Pensions | 12 Months Ended |
Dec. 31, 2013 |
Pensions | ' |
Pensions | ' |
12. Pensions |
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The Company sponsors defined benefit pension plans covering certain union and non-union employees in the U.S. and Europe. The Company uses a measurement date of December 31 for all of its pension plans. |
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For U.S. plans, the following table provides a reconciliation of changes in the plans’ benefit obligations and fair value of assets over the two-year period ended December 31, 2013 and the funded status as of December 31 for both years: |
|
(Dollars in thousands) | | 2013 | | 2012 | | | | | | | |
| | | | | | | | | | | |
Change in Projected Benefit Obligations | | | | | | | | | | | |
Projected benefit obligations at January 1 | | $ | 116,620 | | $ | 106,127 | | | | | | | |
Service cost | | 1,165 | | 1,059 | | | | | | | |
Interest cost | | 4,423 | | 4,796 | | | | | | | |
Actuarial (gain) loss | | (14,471 | ) | 12,083 | | | | | | | |
Benefits paid | | (5,428 | ) | (3,343 | ) | | | | | | |
Settlement | | — | | (4,102 | ) | | | | | | |
Projected benefit obligations at December 31 | | 102,309 | | 116,620 | | | | | | | |
| | | | | | | | | | | |
Change in Plan Assets | | | | | | | | | | | |
Fair value of plan assets at January 1 | | 88,184 | | 82,970 | | | | | | | |
Actual return on plan assets | | 14,186 | | 10,577 | | | | | | | |
Employer contributions | | 2,842 | | 2,082 | | | | | | | |
Benefits paid | | (5,428 | ) | (3,343 | ) | | | | | | |
Settlement | | — | | (4,102 | ) | | | | | | |
Fair value of plan assets at December 31 | | 99,784 | | 88,184 | | | | | | | |
Funded status at December 31 | | $ | (2,525 | ) | $ | (28,436 | ) | | | | | | |
| | | | | | | | | | | |
Amounts recognized in the Balance Sheets: | | | | | | | | | | | |
Noncurrent asset | | $ | 2,470 | | $ | — | | | | | | | |
Current liability — Accrued benefit cost | | (82 | ) | (82 | ) | | | | | | |
Noncurrent liability — Accrued benefit cost | | (4,913 | ) | (28,354 | ) | | | | | | |
Net amount recognized | | $ | (2,525 | ) | $ | (28,436 | ) | | | | | | |
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Amounts recognized in Accumulated Other Comprehensive Income consist of: |
|
(Dollars in thousands) | | 2013 | | 2012 | | | | | | | |
Accumulated prior service cost | | $ | 89 | | $ | 164 | | | | | | | |
Accumulated net actuarial loss | | 20,752 | | 46,267 | | | | | | | |
Net amount recognized, before tax effect | | $ | 20,841 | | $ | 46,431 | | | | | | | |
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The 2012 settlement was as a result of lump sum payments made to plan participants as of the period ended December 31, 2012. |
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The accumulated benefit obligation at December 31, 2013 and 2012 was $50.2 million and $111.6 million, respectively. |
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For U.S. plans, the assumptions used to determine benefit obligations are shown in the following table: |
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Weighted average actuarial assumptions at December 31: | | 2013 | | 2012 | | | | | | | | | |
Discount rate | | 4.88 | % | 3.92 | % | | | | | | | | |
Rate of increase in compensation levels | | 3.5 | % | 4 | % | | | | | | | | |
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The following tables set forth the fair values of the Company’s U.S. pension plans assets as of December 31, 2013 and 2012: |
|
| | Fair Value Measurements at December 31, 2013 | |
| | | | Quoted | | | | | |
| | | | Prices in | | | | | |
| | | | Active | | | | | |
| | | | Markets for | | Significant | | Significant | |
| | | | Identical | | Observable | | Unobservable | |
(Dollars in thousands) | | | | Assets | | Inputs | | Inputs | |
Asset Category | | Total | | (Level 1) | | (Level 2) | | (Level 3) | |
Cash and Cash Equivalents | | $ | 2,010 | | $ | 174 | | $ | 1,836 | | $ | — | |
Equity Securities | | | | | | | | | |
Large Cap (a) | | 21,139 | | 21,139 | | — | | — | |
Small/Mid Cap (b) | | 13,446 | | 13,446 | | — | | — | |
Equities Blend (c) | | 715 | | 715 | | — | | — | |
International Equity (d) | | 9,532 | | 9,532 | | — | | — | |
Emerging Markets (e) | | 6.402 | | 6,402 | | — | | — | |
Fixed Income Securities | | | | | | | | | |
Corporate Bonds (f) | | 23,563 | | 16,489 | | 7,074 | | — | |
