Pensions and Other Post-retirement Benefits | 12 Months Ended |
Dec. 31, 2013 |
Compensation and Retirement Disclosure [Abstract] | ' |
Pensions and Other Post-retirement Benefits | ' |
Pensions and Other Post-retirement Benefits |
The obligation and funded status of the Company’s pension and other post-retirement benefit plans are shown below. The Pension Benefits column aggregates defined benefit pension plans in the U.S., Germany and England and the U.S. supplemental retirement plans. The Other Benefits column includes the domestic retiree medical and life insurance plan. |
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| | Pension Benefits | | Other Benefits | | | | | | | | |
(Thousands) | | 2013 | | 2012 | | 2013 | | 2012 | | | | | | | | |
Change in benefit obligation | | | | | | | | | | | | | | | | |
Benefit obligation at beginning of year | | $ | 253,839 | | | $ | 210,996 | | | $ | 34,294 | | | $ | 33,209 | | | | | | | | | |
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Service cost | | 9,724 | | | 7,915 | | | 305 | | | 285 | | | | | | | | | |
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Interest cost | | 9,936 | | | 9,912 | | | 1,243 | | | 1,439 | | | | | | | | | |
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Plan amendments | | — | | | 117 | | | — | | | — | | | | | | | | | |
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Actuarial (gain) loss | | (28,581 | ) | | 32,595 | | | (2,396 | ) | | 1,493 | | | | | | | | | |
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Benefit payments from fund | | (22,893 | ) | | (7,523 | ) | | — | | | — | | | | | | | | | |
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Benefit payments directly by Company | | (136 | ) | | (129 | ) | | (2,271 | ) | | (2,431 | ) | | | | | | | | |
Expenses paid from assets | | (613 | ) | | (293 | ) | | — | | | — | | | | | | | | | |
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Medicare Part D subsidy | | — | | | — | | | 223 | | | 299 | | | | | | | | | |
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Foreign currency exchange rate changes | | 472 | | | 249 | | | — | | | — | | | | | | | | | |
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Benefit obligation at end of year | | 221,748 | | | 253,839 | | | 31,398 | | | 34,294 | | | | | | | | | |
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Change in plan assets | | | | | | | | | | | | | | | | |
Fair value of plan assets at beginning of year | | 163,436 | | | 140,344 | | | — | | | — | | | | | | | | | |
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Actual return on plan assets | | 23,824 | | | 18,534 | | | — | | | — | | | | | | | | | |
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Employer contributions | | 9,615 | | | 12,218 | | | — | | | — | | | | | | | | | |
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Benefit payments from fund | | (22,893 | ) | | (7,523 | ) | | — | | | — | | | | | | | | | |
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Expenses paid from assets | | (613 | ) | | (293 | ) | | — | | | — | | | | | | | | | |
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Foreign currency exchange rate changes | | 125 | | | 156 | | | — | | | — | | | | | | | | | |
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Fair value of plan assets at end of year | | 173,494 | | | 163,436 | | | — | | | — | | | | | | | | | |
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Funded status at end of year | | $ | (48,254 | ) | | $ | (90,403 | ) | | $ | (31,398 | ) | | $ | (34,294 | ) | | | | | | | | |
Amounts recognized in the Consolidated | | | | | | | | | | | | | | | | |
Balance Sheets consist of: | | | | | | | | |
Other assets | | $ | 1,321 | | | $ | 1,112 | | | $ | — | | | $ | — | | | | | | | | | |
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Other liabilities and accrued items | | (1,138 | ) | | (475 | ) | | (2,663 | ) | | (2,663 | ) | | | | | | | | |
Retirement and post-employment benefits | | (48,437 | ) | | (91,040 | ) | | (28,735 | ) | | (31,631 | ) | | | | | | | | |
| | $ | (48,254 | ) | | $ | (90,403 | ) | | $ | (31,398 | ) | | $ | (34,294 | ) | | | | | | | | |
Amounts recognized in other comprehensive income (before tax) consist of: | | | | | | | | | | | | | | | | |
Net actuarial loss | | $ | 78,983 | | | $ | 127,027 | | | $ | 52 | | | $ | 2,472 | | | | | | | | | |
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Net prior service (credit) cost | | (1,734 | ) | | (2,075 | ) | | — | | | 115 | | | | | | | | | |
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| | $ | 77,249 | | | $ | 124,952 | | | $ | 52 | | | $ | 2,587 | | | | | | | | | |
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Amortizations expected to be recognized during next fiscal year (before tax): | | | | | | | | | | | | | | | | |
Amortization of net loss | | $ | 5,100 | | | $ | 7,731 | | | $ | — | | | $ | — | | | | | | | | | |
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Amortization of prior service credit | | (434 | ) | | (341 | ) | | — | | | 115 | | | | | | | | | |
