10.

Pension and Other Post-retirement Benefits

The Company provides retirement benefits for all U.S. employees including benefits for employees of previously owned businesses which were earned up to the date of sale. The Company also has two foreign pension plans, neither of which is material to the Company’s financial position.

The Company has a defined contribution plan which matches 100 percent of the first one percent of contributions made by participating employees and matches 50 percent of the next five percent of employee contributions. The Company also has defined contribution plans for certain hourly employees which provide for matching Company contributions.

The Company also has a defined benefit plan for salaried employees and its non-union hourly workforce. In 2009, the Company announced U.S. employees hired after January 1, 2010, would not participate in the defined benefit plan, and benefit accruals for the majority of current salaried and hourly employees sunset on December 31, 2014. Beginning in 2015, an additional Company contribution is being made to the defined contribution plan in lieu of benefits earned in a defined benefit plan. The Company also has defined benefit and contribution plans for certain union hourly employees.

The Company has unfunded defined-benefit post-retirement plans covering certain hourly and salaried employees that provide medical and life insurance benefits from retirement to age 65. Certain hourly employees retiring after January 1, 1996, are subject to a maximum annual benefit and salaried employees hired after December 31, 1993, are not eligible for post-retirement medical benefits.

As of December 31, 2015, the Company changed the method used to estimate the service and interest components of net periodic benefit cost for its pension plan and its post-retirement benefit plan. This change compared to the previous method resulted in a $7.7 million and $7.1 million decrease in the service and interest components for pension cost in 2017 and 2016, respectively compared to 2015. Historically, the Company estimated the service and interest cost components utilizing a single weighted-average discount rate derived from the yield curve used to measure the benefit obligation at the beginning of the period. The Company has elected to utilize an approach that discounts the individual expected cash flows underlying the service cost and interest cost using the applicable spot rates derived from the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. This change was made to provide a more precise measurement of service and interest costs by improving the correlation between the projected benefit cash flows to the corresponding spot yield curve rates.

This change did not affect the measurement of the total benefit obligations but reduced the service and interest cost for the pension plan. The Company accounted for this change as a change in accounting estimate that is inseparable from a change in accounting principle and accordingly accounted for it prospectively beginning January 1, 2016.

Obligations and Funded Status

Pension and Post-Retirement Disclosure Information under ASC 715, Compensation – Retirement Benefits (ASC 715)

The following tables present the changes in benefit obligations, plan assets and funded status for domestic pension and post-retirement plans and the components of net periodic benefit costs.


	Pension Benefits						Post-retirement Benefits
Years ended December 31 (dollars in millions)	2017			2016			2017			2016
Accumulated benefit obligation (ABO) at December 31	$	921.8		$	894.3			N/A			N/A
Change in projected benefit obligations (PBO)
PBO at beginning of year	$	(895.8	)	$	(892.9	)	$	(6.6	)	$	(6.6	)
Service cost		(1.8	)		(1.8	)		(0.1	)		(0.1	)
Interest cost		(30.0	)		(30.6	)		(0.3	)		(0.2	)
Participant contributions		—			—			(0.1	)		—
Plan amendments		—			(0.7	)		—			—
Actuarial loss including assumption changes		(54.3	)		(31.0	)		(1.1	)		(0.2	)
Benefits paid		59.2			61.2			0.6			0.5

PBO at end of year	$	(922.7	)	$	(895.8	)	$	(7.6	)	$	(6.6	)

Change in fair value of plan assets
Plan assets at beginning of year	$	787.0		$	759.0		$	—		$	—
Actual return on plan assets		116.5			57.0			—			—
Contribution by the company		30.5			32.2			0.4			0.5
Participant contributions		—			—			0.1			—
Benefits paid		(59.2	)		(61.2	)		(0.5	)		(0.5	)

Plan assets at end of year	$	874.8		$	787.0		$	—		$	—

Funded status	$	(47.9	)	$	(108.8	)	$	(7.6	)	$	(6.6	)
Amount recognized in the balance sheet
Current liabilities	$	(0.5	)	$	(0.5	)	$	(0.3	)	$	(0.4	)
Non-current liabilities		(47.4	)		(108.3	)		(7.3	)		(6.2	)

Net pension liability at end of year	$	(47.9	)*	$	(108.8	)*	$	(7.6	)	$	(6.6	)

Amounts recognized in accumulated other comprehensive loss before tax
Net actuarial loss (gain)	$	451.8		$	473.5		$	(0.8	)	$	(2.0	)
Prior service cost		(0.5	)		(0.9	)		(2.6	)		(2.9	)

Total recognized in accumulated other comprehensive loss	$	451.3		$	472.6		$	(3.4	)	$	(4.9	)

*	In addition, the Company has a liability for a foreign pension plan of $0.2 million and $0.2 million at December 31, 2017 and 2016, respectively.


