Retirement Benefits | 12 Months Ended |
Dec. 31, 2013 |
Compensation and Retirement Disclosure [Abstract] | ' |
Retirement benefits | ' |
Note 3 – Retirement Benefits |
|
Defined-benefit Pension Plans |
|
Summary |
We have various defined-benefit pension plans covering eligible current and former employees. Benefits under most plans are based on salary and years of service. There are limits to the amount of benefits which can be paid to participants from a U.S. qualified pension plan. We maintain a nonqualified U.S. plan to pay benefits for those eligible current and former employees in the U.S. whose benefits exceed the regulatory limits. |
|
Components of Net Periodic Pension Cost |
| (In millions) | | U.S. Plans | | Non-U.S. Plans | | Total | | | | |
| Years Ended December 31, | | 2013 | 2012 | 2011 | | 2013 | 2012 | 2011 | | 2013 | 2012 | 2011 | | | | |
| | | | | | | | | | | | | | | | | |
| Service cost | $ | - | - | - | $ | 15 | 11.1 | 10.2 | $ | 15 | 11.1 | 10.2 | | | | |
| Interest cost on projected benefit obligation | | 42.2 | 43.8 | 46.2 | | 19.1 | 19.1 | 16.9 | | 61.3 | 62.9 | 63.1 | | | | |
| Return on assets – expected | | -56.9 | -60 | -65 | | -12.9 | -12.2 | -12 | | -69.8 | -72.2 | -77 | | | | |
| Amortization of losses | | 45.1 | 39.5 | 28.2 | | 6.1 | 4 | 2.8 | | 51.2 | 43.5 | 31 | | | | |
| Amortization of prior service cost | | - | - | - | | 0.8 | 2 | 1.5 | | 0.8 | 2 | 1.5 | | | | |
| Settlement loss | | 0.1 | 5 | - | | 2.6 | 3.3 | 2.2 | | 2.7 | 8.3 | 2.2 | | | | |
| Net periodic pension cost | $ | 30.5 | 28.3 | 9.4 | $ | 30.7 | 27.3 | 21.6 | $ | 61.2 | 55.6 | 31 | | | | |
Obligations and Funded Status |
Changes in the projected benefit obligation (“PBO”) and plan assets for our pension plans are as follows: |
|
| (In millions) | | U.S. Plans | | Non-U.S. Plans | | Total | | | |
| Years Ended December 31, | | 2013 | | 2012 | | 2013 | | 2012 | | 2013 | | 2012 | | | |
| | | | | | | | | | | | | | | | | |
| Benefit obligation at beginning of year | $ | 1,031.30 | | 990.7 | | 392.3 | | 306.9 | | 1,423.60 | | 1,297.60 | | | |
| Service cost | | - | | - | | 15 | | 11.1 | | 15 | | 11.1 | | | |
| Interest cost | | 42.2 | | 43.8 | | 19.1 | | 19.1 | | 61.3 | | 62.9 | | | |
| Participant contributions | | - | | - | | 3.8 | | 3.5 | | 3.8 | | 3.5 | | | |
| Plan amendments | | - | | - | | -4.9 | | 11.7 | | -4.9 | | 11.7 | | | |
| Curtailments | | - | | - | | -0.2 | | -0.4 | | -0.2 | | -0.4 | | | |
| Settlements | | -0.5 | | -13.9 | | -2 | | -3.2 | | -2.5 | | -17.1 | | | |
| Benefits paid | | -43.6 | | -42.3 | | -18.8 | | -22 | | -62.4 | | -64.3 | | | |
| Actuarial (gains) losses | | -94.5 | | 53 | | -8 | | 54.9 | | -102.5 | | 107.9 | | | |
| Foreign currency exchange effects | | - | | - | | -5.9 | | 10.7 | | -5.9 | | 10.7 | | | |
| Benefit obligation at end of year | $ | 934.9 | | 1,031.30 | | 390.4 | | 392.3 | | 1,325.30 | | 1,423.60 | | | |
| | | | | | | | | | | | | | | | | |
| Fair value of plan assets at beginning of year | $ | 756.3 | | 685.4 | | 283 | | 230.5 | | 1,039.30 | | 915.9 | | | |
| Return on assets – actual | | 85.5 | | 89.9 | | 16.6 | | 34.7 | | 102.1 | | 124.6 | | | |
| Participant contributions | | - | | - | | 3.8 | | 3.5 | | 3.8 | | 3.5 | | | |
| Employer contributions | | 14.1 | | 37.2 | | 40.1 | | 32.8 | | 54.2 | | 70 | | | |
| Settlements | | -0.5 | | -13.9 | | -2 | | -3.2 | | -2.5 | | -17.1 | | | |
| Benefits paid | | -43.6 | | -42.3 | | -18.8 | | -22 | | -62.4 | | -64.3 | | | |
| Foreign currency exchange effects | | - | | - | | -0.7 | | 6.7 | | -0.7 | | 6.7 | | | |
| Fair value of plan assets at end of year | $ | 811.8 | | 756.3 | | 322 | | 283 | | 1,133.80 | | 1,039.30 | | | |
| | | | | | | | | | | | | | | | | |
| Funded status | $ | -123.1 | | -275 | | -68.4 | | -109.3 | | -191.5 | | -384.3 | | | |
| | | | | | | | | | | | | | | | | |
| Included in: | | | | | | | | | | | | | | | |
| | Noncurrent asset | $ | - | | - | | -28.6 | | -21.9 | | -28.6 | | -21.9 | | | |
| | Current liability, included in accrued liabilities | | 0.8 | | 0.9 | | 4.5 | | 7.5 | | 5.3 | | 8.4 | | | |
| | Noncurrent liability | | 122.3 | | 274.1 | | 92.5 | | 123.7 | | 214.8 | | 397.8 | | | |
| Net pension liability | $ | 123.1 | | 275 | | 68.4 | | 109.3 | | 191.5 | | 384.3 | | | |
The 2012 U.S. Plans settlements primarily reflect the lump sum payment due to the retirement of our former chief executive officer. |
Other Changes in Plan Assets and Benefit Recognized in Other Comprehensive Income (Loss) |
| (In millions) | | U.S. Plans | | Non-U.S. Plans | | Total | |
| Years Ended December 31, | | 2013 | | 2012 | | 2013 | | 2012 | | 2013 | | 2012 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Benefit plan net experience losses recognized in | | | | | | | | | | | | | |
| | accumulated other comprehensive income (loss): | | | | | | | | | | | | | |
