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RETIREMENT ANNUITY AND GUARANTEED CONTINUOUS EMPLOYMENT PLANS | 12 Months Ended
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Dec. 31, 2012
RETIREMENT AND POSTRETIREMENT BENEFIT PLANS |
RETIREMENT ANNUITY AND GUARANTEED CONTINUOUS EMPLOYMENT PLANS | RETIREMENT ANNUITY AND GUARANTEED CONTINUOUS EMPLOYMENT PLANS The Company maintains a number of defined benefit and defined contribution plans to provide retirement benefits for employees. These plans are maintained and contributions are made in accordance with the Employee Retirement Income Security Act of 1974 ("ERISA"), local statutory law or as determined by the Board of Directors. The plans generally provide benefits based upon years of service and compensation. Pension plans are funded except for a domestic non-qualified pension plan for certain key employees and certain foreign plans. The Company uses a December 31 measurement date for its plans. The Company does not have, and does not provide for, any postretirement or postemployment benefits other than pensions and certain non-U.S. statutory termination benefits. Defined Benefit Plans The defined benefit plans generally provide benefits based upon years of service and compensation. The plans are funded except for a domestic non-qualified pension plan for certain key employees and certain foreign plans. The contributions are made in amounts sufficient to fund current service costs on a current basis and to fund past service costs, if any, over various amortization periods. Obligations and Funded Status
|  | December 31,
|  | 2012 |  | 2011
Change in benefit obligations |  |  |  |
Benefit obligations at beginning of year |  | $ | 991,979 |  |  | $ | 851,948 |
Service cost |  | 21,538 |  |  | 17,331 |
Interest cost |  | 41,584 |  |  | 44,161 |
Plan participants' contributions |  | 334 |  |  | 365 |
Plan amendments |  | (3,681 | ) |  | — |
Actuarial loss |  | 70,015 |  |  | 121,800 |
Benefits paid |  | (86,722 | ) |  | (40,345 | )
Settlement/curtailment |  | (3,946 | ) |  | (2,434 | )
Currency translation |  | 2,624 |  |  | (847 | )
Benefit obligations at end of year |  | 1,033,725 |  |  | 991,979 |
Change in plan assets |  |  |  |
Fair value of plan assets at beginning of year |  | 749,456 |  |  | 726,474 |
Actual return on plan assets |  | 83,156 |  |  | 29,470 |
Employer contributions |  | 68,029 |  |  | 33,994 |
Plan participants' contributions |  | 334 |  |  | 365 |
Benefits paid |  | (85,238 | ) |  | (37,960 | )
Settlement |  | (3,798 | ) |  | (2,415 | )
Currency translation |  | 1,958 |  |  | (472 | )
Fair value of plan assets at end of year |  | 813,897 |  |  | 749,456 |
Funded status at end of year |  | (219,828 | ) |  | (242,523 | )
Unrecognized actuarial net loss |  | 422,042 |  |  | 408,474 |
Unrecognized prior service cost |  | (4,101 | ) |  | (515 | )
Unrecognized transition assets, net |  | 26 |  |  | 41 |
Net amount recognized |  | $ | 198,139 |  |  | $ | 165,477 |
The Company's U.S. defined benefit plans were amended to allow participants, including those with deferred vested pension benefits, additional payment options including a lump sum and a five year payment option. Increased benefits paid primarily reflect the disbursements related to deferred vested participants taking lump sum payment options. The after-tax amounts of unrecognized actuarial net loss, prior service costs and transition assets included in Accumulated other comprehensive loss at December 31, 2012 were $264,514, $(2,690) and $20, respectively. The actuarial loss represents changes in the estimated obligation not yet recognized in the Consolidated Income Statement. Actuarial losses arising during 2012 are primarily attributable to a lower discount rate. The pre-tax amounts of unrecognized actuarial net loss, prior service credits and transition obligations expected to be recognized as components of net periodic benefit cost during 2013 are $32,314, $(615) and $4, respectively. Amounts Recognized in Consolidated Balance Sheets
