Employee Benefit Plans | 12 Months Ended |
Dec. 31, 2014 |
Compensation and Retirement Disclosure [Abstract] | |
Employee Benefit Plans | Employee Benefit Plans |
|
The Company maintains a non-contributory defined benefit pension plan that covers substantially all U.S. employees who were employed at December 31, 2011. After that date, no further benefits are being accrued in this plan. For the frozen pension plan, benefits are based primarily on years of service and, for certain plans, levels of compensation. |
|
The Company also maintains supplemental non-qualified plans for certain officers and other key employees, and an Employee Savings and Stock Option Plan (“ESSOP”). |
|
The Company also has a postretirement healthcare benefit plan that provides medical benefits for certain U.S. retirees and eligible dependents hired prior to November 1, 2004. Employees are eligible to receive postretirement healthcare benefits upon meeting certain age and service requirements. No employees hired after October 31, 2004 are eligible to receive these benefits. This plan requires employee contributions to offset benefit costs. |
|
Amounts included in accumulated other comprehensive loss, net of tax, at December 31, 2014 that have not yet been recognized in net periodic benefit cost are as follows: |
| | | | | | | | |
| | | | | | | | | | | | | | | |
| Pension | | Other | | | | | | | | |
plans | postretirement | | | | | | | | |
| benefits | | | | | | | | |
| (In thousands) | | | | | | | | |
Prior service cost | $ | — | | | $ | 6 | | | | | | | | | |
| | | | | | | |
Net actuarial loss | $ | 11,156 | | | $ | 314 | | | | | | | | | |
| | | | | | | |
|
Amounts included in accumulated other comprehensive loss, net of tax, at December 31, 2014 expected to be recognized in net periodic benefit cost during the fiscal year ending December 31, 2015 are as follows: |
| | | | | | | | |
| | | | | | | | | | | | | | | |
| Pension | | Other | | | | | | | | |
plans | postretirement | | | | | | | | |
| benefits | | | | | | | | |
| (In thousands) | | | | | | | | |
Prior service credit | $ | — | | | $ | 33 | | | | | | | | | |
| | | | | | | |
Net actuarial loss | $ | 471 | | | $ | — | | | | | | | | | |
| | | | | | | |
|
Qualified Pension Plan |
|
The Company maintains a non-contributory defined benefit pension plan (sometimes referred to as the “qualified pension plan”) for certain employees. On December 31, 2010, the Company froze the qualified pension plan for its non-union participants and formed a new defined contribution feature within the ESSOP plan in which each employee received a similar benefit. On December 31, 2011, the Company froze the qualified pension plan for its union participants and included them in the same defined contribution feature within the ESSOP. After December 31, 2011, employees receive no future benefits under the qualified pension benefit plan as benefits were frozen and the employees now receive a defined contribution in its place. Employees will continue to earn returns on their frozen balances. |
|
The following table sets forth the components of net periodic pension cost for the years ended December 31, 2014, 2013 and 2012 based on a December 31 measurement date: |
| | | | |
| | | | | | | | | | | | | | | |
| 2014 | | 2013 | | 2012 | | | | |
| (In thousands) | | | | |
Service cost — benefits earned during the year | $ | 4 | | | $ | 5 | | | $ | 6 | | | | | |
| | | |
Interest cost on projected benefit obligations | 1,888 | | | 1,842 | | | 2,205 | | | | | |
| | | |
Expected return on plan assets | (2,806 | ) | | (2,744 | ) | | (3,190 | ) | | | | |
Amortization of net loss | 606 | | | 719 | | | 645 | | | | | |
| | | |
Settlement expense | 858 | | | 806 | | | 1,075 | | | | | |
| | | |
Net periodic pension cost | $ | 550 | | | $ | 628 | | | $ | 741 | | | | | |
| | | |
Actuarial assumptions used in the determination of the net periodic pension cost are: |
| | | | | | | |
| | | | | | | | | | | | | | | |
| 2014 | | 2013 | | 2012 | | | | | | | |
Discount rate | 4.47 | % | | 3.68 | % | | 4.69 | % | | | | | | | |
Expected long-term return on plan assets | 6.5 | % | | 6.5 | % | | 7 | % | | | | | | | |
Rate of compensation increase | n/a | | | n/a | | | n/a | | | | | | | | |
| | | | | | |
|
The Company's discount rate assumptions for the qualified pension plan are based on the average yield of a hypothetical high quality bond portfolio with maturities that approximately match the estimated cash flow needs of the plan. The assumptions for expected long-term rates of return on assets are based on historical experience and estimated future investment returns, taking into consideration anticipated asset allocations, investment strategies and the views of various investment professionals. The use of these assumptions can cause volatility if actual results differ from expected results. |
|
The following table provides a reconciliation of benefit obligations, plan assets and funded status based on a December 31 measurement date: |
| | | | | | | | |
| | | | | | | | | | | | | | | |