| | | Beginning of year | $ | -491.9 | | -513.3 | | -59.7 | | -34.6 | | -551.6 | | -547.9 | |
| | | Net experience gains (losses) arising during the year | | 123.1 | | -23.1 | | 11.7 | | -32.4 | | 134.8 | | -55.5 | |
| | | Reclassification adjustment for amortization of | | | | | | | | | | | | | |
| | | | prior experience losses included in net income | | 45.2 | | 44.5 | | 8.8 | | 7.3 | | 54 | | 51.8 | |
| | | End of year | $ | -323.6 | | -491.9 | | -39.2 | | -59.7 | | -362.8 | | -551.6 | |
| | | | | | | | | | | | | | | | | |
| Benefit plan prior service cost recognized in | | | | | | | | | | | | | |
| | accumulated other comprehensive income (loss): | | | | | | | | | | | | | |
| | | Beginning of year | $ | - | | - | | -15.8 | | -6.1 | | -15.8 | | -6.1 | |
| | | Prior service credit (cost) from plan amendments | | | | | | | | | | | | | |
| | | | during the year | | - | | - | | 4.9 | | -11.7 | | 4.9 | | -11.7 | |
| | | Reclassification adjustment for amortization of | | | | | | | | | | | | | |
| | | | prior service cost included in net income | | - | | - | | 0.7 | | 2 | | 0.7 | | 2 | |
| | | End of year | $ | - | | - | | -10.2 | | -15.8 | | -10.2 | | -15.8 | |
Approximately $30.9 million of experience loss and $0.8 million of prior service cost are expected to be amortized from accumulated other comprehensive income (loss) into net periodic pension cost during 2014. |
|
The net experience gains in 2013 (the majority attributed to the U.S. plans) were primarily due to the higher discount rates at the end of the year and the actual return on assets being higher than expected. The net experience losses in 2012 were primarily due to the lower discount rate of the U.S. plans, partially offset by the actual return on assets being higher than expected. |
|
Information Comparing Plan Assets to Plan Obligations |
Information comparing plan assets to plan obligations as of December 31, 2013 and 2012 are aggregated below. The accumulated benefit obligation (“ABO”) differs from the PBO in that the ABO is based on the benefit earned through the date noted. The PBO includes assumptions about future compensation levels for plans that have not been frozen. |
| (In millions) | | U.S. Plans | Non-U.S. Plans | Total | | |
| December 31, | | 2013 | | 2012 | | 2013 | | 2012 | | 2013 | | 2012 | | | |
| | | | | | | | | | | | | | | | | |
| Pension plans with an accumulated benefit obligation in excess of plan assets: | | | | | | | | | | | | | | | |
| | Fair value of plan assets | $ | 811.8 | | 756.3 | | 38.1 | | 137.2 | | 849.9 | | 893.5 | | | |
| | Accumulated benefit obligation | | 934.9 | | 1,031.30 | | 103.6 | | 223.2 | | 1,038.50 | | 1,254.50 | | | |
| | Projected benefit obligation | | 934.9 | | 1,031.30 | | 135.1 | | 268.4 | | 1,070.00 | | 1,299.70 | | | |
The ABO for our U.S. pension plans was $934.9 million in 2013 and $1,031.3 million in 2012. The ABO for our Non-U.S. pension plans was $345.3 million in 2013 and $345.1 million in 2012. |
Assumptions |
The weighted-average assumptions used in determining the net pension cost and benefit obligations for our pension plans were as follows: |
| | | U.S. Plans | | Non-U.S. Plans | | | | |
| | | 2013 | | 2012 | | 2011 | | 2013 | | 2012 | | 2011 | | | | |
| | | | | | | | | | | | | | | | | |
| Discount rate: | | | | | | | | | | | | | | | |
| | Pension cost | 4.20% | | 4.60% | | 5.30% | | 5.30% | | 5.40% | | 5.80% | | | | |
| | Benefit obligation at year end | 5.00% | | 4.20% | | 4.60% | | 6.30% | | 5.30% | | 5.40% | | | | |
| | | | | | | | | | | | | | | | | |
| Expected return on assets – pension cost | 8.00% | | 8.25% | | 8.75% | | 4.64% | | 4.92% | | 5.16% | | | | |
| | | | | | | | | | | | | | | | | |
| Average rate of increase in salaries(a): | | | | | | | | | | | | | | | |
| | Pension cost | N/A | | N/A | | N/A | | 3.80% | | 3.20% | | 3.30% | | | | |
| | Benefit obligation at year end | N/A | | N/A | | N/A | | 3.90% | | 3.80% | | 3.20% | | | | |
|
Salary scale assumptions are determined through historical experience and vary by age and industry. The U.S. plan benefits are frozen. Pension benefits will not increase due to future salary increases. |
|
|
The RP-2000 Combined Healthy Blue Collar mortality table and the RP-2000 Combined Healthy White Collar mortality table were used to estimate the expected lives of participants in the U.S. pension plans. Expected lives of participants in non-U.S. pension plans were estimated using mortality tables in the country of operation. |
|
Estimated Future Cash Flows |
Estimated Future Contributions from the Company into Plan Assets |
Our policy is to fund at least the minimum actuarially determined amounts required by applicable regulations. In 2014, we expect to contribute $27.3 million to our non-U.S. pension plans, $25.9 million to our primary U.S. pension plan, and $0.8 million to our nonqualified U.S. pension plan. |
|
Estimated Future Benefit Payments from Plan Assets to Beneficiaries |
