTS

Our plan assets are primarily invested in commingled funds holding equity and debt securities, which are valued using the Net Asset Value, or NAV, provided by the administrator of the fund. 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. Commingled funds are classified within Level 2 (as described in Note 9) of the fair value hierarchy because the NAV’s are not publicly available. Plan excess cash balances are invested in short term investment funds which include investments in cash, bank notes, corporate notes, government bills and various short-term debt instruments. These typically are commingled funds valued using one dollar for the NAV. These short term funds are also classified within Level 2 of the valuation hierarchy.

The fair value of our plan assets by asset category consisted of the following at December 31:


	2011		2010
	(Dollars in thousands)
Equity securities—U.S.	$	239,076	$	256,524
Equity securities—International		50,599		51,715
Debt securities		216,156		182,519
Cash and cash equivalents		4,046		3,423

	$	509,877	$	494,181

CONCENTRATIONS OF CREDIT RISK

As of December 31, 2011, approximately 99 percent of plan assets were under management by a single investment management company in six individual commingled equity and debt index funds. Of these six funds, four funds held assets individually in excess of ten percent of our total plan assets.

MINIMUM REQUIRED CONTRIBUTIONS

Based on current legislation, there are no significant minimum required contributions to our pension benefit plans in 2012. In order to reduce our unfunded pension liability, we have historically made contributions in excess of the ERISA minimum requirements that are tax deductible.