	Pension Benefits									Post-retirement Benefits
Years ended December 31 (dollars in millions)	2017			2016			2015			2017			2016			2015
Net periodic benefit cost
Service cost	$	1.8		$	1.8		$	1.9		$	0.1		$	0.1		$	0.1
Interest cost		30.0			30.6			37.6			0.3			0.2			0.3
Expected return on plan assets		(58.4	)		(55.9	)		(57.5	)		—			—			—
Amortization of unrecognized:
Net actuarial loss (gain)		17.9			17.7			19.1			(0.1	)		(0.2	)		(0.1	)
Prior service cost		(0.4	)		(1.1	)		(1.0	)		(0.4	)		(0.4	)		(0.4	)
Curtailment and other one-time charges		—			—			—			—			—			—

Defined-benefit plan (income) cost		(9.1	)		(6.9	)		0.1		$	(0.1	)	$	(0.3	)	$	(0.1	)

Various U.S. defined contribution plans cost		12.0			11.6			10.8

	$	2.9		$	4.7		$	10.9

Other changes in plan assets and projected benefit obligation recognized in other comprehensive loss
Net actuarial (gain) loss	$	(3.8	)	$	29.9		$	17.2		$	1.1		$	0.2		$	—
Amortization of net actuarial (loss) gain		(17.9	)		(17.7	)		(19.1	)		0.1			0.2			0.1
Prior service cost		—			0.6			2.5			—			—			(3.7	)
Amortization of prior service cost		0.5			1.1			1.0			0.4			0.4			0.4

Total recognized in other comprehensive loss		(21.2	)		13.9			1.6			1.6			0.8			(3.2	)

Total recognized in net periodic (benefit) cost and other comprehensive loss	$	(30.3	)	$	7.0		$	1.7		$	1.5		$	0.5		$	(3.3	)

The estimated net actuarial loss and prior service cost for the pension plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost during 2018 are $18.7 million and $(0.4) million, respectively. The estimated net actuarial loss and prior year service cost for the post-retirement benefit plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost during 2018 are $(0.1) million and $(0.4) million, respectively. As permitted under ASC 715, the amortization of any prior service cost was previously determined using a straight-line amortization of the cost over the average remaining service period of employees expected to receive benefits under the plan. Beginning in 2015 the amortization occurs over the average remaining life expectancy of participants expected to receive benefits under the plan as permitted under ASC 715.

The 2017 and 2016 after tax adjustments for additional minimum pension liability resulted in other comprehensive gain (loss) of $12.1 million and $(9.0) million, respectively.

Actuarial assumptions used to determine benefit obligations at December 31 are as follows:


	Pension Benefits						Post-retirement Benefits
	2017			2016			2017			2016
Discount rate		3.65	%		4.15	%		3.79	%		4.33	%
Average salary increases		n/a			4.00	%		n/a			n/a

Actuarial assumptions used to determine net periodic benefit cost for the year ended December 31 are as follows:


	Pension Benefits									Post-retirement Benefits
Years ended December 31	2017			2016			2015			2017			2016			2015
Discount rate		4.15	%		4.40	%		4.05	%		4.40	%		4.55	%		4.00	%
Expected long-term return on plan assets		7.50	%		7.50	%		7.75	%		n/a			n/a			n/a
Rate of compensation increase		4.00	%		4.00	%		4.00	%		4.00	%		4.00	%		4.00	%

Assumptions

In developing the expected long-term rate of return on plan assets assumption, the Company evaluated its pension plan’s target and actual asset allocation and expected long-term rates of return of equity and bond indices. The Company also considered its pension plan’s historical ten-year and 25-year compounded annualized returns of 6.3 percent and 9.2 percent, respectively.

Assumed health care cost trend rates

Assumed health care cost trend rates as of December 31 are as follows:


	2017			2016
Health care cost trend rate assumed for next year		6.50	%		6.50	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)		5.00	%		5.00	%
Year that the rate reaches the ultimate trend rate		2021			2021

A one-percentage-point change in the assumed health care cost trend rates would not result in a material impact on the Company’s consolidated financial statements.

