Slide 1: Pension Funding and Transition Strategy
Pension Funding and Transition Strategy March 22, 2012
Slide 2: Situation Overview
Situation Overview 2 We have 3 defined benefit (DB) pension plans These plans are under-funded (1) May 2011 = $42MM Today ≈ $50MM Plan expenses are currently ≈$10MM (FY2012) and will likely rise in the future Funding commitments have been significant Avg. $23MM per year (past 10 years)
Slide 3: Volatility in Funded Status
3 (1) On an accounting basis as measured against Projected Benefit Obligation (PBO) Volatility in Funded Status We have experienced significant volatility in the funded status (assets less liabilities) of our DB plans. (1)
Slide 4: Funding History
Funding History 4 Contributions ($MM) Net Sales ($MM) Plan funding requirements have been highest when we can least afford it.
Slide 5: Our Strategy Going Forward
Our Strategy Going Forward 5 1. Improve the funded position of our plans Estimated initial cash outlay: $40MM to $45MM (net of tax benefits) Estimated Timing: Majority Q4 FY2012 / Balance Q1 FY2013 2. Reduce the risk profile of plan investments 3. Cease future service accruals on all DB plans
Slide 6: Unrecognized Actuarial Losses
Unrecognized Actuarial Losses 6 At the end of FY2011, our DB plans had Unrecognized Actuarial Losses totaling $153MM (pre-tax) Approximately $104MM after tax These losses primarily relate to investment under-performance and decreasing interest rates GAAP accounting requires us to amortize th
Slide 7: Income Statement Impact
7 Income Statement Impact The Unrecognized Actuarial Losses associated with our DB plans will drive an increase in non-cash pension expenses for a period of time. The amortization of these losses will continue throughout the 12 to 24 month transition period Currently running approximately $9MM p
Slide 8: Benefits of this Strategy
Benefits of this Strategy 8 Eliminates Company exposure to investment risk associated with employee retirement plans in the U.S. Better aligns cash flow and expenses with business cycles Eliminates a volatile liability and increases future debt capacity Free up future cash flow for strategic