Employee Benefit Plans | NOTE F Employee Benefit Plans Plans On July 31, 2013, the Company adopted a sunset freeze on its U.S. Salaried Pension Plan. Effective August 1, 2013, there are no longer any new entrants into the plan. Then effective, August 1, 2016, Employees hired prior to August 1, 2013, will no longer continue to accrue Company contribution credits under the plan. Net periodic pension costs for the Companys pension plans include the following components: 2015 2014 2013 (thousands of dollars) Service cost $ 20,412 $ 18,821 $ 19,439 Interest cost 19,108 19,499 16,953 Expected return on assets (29,529 ) (30,794 ) (28,111 ) Prior service cost and transition amortization 570 590 591 Actuarial loss amortization 7,086 7,403 10,362 Settlement loss 3,906 Net periodic benefit cost $ 21,553 $ 15,519 $ 19,234 The obligations and funded status of the Companys pension plans as of 2015 and 2014, is as follows: 2015 2014 (thousands of dollars) Change in benefit obligation: Benefit obligation, beginning of year $ 498,653 $ 444,943 Service cost 20,412 18,821 Interest cost 19,108 19,499 Plan amendments (26 ) Participant contributions 1,156 1,308 Actuarial loss/(gain) 13,148 29,638 Currency exchange rates (18,215 ) 8,873 Divestiture (3,200 ) Settlement (9,185 ) Benefits paid (26,378 ) (21,229 ) Benefit obligation, end of year $ 498,673 $ 498,653 Change in plan assets: Fair value of plan assets, beginning of year $ 489,870 $ 452,724 Actual return on plan assets 34,959 45,978 Company contributions 5,511 4,263 Participant contributions 1,156 1,308 Currency exchange rates (17,454 ) 9,912 Divestiture (3,086 ) Settlement (9,185 ) Benefits paid (26,378 ) (21,229 ) Fair value of plan assets, end of year $ 478,479 $ 489,870 Funded status: Underfunded status at July 31, 2015 and 2014 $ (20,194 ) $ (8,783 ) Amounts recognized on the consolidated balance sheets consist of: Other long-term assets 10,317 17,800 Other current liabilities (2,901 ) (832 ) Other long-term liabilities (27,610 ) (25,751 ) Recognized asset / (liability) $ (20,194 ) $ (8,783 ) The net underfunded status of $20.2 million at July 31, 2015, is recognized in the accompanying Consolidated Balance Sheet. AOCI at July 31, 2015, and 2014 was $135.4 million and $143.4 million, respectively, and consisted primarily of unrecognized actuarial losses. The loss expected to be recognized in net periodic pension expense during Fiscal 2016 is $8.6 million. The accumulated benefit obligation for all defined benefit pension plans was $484.2 million and $476.1 million at July 31, 2015 and 2014, respectively. The projected benefit obligation and fair value of plan assets for pension plans with projected benefit obligations in excess of plan assets were $290.0 million and $259.5 million, respectively, as of July 31, 2015, and $289.3 million and $262.7 million, respectively, as of July 31, 2014. The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were $242.3 million, $241.9 million, and $216.0 million, respectively, as of July 31, 2015, and $234.8 million, $233.8 million, and $215.9 million, respectively, as of July 31, 2014. For the fiscal years ended July 31, 2015 and 2014, the two U.S. pension plans represented approximately 67 percent and 69 percent, respectively, of the Companys total plan assets, approximately 69 percent, for both fiscal years, of the Companys total projected benefit obligation, and approximately 81 percent and 80 percent, respectively, of the Companys total pension expense. The weighted-average discount rate and rates of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligation are as follows: Weighted average actuarial assumptions 2015 2014 All U.S. plans: Discount rate 4.33% 4.33% Rate of compensation increase 2.56% 2.61% Non - U.S. plans: Discount rate 3.14% 3.64% Rate of compensation increase 2.68% 2.79% The weighted-average discount rates, expected returns on plan assets and rates of increase in future compensation levels used to determine the net periodic benefit cost are as follows: Weighted average actuarial assumptions 2015 2014 2013 All U.S. plans: Discount rate 4.33% 4.58% 3.59% Expected return on plan assets 7.14% 7.50% 7.50% Rate of compensation increase 2.61% 2.61% 2.61% Non - U.S. plans: Discount rate 3.64% 4.04% 4.13% Expected return on plan assets 