Plan Assets

The Company’s pension plan weighted asset allocations as of December 31 by asset category are as follows:


Asset Category	2017			2016
Equity securities		45	%		48	%
Debt securities		43			37
Real estate		9			10
Private equity		2			4
Other		1			1

		100	%		100	%

The following tables present the fair value measurement of the Company’s plan assets as of December 31, 2017 and 2016 (dollars in millions):


			December 31, 2017
Asset Category	Total		Quoted Prices in Active Markets for Identical Contracts (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Non- observable Inputs (Level 3)
Short-term investments	$	15.8	$	2.0	$	13.8	$	—
Equity securities
Common stocks		220.3		220.3		—		—
Commingled equity funds		121.5		—		121.5		—
Fixed income securities
U.S. treasury securities		46.0		46.0		—		—
Other fixed income securities		219.9		—		219.9		—
Commingled fixed income funds		99.8		—		99.8		—
Other types of investments
Mutual funds		51.8		—		51.8		—
Real estate funds		77.8		—		—		77.8
Private equity		20.9		—		—		20.9

Total fair value of plan asset investments	$	873.8	$	268.3	$	506.8	$	98.7

Non-investment plan assets		1.0

Total plan assets	$	874.8


			December 31, 2016
Asset Category	Total		Quoted Prices in Active Markets for Identical Contracts (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Non- observable Inputs (Level 3)
Short-term investments	$	28.7	$	1.1	$	7.9	$	19.7
Equity securities
Common stocks		254.0		254.0		—		—
Commingled equity funds		105.6		—		105.6		—
Fixed income securities
U.S. treasury securities		97.6		97.6		—		—
Other fixed income securities		102.6		—		102.6		—
Commingled fixed income funds		90.3		—		90.3		—
Other types of investments
Mutual funds		4.5		—		4.5		—
Real estate funds		74.3		—		—		74.3
Private equity		28.0		—		—		28.0

Total fair value of plan asset investments	$	785.6	$	352.7	$	310.9	$	122.0

Non-investment plan assets		1.4

Total plan assets	$	787.0

The short-term investments included in the Company’s plan assets consist of cash and cash equivalents. The fair value of the remaining categories of the Company’s plan assets are valued as follows: equity securities are valued using the closing stock price on a national securities exchange, which reflects the last reported sales price on the last business day of the year; fixed income securities are valued using institutional bond quotes, which are based on various market and industry inputs; mutual funds and real estate funds are valued using the net asset value of the fund, which is based on the fair value of the underlying securities; and private equity investments are valued at the estimated fair value at the previous quarter end, which is based on the proportionate share of the underlying portfolio investments.

The following table presents a reconciliation of the fair value measurements using significant unobservable inputs (Level 3) as of December 31, 2017 and 2016 (dollars in millions):


	Short term investments			Real estate funds		Private equity			Total
Balance at December 31, 2015	$	12.4		$	70.9	$	34.3		$	117.6
Actual return (loss) on plan assets:
Relating to assets still held at the reporting date		—			3.4		(5.5	)		(2.1	)
Relating to assets sold during the period		—			—		9.3			9.3
Purchases, sales and settlements		7.3			—		(10.1	)		(2.8	)

Balance at December 31, 2016		19.7			74.3		28.0			122.0
Actual return (loss) on plan assets:
Relating to assets still held at the reporting date		—			3.5		(5.6	)		(2.1	)
Relating to assets sold during the period		—			—		7.8			7.8
Purchases, sales and settlements		(19.7	)		—		(9.3	)		(29.0	)

Balance at December 31, 2017	$	—		$	77.8	$	20.9		$	98.7

The Company’s investment policies employ an approach whereby a diversified blend of equity and bond investments is used to maximize the long-term return of plan assets for a prudent level of risk. Equity investments are diversified across domestic and non-domestic stocks, as well as growth, value, and small to large capitalizations. Bond investments include corporate and government issues, with short-, mid- and long-term maturities, with a focus on investment grade when purchased. The Company’s target allocation to equity managers is between 45 to 55 percent with the remainder allocated primarily to bonds, real estate, private equity managers and cash. Investment and market risks are measured and monitored on an ongoing basis through regular investment portfolio reviews, annual liability measurements and periodic asset/liability studies.

The Company’s actual asset allocations are in line with target allocations. The Company regularly reviews its actual asset allocation and periodically rebalances its investments to the targeted allocation when considered appropriate.

There was no Company stock included in plan assets at December 31, 2017.

Cash Flows

The Company was not required to make a contribution in 2017 but elected to make a $30 million voluntary contribution. The Company is not required to make a contribution in 2018.

Estimated Future Payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:


Years ending December 31 (dollars in millions)	Pension Benefits		Post-retirement Benefits
2018	$	60.5	$	0.3
2019		66.6		0.4
2020		68.5		0.4
2021		59.3		0.4
2022		58.6		0.4
2023 – 2027		285.6		2.2