Annual report pursuant to Section 13 and 15(d)

Deferred Compensation and Retirement Plans

 v2.3.0.11
Deferred Compensation and Retirement Plans
12 Months Ended
Apr. 30, 2011
Deferred Compensation and Retirement Plans [Abstract]  
Deferred Compensation and Retirement Plans
7.   Deferred Compensation and Retirement Plans
 
The Company has several deferred compensation and retirement plans for vice-presidents that provide defined benefits to participants based on the deferral of current compensation or contributions made by the Company subject to vesting and retirement or termination provisions.
 
The total long-term benefit obligations for these plans were as follows:
 
                 
    Year Ended April 30,  
    2011     2010  
    (In thousands)  
 
Deferred compensation plans
  $ 66,637     $ 60,890  
Pension plan
    3,815       3,483  
Retirement plans
    3,153       2,611  
Executive Capital Accumulation Plan
    65,953       56,810  
                 
Total long-term benefit obligations
  $ 139,558     $ 123,794  
                 
 
Deferred Compensation Plans
 
The EWAP was established in fiscal 1994, which replaced the WAP. Certain vice presidents elected to participate in a “deferral unit” that required the participant to contribute a portion of their compensation for an eight year period, or in some cases, make an after tax contribution, in return for defined benefit payments from the Company over a fifteen year period generally at retirement age of 65 or later. Participants were able to acquire additional “deferral units” every five years. Vice presidents who did not choose to roll over their WAP units into the EWAP continue to be covered under the earlier version in which participants generally vest and commence receipt of benefit payments at retirement age of 65. In June 2003, the Company amended the EWAP and WAP plans, so as not to allow new participants or the purchase of additional deferral units by existing participants.
 
The Company also maintains a SEIP for participants approved by the Board. Generally, to be eligible, the vice president must be participating in the EWAP. Participation in the SEIP required the participant to contribute a portion of their compensation during a four-year period, or in some cases make an after tax contribution, in return for a defined benefit paid by the Company generally over a fifteen year period after ten years of participation in the plan or such later date as elected by the participant. In June 2003, the Company amended the SEIP plan, so as not to allow new participants or the purchase of additional deferral units by existing participants.
 
Pension Plan
 
The Company has a defined benefit pension plan, referred to as the WEB, covering certain executives in the U.S. and foreign countries. The WEB is designed to integrate with government sponsored and local benefits and provide a monthly benefit to vice presidents upon retirement from the Company. Each year a plan participant accrued and was fully vested in one-twentieth of the targeted benefits expressed as a percentage set by the Company for that year. Upon retirement, a participant receives a monthly benefit payment equal to the sum of the percentages accrued over such participant’s term of employment, up to a maximum of 20 years, multiplied by the participant’s highest average monthly salary during the 36 consecutive months in the final 72 months of active full-time employment through June 2003. In June 2003, the Company froze the WEB, so as to not allow new participants, future accruals and future salary increases.
 
Accounting for Deferred Compensation and Pension Plans
 
During fiscal 2011, the Company recorded an increase in deferred compensation and pension plan liabilities of $6.7 million, a decrease in accumulated other comprehensive income of $4.1 million and a net decrease of $2.6 million in deferred income taxes.
 
During fiscal 2010, the Company recorded an increase in deferred compensation and pension plan liabilities of $13.4 million, a decrease in accumulated other comprehensive income of $8.7 million and a net decrease of $4.7 million in deferred income taxes.
 
Deferred Compensation Plan
 
The following tables reconcile the benefit obligation for the deferred compensation plans:
 
                         
    Year Ended April 30,  
    2011     2010     2009  
    (In thousands)  
 
Change in benefit obligation:
                       
Benefit obligation, beginning of year
  $ 64,890     $ 52,149     $ 54,749  
Service cost
    137       339       696  
Interest cost
    3,495       3,557       3,432  
Plan participants’ contributions with interest
    65       194       367  
Actuarial loss (gain)
    6,764       12,848       (3,263 )
Benefits paid
    (5,032 )     (4,197 )     (3,832 )
                         
Benefit obligation, end of year
    70,319       64,890       52,149  
Less: current portion of benefit obligation
    (3,682 )     (4,000 )     (3,782 )
                         
Non-current benefit obligation
  $ 66,637     $ 60,890     $ 48,367  
                         
 
The components of net periodic benefits costs are as follows:
 
                         
    Year Ended April 30,  
    2011     2010     2009  
    (In thousands)  
 
Service cost
  $ 137     $ 339     $ 696  
Interest cost
    3,495       3,557       3,432  
Amortization of actuarial loss
    422              
Amortization of net transition obligation
                212  
                         
Net periodic benefit cost
  $ 4,054     $ 3,896     $ 4,340  
                         
 
The weighted-average assumptions used in calculating the benefit obligations were as follows:
 
                         
    Year Ended April 30,
    2011   2010   2009
 
Discount rate, beginning of year
    5.61 %     7.10 %     6.50 %
Discount rate, end of year
    4.94 %     5.61 %     7.10 %
Rate of compensation increase
    0.00 %     0.00 %     0.00 %
 
Pension Plan
 
The following tables reconcile the benefit obligation for the pension plan:
 
                         
    Year Ended April 30,  
    2011     2010     2009  
    (In thousands)  
 
Change in benefit obligation:
                       