Government Bonds (g) | | 11,490 | | 10,820 | | 670 | | — | |
Mortgage/Asset Backed (h) | | 6,140 | | — | | 6,140 | | | |
Miscellaneous | | | | | | | | | |
Commodities (i) | | 3,383 | | 3,383 | | | | | |
Real Estate (j) | | 1,964 | | 1,964 | | | | | |
Total | | $ | 99,784 | | $ | 84,064 | | $ | 15,720 | | $ | — | |
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(a) This category consists of growth and value strategies investing primarily in the common stock of large capitalization companies located in the United States. Growth oriented strategies seek companies within the Russell 1000 Growth Universe with above average earnings, growth, and revenue expectations. Value oriented strategies seek companies within the Russell 1000 Value Universe that are undervalued relative to their intrinsic value. These strategies are benchmarked against the Russell 1000 Growth and Value Indices, respectively. |
(b) This category consists of growth and value strategies investing primarily in the common stock of mid and small capitalization companies located in the United States that are either undervalued relative to their intrinsic value or have above average growth and revenue expectations. These strategies are benchmarked to the Russell 2500 Growth and Value Indices, respectively. |
(c) This category invests in the common stock of primarily U.S. companies across the capitalization spectrum (Large, Mid, and Small Cap) that are undervalued relative to their intrinsic value or represent growth opportunities. This strategy is benchmarked to the Russell 3000 Index. |
(d) This category consists of international equity securities represented by 21 major MSCI indices from Europe, Australia and Southeast Asia. This strategy is benchmarked to the MSCI EAFE Index. |
(e) This category invests in all types of capitalization companies operating in global emerging markets outside the United States. The strategy targets broad diversification across various economic sectors in 21 emerging economies. This category is benchmarked to the MSCI Emerging Markets Index. |
(f) This category invests primarily in investment grade corporate securities. This category is benchmarked to the Barclays Aggregate Bond Index. |
(g) This category includes securities and mutual funds which invest in a diversified portfolio of longer duration bonds. The funds typically invest primarily in U.S. investment grade securities. The portfolio has an average duration that normally varies within two years (plus or minus) of the benchmark. This category is benchmarked to the Barclays Capital Long-Term Government/Credit Index. |
(h) This category invests primarily in mortgage-backed securities which covers the mortgage backed securities component of the Barclays US Aggregate Bond Index. This category is benchmarked against the Barclays Mortgage-Backed Securities Index. |
(i) This fund invests in assets of commodity linked derivative instruments and fixed income securities. The fund is benchmarked against the Dow Jones-UBS Commodity Index Total Return. |
(j) This fund normally invests at least 80% of its assets in equity related securities of real estate companies and other real estate securities. Under normal circumstances, the fund invests in at least three different countries and at least 40% of the total assets are in foreign securities. This strategy is benchmarked to the Lipper Global Real Estate Funds Average. |
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| | Fair Value Measurements at December 31, 2012 | |
| | | | Quoted | | | | | |
| | | | Prices in | | | | | |
| | | | Active | | | | | |
| | | | Markets for | | Significant | | Significant | |
| | | | Identical | | Observable | | Unobservable | |
(Dollars in thousands) | | | | Assets | | Inputs | | Inputs | |
Asset Category | | Total | | (Level 1) | | (Level 2) | | (Level 3) | |
Cash and Cash Equivalents | | $ | 1,585 | | $ | 1,585 | | $ | — | | $ | — | |
Equity Securities | | | | | | | | | |
All Cap (a) | | 9,126 | | 9,126 | | — | | — | |
Large Cap (b) | | 20,820 | | 20,820 | | — | | — | |
Small Cap Mutual Fund (c) | | 6,252 | | — | | 6,252 | | — | |
Microcap Mutual Fund (d) | | 5,852 | | 5,852 | | — | | — | |
International Mutual Fund (e) | | 15,884 | | 15,884 | | — | | — | |
Fixed Income Securities | | | | | | | | | |
Long Duration Mutual Fund (f) | | 24,370 | | 24,370 | | — | | — | |
Emerging Markets Debt Mutual Fund (g) | | 4,295 | | 4,295 | | — | | — | |