| 2014 | | 2013 | | | | | | | | |
| (In thousands) | | | | | | | | |
Change in benefit obligation: | | | | | | | | | | | |
Benefit obligation at beginning of plan year | $ | 45,561 | | | $ | 50,700 | | | | | | | | | |
| | | | | | | |
Service cost | 4 | | | 5 | | | | | | | | | |
| | | | | | | |
Interest cost | 1,888 | | | 1,842 | | | | | | | | | |
| | | | | | | |
Actuarial (gain)/loss | 4,989 | | | (3,208 | ) | | | | | | | | |
| | | | | | | |
Benefits paid | (4,242 | ) | | (3,778 | ) | | | | | | | | |
Projected benefit obligation at measurement date | $ | 48,200 | | | $ | 45,561 | | | | | | | | | |
| | | | | | | |
| | | | | | | | | | | |
Change in plan assets: | | | | | | | | | | | |
Fair value of plan assets at beginning of plan year | $ | 49,873 | | | $ | 46,547 | | | | | | | | | |
| | | | | | | |
Actual return on plan assets | 3,025 | | | 7,104 | | | | | | | | | |
| | | | | | | |
Benefits paid | (4,242 | ) | | (3,778 | ) | | | | | | | | |
Fair value of plan assets at measurement date | $ | 48,656 | | | $ | 49,873 | | | | | | | | | |
| | | | | | | |
| | | | | | | | | | | |
Funded status of the plan: | | | | | | | | | | | |
Benefit plan assets of benefit obligation | 456 | | | 4,312 | | | | | | | | | |
| | | | | | | |
Prepaid pension asset (accrued pension liability) | $ | 456 | | | $ | 4,312 | | | | | | | | | |
| | | | | | | |
|
The actuarial assumption used in the determination of the benefit obligation of the above data is: |
| | | | | | | | | | |
| | | | | | | | | | | | | | | |
| 2014 | | 2013 | | | | | | | | | | |
Discount rate | 3.81 | % | | 4.47 | % | | | | | | | | | | |
|
The fair value of the qualified pension plan assets was $48.7 million at December 31, 2014 and $49.9 million at December 31, 2013. The variation in the fair value of the assets between years was due to the change in the market value of the underlying investments and benefits paid. Estimated future benefit payments expected to be paid in each of the next five years beginning with 2015 are $4.5 million, $4.3 million, $4.1 million, $3.7 million and $3.4 million, with an aggregate of $16.4 million for the five years thereafter. As of the most recent actuarial measurement date, the Company is not required to make a minimum contribution for the 2015 calendar year. |
|
Historically the Company employed a total return investment approach whereby a mix of equities and fixed income investments were used to maximize the long-term return of plan assets for a prudent level of risk. Because of volatility in market returns and the plan’s current funding status, the decision was made in 2014 to move towards a liability driven investing strategy whereby the assets are primarily fixed income investments. The fixed income investments chosen under this strategy, while not precisely the same, are meant to parallel the investments selected in determining the discount rate used to calculate the Company’s pension liability. The purpose of this strategy is to minimize equity exposure and interest risk and thereby maintain the funding status of the plan, regardless of movement in interest rates. In 2014, the Company adjusted the investment portfolio to reduce its equity allocation and introduced higher fixed-income investments that matched the duration of the estimated pension liability. The remaining equity investments are diversified across various stocks, as well as growth, value, and small and large capitalizations. Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews, annual liability measurements and periodic asset/liability studies. |
|
As a result of the change in investing strategy in 2014, changes were made to the investment policy for the plan. The target allocations for plan assets are 0%-18% for public equities, 0%-14% for bank loans, and 68%-100% for traditional and cash balance liability-hedging assets. |
|
Accounting Standards Codification 820, “Fair Value Measurements and Disclosures,” establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy consists of three broad levels: Level 1 inputs consist of unadjusted quoted prices in active markets for identical assets and have the highest priority. Level 2 inputs consist of inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for determining the fair value of assets or liabilities that reflect assumptions that market participants would use in pricing assets or liabilities. The plan uses appropriate valuation techniques based on the available inputs to measure the fair value of its investments. |
|
The fair value of the Company's qualified pension plan assets by category at December 31, 2014 are as follows: |
|
| | | | | | | | | | | | | | | |
| Market | | Quoted | | Significant | | Significant |
value | prices in active | observable | unobservable |
| markets for | inputs | inputs |
| identical assets | (Level 2) | (Level 3) |
| (Level 1) | | |
| (In thousands) |
Equity securities (a) | $ | 6,356 | | | $ | — | | | $ | 6,356 | | | $ | — | |
|
Fixed income funds (b) | 41,351 | | | — | | | 41,351 | | | — | |
|
Cash/cash equivalents (c) | 949 | | | 949 | | | — | | | — | |