Projected benefit payments of the plans in the next 10 years using assumptions in effect at December 31, 2013, are as follows: |
|
| (In millions) | | U.S. Plans | | Non-U.S. Plans | | Total | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| 2014 | $ | 47.7 | | | 14.6 | | | 62.3 | | | | | | | | |
| 2015 | | 48.9 | | | 13.7 | | | 62.6 | | | | | | | | |
| 2016 | | 50 | | | 16.4 | | | 66.4 | | | | | | | | |
| 2017 | | 51.5 | | | 19.1 | | | 70.6 | | | | | | | | |
| 2018 | | 53.1 | | | 21.3 | | | 74.4 | | | | | | | | |
| 2019 through 2023 | $ | 287.3 | | | 168.8 | | | 456.1 | | | | | | | | |
Retirement Benefits Other than Pensions |
|
Summary |
We provide retirement healthcare benefits for eligible current and former U.S., Canadian, and Brazilian employees. Retirement benefits related to our former U.S. coal operation include medical benefits provided by the Pittston Coal Group Companies Employee Benefit Plan for UMWA Represented Employees (the “UMWA plans”) as well as costs related to Black Lung obligations. |
|
Components of Net Periodic Postretirement Cost |
The components of net periodic postretirement cost related to retirement benefits other than pensions were as follows: |
| (In millions) | | UMWA Plans | | Black Lung and Other Plans | | Total | | | | |
| Years Ended December 31, | | 2013 | 2012 | 2011 | | 2013 | 2012 | 2011 | | 2013 | 2012 | 2011 | | | | |
| | | | | | | | | | | | | | | | | |
| Service cost | $ | - | - | - | $ | 0.3 | 0.6 | - | $ | 0.3 | 0.6 | - | | | | |
| Interest cost on APBO | | 19.7 | 22.3 | 24 | | 1.9 | 2.8 | 2.8 | | 21.6 | 25.1 | 26.8 | | | | |
| Return on assets – expected | | -20.8 | -21.3 | -25.5 | | - | - | - | | -20.8 | -21.3 | -25.5 | | | | |
| Amortization of losses | | 19.6 | 21 | 14.7 | | 0.7 | 1.5 | 0.6 | | 20.3 | 22.5 | 15.3 | | | | |
| Amortization of prior service cost | | - | - | - | | 1.7 | 2 | 2 | | 1.7 | 2 | 2 | | | | |
| Net periodic postretirement cost | $ | 18.5 | 22 | 13.2 | $ | 4.6 | 6.9 | 5.4 | $ | 23.1 | 28.9 | 18.6 | | | | |
Obligations and Funded Status |
Changes in the accumulated postretirement benefit obligation (“APBO') and plan assets related to retirement healthcare benefits are as follows: |
|
| (In millions) | | UMWA Plans | | Black Lung and Other Plans | | Total | | | |
| Years Ended December 31, | | 2013 | | 2012 | | 2013 | | 2012 | | 2013 | | 2012 | | | |
| | | | | | | | | | | | | | | | | |
| APBO at beginning of year | $ | 525.3 | | 529.6 | | 53 | | 60.9 | | 578.3 | | 590.5 | | | |
| Service cost | | - | | - | | 0.3 | | 0.6 | | 0.3 | | 0.6 | | | |
| Interest cost | | 19.7 | | 22.3 | | 1.9 | | 2.8 | | 21.6 | | 25.1 | | | |
| Plan amendments | | -55.7 | | - | | - | | -1.9 | | -55.7 | | -1.9 | | | |
| Benefits paid | | -34.2 | | -35.7 | | -7.1 | | -6.6 | | -41.3 | | -42.3 | | | |
| Medicare subsidy received | | 3.1 | | 3.2 | | - | | - | | 3.1 | | 3.2 | | | |
| Actuarial (gains) losses, net | | -31.7 | | 5.9 | | 0.8 | | -2.2 | | -30.9 | | 3.7 | | | |
| Foreign currency exchange effects | | - | | - | | - | | -0.6 | | - | | -0.6 | | | |
| APBO at end of year | $ | 426.5 | | 525.3 | | 48.9 | | 53 | | 475.4 | | 578.3 | | | |
| | | | | | | | | | | | | | | | | |
| Fair value of plan assets at beginning of year | $ | 268.7 | | 268 | | - | | - | | 268.7 | | 268 | | | |
| Employer contributions | | 1 | | - | | 7.1 | | 6.6 | | 8.1 | | 6.6 | | | |
| Return on assets – actual | | 45.8 | | 33.5 | | - | | - | | 45.8 | | 33.5 | | | |
| Benefits paid | | -34.2 | | -36 | | -7.1 | | -6.6 | | -41.3 | | -42.6 | | | |
| Medicare subsidy received | | 3.1 | | 3.2 | | - | | - | | 3.1 | | 3.2 | | | |
| Fair value of plan assets at end of year | $ | 284.4 | | 268.7 | | - | | - | | 284.4 | | 268.7 | | | |
| | | | | | | | | | | | | | | | | |
| Funded status | $ | -142.1 | | -256.6 | | -48.9 | | -53 | | -191 | | -309.6 | | | |
| | | | | | | | | | | | | | | | | |
| Included in: | | | | | | | | | | | | | | | |
| | Current, included in accrued liabilities | $ | - | | - | | 5 | | 5 | | 5 | | 5 | | | |
| | Noncurrent | | 142.1 | | 256.6 | | 43.9 | | 48 | | 186 | | 304.6 | | | |
| Retirement benefits other than pension liability | $ | 142.1 | | 256.6 | | 48.9 | | 53 | | 191 | | 309.6 | | | |
Other Changes in Plan Assets and Benefit Recognized in Other Comprehensive Income (Loss) |
Changes in accumulated other comprehensive income (loss) of our retirement benefit plans other than pensions are as follows: |
|
| | | | | | | | | | Black Lung and Other | | | | | |
| (In millions) | | UMWA Plans | | Plans | | Total | |
| Years Ended December 31, | | 2013 | | 2012 | | 2013 | | 2012 | | 2013 | | 2012 | |
| | | | | | | | | | | | | | | | | |
| Benefit plan net experience gain (loss) recognized in | | | | | | | | | | | | | |
| | accumulated other comprehensive income (loss): | | | | | | | | | | | | | |
