Notes to Consolidated Financial Statements
The investment objectives of the pension benefit plans are to secure the benefit obligations to participants at a reasonable cost to us. The goal is to optimize the long-term return on plan assets at a moderate level of risk, by balancing higher-returning assets such as equity securities, with less volatile assets, such as fixed income securities. The assets are managed by professional investment firms and performance is evaluated quarterly against specific benchmarks.
Equity securities in the U.S. plan included McCormick stock with a fair value of $28.8 million (0.9 million shares and 10.5% of total U.S. pension plan assets) and $33.6 million (0.9 million shares and 13.5% of total U.S. pension plan assets) at November 30, 2005 and 2004, respectively. Dividends paid on these shares were $0.6 million in 2005 and $0.5 million in 2004.
Pension benefit payments in our major plans are made from assets of the pension plans. It is anticipated that future benefit payments for the U.S. plans for the next 10 fiscal years will be as follows:
| (millions) |
United States
Expected Payments |
|
| 2006 |
|
$ 16.0 |
|
|
| 2007 |
|
17.1 |
|
| 2008 |
|
18.6 |
|
| 2009 |
|
20.7 |
|
| 2010 |
|
22.0 |
|
| 2011-2015 |
|
138.3 |
|
|
It is anticipated that future benefit payments for the international plans for the next 10 fiscal years will be as follows:
| (millions) |
International
Expected Payments |
|
| 2006 |
|
$ 4.0 |
|
| 2007 |
|
4.2 |
|
| 2008 |
|
4.3 |
|
| 2009 |
|
4.5 |
|
| 2010 |
|
4.8 |
|
| 2011-2015 |
|
31.8 |
|
|
In 2006, we expect to contribute approximately $28 million to our U.S. pension plans, including $6 million to our plan that has assets held in a Rabbi Trust. In addition, we expect to contribute approximately $6 million to our international pension plans in 2006.
401(k) Retirement Plans
For the U.S. McCormick 401(k) Retirement Plan, we match
100% of the participant's contribution up to the first 3% of the participant's
salary, and 50% of the next 2% of a participant's salary. Certain of
our U.S. subsidiaries sponsor separate 401(k) retirement plans. Our
contributions charged to expense under all 401(k) Retirement Plans
were $5.7 million, $5.7 million and $5.4 million in 2005, 2004 and 2003,
respectively.
At the participant's election, all 401(k) Retirement Plans held 3.9 million shares, with a fair value of $120.5 million, of our stock at November 30, 2005. Dividends paid on these shares in 2005 were $2.5 million.
10. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
We currently provide postretirement medical and life insurance
benefits to certain U.S. employees who were covered under the active
employees' plan and retire after age 55 with at least 10 years of service
(earned after age 45). The benefits provided under these plans are based
primarily on age at date of retirement.
Our other postretirement benefit
expense follows:
| (millions) |
2005 |
|
2004 |
|
2003 |
|
| Service cost |
$ 3.2 |
|
$ 2.7 |
|
$ 2.9 |
|
| Interest costs |
5.0 |
|
5.3 |
|
5.7 |
|
| Amortization of prior service cost |
(1.1 |
) |
(1.1 |
) |
(1.4 |
) |
| Amortization of (gains)/losses |
.2 |
|
1.1 |
|
.9 |
|
| One time recognition of curtailment gain |
- |
|
- |
|
(3.5 |
) |
| Discontinued operations |
- |
|
- |
|
1.4 |
|
| Postretirement benefit expense |
$ 7.3 |
|
$ 8.0 |
|
$ 6.0 |
|
Rollforwards of the benefit obligation, fair value of plan assets and a reconciliation of the plans' funded status at November 30, the measurement date, follow:
| (millions) |
|
2005 |
|
|
2004 |
|
| Change in benefit obligation |
|
|
|
|
|
|
| Benefit obligation at beginning of year |
$ |
92.4 |
|
$ |
95.9 |
|
| Service cost |
|
3.2 |
|
|
2.7 |
|
| Interest costs |
|
5.0 |
|
|
5.3 |
|
| Employee contributions |
|
2.6 |
|
|
2.6 |
|
| Trend rate assumption change |
|
4.5 |
|
|
- |
|
| Actuarial (gain)/loss |
|
(1.9 |
) |
|
(6.7 |
) |
| Benefits paid |
|
(8.5 |
) |
|
(7.4 |
) |
| Benefit obligation at end of year |
$ |
97.3 |
|
$ |
92.4 |
|
| Change in fair value of plan assets |
|
|
|
|
|
|
| Fair value of plan assets at beginning of year |
|
- |
|
|
- |
|
| Employer contributions |
$ |
5.9 |
|
$ |
4.8 |
|
| Employee contributions |
|
2.6 |
|
|
2.6 |
|
| Benefits paid |
|
(8.5 |
) |
|
(7.4 |
) |
| Fair value of plan assets at end of year |
|
- |
|
|
- |
|
| Funded status |
$ |
(97.3 |
) |
$ |
(92.4 |
) |
| Unrecognized net actuarial loss |
|
17.0 |
|
|
14.6 |
|
| Unrecognized prior service cost |
|
(6.6 |
) |
|
(7.7 |
) |
| Other postretirement benefit liability |
$ |
(86.9 |
) |
$ |
(85.5 |
) |
Estimated future benefit payments for the next 10 fiscal years are as follows:
| |
Retiree |
Retiree Life |
|
| (millions) |
Medical |
Insurance |
Total |
| 2006 |
|
$ 5.6 |
|
|
$ .7 |
|
|
$ 6.3 |
|
| 2007 |
|
5.9 |
|
|
.8 |
|
|
6.7 |
|
| 2008 |
|
6.1 |
|
|
.8 |
|
|
6.9 |
|
| 2009 |
|
6.5 |
|
|
.9 |
|
|
7.4 |
|
| 2010 |
|
6.8 |
|
|
.9 |
|
|
7.7 |
|
| 2011-2015 |
|
39.4 |
|
|
5.4 |
|
|
44.8 |
|
The assumed discount rate was 5.9% and 6.0% for 2005 and 2004, respectively.
|