Total | | $ | 88,184 | | $ | 81,932 | | $ | 6,252 | | $ | — | |
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(a) This category invests in the common stock of primarily U.S. companies across the capitalization spectrum (Large, Mid, and Small Cap) that are undervalued relative to their intrinsic value. The strategy is benchmarked to the Russell 3000 Value Index. |
(b) This category consists of Growth and Value strategies investing primarily in the common stock of large capitalization companies located in the United States. Growth oriented strategies seek companies within the Russell 1000 Growth Universe with above average earnings, growth, and revenue expectations. Value oriented strategies seek companies within the Russell 1000 Value Universe that are undervalued relative to their intrinsic value. These strategies are benchmarked to the Russell 1000 Growth and Value Indices respectively. |
(c) This category invests primarily in small capitalization U.S. companies that are either undervalued relative to their intrinsic value or that have above average earnings growth and revenue expectations. The smaller cap orientation of the strategy requires the investment manager to be cognizant of liquidity and capital restraints, which are monitored by the investment team on an ongoing basis. This strategy is benchmarked to the Russell 2000 Index. |
(d) This category invests primarily in micro-capitalization U.S. companies that are undervalued relative to their intrinsic value. The smaller cap orientation of the strategy requires the investment managers to be cognizant of liquidity and capital restraints, which are monitored by the investment team on an ongoing basis. This strategy is benchmarked to the Russell Micro Cap Value Index. |
(e) This category invests in all types of capitalization companies operating in both developed and emerging markets outside the United States. The strategy targets broad diversification across various economic sectors and seeks to achieve lower overall portfolio volatility by investing with complimentary active managers with varying risk characteristics. Total combined exposure to emerging markets typically ranges from 10% to 20%, with a maximum restriction of 40%. This category is benchmarked to the MSCI EAFE Index and the MSCI All Country World Index ex U.S. |
(f) This category invests in a diversified portfolio of longer duration bonds. The fund typically invests primarily in U.S. investment grade securities, but does have the ability to invest up to 10% in high yield (minimum credit rating of B), and up to 30% in non-U.S. denominated securities. The portfolio has an average duration that normally varies within two years (plus or minus) of the benchmark. This category is benchmarked to the Barclays Capital Long-Term Government/Credit Index. |
(g) This category invests primarily in local currency denominated government debt securities of countries within the Emerging Markets. The strategy is broadly diversified by country and will invest in locally denominated corporate securities. This strategy is benchmarked to the JP Morgan GBI-EM Global Diversified Index. |
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The Company’s investment strategy is to earn the highest possible long-term total rate of return while minimizing the associated risk to ensure the preservation of the plan assets for the provision of benefits to participants and their beneficiaries. This is accomplished by managing a diversified portfolio of fund styles, asset types, risk characteristics and investment holdings. |
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At December 31, 2013 and 2012, the projected benefit obligations, accumulated benefit obligations, and fair value of plan assets for U.S. pension plans with a projected benefit obligation in excess of plan assets, and for pension plans with an accumulated benefit obligation in excess of plan assets was as follows: |
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| | Projected Benefit Obligation | | Accumulated Benefit | |
Exceeds the Fair Value of | Obligation Exceeds the Fair |
Plan’s Assets | Value of Plan’s Asset |
(Dollars in thousands) | | 2013 | | 2012 | | 2013 | | 2012 | |
Projected benefit obligation | | $ | 53,699 | | $ | 116,620 | | $ | 53,699 | | $ | 116,620 | |
Accumulated benefit obligation | | $ | 50,188 | | $ | 111,625 | | $ | 50,188 | | $ | 111,625 | |
