EMPLOYEE RETIREMENT AND PROFIT SHARING PLANS

We sponsor various defined benefit and defined contribution retirement plans, including various employee savings and profit sharing plans, and contribute to various multiemployer pension plans on behalf of our employees. Substantially all full-time union and non-union employees who have completed one or more years of service and have met other requirements pursuant to the plans are eligible to participate in one or more of these plans. During 2014, 2013 and 2012, our retirement and profit sharing plan expenses were as follows:



	Year Ended December 31
	2014		2013		2012
	(In thousands)
Defined benefit plans	$	4,729	$	10,400	$	12,969
Defined contribution plans	16,503		17,619		17,637
Multiemployer pension and certain union plans	28,933		29,148		27,016
Total	$	50,165	$	57,167	$	57,622

Defined Benefit Plans — The benefits under our defined benefit plans are based on years of service and employee compensation. Our funding policy is to contribute annually the minimum amount required under ERISA regulations plus additional amounts as we deem appropriate.

Included in accumulated other comprehensive income at December 31, 2014 and 2013 are the following amounts that have not yet been recognized in net periodic pension cost: unrecognized prior service costs of $3.8 million ($2.3 million net of tax) and $3.5 million ($2.1 million net of tax) and unrecognized actuarial losses of $128.7 million ($79.3 million net of tax) and $86.8 million ($53.1 million net of tax), respectively. Prior service costs and actuarial losses included in accumulated other comprehensive income and expected to be recognized in net periodic pension cost during the year ended December 31, 2015 are $0.9 million ($0.6 million net of tax) and $8.5 million ($5.2 million net of tax), respectively.

The reconciliation of the beginning and ending balances of the projected benefit obligation and the fair value of plan assets for the years ended December 31, 2014 and 2013, and the funded status of the plans at December 31, 2014 and 2013 is as follows:



	December 31
	2014			2013
	(In thousands)
Change in benefit obligation:
Benefit obligation at beginning of year	$	293,850		$	347,798
Service cost	3,081			3,692
Interest cost	13,979			12,496
Plan participants’ contributions	13			12
Plan amendments	(411		)	—
Actuarial (gain) loss	57,716			(45,076		)
Benefits paid	(22,462		)	(25,072		)
Benefit obligation at end of year	345,766			293,850
Change in plan assets:
Fair value of plan assets at beginning of year	270,123			251,094
Actual return on plan assets	28,980			32,558
Employer contributions	14,338			11,531
Plan participants’ contributions	13			12
Benefits paid	(22,462		)	(25,072		)
Plan settlements	(1,466		)	—
Fair value of plan assets at end of year	289,526			270,123
Funded status at end of year	$	(56,240	)	$	(23,727	)

The underfunded status of the plans of $56.2 million at December 31, 2014 is recognized in our Consolidated Balance Sheet and includes $0.8 million classified as a current accrued pension liability. We do not expect any plan assets to be returned to us during the year ended December 31, 2015. We expect to contribute $5.4 million to the pension plans in 2015.

A summary of our key actuarial assumptions used to determine benefit obligations as of December 31, 2014 and 2013 follows:



	December 31
	2014		2013
Weighted average discount rate	4.08	%	4.90	%
Rate of compensation increase	4.00	%	4.00	%

A summary of our key actuarial assumptions used to determine net periodic benefit cost for 2014, 2013 and 2012 follows:



	Year Ended December 31
	2014		2013		2012
Weighted average discount rate	4.90	%	3.70	%	4.50	%
Expected return on plan assets	7.00	%	7.50	%	7.67	%
Rate of compensation increase	4.00	%	4.00	%	4.00	%



	Year Ended December 31
	2014			2013			2012
	(In thousands)
Components of net periodic benefit cost:
Service cost	$	3,081		$	3,692		$	3,068
Interest cost	13,979			12,496			14,001
Expected return on plan assets	(18,761		)	(18,531		)	(17,413		)
Amortizations:
Unrecognized transition obligation	—			—			112
Prior service cost	787			791			759
Unrecognized net loss	5,105			11,759			11,667
Effect of settlement	538			(136		)	—
Other	—			329			774
Net periodic benefit cost	$	4,729		$	10,400		$	12,968

The overall expected long-term rate of return on plan assets is a weighted-average expectation based on the targeted and expected portfolio composition. We consider historical performance and current benchmarks to arrive at expected long-term rates of return in each asset category.

The amortization of unrecognized net loss represents the amortization of investment losses incurred. The effect of settlement costs in 2014, 2013 and 2012 represents the recognition of net periodic benefit cost related to pension settlements reached as a result of plant closures.