| | | Beginning of year | $ | -295.7 | | -323 | | -6.2 | | -9.9 | | -301.9 | | -332.9 | |
| | | Net experience gains (losses) arising during the year | | 56.7 | | 6.3 | | -0.8 | | 2.2 | | 55.9 | | 8.5 | |
| | | Reclassification adjustment for amortization of | | | | | | | | | | | | | |
| | | | prior experience losses included in net income | | 19.6 | | 21 | | 0.7 | | 1.5 | | 20.3 | | 22.5 | |
| | | End of year | $ | -219.4 | | -295.7 | | -6.3 | | -6.2 | | -225.7 | | -301.9 | |
| | | | | | | | | | | | | | | | | |
| Benefit plan prior service (cost) credit recognized in | | | | | | | | | | | | | |
| | accumulated other comprehensive income (loss): | | | | | | | | | | | | | |
| | | Beginning of year | $ | - | | - | | -9.4 | | -13.3 | | -9.4 | | -13.3 | |
| | | Prior service credit from plan amendments during the year | | 55.7 | | - | | - | | 1.9 | | 55.7 | | 1.9 | |
| | | Reclassification adjustment for amortization or curtailment | | | | | | | | | | | | | |
| | | | of prior service cost included in net income | | - | | - | | 1.7 | | 2 | | 1.7 | | 2 | |
| | | End of year | $ | 55.7 | | - | | -7.7 | | -9.4 | | 48 | | -9.4 | |
We estimate that $15.2 million of experience loss and $2.9 million of prior service credit will be amortized from accumulated other comprehensive income (loss) into net periodic postretirement cost during 2014. |
|
We recognized a prior service credit in 2013 associated with UMWA obligations due to a plan amendment that changed the plan from a self-insured welfare benefit plan to an employer group waiver plan (“EGWP”), which reduced future expected net per capita claims costs. We recognized net experience gains in 2013 associated with the UMWA obligations primarily related to the higher discount rate, a return on assets being higher than expected and a decrease in the expected obligation related to the excise tax on high-cost health plans. The gain related to the excise tax on high-cost health plans reflects the benefit of lower per capita claims costs from the change to EGWP. |
|
We recognized net experience gains in 2012 associated with the UMWA obligations primarily related to the return on assets being higher than expected, partially offset by the lower discount rate and an increase in the expected obligation related to the excise tax on high-cost health plans. |
|
Assumptions |
The APBO for each of the plans was determined using the unit credit method and an assumed discount rate as follows: |
| | | | 2013 | | 2012 | | 2011 | | | | | | |
| | | | | | | | | | | | | | | | | |
| Weighted-average discount rate: | | | | | | | | | | | | | | |
| | Postretirement cost: | | | | | | | | | | | | | | |
| | | UMWA plans | 3.9 | % | | 4.4 | % | | 5.3 | % | | | | | | |
| | | Black lung | 3.5 | % | | 4.2 | % | | 4.8 | % | | | | | | |
| | | Weighted-average | 3.9 | % | | 4.4 | % | | 5.2 | % | | | | | | |
| | Benefit obligation at year end: | | | | | | | | | | | | | | |
| | | UMWA plans | 4.7 | % | | 3.9 | % | | 4.4 | % | | | | | | |
| | | Black lung | 4.4 | % | | 3.5 | % | | 4.2 | % | | | | | | |
| | | Weighted-average | 4.7 | % | | 3.9 | % | | 4.4 | % | | | | | | |
| Expected return on assets | 8.25 | % | | 8.5 | % | | 8.75 | % | | | | | | |
The RP-2000 Separate, Pre- and Post-retirement Rates, Healthy Blue Collar and Combined Annuitant/Non-Annuitant Blue Collar mortality tables are primarily used to estimate expected lives of participants. |
|
Healthcare Cost Trend Rates |
For UMWA plans, the assumed healthcare cost trend rate used to compute the 2013 APBO is 7.0% for 2014, declining to 5.0% in 2020 and thereafter (in 2012: 7.0% for 2013 declining to 5.0% in 2019 and thereafter). For the black lung obligation, the assumed healthcare cost trend rate used to compute the 2013 APBO was 5.0%. Other plans in the U.S. provide for fixed-dollar value coverage for eligible participants and, accordingly, are not adjusted for inflation. |
|
For the Canadian plan, the assumed healthcare cost trend rate used to compute the 2013 APBO is 7.0% for 2014, declining to 5.0% in 2020. For the Brazilian plan, the assumed healthcare cost trend rate used to compute the 2013 APBO is 3.0%. |
|
The table below shows the estimated effects of a one percentage-point change in the assumed healthcare cost trend rates for each future year. |
| | | Effect of Change in Assumed Healthcare Trend Rates | | | | | | | | |
| (In millions) | | Increase 1% | | Decrease 1% | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Higher (lower): | | | | | | | | | | | | | | | |
| | Service and interest cost in 2013 | $ | 2.3 | | | -1.9 | | | | | | | | | | |
| | APBO at December 31, 2013 | | 45.4 | | | -38.6 | | | | | | | | | | |
The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Medicare Act”) provides for a prescription drug benefit under Medicare as well as a federal subsidy to sponsors of retiree healthcare benefit plans that provide a benefit that is at least actuarially equivalent to Medicare prescription drug benefits. Because of the broadness of coverage provided under our UMWA plans, we believe that the plans benefits are at least actuarially equivalent to the Medicare benefits. |