Fair value of plan assets | | $ | 48,704 | | $ | 88,184 | | $ | 48,704 | | $ | 88,184 | |
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Information about the expected cash flows for the U.S. pension plans follows: |
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| | Pension Benefits | | | | | | | | | | |
Year | | (Thousands) | | | | | | | | | | |
| | | | | | | | | | | | |
Employer contributions | | | | | | | | | | | | |
2014 | | $ | 1,526 | | | | | | | | | | |
| | | | | | | | | | | | |
Benefit Payments | | | | | | | | | | | | |
2014 | | $ | 5,869 | | | | | | | | | | |
2015 | | 6,929 | | | | | | | | | | |
2016 | | 6,960 | | | | | | | | | | |
2017 | | 6,261 | | | | | | | | | | |
2018 | | 6,770 | | | | | | | | | | |
2019 – 2023 | | 36,676 | | | | | | | | | | |
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For U.S. plans, the following table provides the components of net periodic pension costs of the plans for the years ended December 31, 2013, 2012, and 2011: |
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| | Year Ended December 31 | | | | |
(Dollars in thousands) | | 2013 | | 2012 | | 2011 | | | | |
Service cost | | $ | 1,165 | | $ | 1,059 | | $ | 1,022 | | | | |
Interest cost | | 4,423 | | 4,796 | | 4,942 | | | | |
Expected return on assets | | (6,660 | ) | (6,166 | ) | (6,669 | ) | | | |
Prior service cost | | 74 | | 74 | | 75 | | | | |
Net amortization | | 3,519 | | 3,430 | | 1,728 | | | | |
Settlement | | — | | 1,369 | | — | | | | |
Net periodic pension cost | | $ | 2,521 | | $ | 4,562 | | $ | 1,098 | | | | |
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Other Changes in Plan Assets and Benefit Obligations Recognized in Other |
Comprehensive Income (Loss) |
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| | Year Ended December 31 | | | | | | | |
(Dollars in thousands) | | 2013 | | 2012 | | | | | | | |
Current year actuarial (gain) loss | | $ | (21,997 | ) | $ | 7,672 | | | | | | | |
Amortization of actuarial loss | | (3,519 | ) | (3,430 | ) | | | | | | |
Amortization of prior service cost | | (74 | ) | (74 | ) | | | | | | |
Settlement | | — | | (1,369 | ) | | | | | | |
Total recognized in other comprehensive income (loss) | | $ | (25,590 | ) | $ | 2,799 | | | | | | | |
Total recognized in net periodic pension cost and other comprehensive income (loss) | | $ | (23,069 | ) | $ | 7,361 | | | | | | | |
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The estimated amounts that will be amortized from accumulated other comprehensive income into net periodic pension cost in 2014 are as follows: |
|
(Dollars in thousands) | | | | | | | | | | | | |
Prior service cost | | $ | 74 | | | | | | | | | | |
Net actuarial loss | | 950 | | | | | | | | | | |
Total at December 31 | | $ | 1,024 | | | | | | | | | | |
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For U.S. plans, the assumptions used in the measurement of net periodic pension cost are shown in the following table: |
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| | 2013 | | 2012 | | 2011 | | | | | | | |
Weighted average actuarial assumptions at December 31: | | | | | | | | | | | | | |
Discount rate | | 3.92 | % | 4.67 | % | 5.26 | % | | | | | | |
Expected annual return on plan assets | | 7.75 | % | 7.75 | % | 8 | % | | | | | | |
Rate of increase in compensation levels | | 4 | % | 4 | % | 4 | % | | | | | | |
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The discount rates that the Company utilizes for its Qualified Plans to determine pension obligations are based on a review of long-term corporate bonds that receive one of the two highest ratings given by a recognized rating agency. The expected rate of return on plan assets was determined by evaluating input from the Company’s investment consultant, including their review of asset class return expectations, as well as long-term inflation assumptions. The Company also considered historical returns on asset classes, investment mix, and investment manager performance. The expected long-term return on the U.S. Qualified Plans’ assets is based on an asset allocation assumption of approximately 52% equity securities, 43% fixed income securities, and 5% with other investments. The Company also takes into account the effect on its projected returns from any reasonably likely changes in its asset portfolio when applicable. |