Pension plans with an accumulated benefit obligation in excess of plan assets follows:



	December 31
	2014		2013
	(In millions)
Projected benefit obligation	$	345.8	$	282.6
Accumulated benefit obligation	341.3		279.4
Fair value of plan assets	289.5		258.3

The accumulated benefit obligation for all defined benefit plans was $341.3 million and $290.6 million at December 31, 2014 and 2013, respectively.

Almost 90% of our defined benefit plan obligations are frozen as to future participation or increases in projected benefit obligation. Many of these obligations were acquired in prior strategic transactions. As an alternative to defined benefit plans, we offer defined contribution plans for eligible employees.

The weighted average discount rate reflects the rate at which our defined benefit plan obligations could be effectively settled. The rate, which is updated annually with the assistance of an independent actuary, uses a model that reflects a bond yield curve.

Substantially all of our qualified pension plans are consolidated into one master trust. Our investment objectives are to minimize the volatility of the value of our pension assets relative to our pension liabilities and to ensure assets are sufficient to pay plan benefits. In 2014, we adopted a broad pension de-risking strategy intended to align the characteristics of our assets relative to our liabilities. The strategy targets investments depending on the funded status of the obligation. We anticipate this strategy will continue in future years and will be dependent upon market conditions and plan characteristics.

At December 31, 2014, our master trust was invested as follows: investments in equity securities were at 50%; investments in fixed income were at 49%; cash equivalents were at 1% and other investments were less than 1%. We believe the allocation of our master trust investments as of December 31, 2014 is generally consistent with the targets set forth by the Investment Committee.

Estimated pension plan benefit payments to participants for the next ten years are as follows:



2015	$	18.2	million
2016	18.5		million
2017	19.1		million
2018	19.6		million
2019	19.8		million
Next five years	105.7		million

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering assumptions, we follow a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value of our defined benefit plans’ consolidated assets as follows:


•	Level 1 — Quoted prices for identical instruments in active markets.


•	Level 2 — Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations, in which all significant inputs are observable in active markets.


•	Level 3 — Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The fair values by category of inputs as of December 31, 2014 were as follows (in thousands):



	Fair Value as of December 31, 2014		Level 1		Level 2		Level 3
Equity Securities:
Common Stock	$	210	$	210	$	—	$	—
Index Funds:
U.S. Equities(a)	135,726		—		135,726		—
International Equities	—		—		—		—
Equity Funds(b)	8,101		—		8,101		—
Total Equity Securities	144,037		210		143,827		—
Fixed Income:
Bond Funds(c)	140,714		—		140,714		—
Diversified Funds(d)	2,921		—		—		2,921
Total Fixed Income	143,635		—		140,714		2,921
Cash Equivalents:
Short-term Investment Funds(e)	2,507		—		2,507
Total Cash Equivalents	2,507		—		2,507
Other Investments:
Partnerships/Joint Ventures(f)	567		—		—		567
Total Other Investments	567		—		—		567
Total	$	290,746	$	210	$	287,048	$	3,488


(a)	Represents a pooled/separate account that tracks the Dow Jones U.S. Total Stock Market Index.


(b)	Represents a pooled/separate account comprised of approximately 90% U.S. large-cap stocks and 10% in international stocks.


(c)	Represents investments primarily in US dollar-denominated, investment grade bonds, including government securities, corporate bonds, and mortgage- and asset-backed securities.


(d)	Represents a pooled/separate account investment in the General Investment Account of an investment manager. The account primarily invests in fixed income debt securities, such as high grade corporate bonds, government bonds and asset-backed securities.


(e)	Investment is comprised of high grade money market instruments with short-term maturities and high liquidity.


(f)	The majority of the total partnership balance is a partnership comprised of a portfolio of two limited partnership funds that invest in public and private equity.

The fair values by category of inputs as of December 31, 2013 were as follows (in thousands):



	Fair Value as of December 31, 2013		Level 1		Level 2		Level 3
Equity Securities:
Common Stock	$	177	$	177	$	—	$	—
Index Funds:
U.S. Equities(a)	133,763		—		133,763		—
International Equities(b)	27,571		—		27,571		—
Equity Funds(c)	8,712		—		8,712		—
Total Equity Securities	170,223		177		170,046		—
Fixed Income:
Bond Funds(d)	92,103		—		92,103		—
Diversified Funds(e)	3,093		—		—		3,093
Total Fixed Income	95,196		—		92,103		3,093
Cash Equivalents:
Short-term Investment Funds(f)	3,840		—		3,840		—
Total Cash Equivalents	3,840		—		3,840		—
Other Investments:
Partnerships/Joint Ventures(g)	864		—		—		864
Total Other Investments	864		—		—		864
Total	$	270,123	$	177	$	265,989	$	3,957


(a)	Represents a pooled/separate account that tracks the Dow Jones U.S. Total Stock Market Index.


