Management’s Discussion and Analysis of Financial Condition and Results of Operations The following key assumptions were used to calculate the benefit obligation and net periodic cost for the periods indicated: The long term expected rate of return on plan assets assumptions were determined with input from independent investment con- sultants and plan actuaries, utilizing asset pricing models and con- sidering historic returns. The discount rates we used for valuing pension liabilities are based on a review of high quality corporate bond yields with maturities approximating the remaining life of the projected benefit obligation. Postretirement Benefits Other than Pensions. We and certain of our subsidiaries provide postretirement health care and life insurance benefits to current and former employees hired before January 1, 1990, who meet minimum age and years of service requirements. We do not pre-fund these benefits and retain the right to modify or terminate the plans. We expect, based on current actuarial calculations, to contribute cash of $1.2 million to our postretirement benefit plans in 2013. The weighted average dis- count rates assumed to determine postretirement benefit obliga- tions were 3.2%, 4.25% and 4.75% for 2012, 2011, and 2010, respectively. The health care cost trend rates assumed were 8.0%, 8.5% and 9.0% in 2012, 2011 and 2010, respectively. See Note 7, “Pension and Postretirement Benefits,” to the Notes to the Con- solidated Financial Statements for details of the impact of a one percentage point change in assumed health care trend rates on the postretirement health care benefit expense and obligation. Information regarding new accounting pronouncements is included in Note 1 to the Consolidated Financial Statements. The following is an analysis of the potential changes in interest rates and currency exchange rates based upon sensitivity analysis that models effects of shifts in rates. These are not forecasts. Total debt outstanding was $400 million at December 31, 2012, substantially all of which was at fixed rates of interest ranging from 5.50% to 6.55%. Our cash flows and earnings are subject to fluctuations from changes in interest rates and foreign currency exchange rates. We manage our exposures to these market risks through internally established policies and procedures and, when deemed appro- priate, through the use of interest-rate swap agreements and for- ward exchange contracts. We do not enter into derivatives or other financial instruments for trading or speculative purposes. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Recent Accounting Pronouncements 30 • Our year-end portfolio is comprised primarily of fixed-rate debt; therefore, the effect of a market change in interest rates would not be significant. • If, on January 1, 2013, currency exchange rates were to decline 1% against the U.S. dollar and the decline remained in place for 2013, based on our year-end 2012 portfolio, net income would not be materially impacted. Pension Benefits December 31, 2012 2011 2010 Benefit Obligations U.S. Plans: Discount rate 4.20% 5.00% 5.80% Rate of compensation increase 3.50% 3.50% 3.50% Non-U.S. Plans: Discount rate 3.93% 4.56% 5.40% Rate of compensation increase 3.14% 3.89% 3.74% Net Periodic Benefit Cost U.S. Plans: Discount rate 5.00% 5.80% 6.10% Expected rate of return on plan assets 8.25% 8.25% 8.25% Rate of compensation increase 3.50% 3.50% 3.65% Non-U.S. Plans: Discount rate 4.56% 5.40% 5.76% Expected rate of return on plan assets 7.00% 7.01% 7.13% Rate of compensation increase 3.89% 3.74% 3.72%