|
The estimated effect of the Medicare Act was recorded as a reduction to the APBO for the year ended December 31, 2012, as permitted by FSP 106-2, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003, included in FASB ASC Topic 715, Compensation – Retirement Benefits. The estimated value of the projected federal subsidy assumed no changes in participation rates and assumed that the subsidy was received in the year after claims were paid. |
|
For the year ended December 31, 2013, we changed the way we provide healthcare benefits to our UMWA retirees which are eligible for the Medicare Act subsidy reimbursement. We changed from a self-insured welfare benefit plan to an employer group waiver plan (“EGWP”). Under this new arrangement, a government approved health insurance provider will receive the Medicare Act subsidy reimbursement on our behalf and pass these savings to us. Additionally, by moving to an EGWP, we will be able to benefit from the mandatory 50% discount that pharmaceutical companies must provide for Medicare Act-eligible prescription drugs. The combined savings of the subsidy and the 50% discount are directly reflected in the UMWA APBO for the year ended December 31, 2013. |
|
Excise Tax on Administrators by Patient Protection and Affordable Care Act of 2010 |
A 40% excise tax on third-party benefit plan administrators by the Patient Protection and Affordable Care Act will be imposed on high-cost health plans (“Cadillac plans”) beginning in 2018. We are currently unable to reduce the benefit levels of our UMWA medical plans to avoid this excise tax because these benefit levels are required by the Coal Industry Retiree Health Benefit Act of 1992. We have assumed that the cost of the excise tax paid by administrators will be passed through to us in the form of higher premiums or higher claims administration fees, increasing our obligations. We project that we will have to pay the benefits plan administrator this excise tax beginning in 2018, and our plan obligations at December 31, 2013, include $22.9 million related to this tax ($31.0 million at December 31, 2012). |
Cash Flows |
Estimated Contributions from the Company to Plan Assets |
Based on the funded status and assumptions at December 31, 2013, we expect the Company to contribute $5.0 million in cash to the plans to pay 2014 beneficiary payments for black lung and other plans. We do not expect to contribute cash to our UMWA plans since we believe these plans have sufficient amounts held in trust to pay for beneficiary payments for 2014. Our UMWA plans are not covered by ERISA or other funding laws or regulations that require these plans to meet funding ratios. |
|
Estimated Future Benefit Payments from Plan Assets to Beneficiaries |
Projected benefit payments of the plans in the next 10 years using assumptions in effect at December 31, 2013, are as follows: |
|
| | | | | | | | | | | | | |
| (In millions) | | UMWA plans | | Black lung and other plans | | Total | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| 2014 | $ | 31.5 | | | 5 | | | 36.5 | | | | | | | | |
| 2015 | | 31.9 | | | 4.7 | | | 36.6 | | | | | | | | |
| 2016 | | 31.5 | | | 4.4 | | | 35.9 | | | | | | | | |
| 2017 | | 31.3 | | | 4.1 | | | 35.4 | | | | | | | | |
| 2018 | | 32.9 | | | 3.8 | | | 36.7 | | | | | | | | |
| 2019 through 2023 | | 148.6 | | | 15.9 | | | 164.5 | | | | | | | | |
Retirement Plan Assets |
|
U.S. Plans |
The fair value of the Level 3 investments has been estimated using the net asset value per share of the investment. |
|
| | | | | 31-Dec-13 | | 31-Dec-12 | | |
| | | Fair | | | | % | | % | | | | % | | % | | |
| | | Value | | Total Fair | | Actual | | Target | | Total Fair | | Actual | | Target | | |
| (In millions, except for percentages) | Level | | Value | | Allocation | | Allocation | | Value | | Allocation | | Allocation | | |
| | | | | | | | | | | | | | | | | |
| U.S. Pension Plans | | | | | | | | | | | | | | | |
| Cash, cash equivalents and receivables | | $ | 3.8 | | - | | - | | 3.5 | | 1 | | - | | |
| Equity securities: | | | | | | | | | | | | | | | |
| | U.S. large-cap(a) | 1 | | 132.1 | | 16 | | 16 | | 227.3 | | 30 | | 30 | | |
| | U.S. small/mid-cap(a) | 1 | | 58.6 | | 7 | | 7 | | 60.8 | | 8 | | 8 | | |
| | International(a) | 1 | | 114.4 | | 14 | | 14 | | 94.1 | | 12 | | 12 | | |
| | Emerging markets(b) | 1 | | 31.7 | | 4 | | 4 | | - | | - | | - | | |
| | Dynamic asset allocation(c) | 1 | | 50.2 | | 6 | | 6 | | - | | - | | - | | |
| Fixed-income securities: | | | | | | | | | | | | | | | |
| | Long duration(d) | 1 | | 190.8 | | 32 | | 32 | | 139.9 | | 24 | | 23 | | |
| | Long duration(d) | 2 | | 65 | | | | | | 39.1 | | | | | | |
