Annual report pursuant to Section 13 and 15(d)

Pension and Other Post-retirement Benefit Plans

v2.4.0.6
Pension and Other Post-retirement Benefit Plans
12 Months Ended
Mar. 31, 2013
Pension and Other Post-retirement Benefit Plans  
Pension and Other Post-retirement Benefit Plans

Note 10: Pension and Other Post-retirement Benefit Plans

        The Company sponsors defined benefit pension plans which include seven in Europe, one in Singapore and two in Mexico. The Company funds the pension liabilities in accordance with laws and regulations applicable to those plans.

        In July 2012, Film and Electrolytic paid out retirement benefits which represented more than 20% of a plan's pension obligation. As a result, the Company recognized a settlement gain of $1.7 million. In the second half of fiscal year 2013, the Company recognized a curtailment loss of $2.0 million as a result of headcount reductions within a sales office, this curtailment was allocated equally to each business group.

        The Company has two post-retirement benefit plans: health care and life insurance benefits for certain retired United States employees who reached retirement age while working for the Company. The health care plan is contributory, with participants' contributions adjusted annually. The life insurance plan is non-contributory. A summary of the changes in benefit obligations and plan assets is as follows (amounts in thousands):

 
  Pension   Other Benefits  
 
  2013   2012   2013   2012  

Change in Benefit Obligation

                         

Benefit obligation at beginning of the year

  $ 47,892   $ 44,402   $ 1,057   $ 1,339  

Service cost

    1,583     1,310          

Interest cost

    1,903     2,111     27     44  

Plan participants' contributions

    73     84     503     517  

Actuarial (gain) loss

    4,108     2,852     (145 )   (206 )

Foreign currency exchange rate change

    (1,391 )   (1,352 )        

Gross benefits paid

    (1,300 )   (1,515 )   (643 )   (637 )

Curtailments and settlements

    (13,772 )            
                   

Benefit obligation at end of year

  $ 39,096   $ 47,892   $ 799   $ 1,057  
                   

Change in Plan Assets

                         

Fair value of plan assets at beginning of year

  $ 17,156   $ 15,919   $   $  

Actual return on plan assets

    1,097     719          

Foreign currency exchange rate changes

    (799 )   48          

Employer contributions

    2,490     1,901     140     120  

Settlements

    (9,911 )            

Plan participants' contributions

    73     84     503     517  

Gross benefits paid

    (1,300 )   (1,515 )   (643 )   (637 )
                   

Fair value of plan assets at end of year

  $ 8,806   $ 17,156   $   $  
                   

Funded status at end of year

                         

Fair value of plan assets

  $ 8,806   $ 17,156   $   $  

Benefit obligations

    (39,096 )   (47,892 )   (799 )   (1,057 )
                   

Amount recognized at end of year

  $ (30,290 ) $ (30,736 ) $ (799 ) $ (1,057 )
                   

        The Company expects to contribute $1.5 million to the pension plans in fiscal year 2014, which includes direct contributions to be made for funded plans and benefit payments to be made for unfunded plans.

        The Company does not prefund its post-retirement health care and life insurance benefit plans. As a result, the Company is annually responsible for the payment of benefits as incurred by the plans. The Company anticipates making payments of $91 thousand during fiscal year 2014. Amounts recognized in the Consolidated Balance Sheets consist of the following (amounts in thousands):

 
  Pension   Other Benefits  
 
  2013   2012   2013   2012  

Current liability

  $ (644 ) $ (1,183 ) $ (90 ) $ (117 )

Noncurrent liability

    (29,646 )   (29,553 )   (709 )   (940 )
                   

Amount recognized, end of year

  $ (30,290 ) $ (30,736 ) $ (799 ) $ (1,057 )
                   

        Amounts recognized in Accumulated other comprehensive income (loss) consist of the following (amounts in thousands):

 
  Pension   Other Benefits  
 
  2013   2012   2013   2012  

Net actuarial loss (gain)

  $ 9,742   $ 10,889   $ (1,816 ) $ (1,993 )

Prior service cost

    32     137          
                   

Accumulated other comprehensive income

  $ 9,774   $ 11,026   $ (1,816 ) $ (1,993 )
                   

        The tax effect on the above balances was $2.1 million and $2.8 million as of March 31, 2013 and 2012, respectively.