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| | $ | 4,666 | | | $ | 7,390 | | | $ | — | | | $ | 115 | | | | | | | | | |
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Additional information | | | | | | | | | | | | | | | | |
Accumulated benefit obligation for all defined benefit pension plans | | $ | 213,585 | | | $ | 242,854 | | | — | | | — | | | | | | | | | |
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For defined benefit pension plans with benefit obligations in excess of plan assets: | | | | | | | | | | | | | | | | |
Aggregate benefit obligation | | 216,567 | | | 249,075 | | | — | | | — | | | | | | | | | |
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Aggregate fair value of plan assets | | 166,992 | | | 157,560 | | | — | | | — | | | | | | | | | |
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For defined benefit pension plans with accumulated benefit obligations in excess of plan assets: | | | | | | | | | | | | | | | | |
Aggregate accumulated benefit obligation | | 208,404 | | | 238,090 | | | — | | | — | | | | | | | | | |
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Aggregate fair value of plan assets | | 166,992 | | | 157,560 | | | — | | | — | | | | | | | | | |
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Components of net periodic benefit cost and other amounts recognized in other comprehensive income (OCI) |
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| | Pension Benefits | | Other Benefits |
(Thousands) | | 2013 | | 2012 | | 2011 | | 2013 | | 2012 | | 2011 |
Net periodic benefit cost | | | | | | | | | | | | |
Service cost | | $ | 9,724 | | | $ | 7,915 | | | $ | 6,955 | | | $ | 305 | | | $ | 285 | | | $ | 284 | |
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Interest cost | | 9,936 | | | 9,912 | | | 9,786 | | | 1,243 | | | 1,439 | | | 1,596 | |
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Expected return on plan assets | | (12,261 | ) | | (11,934 | ) | | (11,050 | ) | | — | | | — | | | — | |
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Amortization of prior service cost (benefit) | | (340 | ) | | (335 | ) | | (335 | ) | | 115 | | | 87 | | | (36 | ) |
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Recognized net actuarial loss | | 7,912 | | | 5,605 | | | 3,920 | | | — | | | — | | | — | |
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Net periodic benefit cost | | $ | 14,971 | | | $ | 11,163 | | | $ | 9,276 | | | $ | 1,663 | | | $ | 1,811 | | | $ | 1,844 | |
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| Pension Benefits | | Other Benefits | |
(Thousands) | 2013 | | 2012 | | 2011 | | 2013 | | 2012 | | 2011 | |
Change in other comprehensive income | | | | | | | | | | | | |
OCI at beginning of year | $ | 124,955 | | | $ | 104,056 | | | $ | 69,716 | | | $ | 2,587 | | | $ | 1,180 | | | $ | (275 | ) | |
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Increase (decrease) in OCI: | | | | | | | | | | | | |
Recognized during year — prior service cost (credit) | 340 | | | 335 | | | 335 | | | (115 | ) | | (87 | ) | | 36 | | |
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Recognized during year — net actuarial (losses) gains | (7,912 | ) | | (5,605 | ) | | (3,920 | ) | | — | | | — | | | — | | |
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Occurring during year — prior service cost | — | | | 117 | | | 430 | | | — | | | — | | | — | | |
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Occurring during year — net actuarial losses (gains) | (40,143 | ) | | 25,995 | | | 37,543 | | | (2,397 | ) | | 1,494 | | | 1,419 | | |
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Other adjustments | (3 | ) | | — | | | — | | | (23 | ) | | — | | | — | | |
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Foreign currency exchange rate changes | 12 | | | 57 | | | (48 | ) | | — | | | — | | | — | | |
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OCI at end of year | $ | 77,249 | | | $ | 124,955 | | | $ | 104,056 | | | $ | 52 | | | $ | 2,587 | | | $ | 1,180 | | |
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Summary of key valuation assumptions |
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| | Pension Benefits | | Other Benefits | | | | | | |
| | 2013 | | 2012 | | 2011 | | 2013 | | 2012 | | 2011 | | | | | | |
Weighted-average assumptions used to determine benefit obligations at fiscal year end | | | | | | | | | | | | | | | | | | |
Discount rate | | 4.8 | % | | 3.99 | % | | N/A | | | 4.5 | % | | 3.75 | % | | N/A | | | | | | | |
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Rate of compensation increase | | 4.43 | % | | 4.44 | % | | N/A | | | 4.5 | % | | 4.5 | % | | N/A | | | | | | | |
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Weighted-average assumptions used to determine net cost for the fiscal year | | | | | | | | | | | | | | | | | | |
Discount rate | | 3.97 | % | | 4.81 | % | | 5.49 | % | | 3.75 | % | | 4.5 | % | | 5.13 | % | | | | | | |
Expected long-term return on plan assets | | 7.44 | % | | 7.65 | % | | 7.88 | % | | N/A | | | N/A | | | N/A | | | | | | | |
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Rate of compensation increase | | 4.42 | % | | 4.43 | % | | 3.97 | % | | 4.5 | % | | 4.5 | % | | 4 | % | | | | | | |