| | High yield(e) | 1 | | 24.5 | | 3 | | 3 | | 61.9 | | 8 | | 8 | | |
| | Emerging markets(f) | 1 | | 23.2 | | 3 | | 3 | | 30.4 | | 4 | | 4 | | |
| Other types of investments: | | | | | | | | | | | | | | | |
| | Hedge fund of funds(g) | 2 | | 37.3 | | 5 | | 5 | | 99.3 | | 13 | | 15 | | |
| | Core property(h) | 2 | | 40.2 | | 5 | | 5 | | - | | - | | - | | |
| | Structured credit(i) | 3 | | 40 | | 5 | | 5 | | - | | - | | - | | |
| Total | | $ | 811.8 | | 100 | | 100 | | 756.3 | | 100 | | 100 | | |
| | | | | | | | | | | | | | | | | |
| UMWA Plans | | | | | | | | | | | | | | | |
| Equity securities: | | | | | | | | | | | | | | | |
| | U.S. large-cap(a) | 1 | $ | 107 | | 38 | | 37 | | 97.2 | | 36 | | 37 | | |
| | U.S. small/mid-cap(a) | 1 | | 27.9 | | 10 | | 9 | | 23.7 | | 9 | | 9 | | |
| | International(a) | 1 | | 41.8 | | 15 | | 14 | | 39.3 | | 15 | | 14 | | |
| Fixed-income securities: | | | | | | | | | | | | | | | |
| | High yield(e) | 1 | | 24.1 | | 8 | | 8 | | 23.1 | | 9 | | 8 | | |
| | Emerging markets(f) | 1 | | 10.9 | | 4 | | 4 | | 11.7 | | 4 | | 4 | | |
| | Multi asset real return(j) | 1 | | 29.3 | | 10 | | 13 | | 32.8 | | 12 | | 13 | | |
| Other types of investments: | | | | | | | | | | | | | | | |
| | Hedge fund of funds(g) | 2 | | 29.2 | | 10 | | 10 | | 40.9 | | 15 | | 15 | | |
| | Core property(h) | 2 | | 14.2 | | 5 | | 5 | | - | | - | | - | | |
| Total | | $ | 284.4 | | 100 | | 100 | | 268.7 | | 100 | | 100 | | |
|
These categories include passively managed U.S. large-cap mutual funds and actively managed U.S. small/mid-cap and international mutual funds that track various indices such as the S&P 500 Index, the Russell 2500 Index and the MSCI All Country World Ex-U.S. Index. |
This category represents an actively managed mutual fund that invests primarily in equity securities of emerging market issuers. Emerging market countries are those countries that are characterized as developing or emerging by any of the World Bank, the United Nations, the International Finance Corporation, or the European Bank for Reconstruction and Development or included in an emerging markets index by a recognized index provider. |
This category represents an actively managed mutual fund that seeks to generate total return over time by selecting investments from among a broad range of asset classes. The fund's allocations among asset classes may be adjusted over short periods and can vary from multiple to a single asset class. |
This category represents actively managed mutual funds that seeks to duplicate the risk and return characteristics of a long-term fixed-income securities portfolio with an approximate duration of 10 years and longer by using a long duration bond portfolio, including interest-rate swap agreements and Treasury futures contracts, and zero-coupon securities created by the U.S. Treasury, for the purpose of managing the overall duration of this fund. |
This category represents an actively managed mutual fund that invests primarily in fixed-income securities rated below investment grade, including corporate bonds and debentures, convertible and preferred securities and zero-coupon obligations. The fund's average weighted maturity may vary and will generally not exceed ten years. |
This category represents an actively managed mutual fund that invests primarily in U.S.-dollar-denominated debt securities of government, government-related and corporate issuers in emerging market countries, as well as entities organized to restructure the outstanding debt of such issuers. |
This category represents an actively managed mutual fund that invests in different hedge-fund investments, with various strategies. The fund holds approximately 40 separate hedge-fund investments. Strategies included (1) long-short equity, (2) event-driven and distressed-debt, (3) global macro, (4) credit hedging, (5) multi-strategy, and (6) fixed-income arbitrage. Its investment objective is to seek to achieve an attractive risk-adjusted return with moderate volatility and moderate directional market exposure over a full market cycle. |
This category represents an actively managed mutual fund that seeks both current income and long-term capital appreciation through investing in underlying funds that acquire, manage, and dispose of commercial real estate properties. These properties are high-quality, low-leveraged, income-generating office, industrial, retail, and multi-family properties, generally fully-leased to creditworthy companies and governmental entities. |
This category represents an actively managed mutual fund that invests primarily in a diversified portfolio comprised primarily of collateralized loan obligations and other structured credit investments backed primarily by bank loans. |