|
Total | $ | 48,656 | | | $ | 949 | | | $ | 47,707 | | | $ | — | |
|
|
| | | | | | | | | | | | | | | |
(a) | The Equity funds in aggregate are well diversified by market capitalization, investment style and geography. The funds seek to provide investment results approximating the aggregate price and dividend performance of securities included in the S&P 500 Index, Russell 2000 Index and MSCI All Country World ex-US Index. | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | |
(b) | The Fixed Income funds consist of bonds. In aggregate, the funds seek to provide investment return approximating the return of the Plan’s obligations. The funds consist of Long Credit bonds, Intermediate Credit bonds, Short Duration Government Credit bonds and Bank Loans. | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | |
(c) | This category comprises the cash held to pay beneficiaries. The fair value of cash equals its book value. | | | | | | | | | | | | | | |
|
The fair value of the Company’s qualified pension plan assets by category at December 31, 2013 are as follows: |
|
| | | | | | | | | | | | | | | |
| Market | | Quoted | | Significant | | Significant |
value | prices in active | observable | unobservable |
| markets for | inputs | inputs |
| identical assets | (Level 2) | (Level 3) |
| (Level 1) | | |
| (In thousands) |
Equity securities (a) | $ | 27,049 | | | $ | 27,049 | | | $ | — | | | $ | — | |
|
Fixed income funds (b) | 18,990 | | | 18,990 | | | — | | | — | |
|
Cash/cash equivalents (c) | 3,834 | | | 3,834 | | | — | | | — | |
|
Total | $ | 49,873 | | | $ | 49,873 | | | $ | — | | | $ | — | |
|
|
| | | | | | | | | | | | | | | |
(a) | This category includes investments in equity securities of large, small and medium sized companies, equity securities of foreign companies and equity funds, or 52.8%, 11.1%, 12.1%, 17.2% and 6.8% of total assets, respectively. Of the total equity amount, 11.1% was invested in common stocks in a wide variety of industries and 88.9% was invested in mutual funds. The funds are valued using the closing market prices at December 31, 2013. | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | |
(b) | This category includes investments in investment-grade fixed-income instruments and corporate bonds. Government instruments were 33.4% of the total. The funds are valued using the closing market prices at December 31, 2013. | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | |
(c) | This category comprises the cash held to pay beneficiaries. The fair value of cash equals its book value. | | | | | | | | | | | | | | |
The pension plan has a separately determined accumulated benefit obligation that is the actuarial present value of benefits based on service rendered and current and past compensation levels. Prior to December 31, 2012, this differed from the projected benefit obligation in that it included no assumption about future compensation levels. The accumulated benefit obligation was $48.2 million at December 31, 2014 and $45.6 million at December 31, 2013. |
|
Supplemental Non-qualified Unfunded Plans |
|
The Company also maintains supplemental non-qualified unfunded plans for certain officers and other key employees. Expense for these plans was $0.3 million for the year ended 2014, $0.2 million for the year ended 2013, and $0.3 million for the year ended 2012. The amount accrued was $1.6 million and $1.5 million as of December 31, 2014 and 2013, respectively. Amounts were determined based on similar assumptions as the qualified pension plan as of the December 31 measurement date for 2014 and 2013. |
|
Other Postretirement Benefits |
|
The Company has a postretirement plan that provides medical benefits for certain U.S. retirees and eligible dependents hired prior to November 1, 2004. The following table sets forth the components of net periodic postretirement benefit cost for the years ended December 31, 2014, 2013 and 2012: |
| | | | |
| | | | | | | | | | | | | | | |
| 2014 | | 2013 | | 2012 | | | | |
| (In thousands) | | | | |
Service cost, benefits attributed for service of active employees for the period | $ | 130 | | | $ | 154 | | | $ | 143 | | | | | |
| | | |
Interest cost on the accumulated postretirement benefit obligation | 269 | | | 255 | | | 295 | | | | | |
| | | |
Amortization of prior service cost | 161 | | | 161 | | | 161 | | | | | |
| | | |
Net periodic postretirement benefit cost | $ | 560 | | | $ | 570 | | | $ | 599 | | | | | |
| | | |
|
The discount rate used to measure the net periodic postretirement benefit cost was 4.73% for 2014, 3.92% for 2013 and 4.79% for 2012. It is the Company's policy to fund healthcare benefits on a cash basis. Because the plans are unfunded, there are no plan assets. The following table provides a reconciliation of the projected benefit obligation at the Company's December 31 measurement date: |
| | | | | | | | |
| | | | | | | | | | | | | | | |
| 2014 | | 2013 | | | | | | | | |
| (In thousands) | | | | | | | | |
Benefit obligation at beginning of year | $ | 6,376 | | | $ | 6,940 | | | | | | | | | |