The Company uses a December 31 measurement date for the above plans. |
Effective January 1, 2014, the Company revised the expected long-term rate of return assumption used in calculating the annual expense for its domestic defined benefit pension plan, decreasing it to 7.25% from 7.50%. Effective January 1, 2013, the Company revised the expected long-term rate of return assumption used in calculating the annual expense for its domestic defined benefit pension plan, decreasing it to 7.50% from 7.75%, and effective January 1, 2012, this assumption was decreased to 7.75% from 8.00%. In each instance, the impact was accounted for as a change in estimate. |
Management establishes the domestic expected long-term rate of return assumption by reviewing its historical trends and analyzing the current and projected market conditions in relation to the plan’s asset allocation and risk management objectives. Consideration is given to both recent plan asset performance as well as plan asset performance over various long-term periods of time, with an emphasis on the assumption being a prospective, long-term rate of return. Management consults with and considers the opinions of its outside investment advisors and actuaries when establishing the rate and reviews its assumptions with the Audit Committee of the Board of Directors. Management believes that the 7.25% domestic expected long-term rate of return assumption is achievable and reasonable given current market conditions and forecasts, asset allocations, investment policies and investment risk objectives. |
The rate of compensation increase assumption was changed to 4.5% for 2012 and years after in the domestic defined benefit pension plan and the domestic retiree medical plan. Previously, a graded assumption was used that resulted in an assumption of 4.0% for the 2011. |
In the second quarter 2012, the Company closed its domestic defined benefit pension plan to new entrants. Current plan participants will continue to accrue benefits under the existing formulas while new hires will be offered an enhanced defined contribution plan. |
Assumptions for the defined benefit pension plans in Germany and England are determined separately from the U.S. plan assumptions, based on historical trends and current and projected market conditions in Germany and England. The plan in Germany is unfunded and the plan in England has assets that are approximately 4.0% of the Company’s aggregated total fair value of plan assets as of year-end 2013. |
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Assumed health care trend rates at fiscal year end | | 2013 | | 2012 | | | | | | | | | | | | | | | | | | | | |
Health care trend rate assumed for next year | | 7.50% | | 8.00% | | | | | | | | | | | | | | | | | | | | |
Rate that the trend rate gradually declines to (ultimate trend rate) | | 5.00% | | 5.00% | | | | | | | | | | | | | | | | | | | | |
Year that the rate reaches the ultimate trend rate | | 2019 | | 2019 | | | | | | | | | | | | | | | | | | | | |
Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects: |
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| | 1-Percentage- | | 1-Percentage- | | | | | | | | |
Point Increase | Point Decrease | | | | | | | | |
(Thousands) | | 2013 | | 2012 | | 2013 | | 2012 | | | | | | | | |
Effect on total of service and interest cost components | | $ | 30 | | | $ | 35 | | | $ | (26 | ) | | $ | (31 | ) | | | | | | | | |
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Effect on post-retirement benefit obligation | | 602 | | | 827 | | | (567 | ) | | (723 | ) | | | | | | | | |
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Plan Assets |
The following tables present the fair values of the Company’s defined benefit pension plan assets as of December 31, 2013 and 2012 by asset category. See Note H to the Consolidated Financial Statements for definitions of fair value hierarchy. |
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| | December 31, 2013 | | | | | | | | |
| | Total | | Level 1 | | Level 2 | | Level 3 | | | | | | | | |
(Thousands) | | | | | | | | | | | | | | | | |
Cash | | $ | 6,568 | | | $ | 6,568 | | | $ | — | | | $ | — | | | | | | | | | |
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Equity securities: | | | | | | | | | | | | | | | | |
U.S. (a) | | 63,321 | | | 54,095 | | | 9,226 | | | — | | | | | | | | | |
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International (b) | | 27,403 | | | 23,911 | | | 3,492 | | | — | | | | | | | | | |
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Emerging markets (c) | | 14,165 | | | 13,908 | | | 257 | | | — | | | | | | | | | |
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Fixed income securities: | | | | | | | | | | | | | | | | |
Intermediate-term bonds (d) | | 21,874 | | | 14,482 | | | 7,392 | | | — | | | | | | | | | |
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Short-term bonds (e) | | 11,608 | | | 11,608 | | | — | | | — | | | | | | | | | |
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Global bonds (f) | | 12,728 | | | 10,879 | | | 1,849 | | | — | | | | | | | | | |