5.41% 5.48% 5.20% Rate of compensation increase 2.79% 2.92% 2.86% Expected Long-Term Rate of Return Discount Rate Plan Assets Level 1 Quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 Inputs other than quoted prices available in Level 1 that are observable either directly or indirectly. Level 3 Unobservable inputs for the asset or liability. The fair values of the assets held by the U.S. pension plans by asset category are as follows (in millions): Asset Category Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total 2015 Cash $ 1.9 $ $ $ 1.9 Global Equity Securities 76.6 84.6 19.5 180.7 Fixed Income Securities 0.9 64.1 54.7 119.7 Real Assets 6.0 13.0 19.0 Total U.S. Assets at July 31, 2015 $ 85.4 $ 148.7 $ 87.2 $ 321.3 2014 Cash $ 14.2 $ $ $ 14.2 Global Equity Securities 107.3 87.3 21.1 215.7 Fixed Income Securities 27.0 58.7 85.7 Real Assets 7.1 13.5 20.6 Total U.S. Assets at July 31, 2014 $ 155.6 $ 87.3 $ 93.3 $ 336.2 2013 Cash $ 18.5 $ $ $ 18.5 Global Equity Securities 82.5 50.2 19.4 152.1 Fixed Income Securities 42.9 20.8 60.8 124.5 Real Assets 22.1 22.1 Total U.S. Assets at July 31, 2013 $ 143.9 $ 71.0 $ 102.3 $ 317.2 Global Equity consists primarily of publicly traded U.S. and non-U.S. equities, Europe, Australasia, Far East (EAFE) index funds, equity private placement funds, private equity investments, and some cash and cash equivalents. Publicly traded equities are valued at the closing price reported in the active market in which the individual securities are traded. Index funds are valued at the net asset value (NAV) as determined by the custodian of the fund. The NAV is based on the fair value of the underlying assets owned by the fund, minus its liabilities then divided by the number of units outstanding. Private equity consists of interests in partnerships that invest in U.S. and non-U.S. equity and debt securities. This may include a diversified mix of partnership interests including buyouts, restructured/distressed debt, growth equity, mezzanine/subordinated debt, real estate, special situation partnerships, and venture capital investments. Partnership interest is valued using the most recent general partner statement of fair value, updated for any subsequent partnership interests cash flow. The target allocation for Global Equity investments was 65 percent and 35 percent in the Salaried and Hourly Pension Plans, respectively. The underlying global equity investment managers within the Plan will invest primarily in equity securities spanning across market capitalization, geography, style (e.g. value, growth, etc.), and other diversifying characteristics. Managers may invest in common stocks or American Depository Receipts (ADRs), mutual funds, bank or trust company pooled funds, international stocks, stock options for hedging purposes, stock index futures, financial futures for purposes of replicating a major market index, and private equity partnerships. The Long/Short Equity managers within Global Equity may take long or short positions in equity securities and have the ability to shift exposure from net long to net short. Long/Short Equity managers made up about 15 percent of the global equity portfolio at year-end, and are considered less liquid, as the funds can be partially liquidated on a quarterly basis. Long-only managers are considered liquid. The long-only investment managers are typically valued daily, while long/short equity is valued on a monthly basis. Private equity is considered illiquid and performance is typically valued on a quarterly basis. The underlying assets, however, may be valued less frequently, such as annually, or if and when a potential buyer is identified and has submitted a bid to similar types of investments. Fixed income consists primarily of investment and non-investment grade debt securities and alternative fixed income-like investments. Corporate and other bonds and notes are valued at either the yields currently available on comparable securities of issuers with similar credit ratings or valued under a discounted cash flows approach that maximizes observable inputs, such as current yields of similar instruments, but includes adjustments for certain risks that may not be observable such as credit and liquidity risks. Alternative fixed income-like investments