        Components of benefit costs (credit) consist of the following (amounts in thousands):

 
  Pension   Other Benefits  
 
  2013   2012   2011   2013   2012   2011  

Net service cost

  $ 1,583   $ 1,310   $ 1,060   $   $   $  

Interest cost

    1,903     2,111     1,836     27     44     62  

Expected return on plan assets

    (656 )   (712 )   (677 )            

Amortization:

                                     

Actuarial (gain) loss

    544     392     126     (322 )   (323 )   (306 )

Prior service cost

    20     25     22              
                           

Recurring activity

    3,394     3,126     2,367     (295 )   (279 )   (244 )

One time curtailment expense

    266         291              
                           

Net periodic benefit cost (credit)

  $ 3,660   $ 3,126   $ 2,658   $ (295 ) $ (279 ) $ (244 )
                           

        The estimated amounts that will be amortized from accumulated other comprehensive income into net periodic benefit costs in fiscal year 2014 are actuarial losses of $34 thousand, and prior service costs of $3 thousand.

        The asset allocation for the Company's defined benefit pension plans at March 31, 2013 and the target allocation for 2013, by asset category, are as follows:

Asset Category
  Target
Allocation
(%)
  Plan Assets
at March 31,
2013
(%)
 

Insurance(1)

    10     7  

International equities

    30     33  

International bonds

    50     58  

Other

    10     2  
           

 

    100     100  
           

(1)
Comprised of assets held by the defined benefit pension plan in Germany.

        The Company's investment strategy for its defined benefit pension plans is to maximize long-term rate of return on plan assets within an acceptable level of risk in order to minimize the cost of providing pension benefits. The investment policy establishes a target allocation range for each asset class and the fund is managed within those ranges. The plans use a number of investment approaches including insurance products, equity and fixed income funds in which the underlying securities are marketable in order to achieve this target allocation. Certain plans invest solely in insurance products. The Company continuously monitors the performance of the overall pension asset portfolio, asset allocation policies, and the performance of individual pension asset managers and makes adjustments and changes, as required. The Company does not manage any assets internally, does not have any passive investments in index funds, and does not directly utilize futures, options, or other derivative instruments or hedging strategies with regard to the pension plans; however, the investment mandate of some pension asset managers allows the use of the foregoing as components of their portfolio management strategies.

        The expected rate of return was determined by modeling the expected long-term rates of return for broad categories of investments held by the plan against a number of various potential economic scenarios.

        Other changes in plan assets and benefit obligations recognized in Accumulated other comprehensive income (loss) are as follows (amounts in thousands):

 
  Pension   Other Benefits  
 
  2013   2012   2011   2013   2012   2011  

Current year actuarial (gain) loss

  $ 3,669   $ 2,845   $ 2,918   $ (145 ) $ (206 ) $ (7 )

Foreign currency exchange rate changes

    (238 )   (218 )   728     322     323     306  

Amortization of actuarial gain (loss)

    (4,582 )   (392 )   (649 )            

Current year prior service cost

            270              

Amortization of prior service cost

    (101 )   (25 )   (292 )            
                           

Total recognized in other comprehensive income

  $ (1,252 ) $ 2,210   $ 2,975   $ 177   $ 117   $ 299  
                           

Total recognized in net periodic benefit cost and other comprehensive income (loss)

  $ 2,408   $ 5,336   $ 5,633   $ (118 ) $ (162 ) $ 55  
                           

        Each of these changes has been factored into the following benefit payments schedule for the next ten fiscal years. The Company expects to have benefit payments in the future as follows (amounts in thousands):

 
  Expected benefit payments  
 
  2014   2015   2016   2017   2018   2019 - 2023  

Pension benefits

  $ 1,444   $ 1,450   $ 1,546   $ 1,658   $ 1,683   $ 10,450  

Other benefits

    91     90     86     82     77     295  
                           

 