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For European plans, the following tables provide a reconciliation of changes in the plan’s benefit obligations and fair value of assets over the two-year period ended December 31, 2013 and the funded status as of December 31 of both years: |
|
(Dollars in thousands) | | 2013 | | 2012 | | | | | | | |
| | | | | | | | | | | |
Change in Projected Benefit Obligations | | | | | | | | | | | |
Projected benefit obligations at January 1 | | $ | 42,417 | | $ | 33,469 | | | | | | | |
Service cost | | 314 | | 148 | | | | | | | |
Interest cost | | 1,511 | | 1,640 | | | | | | | |
Employee contributions | | 103 | | 119 | | | | | | | |
Actuarial loss | | 1,178 | | 5,203 | | | | | | | |
Benefits paid | | (1,550 | ) | (1,254 | ) | | | | | | |
Settlement | | (1,249 | ) | — | | | | | | | |
Other | | (1,689 | ) | 1,689 | | | | | | | |
Foreign currency exchange rate changes | | 1,332 | | 1,403 | | | | | | | |
Projected benefit obligations at December 31 | | 42,367 | | 42,417 | | | | | | | |
| | | | | | | | | | | |
Change in Plan Assets | | | | | | | | | | | |
Fair value of plan assets at January 1 | | 28,177 | | 24,414 | | | | | | | |
Actual return on plan assets | | 1,395 | | 2,053 | | | | | | | |
Employer contributions | | 1,875 | | 1,831 | | | | | | | |
Employee contributions | | 103 | | 119 | | | | | | | |
Benefits paid | | (1,550 | ) | (1,254 | ) | | | | | | |
Settlement | | (1,249 | ) | — | | | | | | | |
Foreign currency exchange rate changes | | 835 | | 1,014 | | | | | | | |
Fair value of plan assets at December 31 | | 29,586 | | 28,177 | | | | | | | |
Funded Status at December 31 | | $ | (12,781 | ) | $ | (14,240 | ) | | | | | | |
| | | | | | | | | | | |
Amounts Recognized in the Balance Sheets: | | | | | | | | | | | |
Noncurrent asset | | $ | 603 | | $ | 1,013 | | | | | | | |
Current liability — Accrued benefit cost | | (561 | ) | (590 | ) | | | | | | |
Noncurrent liability — Accrued benefit cost | | (12,823 | ) | (14,663 | ) | | | | | | |
Net amount recognized | | $ | (12,781 | ) | $ | (14,240 | ) | | | | | | |
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Amounts recognized in Accumulated Other Comprehensive Income consist of: |
|
(Dollars in thousands) | | 2013 | | 2012 | | | | | | | |
Accumulated net actuarial loss | | $ | 7,022 | | $ | 6,167 | | | | | | | |
Net amount recognized, before tax effect | | $ | 7,022 | | $ | 6,167 | | | | | | | |
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The 2013 settlement was as a result of the separation of an employee under the Belgian salaried plan. |
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The accumulated benefit obligation at the end of both 2013 and 2012 was $40.5 million and $40.5 million, respectively. |
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For European plans, the assumptions used to determine end of year benefit obligations are shown in the following table: |
|
| | 2013 | | 2012 | | | | | | | | | |
Weighted average actuarial assumptions at December 31: | | | | | | | | | | | | | |
Discount rate | | 3.92 | % | 3.95 | % | | | | | | | | |
Rate of increase in compensation levels | | 3.5 | % | 3.5 | % | | | | | | | | |
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The following tables set forth the fair values of the Company’s European pension plans assets as of December 31, 2013 and 2012: |
|
| | Fair Value Measurements at December 31, 2013 | |
| | | | Quoted | | | | | |
| | | | Prices in | | | | | |
| | | | Active | | | | | |
| | | | Markets for | | Significant | | Significant | |
| | | | Identical | | Observable | | Unobservable | |
(Dollars in thousands) | | | | Assets | | Inputs | | Inputs | |
Asset Category | | Total | | (Level 1) | | (Level 2) | | (Level 3) | |
Cash and Cash Equivalents | | $ | 542 | | $ | 542 | | $ | — | | $ | — | |
Equity Securities | | | | | | | | | |
M&G PP Discretionary Fund (a) | | 4,498 | | 4,498 | | — | | — | |
Global Equity 60-40 Index (b) | | 5,667 | | 5,667 | | — | | — | |
Fixed Income Securities | | | | | | | | | |
Delta Lloyd Fixed Income (c) | | 4,207 | | — | | — | | 4,207 | |
Corporate Bonds (d) | | 4,779 | | 4,779 | | — | | — | |
Government Bonds (e) | | 6,384 | | 6,384 | | — | | — | |
Real Estate (f) | | 2,034 | | 2,034 | | — | | — | |
Insurance Reserves (g) | | 1,475 | | — | | — | | 1,475 | |
Total | | $ | 29,586 | | $ | 23,904 | | $ | — | | $ | 5,682 | |
|
| | Fair Value Measurements at December 31, 2012 | |
| | | | Quoted | | | | | |
| | | | Prices in | | | | | |