consist primarily of private partnership interests in hedge funds of funds. Partnership interests are valued using the NAV as determined by the administrator or custodian of the fund. The target allocation for Fixed Income was 30 percent and 60 percent in the Salaried and Hourly Pension Plans respectively. The Fixed Income class may invest in Debt securities issued or guaranteed by the U.S., its agencies or instrumentalities (including U.S. Government Agency mortgage backed securities), or other investment grade rated debt issued by foreign governments; corporate bonds, debentures and other forms of corporate debt obligations, including equipment trust certificates; Indexed notes, floaters and other variable rate obligations; bank collective funds; mutual funds; insurance company pooled funds and guaranteed investments; futures and options for the purpose of yield curve management; and private debt investments. Fixed Income risk is driven by various factors including, but not limited to , Real assets consist of commodity funds, Real Estate Investment Trusts (REITS), and interests in partnerships that invest in private real estate, commodities, and timber investments. Private investments are valued using the most recent partnership statement of fair value, updated for any subsequent partnership interests cash flows. Commodity funds and REITS are valued at the closing price reported in the active market in which it is traded . The target allocation for Real Assets was 5 percent in both the Salaried and Hourly Pension Plans. The Fund invests in real assets to provide a hedge against unexpected inflation, to capture unique sources of returns, and to provide diversification benefits. The Fund pursues a real asset strategy through a fund of funds, private investments, and/or a direct investment program that may invest long, short, or both, in assets including, but not limited to, domestic and international properties, buildings and developments, timber, and/or commodities. Real assets range from less liquid to illiquid, with about two-thirds of the real asset allocation having monthly liquidity and one-third illiquid. Real asset manager performance is typically reported quarterly, though underlying assets may be valued less frequently. The following table sets forth a summary of changes in the fair values of the U.S. pension plans Level 3 assets for the years ended July 31, 2015, 2014, and 2013 (in millions): Global Equity Fixed Income Real Assets Total Beginning balance at August 1, 2012 $ 19.4 $ 55.0 $ 31.4 $ 105.8 Unrealized gains (0.8 ) 6.4 1.1 6.7 Realized gains 1.7 0.7 2.4 Purchases 2.1 1.0 3.1 Sales (3.0 ) (1.3 ) (11.4 ) (15.7 ) Ending balance at July 31, 2013 $ 19.4 $ 60.8 $ 22.1 $ 102.3 Unrealized gains 1.7 (2.0 ) (0.3 ) Realized gains 2.4 8.9 0.8 12.1 Purchases 2.0 20.0 2.7 24.7 Sales (4.4 ) (29.0 ) (12.1 ) (45.5 ) Ending balance at July 31, 2014 $ 21.1 $ 58.7 $ 13.5 $ 93.3 Unrealized gains (0.3 ) (3.7 ) 0.7 (3.3 ) Realized gains 2.8 5.1 0.6 8.5 Purchases 1.8 0.8 2.6 Sales (5.9 ) (5.4 ) (2.6 ) (13.9 ) Ending balance at July 31, 2015 $ 19.5 $ 54.7 $ 13.0 $ 87.2 The following table sets forth a summary of the U.S. pension plans assets valued at NAV for the year ended July 31, 2015 (in millions): Fair Value Unfunded Commitments Redemption Frequency (If Currently Eligible) Redemption Notice Period Global Equity $ 181.3 $ 3.4 Daily, Monthly, Quarterly, Annually 10 - 100 days Fixed Income 55.6 Daily, Quarterly, Semi-Annually 60 - 120 days Real Assets 19.0 2.3 Daily, Quarterly 95 days Total $ 255.9 $ 5.7 Fair values of the assets held by the non-U.S. pension plans by asset category are as follows (in millions): Asset Category Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total 2015 Cash $ $ $ $ Global Equity Securities 71.7 71.7 Fixed Income Securities 4.2 35.9 40.1 Equity/Fixed Income 17.2 28.2 45.4 Total Non-U.S. Assets at July 31, 2015 $ 93.1 $ 35.9 $ 28.2 $ 157.2 2014 Cash $ 5.7 $ $ $ 5.7 Global Equity Securities 71.3 71.3 Fixed Income Securities 4.8 23.3 28.1 Equity/Fixed Income 18.0 30.5 48.5 Total Non-U.S. Assets at July 31, 2014 $ 99.8 $ 23.3 $ 30.5 $ 153.6 2013 Global Equity Securities $ 0.6 $ $ $ 0.6 Fixed Income Securities 63.8 63.8 Equity/Fixed Income 6.9 21.0 27.9 Real Assets 16.9 26.3 43.2 Total Non-U.S. Assets