  $ 1,535   $ 1,540   $ 1,632   $ 1,740   $ 1,760   $ 10,745  
                           

        The following weighted-average assumptions were used to determine the projected benefit obligation at the measurement date and the net periodic cost for the pension and post-retirement plan (amounts in thousands except percentages):

 
  Pension   Other Benefits  
 
  2013   2012   2013   2012  

Projected benefit obligation:

                         

Discount rate

    4.5 %   4.2 %   2.8 %   3.5 %

Rate of compensation increase

    3.5 %   2.9 %        

Health care cost trend on covered charges

            7.0 %   7.5 %

 

                decreasing to
ultimate trend
of 5% in 2017
    decreasing to
ultimate trend
of 5% in 2017
 

Net periodic benefit cost:

                         

Discount rate

    4.2 %   5.0 %   3.5 %   4.4 %

Rate of compensation increase

    2.9 %   2.9 %        

Expected return on plan assets

    4.0 %   4.4 %        

Health care cost trend on covered charges

            7.5 %   7.5 %

 

                decreasing to
ultimate trend
of 5% in 2017
    decreasing to
ultimate trend
of 5% in 2016
 

Sensitivity of retiree welfare results

                         

Effect of a one percentage point increase in assumed health care cost trend:

                         

—On total service and interest costs components

              $   $ 1  

—On post-retirement benefits obligation

                11     27  

Effect of a one percentage point decrease in assumed health care cost trend:

                         

—On total service and interest costs components

                    (1 )

—On post-retirement benefits obligation

                (10 )   (25 )

        The measurement date used to determine pension and post-retirement benefits is March 31.

        The Company evaluated input from its third-party actuary to determine the appropriate discount rate. The determination of the discount rate is based on various factors such as the rate on bonds, term of the expected payouts, and long-term inflation factors.

        The following table sets forth by level, within the fair value hierarchy as described in Note 1, the pension plan's assets, required to be carried at fair value on a recurring basis as of March 31, 2013 and March 31, 2012 (amounts in thousands):

 
   
  Fair Value Measurement Using    
  Fair Value Measurement Using  
 
  Fair Value
March 31,
2013
  Fair Value
March 31,
2012
 
 
  Level 1   Level 2   Level 3   Level 1   Level 2   Level 3  

Cash and cash equivalents

  $   $   $   $   $   $   $   $  

Equity securities:

                                                 

International equities

    2,884     2,884             2,520     2,520          

Fixed income securities:

                                                 

International bonds

    5,098     5,098             4,802     4,802          

Insurance contracts

    636             636     9,700             9,700  

Other

    188     188             134     134          
                                   

 

  $ 8,806   $ 8,170   $   $ 636   $ 17,156   $ 7,456   $   $ 9,700  
                                   

        The table below sets forth a summary of changes in the fair value of the defined benefit pension plan's Level 3 assets for the fiscal year ended March 31, 2013 (amounts in thousands):

Balance at March 31, 2012

  $ 9,700  

Actual return on plan assets

    132  

Employer contributions

    848  

Settlements

    (9,255 )

Employee contributions

    73  

Benefits paid

    (524 )

Foreign currency exchange rate change

    (338 )
       

Balance at March 31, 2013

  $ 636  
       

        The Company also sponsors a deferred compensation plan for highly compensated employees. The plan is non-qualified and allows certain employees to contribute to the plan. Gains net of the Company matches related to the deferred compensation plan were $141 thousand in fiscal year 2013, $26 thousand in fiscal year 2012, and $6 thousand in fiscal year 2011. Total benefits accrued under this plan were 1.9 million and $2.3 million at March 31, 2013 and March 31, 2012, respectively.

        In addition, the Company has a defined contribution retirement plan (the "Savings Plan") in which all United States employees who meet certain eligibility requirements may participate. A participant may direct the Company to contribute amounts, based on a percentage of the participant's compensation, to the Savings Plan through the execution of salary reduction agreements. In addition, the participants may elect to make after-tax contributions. The Company matches contributions to the Savings Plan up to 6% of the employee's salary. The Company made matching contributions of $2.5 million, $2.2 million and $1.7 million in fiscal years 2013, 2012, and 2011, respectively.