Pension Plans

6 Months Ended

Jun. 30, 2012

Pension Plans

Pension Plans

Note 6 — Pension Plans

In April 2012, the Company received an Annual Funding Notice and a Notice of Funded Status (Notices), as defined by the Pension Protection Act (PPA), from the Bakery and Confectionery Union and Industry International Pension Fund (Fund), a multi-employer defined benefit pension plan (Plan) for certain Company union employees and the employees of more than two hundred other employers. The Notices indicate that the Fund’s actuary has certified that the Plan is 65.8% funded as of January 1, 2012. This funding percentage is based on actuarial values and not market values of investments which may be lower. As of January 1, 2011 the Plan was 83.6% funded based on the actuarial value of investments, however, it was only 70.0% funded based on the then current market value of its investments.  The Fund’s actuary has certified to the U.S. Department of the Treasury that the Plan is in critical status, the “Red Zone”, as defined by the PPA.

The Trustees of the Fund (Trustees) have advised that one of the largest contributors to the Fund filed for bankruptcy and ceased making contributions to the Fund in 2011, and that the Fund has failed to achieve investment performance returns needed to maintain a favorable funding status. The Trustees have advised that the aforementioned are some of the reasons for the Fund’s deterioration to critical status. As of January 1, 2011 plan valuation date, the Plan had 116,708 participants, of which 32,449 (28%) were active participants, 54,470 (47%) were retired or separated from service and receiving benefits, and 29,789 (26%) were retired or separated from service and entitled to receive future benefits. The PPA requires that plans in critical status develop a plan (Rehabilitation Plan) to improve the Fund’s funded status, including that contributing employers pay a surcharge to help correct the plan’s financial situation.  In the event that a plan does not have the financial resources to pay benefits at a level specified by law then it must apply to the Pension Benefits Guaranty Corporation for government financial assistance.

The Company’s contributions to the Fund increased to reflect a 5% surcharge effective June 1, 2012, and an additional 5% surcharge will become effective January 1, 2013. Company contributions to the Fund were $2,046 and $1,923 in calendar years 2011 and 2010, respectively. During the second quarter, the Company was further advised by the Plan that its estimate of the Company’s liability upon a withdrawal from the Plan as of January 1, 2011 was $21,120. Subsequent to the end of second quarter 2012, the Company was further advised by the Plan that its revised estimate of the Company’s withdrawal liability as of January 1, 2012 was $37,200. The Company will evaluate the Rehabilitation Plan when it becomes available.  Although the Company does not currently plan to withdraw from the Plan, the Company will be evaluating all of its options, including withdrawal from the Plan.  In the event that the Company withdraws from the Plan, the then applicable withdrawal liability would be determined and payable to the Plan at that time. The Company is currently unable to determine the ultimate outcome to the above discussed matter and therefore, is unable to determine the effects on its consolidated financial statements,but, the ultimate outcome could be material to its consolidated results of operations in one or more periods.