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Other types of investments: | | | | | | | | | | | | | | | | |
Real estate fund (g) | | 9,943 | | | 9,882 | | | 61 | | | — | | | | | | | | | |
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Multi-strategy hedge funds (h) | | 5,467 | | | — | | | — | | | 5,467 | | | | | | | | | |
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Private equity funds | | 417 | | | — | | | — | | | 417 | | | | | | | | | |
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Total | | $ | 173,494 | | | $ | 145,333 | | | $ | 22,277 | | | $ | 5,884 | | | | | | | | | |
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| | 31-Dec-12 | | | | | | | | |
| | Total | | Level 1 | | Level 2 | | Level 3 | | | | | | | | |
(Thousands) | | | | | | | | | | | | | | | | |
Cash | | $ | 7,388 | | | $ | 7,388 | | | $ | — | | | $ | — | | | | | | | | | |
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Equity securities: | | | | | | | | | | | | | | | | |
U.S. (a) | | 54,691 | | | 45,025 | | | 9,666 | | | — | | | | | | | | | |
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International (b) | | 22,683 | | | 19,650 | | | 3,033 | | | — | | | | | | | | | |
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Emerging markets (c) | | 14,786 | | | 14,535 | | | 251 | | | — | | | | | | | | | |
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Fixed income securities: | | | | | | | | | | | | | | | | |
Intermediate-term bonds (d) | | 26,749 | | | 18,378 | | | 8,371 | | | — | | | | | | | | | |
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Short-term bonds (e) | | 11,656 | | | 11,656 | | | — | | | — | | | | | | | | | |
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Global bonds (f) | | 12,854 | | | 11,185 | | | 1,669 | | | — | | | | | | | | | |
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Other types of investments: | | | | | | | | | | | | | | | | |
Real estate fund (g) | | 7,793 | | | 7,768 | | | 25 | | | — | | | | | | | | | |
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Multi-strategy hedge funds (h) | | 4,191 | | | — | | | — | | | 4,191 | | | | | | | | | |
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Private equity funds | | 645 | | | — | | | — | | | 645 | | | | | | | | | |
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Total | | $ | 163,436 | | | $ | 135,585 | | | $ | 23,015 | | | $ | 4,836 | | | | | | | | | |
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(a) | Mutual funds that invest in various sectors of the U.S. market. | | | | | | | | | | | | | | | | | | | | | | | |
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(b) | Mutual funds that invest in non-U.S. companies primarily in developed countries that are generally considered to be value stocks. | | | | | | | | | | | | | | | | | | | | | | | |
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(c) | Mutual funds that invest in non-U.S. companies in emerging market countries. | | | | | | | | | | | | | | | | | | | | | | | |
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(d) | Includes a mutual fund that employs a value-oriented approach to fixed income investment management and a mutual fund that invests primarily in investment-grade debt securities. | | | | | | | | | | | | | | | | | | | | | | | |
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(e) | Includes a mutual fund that seeks a market rate of return for a fixed-income portfolio with low relative volatility of returns, investing generally in U.S. and foreign debt securities maturing in five years or less. | | | | | | | | | | | | | | | | | | | | | | | |
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(f) | Mutual funds that invest in domestic and foreign sovereign securities, fixed income securities, mortgage-backed and asset-backed bonds, convertible bonds, high yield bonds and emerging market bonds. | | | | | | | | | | | | | | | | | | | | | | | |
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(g) | Includes a mutual fund that typically invests at least 80% of its assets in equity and debt securities of companies in the real estate industry or related industries or in companies which own significant real estate assets at the time of investment. | | | | | | | | | | | | | | | | | | | | | | | |
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(h) | Includes a hedge fund that employs multiple strategies to multiple asset classes with low correlations. | | | | | | | | | | | | | | | | | | | | | | | |
The following table summarizes changes in the fair value of the Company’s defined benefit pension plan Level 3 assets measured using significant unobservable inputs during 2013 and 2012: |
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(Thousands) | | Multi- | | Private | | Total | | | | | | | | | | | | |
strategy | Equity | | | | | | | | | | | | |
Hedge Funds | Funds | | | | | | | | | | | | |
Balance as of January 1, 2012 | | $ | 3,989 | | | $ | 682 | | | $ | 4,671 | | | | | | | | | | | | | |
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Actual return: | | | | | | | | | | | | | | | | | | |