| | | | Active | | | | | |
| | | | Markets for | | Significant | | Significant | |
| | | | Identical | | Observable | | Unobservable | |
(Dollars in thousands) | | | | Assets | | Inputs | | Inputs | |
Asset Category | | Total | | (Level 1) | | (Level 2) | | (Level 3) | |
Cash and Cash Equivalents | | $ | 993 | | $ | 993 | | $ | — | | $ | — | |
Equity Securities | | | | | | | | | |
M&G PP Discretionary Fund (a) | | 2,103 | | 2,103 | | — | | — | |
Global Equity 60-40 Index (b) | | 4,604 | | 4,604 | | — | | — | |
Fixed Income Securities | | | | | | | | | |
Delta Lloyd Fixed Income (c) | | 4,058 | | — | | — | | 4,058 | |
Corporate Bonds (d) | | 10,067 | | 10,067 | | — | | — | |
Government Bonds (e) | | 3,061 | | 3,061 | | — | | — | |
Real Estate (f) | | 1,825 | | 1,825 | | — | | — | |
Insurance Reserves (g) | | 1,466 | | — | | — | | 1,466 | |
Total | | $ | 28,177 | | $ | 22,653 | | $ | — | | $ | 5,524 | |
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(a) This fund invests in a mix of UK and overseas equity shares, bonds, property and cash. The fund is actively managed against its benchmark of the CAPS Balanced Pooled Fund Median. A prudent approach of diversification by both location and investment type is employed by the fund and both active stock selection and asset allocation are used to add value. |
(b) This index fund invests 60% in the UK Equity Index Fund and 40% in overseas index funds. The overseas portion has a target allocation of 14% in North American funds, 14% in European funds (not including the UK), 7% in Japanese funds, and 5% in Pacific Basin funds (not including Japan). |
(c) This category invests in 6 year Fixed Income investments with Delta Lloyd. |
(d) This category invests in the M&G PP Discretionary Fund, the AAA Fixed interest - Over 15 Year Fund, and the M&G PP Long Dates Corporate Bond Fund. These funds, respectively, invest primarily in investment grade corporate bonds, as well as other debt instruments, including higher yielding corporate bonds, government debt, convertible and preferred stocks, money market instruments and equities; and in long-dated sterling denominated AAA-rated corporate bonds, as well as smaller holdings in gilts - both providing a fixed rate of interest. |
(e) This category invests mainly in long term gilts through the M&G PP Super Long Index Linked Fund and the M&G PP Discretionary Fund. |
(f) This category invests in the M&G UK Property Fund. The fund invests directly in commercial properties in the UK and is actively managed against its performance benchmark of the BNY Mellon CAPS Pooled Fund Property Median. The fund is well diversified investing in the retail, office, and industrial sectors of the market. A small portion of this category is also held in the M&G PP Discretionary Fund. |
(g) This category invests in individual insurance policies in the name of the individual plan members. |
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The Company’s Level 3 investments in the Delta Lloyd fixed income fund and insurance reserves were valued using significant unobservable inputs. Inputs to these valuations include characteristics and quantitative data relating to the assets and reserves, investment and insurance policy cost, position size, liquidity, current financial condition of the company/insurer and other relevant market data. The following table sets forth changes in fair value measurements using significant unobservable inputs during 2013 and 2012: |
|
(Dollars in thousands) | | Delta Lloyd | | Insurance | | | | | | | |
Fixed Income | Reserves | | | | | | |
| | | | | | | | | | | |
Balance at January 1, 2012 | | $ | 4,514 | | $ | 1,246 | | | | | | | |
Purchases | | — | | 194 | | | | | | | |
Sales/Maturities | | (502 | ) | (4 | ) | | | | | | |
Foreign currency translation | | 46 | | 30 | | | | | | | |
Balance at December 31, 2012 | | 4,058 | | 1,466 | | | | | | | |
Purchases | | 814 | | 160 | | | | | | | |
Sales/Maturities | | (837 | ) | (211 | ) | | | | | | |
Foreign currency translation | | 172 | | 60 | | | | | | | |
Balance at December 31, 2013 | | $ | 4,207 | | $ | 1,475 | | | | | | | |
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At December 31, 2013 and 2012, the projected benefit obligations, accumulated benefit obligations, and fair value of plan assets for European pension plans with a projected benefit obligation in excess of plan assets, and for pension plans with an accumulated benefit obligation in excess of plan assets was as follows: |