This category represents an actively managed mutual fund that invests primarily in fixed income and equity securities and commodity linked instruments. The category seeks total returns that exceed the rate of inflation over a full market cycle regardless of market conditions. |
|
Assets of our U.S. plans are invested with an objective of maximizing the total return, taking into consideration the liabilities of the plan, and minimizing the risks that could create the need for excessive contributions. Plan assets are invested primarily using actively managed accounts with asset allocation targets listed in the tables above. Our policy does not permit the purchase of Brink's common stock if immediately after any such purchase the aggregate fair market value of the plan assets invested in Brink's common stock exceeds 10% of the aggregate fair market value of the assets of the plan, except as permitted by an exemption under ERISA. The plans rebalance their assets on a quarterly basis if actual allocations of assets are outside predetermined ranges. Among other factors, the performance of asset groups and investment managers will affect the long-term rate of return. |
|
Most of our investments of our U.S. retirement plans can be redeemed daily. The hedge-fund-of-funds, core-property and structured-credit investments can be redeemed quarterly with 65 days' notice. The hedge-fund-of-funds investment had a two-year lockup provision that has expired and we transferred this investment from Level 3 to Level 2 in 2013. The structured-credit investment was acquired in 2013 and is subject to a two-year lockup provision which will expire in November 2015. We categorized this investment as Level 3. Beginning in 2013, a portion of the long-duration securities in our U.S. pension plan no longer have an active trading market in order to obtain quoted prices. As such, we transferred these investments from Level 1 to Level 2 in 2013. |
|
Non-U.S. Plans |
Fair values of investments totaling $167.9 million at December 31, 2013, and $140.1 million at December 31, 2012, of our non-U.S. pension plans have been estimated using quoted prices in active markets and are categorized as Level 1 valuation inputs. Fair values for investments of our non-U.S. pension plans totaling $154.1 million at December 31, 2013, and $142.9 million at December 31, 2012, have been estimated using the net asset value per share of the investments and are categorized as Level 2 valuation inputs. |
|
| | | | | 31-Dec-13 | | 31-Dec-12 | | |
| | | | | | | % | | % | | | | % | | % | | |
| | | | | Total Fair | | Actual | | Target | | Total Fair | | Actual | | Target | | |
| (In millions, except for percentages) | | Value | | Allocation | | Allocation | | Value | | Allocation | | Allocation | | |
| | | | | | | | | | | | | | | | | |
| Non-U.S. Pension Plans | | | | | | | | | | | | | | |
| Cash and cash equivalents | $ | 5.2 | | 2 | | - | | 2.6 | | 1 | | - | | |
| Equity securities: | | | | | | | | | | | | | | |
| | U.S. equity funds(a) | | 30 | | | | | | 25.8 | | | | | | |
| | Canadian equity funds(a) | | 38.3 | | | | | | 31.7 | | | | | | |
| | European equity funds(a) | | 8.9 | | | | | | 7.4 | | | | | | |
| | Asia Pacific equity funds(a) | | 1.7 | | | | | | 1.3 | | | | | | |
| | Emerging markets(a) | | 9.3 | | | | | | 4.7 | | | | | | |
| | Other non-U.S. equity funds(a) | | 38.8 | | | | | | 37.3 | | | | | | |
| | | Total equity securities | | 127 | | 39 | | 39 | | 108.2 | | 38 | | 39 | | |
| Fixed-income securities: | | | | | | | | | | | | | | |
| | Global credit(b) | | 37.5 | | | | | | 34.3 | | | | | | |
| | Canadian fixed-income funds(c) | | 24.8 | | | | | | 20.3 | | | | | | |
| | European fixed-income funds(d) | | 11 | | | | | | 10.2 | | | | | | |
| | High-yield(e) | | 12.3 | | | | | | 10.2 | | | | | | |
| | Emerging markets(f) | | 6.9 | | | | | | 5.8 | | | | | | |
| | Long-duration(g) | | 79.4 | | | | | | 76.1 | | | | | | |
| | | Total fixed-income securities | | 171.9 | | 53 | | 55 | | 156.9 | | 55 | | 56 | | |
| Other types of investments: | | | | | | | | | | | | | | |
| | Convertible securities(h) | | 12 | | | | | | 10.1 | | | | | | |
| | Commodity derivatives(i) | | 4.7 | | | | | | 4 | | | | | | |
| | Other | | 1.2 | | | | | | 1.2 | | | | | | |
| | | Total other types of investments | | 17.9 | | 6 | | 6 | | 15.3 | | 6 | | 5 | | |
| Total | $ | 322 | | 100 | | 100 | | 283 | | 100 | | 100 | | |
|
These categories are comprised of equity index actively and passively managed funds that track various indices such as S&P 500 Composite Total Return Index, Russell 1000 and 2000 Indices, MSCI Europe Ex-UK Index, S&P/TSX Total Return Index, MSCI EAFE Index and others. Some of these funds use a dynamic asset allocation investment strategy seeking to generate total return over time by selecting investments from among a broad range of asset classes, investing primarily through the use of derivatives. |