(b)	Represents a pooled/separate account that tracks the MSCI EAFE Index.


(c)	Represents a pooled/separate account comprised of approximately 90% U.S. large-cap stocks and 10% in international stocks.


(d)	Represents a pooled/separate account which tracks the overall performance of the Barclays Capital Long Term Government/Credit Index.


(e)	Represents a pooled/separate account investment in the General Investment Account of an investment manager. The account primarily invests in fixed income debt securities, such as high grade corporate bonds, government bonds and asset-backed securities.


(f)	Investment is comprised of high grade money market instruments with short-term maturities and high liquidity.


(g)	The majority of the total partnership balance is a partnership comprised of a portfolio of two limited partnership funds that invest in public and private equity.

Inputs and valuation techniques used to measure the fair value of plan assets vary according to the type of security being valued. The common stock investments held directly by the plans are actively traded and fair values are determined based on quoted prices in active markets and are therefore classified as Level 1 inputs in the fair value hierarchy.

Fair values of equity securities held through units of pooled or index funds are based on net asset value (NAV) of the units of the funds as determined by the fund manager. These funds are similar in nature to retail mutual funds, but are typically more efficient for institutional investors than retail mutual funds. The fair value of pooled funds is determined by the value of the underlying assets held by the fund and the units outstanding. The values of the pooled funds are not directly observable, but are based on observable inputs and, accordingly, have been classified as Level 2 in the fair value hierarchy.

Fair values of fixed income bond funds are typically determined by reference to the values of similar securities traded in the marketplace and current interest rate levels. Multiple pricing services are typically employed to assist in determining these valuations. These investments are classified as Level 2 in the fair value hierarchy as all significant inputs into the valuation are readily observable in the marketplace. Investments in diversified funds and investments in partnerships/joint ventures are classified as Level 3 in the fair value hierarchy as their fair value is dependent on inputs and assumptions which are not readily observable in the marketplace.

A reconciliation of the change in the fair value measurement of the defined benefit plans’ consolidated assets using significant unobservable inputs (Level 3) during the years ended December 31, 2014 and 2013 is as follows (in thousands):



	Diversified Funds			Partnerships/ Joint Ventures			Total
Balance at December 31, 2012	$	2,938		$	1,447		$	4,385
Actual return on plan assets:
Relating to instruments still held at reporting date	119			(306		)	(187		)
Purchases, sales and settlements (net)	(828		)	—			(828		)
Transfers in and/or out of Level 3	864			(277		)	587
Balance at December 31, 2013	$	3,093		$	864		$	3,957
Actual return on plan assets:
Relating to instruments still held at reporting date	117			(158		)	(41		)
Purchases, sales and settlements (net)	(1,836		)	—			(1,836		)
Transfers in and/or out of Level 3	1,547			(139		)	1,408
Balance at December 31, 2014	$	2,921		$	567		$	3,488

Defined Contribution Plans — Certain of our non-union personnel may elect to participate in savings and profit sharing plans sponsored by us. These plans generally provide for salary reduction contributions to the plans on behalf of the participants of between 1% and 20% of a participant’s annual compensation and provide for employer matching and profit sharing contributions as determined by our Board of Directors. In addition, certain union hourly employees are participants in company-sponsored defined contribution plans, which provide for salary reduction contributions according to several schedules, including as a percentage of salary, various cents per hour and flat dollar amounts. Additionally, employer contributions are sometimes, although not always, provided according to various schedules ranging from flat dollar contributions to matching contributions as a percent of salary based on the employees deferral election.

Multiemployer Pension Plans — Certain of our subsidiaries contribute to various multiemployer pension and other postretirement benefit plans which cover a majority of our full-time union employees and certain of our part-time union employees. Such plans are usually administered by a board of trustees composed of labor representatives and the management of the participating companies. The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects:


•	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 stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers; and


•	If we choose to stop participating in one or more of our multiemployer plans, we may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

At this time, we have not established any significant liabilities because withdrawal from these plans is not probable or reasonably possible.

