## ManageMent’s Discussion anD analysis 

Approximately 50% of fiscal 2014’s natural gas requirements have been hedged at average prices comparable to those realized in fiscal 2013. Any un-hedged volume should benefit from the current low prices of nearby natural gas and therefore increase the adjusted gross margin rate. In addition, limited futures positions for fiscal 2015 to 2017 have also been taken. Some of these positions are at prices higher than current market value, but are at the same or better levels than those achieved in fiscal 2013. We will continue to monitor natural gas market dynamics with the objective of minimizing natural gas costs. 

As discussed previously, the Company entered into a new five-year credit agreement of $150.0 million and a five-year interest rate swap agreement at 2.09%. The reduction in the credit facility combined with the attractive interest rate swap should generate some financing costs savings. 

With the increase in the discount rate at the end of fiscal 2013, pension plan expenses are expected to be slightly lower next year. However, pension cash contributions were increased following this year’s actuarial valuations and may increase in the future as and when new actuarial valuations are done. In fiscal 2014, total pension cash contributions are expected to increase by approximately $4.5 million as the Company will make a one-time cash contribution for future plan benefit updates committed in fiscal 2013 and may fund the potential withdrawal of a SERP by a senior executive following his retirement. In the current financial environment, return on pension plan assets may vary from historical plan performance. This, combined with the discount rate used in assessing the plan liabilities, may impact pension plan expenses in future years. 