| | | | | | | |
Service cost | 130 | | | 154 | | | | | | | | | |
| | | | | | | |
Interest cost | 269 | | | 255 | | | | | | | | | |
| | | | | | | |
Actuarial loss (gain) | 462 | | | (746 | ) | | | | | | | | |
| | | | | | | |
Plan participants' contributions | 708 | | | 716 | | | | | | | | | |
| | | | | | | |
Benefits paid | (1,178 | ) | | (943 | ) | | | | | | | | |
Benefit obligation and funded status at end of year | $ | 6,767 | | | $ | 6,376 | | | | | | | | | |
| | | | | | | |
|
The amounts recognized in the Consolidated Balance Sheets at December 31 are: |
| | | | | | | | |
| | | | | | | | | | | | | | | |
| 2014 | | 2013 | | | | | | | | |
| (In thousands) | | | | | | | | |
Accrued compensation and employee benefits | $ | 425 | | | $ | 442 | | | | | | | | | |
| | | | | | | |
Accrued non-pension postretirement benefits | 6,342 | | | 5,934 | | | | | | | | | |
| | | | | | | |
Amounts recognized at December 31 | $ | 6,767 | | | $ | 6,376 | | | | | | | | | |
| | | | | | | |
|
The discount rate used to measure the accumulated postretirement benefit obligation was 4.01% for 2014 and 4.73% for 2013. The Company's discount rate assumptions for its postretirement benefit plan are based on the average yield of a hypothetical high quality bond portfolio with maturities that approximately match the estimated cash flow needs of the plan. Because the plan requires the Company to establish fixed Company contribution amounts for retiree healthcare benefits, future healthcare cost trends do not generally impact the Company's accruals or provisions. |
|
Estimated future benefit payments of postretirement benefits, assuming increased cost sharing, expected to be paid in each of the next five years beginning with 2015 are $0.4 million in each year of 2015 and 2016, $0.5 million in each year of 2017, 2018 and 2019, with an aggregate of $2.2 million for the five years thereafter. These amounts can vary significantly from year to year because the cost sharing estimates can vary from actual expenses as the Company is self-insured. |
|
Badger Meter Employee Savings and Stock Ownership Plan |
|
In 2010, the Company restructured the outstanding debt of its ESSOP by loaning the ESSOP $0.5 million to repay a loan to a third party and loaning the ESSOP an additional $1.0 million to purchase additional shares of the Company’s Common Stock for future 401(k) savings plan matches under a program that will expire on December 31, 2020. Under this program, the Company agreed to pay the principal and interest on the new loan amount of $1.5 million. The receivable from the ESSOP and the related obligation were therefore netted to zero on the Company’s Consolidated Balance Sheets at December 31, 2014 and 2013. The terms of the loan call for equal payments of principal with the final payment due on December 31, 2020, and prepayments are allowed under the plan terms. At December 31, 2014, $0.9 million of the loan balance remained. |
|
The Company made principal payments of $154,000, $154,000 and $256,000 in 2014, 2013 and 2012, respectively. The associated commitments released shares of Common Stock (11,077 shares in 2014 for the 2013 obligation, 9,918 shares in 2013 for the 2012 obligation, and 16,151 shares in 2012 for the 2011 obligation) for allocation to participants in the ESSOP. The ESSOP held unreleased shares of 72,362, 83,439 and 93,357 as of December 31, 2014, 2013 and 2012, respectively, with a fair value of $4.3 million, $4.5 million and $4.4 million as of December 31, 2014, 2013 and 2012, respectively. Unreleased shares are not considered outstanding for purposes of computing earnings per share. |
|
The ESSOP includes a voluntary 401(k) savings plan that allows certain employees to defer up to 20% of their income on a pretax basis subject to limits on maximum amounts. The Company matches 25% of each employee’s contribution, with the match percentage applying to a maximum of 7% of each employee's salary. The match is paid using the Company's Common Stock released through the ESSOP loan payments. For ESSOP shares purchased prior to 1993, compensation expense is recognized based on the original purchase price of the shares released and dividends on unreleased shares are charged to compensation expense. For shares purchased in or after 1993, expense is based on the market value of the shares on the date released and dividends on unreleased shares are charged to compensation expense. Compensation expense of $0.3 million was recognized for the match for each of 2014, 2013 and 2012. |
|
On December 31, 2010, the Company froze the qualified pension plan for its non-union participants and formed a new defined contribution feature within the ESSOP plan in which each employee received a similar benefit. On December 31, 2011, the Company froze the qualified pension plan for its union participants and included them in the same defined contribution feature within the ESSOP. For 2014, compensation expense under the defined contribution feature totaled $2.3 million. |