Our participation in these multiemployer plans for the year ended December 31, 2014 is outlined in the table below. Unless otherwise noted, the most recent Pension Protection Act (“PPA”) Zone Status available in 2014 and 2013 is for the plans’ year-end at December 31, 2013 and December 31, 2012, respectively. The zone status is based on information that we obtained from each plan’s Form 5500, which is available in the public domain and is certified by the plan’s actuary. Among other factors, plans in the red zone are generally less than 65% funded, plans in the yellow zone are less than 80% funded, and plans in the green zone are at least 80% funded. The “FIP/RP Status Pending/Implemented” column indicates plans for which a funding improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either pending or has been implemented. Federal law requires that plans classified in the yellow zone or red zone adopt a funding improvement plan or rehabilitation plan, respectively, in order to improve the financial health of the plan. The “Extended Amortization Provisions” column indicates plans which have elected to utilize the special 30-year amortization rules provided by the Pension Relief Act of 2010 to amortize its losses from 2008 as a result of turmoil in the financial markets. The last column in the table lists the expiration date(s) of the collective-bargaining agreement(s) to which the plans are subject.

Pension Fund

Employer

Identification

Number

Pension

Plan

Number

PPA Zone Status

FIP /

RP Status

Pending/

Implemented

Extended

Amortization

Provisions

Expiration

Date of

Associated

Collective-

Bargaining

Agreement(s)

2014

2013

Western Conference of Teamsters Pension Plan(1)

91-6145047

001

Green

N/A

February 28, 2015 - May 31, 2017

Central States, Southeast and Southwest Areas Pension Plan(2)

36-6044243

001

Red

Implemented

February 15, 2015 - April 30, 2017

Retail, Wholesale & Department Store International Union and Industry Pension Fund(3)

63-0708442

001

Green

N/A

Yes

June 7, 2015 - September 30, 2017

Dairy Industry – Union Pension Plan for Philadelphia Vicinity(4)

23-6283288

001

Green

Red

N/A

Yes

June 30, 2017 –
March 31, 2018

(1)

We are party to approximately 18 collective bargaining agreements that require contributions to this plan. These agreements cover a large number of employee participants and expire on various dates between 2015 and 2017. We do not believe that any one agreement is substantially more significant than another as none of these agreements individually represent greater than 25% of the total employee participants covered under this plan.


(2)	There are approximately 21 collective bargaining agreements that govern our participation in this plan. The agreements expire on various dates between 2015 and 2017. Approximately 17%, 69% and 14% of our employee participants in this plan are covered by the agreements expiring in 2015, 2016 and 2017, respectively.


(3)	We are subject to approximately eight collective bargaining agreements with respect to this plan. Approximately 50%, 4% and 46% of our employee participants in this plan are covered by the agreements expiring in 2015, 2016 and 2017, respectively.


(4)	We are party to four collective bargaining agreements with respect to this plan. The agreement expiring in September 2017 is the most significant as 69% of our employee participants in this plan are covered by that agreement.

Information regarding our contributions to our multiemployer pension plans is shown in the table below. There are no changes which materially affected the comparability of our contributions to each of these plans during the years ended December 31, 2014, 2013 and 2012.



Pension Fund	Employer Identification Number	Pension Plan Number	Dean Foods Company Contributions (in millions)
Pension Fund	Employer Identification Number	Pension Plan Number	2014		2013		2012		Surcharge Imposed(3)
Western Conference of Teamsters Pension Plan	91-6145047	001	$	12.9	$	13.5	$	12.7	No
Central States, Southeast and Southwest Areas Pension Plan	36-6044243	001	11.9		11.1		9.5		No
Retail, Wholesale & Department Store International Union and Industry Pension Fund⁽¹⁾	63-0708442	001	1.3		1.3		1.3		No
Dairy Industry – Union Pension Plan for Philadelphia Vicinity⁽¹⁾	23-6283288	001	2.0		1.8		1.8		No
Other Funds⁽²⁾			0.8		1.4		1.7
Total Contributions			$	28.9	$	29.1	$	27.0


(1)	During the 2013 and 2012 plan years, our contributions to these plans exceeded 5% of total plan contributions. At the date of filing of this Annual Report on Form 10-K, Forms 5500 were not available for the plan years ending in 2014.


(2)	Amounts shown represent our contributions to all other multiemployer pension and other postretirement benefit plans, which are immaterial both individually and in the aggregate to our Consolidated Financial Statements.

(3)

Federal law requires that contributing employers to a plan in Critical status pay to the plan a surcharge to help correct the plan’s financial situation. The amount of the surcharge is equal to a percentage of the amount we would otherwise be required to contribute to the plan and ceases once our related collective bargaining agreements are amended to comply with the provisions of the rehabilitation plan.