Staples 2014 Annual Report Download - page 164

APPENDIX C
C-32 STAPLES Form 10-K
STAPLES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
2013
Pension Plans
Post-retirement
Benefit Plan
U.S.
Plans
International
Plans
Weighted-average assumptions used to measure net periodic pension cost:
Discount rate 4.3% 3.0% 5.4%
Expected return on plan assets 6.0% 5.4% —%
Rate of compensation increase —% 2.1% 2.0%
Weighted-average assumptions used to measure benefit obligations at year-end:
Discount rate 4.8% 2.9% 5.4%
Rate of compensation increase —% 2.0% 2.0%
Rate of pension increase —% 1.1% —%
2012
Pension Plans
Post-retirement
Benefit Plan
U.S.
Plans
International
Plans
Weighted-average assumptions used to measure net periodic pension cost:
Discount rate 4.7% 4.4% 4.9%
Expected return on plan assets 6.0% 5.4% —%
Rate of compensation increase —% 2.1% 3.0%
Weighted-average assumptions used to measure benefit obligations at year-end:
Discount rate 4.3% 3.0% 4.4%
Rate of compensation increase —% 2.0% 2.5%
Rate of pension increase —% 1.1% —%
The following table shows the effect on pension obligations at January 31, 2015 of a change in discount rate and other assumptions
(in thousands):
Change in Discount Rate
(0.25)% No change 0.25%
Change in rate of compensation increase:
(0.25)% $39,546 $(2,725) $(42,241)
No change 42,440 — (39,662)
0.25% 45,662 2,869 (37,119)
Change in rate of pension increase:
(0.25)% $7,032 $(33,308) $(71,044)
No change 42,440 — (39,662)
0.25% 80,159 35,296 (6,613)
The discount rate used is the interest rate on high quality (AA
rated) corporate bonds that have a maturity approximating
the term of the related obligations. In estimating the expected
return on plan assets, appropriate consideration is taken into
account of the historical performance for the major asset
classes held, or anticipated to be held, by the applicable
pension funds and of current forecasts of future rates of return
for those asset classes.
Staples’ investment strategy for worldwide pension plan
assets is to seek a competitive rate of return relative to an
appropriate level of risk depending on the funded status of
each plan. The majority of the plans’ investment managers
employ active investment management strategies with the
goal of outperforming the broad markets in which they invest.
Risk management practices include diversification across
asset classes and investment styles and periodic rebalancing
toward asset allocation targets. A portion of the currency risk
related to investments in equity securities, real estate and debt
securities is hedged.
The target allocation reflects a risk/return profile Staples feels
is appropriate relative to each plan’s liability structure and
return goals. Staples conducts periodic asset-liability studies
for the plan assets in order to model various potential asset
allocations in comparison to each plan’s forecasted liabilities
and liquidity needs.