|
| | Projected Benefit Obligation | | Accumulated Benefit | |
Exceeds the Fair Value of | Obligation Exceeds the Fair |
Plan’s Assets | Value of Plan’s Asset |
(Dollars in thousands) | | 2013 | | 2012 | | 2013 | | 2012 | |
Projected benefit obligation | | $ | 31,485 | | $ | 33,022 | | $ | 31,485 | | $ | 33,022 | |
Accumulated benefit obligation | | $ | 29,568 | | $ | 31,123 | | $ | 29,568 | | $ | 31,123 | |
Fair value of plan assets | | $ | 18,101 | | $ | 17,769 | | $ | 18,101 | | $ | 17,769 | |
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Information about the expected cash flows for the European pension plans follows: |
|
| | Pension Benefits | | | | | | | | | | |
Year | | (Thousands) | | | | | | | | | | |
| | | | | | | | | | | | |
Employer contributions | | | | | | | | | | | | |
2014 | | $ | 2,126 | | | | | | | | | | |
| | | | | | | | | | | | |
Benefit Payments | | | | | | | | | | | | |
2014 | | $ | 3,297 | | | | | | | | | | |
2015 | | 1,602 | | | | | | | | | | |
2016 | | 1,231 | | | | | | | | | | |
2017 | | 1,527 | | | | | | | | | | |
2018 | | 1,443 | | | | | | | | | | |
2019 – 2023 | | 8,393 | | | | | | | | | | |
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Total benefits expected to be paid include both the Company’s share of the benefit cost and the participants’ share of the cost, which is funded by participant contributions to the plan. |
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For European plans, the following table provides the components of net periodic pension costs of the plans for the years ended December 31, 2013, 2012 and 2011: |
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| | Year Ended December 31 | | | | |
(Dollars in thousands) | | 2013 | | 2012 | | 2011 | | | | |
Service cost | | $ | 314 | | $ | 148 | | $ | 155 | | | | |
Interest cost | | 1,511 | | 1,640 | | 1,947 | | | | |
Expected return on assets | | (1,263 | ) | (1,232 | ) | (1,442 | ) | | | |
Net amortization | | 203 | | 15 | | 68 | | | | |
Settlement | | 279 | | — | | — | | | | |
Special termination benefits | | — | | — | | 200 | | | | |
Net periodic pension cost | | $ | 1,044 | | $ | 571 | | $ | 928 | | | | |
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Other Changes in Plan Assets and Benefit Obligations Recognized in Other |
Comprehensive Income |
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| | Year Ended December 31 | | | | | | | |
(Dollars in thousands) | | 2013 | | 2012 | | | | | | | |
Current year actuarial loss | | $ | 1,046 | | $ | 4,382 | | | | | | | |
Amortization of actuarial loss | | (203 | ) | (15 | ) | | | | | | |
Settlement | | (279 | ) | — | | | | | | | |
Foreign currency exchange | | 292 | | 296 | | | | | | | |
Total recognized in other comprehensive income | | $ | 856 | | $ | 4,663 | | | | | | | |
Total recognized in net periodic pension cost and other comprehensive income | | $ | 1,900 | | $ | 5,234 | | | | | | | |
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The estimated amounts that will be amortized from accumulated other comprehensive income into net periodic pension cost in 2014 are as follows: |
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(Dollars in thousands) | | | | | | | | | | | | |
Total net actuarial loss at December 31 | | $ | 245 | | | | | | | | | | |
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For European plans, the assumptions used in the measurement of the net periodic pension cost are shown in the following table: |
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| | 2013 | | 2012 | | 2011 | | | | | | | |
Weighted average actuarial assumptions at December 31: | | | | | | | | | | | | | |
Discount rate | | 3.99 | % | 5 | % | 5.35 | % | | | | | | |
Expected annual return on plan assets | | 4.91 | % | 4.92 | % | 6.03 | % | | | | | | |
Rate of increase in compensation levels | | 3.5 | % | 3.5 | % | 3.5 | % | | | | | | |
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The expected rate of return on plan assets was determined by evaluating input from the Company’s investment consultant, including their review of asset class return expectations as well as long-term inflation assumptions. Projected returns are based on broad equity and bond indices that the Company uses to benchmark its actual asset portfolio performance based on its portfolio mix of approximately 34% equity securities, 52% fixed income securities, and 14% other investments. The Company also takes into account the effect on its projected returns from any reasonably likely changes in its asset portfolio when applicable. |