Benefit obligation, beginning of year
  $ 3,630     $ 3,125     $ 3,119  
Interest cost
    197       214       196  
Actuarial loss (gain)
    307       503       (4 )
Benefits paid
    (182 )     (212 )     (186 )
                         
Benefit obligation, end of year
    3,952       3,630       3,125  
Less: current portion of benefit obligation
    (137 )     (147 )     (151 )
                         
Non-current benefit obligation
  $ 3,815     $ 3,483     $ 2,974  
                         
 
The components of net periodic benefits costs are as follows:
 
                         
    Year Ended April 30,  
    2011     2010     2009  
    (In thousands)  
 
Interest cost
  $ 197     $ 214     $ 196  
Amortization of actuarial gain
    (2 )     (78 )     (84 )
                         
Net periodic benefit cost
  $ 195     $ 136     $ 112  
                         
 
The weighted-average assumptions used in calculating the benefit obligations were as follows:
 
                         
    Year Ended April 30,
    2011   2010   2009
 
Discount rate, beginning of year
    5.61 %     7.10 %     6.50 %
Discount rate, end of year
    4.94 %     5.61 %     7.10 %
Rate of compensation increase
    0.00 %     0.00 %     0.00 %
 
Benefit payments, which reflect expected future service, as appropriate, are expected to be paid over the next ten years as follows:
 
                 
    Deferred
   
    Compensation
  Pension
Year Ending April 30,   Plans   Benefits
    (In thousands)
 
2012
  $ 5,182     $ 252  
2013
    5,431       273  
2014
    5,881       294  
2015
    5,763       304  
2016
    5,762       299  
2017-2021
    26,919       1,333  
 
International Retirement Plans
 
The Company also maintains various retirement plans and other miscellaneous deferred compensation arrangements in six foreign jurisdictions. The aggregate of the long-term benefit obligation accrued at April 30, 2011 and 2010 is $3.2 million for 155 participants and $2.6 million for 120 participants, respectively. The Company’s contribution to these plans was $0.9 million and $0.4 million in fiscal 2011 and 2010, respectively.
 
Executive Capital Accumulation Plan (“ECAP”)
 
The Company has an ECAP, which is intended to provide certain employees an opportunity to defer salary and/or bonus on a pre-tax basis, or make an after-tax contribution. In addition, the Company, under its incentive plans, makes discretionary contributions into the ECAP and such contributions are granted to key employees annually based on the employee’s performance. In addition, certain key management may receive Company ECAP contributions upon commencement of employment. Participants generally vest in Company contributions over a four year period. Participants have the ability to allocate their deferrals among a number of investment options and may receive their benefits at termination, retirement or “in service” either in a lump sum or in quarterly installments over five, ten or fifteen years. The Company operates two similar plans in Asia Pacific and Canada.
 
The Company made contributions to the ECAP during fiscal 2011, 2010 and 2009, of $0.4 million, $1.9 million and $15.1 million, respectively. The Company expects to make an ECAP contribution of approximately $15 million in fiscal year 2012. In addition, the Company may make additional ECAP contributions in fiscal 2012 if key employees are hired.
 
The ECAP is accounted for whereby the changes in the fair value of the vested amounts owed to the participants are adjusted with a corresponding charge (or credit) to compensation and benefits costs. During fiscal 2011 and 2010, deferred compensation liability increased; therefore the Company recognized compensation expenses of $6.7 million and $8.9 million, respectively. During fiscal 2009, deferred compensation liability decreased; therefore, the Company recognized a reduction in compensation expenses of $10.5 million.
 
Changes in the ECAP liability were as follows:
 
                 
    Year Ended April 30,  
    2011     2010  
    (In thousands)  
 
Balance, beginning of year
  $ 57,871     $ 45,102  
Employee contributions
    2,403       2,493  
Amortization of employer contributions
    6,525       8,456  
Gain on investment
    6,667       8,875  
Employee distributions
    (6,567 )     (7,627 )
Exchange rate translations
    315       572  
                 
Balance, end of year
    67,214       57,871  
Less: current portion
    (1,261 )     (1,061 )
                 
Non-current portion, end of year
  $ 65,953     $ 56,810  
                 
 
Defined Contribution Plan
 
The Company has a defined contribution plan (“401(k) plan”) for eligible employees. Participants may contribute up to 50% of their base compensation, as defined in the plan agreement. In addition, the Company has the option to make matching contributions. The Company expects to make a $1.2 million matching contribution for the year ended April 30, 2011. The Company did not make a matching contribution during the years ended April 30, 2010 or 2009.
 
Company Owned Life Insurance
 
The Company purchased COLI contracts insuring employees eligible to participate in the deferred compensation and pension plans. The gross CSV of these contracts of $143.9 million and $136.0 million is offset by outstanding policy loans of $72.9 million and $66.9 million in the accompanying consolidated balance sheets as of April 30, 2011 and 2010, respectively. Total death benefits payable, net of loans under COLI contracts, were $195.7 million and $197.4 million at April 30, 2011 and 2010, respectively. Management intends to use the future death benefits from these insurance contracts to fund the deferred compensation and pension arrangements; however, there may not be a direct correlation between the timing of the future cash receipts and disbursements under these arrangements. In addition, certain policies are held in trusts to provide additional benefit security for the deferred compensation and pension plans, excluding the WEB. As of April 30, 2011, COLI contracts with a net CSV of $57.6 million and death benefits payable, net of loans, of $113.6 million were held in trust for these purposes.