This category represents investment-grade fixed income debt securities of European issuers from diverse industries. |
This category seeks to achieve a return that exceeds the Scotia Capital Markets Universe Bond Index. |
This category is designed to generate income and exhibit volatility similar to that of the Sterling denominated bond market. This category primarily invests in investment grade or better securities. |
This category consists of global high-yield bonds. This category invests in lower rated and unrated fixed income, floating rate and other debt securities issued by European and American companies. |
This category consists of a diversified portfolio of listed and unlisted debt securities issued by governments, financial institutions, companies or other entities domiciled in emerging market countries. |
This category is designed to achieve a return consistent with holding longer term debt instruments. This category invests in interest rate and inflation derivatives, government-issued bonds, real-return bonds, and futures contracts. |
This category invests in convertible securities of global issuers from diverse industries. |
This category invests in commodities through financial derivatives of global issuers and short-dated government paper and cash components. |
|
|
Asset allocation strategies for our non-U.S. plans are designed to accumulate a diversified portfolio among markets and asset classes in order to reduce market risk and increase the likelihood that pension assets are available to pay benefits as they are due. Assets of non-U.S. pension plans are invested primarily using actively managed accounts. The weighted-average asset allocation targets are listed in the table above, and reflect limitations on types of investments held and allocations among assets classes, as required by local regulation or market practice of the country where the assets are invested. Most of the investments of our non-U.S. retirement plans can be redeemed at least monthly, except for a portion of “Other” in the above table, which can be redeemed quarterly. |
|
The UK pension plan investment that was previously classified as Level 3 had a lockup provision that has expired and has therefore been transferred to Level 2 in 2013. |
Changes in plan assets measured at fair value using significant unobservable inputs (Level 3) for our retirement plans are as follows: |
| (In millions) | U.S. Pension Plans | | UMWA Plans | | Non-U.S. Pension Plans | | | | | |
| | | | | | | | | | | | | | | | | |
| Balance at December 31, 2011 | $ | 96.8 | | | 39.9 | | | 0.6 | | | | | | |
| | Actual return on plan assets: | | | | | | | | | | | | | | |
| | | Relating to assets still held at the reporting date | | 2.5 | | | 1 | | | - | | | | | | |
| | | Relating to assets sold during the period | | - | | | - | | | - | | | | | | |
| | Purchases, sales and settlements | | - | | | - | | | - | | | | | | |
| | Transfers in and/or out of Level 3 | | - | | | - | | | - | | | | | | |
| Balance at December 31, 2012 | | 99.3 | | | 40.9 | | | 0.6 | | | | | | |
| | | | | | | | | | | | | | | | | |
| | Actual return on plan assets: | | | | | | | | | | | | | | |
| | | Relating to assets still held at the reporting date | | 0.4 | | | - | | | - | | | | | | |
| | | Relating to assets sold during the period | | - | | | - | | | - | | | | | | |
| | Purchases, sales and settlements | | 39.6 | | | - | | | - | | | | | | |
| | Transfers out of Level 3(a) | | -99.3 | | | -40.9 | | | -0.6 | | | | | | |
| Balance at December 31, 2013 | $ | 40 | | | - | | | - | | | | | | |
|
Transfers out of Level 3 are deemed to have occurred at the beginning of the year. |
|
Multi-employer Pension Plans |
We contribute to multi-employer pension plans in a few of our non-U.S. subsidiaries. We recognized $0.2 million of multi-employer pension expense for continuing operations in 2013 and $0.3 million in 2012. We did not recognize any multi-employer pension expense in 2011. |
|
Savings Plans |
We sponsor various defined contribution plans to help eligible employees provide for retirement. We record expense for amounts that we contribute on behalf of employees, usually in the form of matching contributions. Prior to December 31, 2011, we matched 125% of up to the first 5% of our employees' eligible contributions to our U.S. 401(k) plan. In January 2012, we reduced the matching contribution to 100% of up to the first 4% of employee contributions. In April 2012, we further reduced the matching contribution to 100% on the first 1% of employee contributions. Our matching contribution expense is as follows: |
|
| (In millions) | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | 2013 | | 2012 | | 2011 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| U.S. 401(K) | $ | 2.6 | | 4.6 | | 16.9 | | | | | | | | | | |
| Other plans | | 2.9 | | 2.5 | | 3.9 | | | | | | | | | | |
| Total | $ | 5.5 | | 7.1 | | 20.8 | | | | | | | | | | |