On assets still held at reporting date | | 386 | | | 17 | | | 403 | | | | | | | | | | | | | |
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On assets sold during the period | | (57 | ) | | 4 | | | (53 | ) | | | | | | | | | | | | |
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Purchases, sales and settlements | | (127 | ) | | (58 | ) | | (185 | ) | | | | | | | | | | | | |
Balance as of December 31, 2012 | | $ | 4,191 | | | $ | 645 | | | $ | 4,836 | | | | | | | | | | | | | |
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Actual return: | | | | | | | | | | | | | | | | | | |
On assets still held at reporting date | | 1,276 | | | (93 | ) | | 1,183 | | | | | | | | | | | | | |
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On assets sold during the period | | — | | | 229 | | | 229 | | | | | | | | | | | | | |
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Purchases, sales and settlements | | — | | | (364 | ) | | (364 | ) | | | | | | | | | | | | |
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Balance as of December 31, 2013 | | $ | 5,467 | | | $ | 417 | | | $ | 5,884 | | | | | | | | | | | | | |
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Capital may be withdrawn from the multi-strategy hedge fund partnership on a monthly basis with a ten day notice period. |
The Company’s domestic defined benefit pension plan investment strategy, as approved by the Governance and Organization Committee of the Board of Directors, is to employ an allocation of investments that will generate returns equal to or better than the projected long-term growth of pension liabilities so that the plan will be self-funding. The return objective is to maximize investment return to achieve and maintain a 100% funded status over time, taking into consideration required cash contributions. The allocation of investments is designed to maximize the advantages of diversification while mitigating the risk and overall portfolio volatility to achieve the return objective. Risk is defined as the annual variability in value and is measured in terms of the standard deviation of investment return. Under the Company’s investment policies, allowable investments include domestic equities, international equities, fixed income securities, cash equivalents and alternative securities (which include real estate, private venture capital investments, hedge funds and tactical asset allocation). Ranges, in terms of a percentage of the total assets, are established for each allowable class of security. Derivatives may be used to hedge an existing security or as a risk reduction strategy. Current asset allocation guidelines are to invest 30% to 70% in equity securities, 20% to 50% in fixed income securities and cash and up to 20% in alternative securities. Management reviews the asset allocation on a quarterly or more frequent basis and makes revisions as deemed necessary. |
None of the plan assets noted above are invested in the Company’s common stock. |
Cash Flows |
Employer Contributions |
The Company expects to contribute $19.0 million to its domestic defined benefit pension plan and $2.7 million to its other benefit plans in 2014. |
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Estimated Future Benefit Payments |
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid: |
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| | Other Benefits | | | | | | | | | | | | |
| | Pension Benefits | | Gross Benefit | | Net of | | | | | | | | | | | | |
Payment | Medicare | | | | | | | | | | | | |
| Part D | | | | | | | | | | | | |
| Subsidy | | | | | | | | | | | | |
(Thousands) | | | | | | | | | | | | | | | | | | |
2014 | | $ | 10,280 | | | $ | 2,663 | | | $ | 2,322 | | | | | | | | | | | | | |
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2015 | | 9,629 | | | 2,745 | | | 2,384 | | | | | | | | | | | | | |
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2016 | | 10,201 | | | 2,789 | | | 2,410 | | | | | | | | | | | | | |
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2017 | | 12,867 | | | 2,852 | | | 2,452 | | | | | | | | | | | | | |
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2018 | | 11,518 | | | 2,883 | | | 2,457 | | | | | | | | | | | | | |
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2019 through 2023 | | 71,293 | | | 13,270 | | | 10,677 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Other Benefit Plans |
In addition to the plans shown above, the Company also has certain foreign subsidiaries with accrued unfunded pension and other post-employment arrangements. The liability for these arrangements was $2.3 million at December 31, 2013 and $2.6 million at December 31, 2012 and was included in retirement and post-employment benefits on the Consolidated Balance Sheets. |
The Company also sponsors defined contribution plans available to substantially all U.S. employees. The Company’s annual defined contribution expense, including the expense for the enhanced defined contribution plan that was implemented in the second quarter 2012, was $2.8 million in 2013, $2.5 million in 2012 and $2.2 million in 2011. |