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The non-current portion of $17.7 million and $43.0 million at December 31, 2013 and 2012, respectively, for the U.S. and European pension liabilities is included in accrued pension and other liabilities. |
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The Company also sponsors a defined contribution plan for certain U.S. employees that permits employee contributions of up to 50% of eligible compensation in accordance with Internal Revenue Service guidance. Under this defined contribution plan, the Company makes a fixed contribution of 3% of eligible employee compensation on a quarterly basis and matches contributions made by each participant in an amount equal to 50% of the employee contribution up to a maximum of 3% of employee compensation. Employer matching and fixed contributions for non-represented employees vest immediately. Employer discretionary contributions vest after two years of service. For each bargaining unit employee at the Catlettsburg, Kentucky facility who is a participant of the defined benefit pension plan and contributes to the defined contribution plan, the Company matches a maximum of $25.00 employee pre-tax contributions per month to the plan. As of June 8, 2010, and continuing under the June 8, 2013 collective bargaining agreement, current employees have the option of remaining in the defined benefit plan or converting to a defined contribution plan. The election to convert will freeze the defined benefit calculation as of such date and employees who elect to freeze their defined benefit will be eligible to receive a Company contribution to the defined contribution plan of $1.40 per actual hour worked as well as for other related hours paid but not worked. The Company will then make additional lump sum contributions to employees of $5,000 per year that have converted on the next three anniversary dates of the voluntary conversion to the defined contribution plan. As a result, employees that have converted will be excluded from the aforementioned $25.00 match. For bargaining unit employees hired after June 8, 2010, the Company contributes $1.40 per actual hour worked, as well as for other related hours paid but not worked, for eligible employees. Effective May 1, 2007, for bargaining unit employees at the Columbus, Ohio facility, the Company makes contributions to the USW 401(k) Plan of $1.15 per actual hour worked for eligible employees. Effective August 1, 2011, for bargaining unit employees at the Neville Island, Pennsylvania facility, the Company began making contributions of $1.65 per actual hour worked to the defined contribution plan for eligible employees when their defined benefit pension plan was frozen. Employer matching contributions for bargaining unit employees vest immediately. Total expenses related to the defined contribution plans were $2.5 million, $1.9 million, and $1.8 million for each of the years ended December 31, 2013, 2012, and 2011, respectively. |
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Other |
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Multi-Employer Plan |
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In addition to the aforementioned European plans, the Company participates in a multi-employer plan in Europe. This multi-employer plan almost entirely relates to former employees of operations it has divested. Benefits are distributed by the multi-employer plan. In August 2012, the Company learned that the multi-employer plan had elected to reduce benefits to entitled parties. Also in August 2012, the Company learned that the local Labor Court had issued a judgment where it concluded that an employer was required to compensate its pensioners for the shortfall if benefits had been reduced by the plan. As a result, the Company has accrued a liability for the past shortfall to its former employees. The Company cannot predict if future benefit payments to be made by the multi-employer plan will be reduced. As of December 31, 2013 and 2012, respectively, the Company has a $0.6 million and $1.7 million liability recorded to account for the reduction of benefits. |
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