at July 31, 2013 $ 88.2 $ 21.0 $ 26.3 $ 135.5 Global equity consists of publicly traded diversified growth funds invested across a broad range of traditional and alternative asset classes which may include, but are not limited to: equities, investment grade and high yield bonds, property, private equity, infrastructure, commodities and currencies. They may invest directly or hold up to 100 percent of the fund in other collective investment vehicles and may use exchange traded and over the counter financial derivatives, such as currency forwards or futures, for both investment as well as hedging purposes. Fixed income consists primarily of investment grade debt securities. Corporate bonds and notes are valued at either the yields currently available on comparable securities of issuers with similar credit ratings or valued under a discounted cash flows approach that maximizes observable inputs, such as current yields of similar instruments, but includes adjustments for certain risks that may not be observable such as credit and liquidity risks. These funds may also aim to provide liability hedging by offering interest rate and inflation protections which replicates the liability profile of a typical defined benefit pension scheme. Equity/Fixed Income consists of Level 1 assets that are part of a unit linked fund with a strategic asset allocation of 40 percent fixed income products and 60 percent equity type products. Assets are valued at either the closing price reported if traded on an active market or at yields currently available on comparable securities of issuers with similar credit ratings. Index funds are valued at the net asset value as determined by the custodian of the fund. The Level 3 assets are composed of mathematical reserves on individual contracts and the Company does not have any influence on the investment decisions as made by the insurer due to the specific minimum guaranteed return characteristics of this type of contract. European insurers in general, broadly have a strategic asset allocation with 80 percent to 90 percent fixed income products and 20 percent to 10 percent equity type products (including real estate). Real Assets consists of property funds. Property funds are valued using the most recent partnership statement of fair value, updated for any subsequent partnership interests cash flows. The following table sets forth a summary of changes in the fair values of the non-U.S. pension plans Level 3 assets for the years ended July 31, 2015, 2014, and 2013 (in millions): Equity/Fixed Income Beginning balance at August 1, 2012 $ 21.8 Unrealized gains 1.1 Foreign currency exchange 1.7 Purchases 2.6 Sales (0.9 ) Ending balance at July 31, 2013 $ 26.3 Unrealized gains 4.3 Realized gains 0.1 Foreign currency exchange 0.1 Purchases 3.1 Sales (3.4 ) Ending balance at July 31, 2014 $ 30.5 Unrealized gains 1.3 Realized gains Foreign currency exchange (5.5 ) Purchases 2.7 Sales (0.8 ) Ending balance at July 31, 2015 $ 28.2 The following table sets forth a summary of the non-U.S. pension plans assets valued at NAV for the year ended July 31, 2015 (in millions): Fair Value Unfunded Commitments Redemption Frequency (If Currently Eligible) Redemption Notice Period Fixed Income $ 35.9 $ Weekly 7 days Equity/Fixed Income 28.2 Yearly 90 days Total $ 64.1 $ Investment Policies and Strategies. For the Companys non-U.S. plans, the general investment objectives are to maintain a suitably diversified portfolio of secure assets of appropriate liquidity which will generate income and capital growth to meet, together with any new contributions from members and the Company, the cost of current and future benefits. Investment policy and performance is measured and monitored on an ongoing basis by the Companys Investment Committee through its use of an investment consultant and through quarterly investment portfolio reviews. Estimated Contributions and Future Payments Estimated future benefit payments for the Companys U.S. and non-U.S. plans are as follows (thousands of dollars): Fiscal Year 2016 $ 25,445 2017 $ 25,721 2018 $ 25,203 2019 $ 26,540 2020 $ 27,332 2021-2025 $ 142,263 Postemployment and Postretirement Benefit Plans Retirement Savings and Employee Stock Ownership Plan Deferred Compensation and Other Benefit Plans |