|  | December 31,
|  | 2012 |  | 2011
Accrued pension liability, current |  | $ | (3,639 | ) |  | $ | (10,348 | )
Accrued pension liability, long-term |  | (216,189 | ) |  | (232,175 | )
Accumulated other comprehensive loss, excluding tax effects |  | 417,967 |  |  | 408,000 |
Net amount recognized in the balance sheets |  | $ | 198,139 |  |  | $ | 165,477 |
Components of Pension Cost for Defined Benefit Plans
|  | Year Ended December 31,
|  | 2012 |  | 2011 |  | 2010
Service cost |  | $ | 21,538 |  |  | $ | 17,331 |  |  | $ | 15,371 |
Interest cost |  | 41,584 |  |  | 44,161 |  |  | 42,730 |
Expected return on plan assets |  | (58,754 | ) |  | (57,405 | ) |  | (50,424 | )
Amortization of prior service cost |  | (90 | ) |  | (62 | ) |  | (44 | )
Amortization of net loss |  | 31,085 |  |  | 21,816 |  |  | 20,830 |
Settlement/curtailment loss |  | 895 |  |  | 529 |  |  | 660 |
Pension cost for defined benefit plans |  | $ | 36,258 |  |  | $ | 26,370 |  |  | $ | 29,123 |
Pension costs in 2012 for the Company's defined benefit plans increased as a result of an increase in amortization of net loss and settlement loss partially offset by an increase in expected return on plan assets. The higher settlement loss includes a charge of $742 related to the rationalization of the Company's Australia manufacturing operations. Pension Plans with Accumulated Benefit Obligations in Excess of Plan Assets
|  | December 31,
|  | 2012 |  | 2011
U.S. pension plans |  |  |  |
Projected benefit obligation |  | $ | 956,837 |  |  | $ | 921,469 |
Accumulated benefit obligation |  | 905,541 |  |  | 883,157 |
Fair value of plan assets |  | 755,491 |  |  | 696,802 |
Non-U.S. pension plans |  |  |  |
Projected benefit obligation |  | $ | 76,884 |  |  | $ | 70,507 |
Accumulated benefit obligation |  | 70,492 |  |  | 66,332 |
Fair value of plan assets |  | 58,403 |  |  | 52,652 |
The total accumulated benefit obligation for all plans was $976,033 as of December 31, 2012 and $949,489 as of December 31, 2011. Contributions to Plans The Company expects to contribute approximately $103,000 to its defined benefit plans in the United States in 2013. The actual amounts to be contributed in 2013 will be determined at the Company's discretion. Benefit Payments for Plans Benefits expected to be paid for the U.S. plans are as follows:
Estimated Payments |
2013 | $ | 53,513 |
2014 | 61,080 |
2015 | 62,051 |
2016 | 58,608 |
2017 | 62,361 |
2018 through 2022 | 311,135 |
Assumptions Weighted average assumptions used to measure the benefit obligation for the Company's significant defined benefit plans as of December 31, 2012 and 2011 were as follows:
|  | December 31,
|  | 2012 |  | 2011
Discount rate |  | 3.8 | % |  | 4.2 | %
Rate of increase in compensation |  | 4.0 | % |  | 4.0 | %
Weighted average assumptions used to measure the net periodic benefit cost for the Company's significant defined benefit plans for each of the three years ended December 31, 2012 were as follows:
|  | December 31,
|  | 2012 |  | 2011 |  | 2010
Discount rate |  | 4.2 | % |  | 5.3 | % |  | 5.8 | %
Rate of increase in compensation |  | 4.0 | % |  | 4.0 | % |  | 4.0 | %
Expected return on plan assets |  | 7.7 | % |  | 7.9 | % |  | 7.9 | %
To develop the discount rate assumption to be used for U.S. plans, the Company refers to the yield derived from matching projected pension payments with maturities of a portfolio of available non-callable bonds rated AA- or better. The expected long-term rate of return assumption is based on the weighted average expected return of the various asset classes in the plans' portfolio and the targeted allocation of plan assets. The asset class return is developed using historical asset return performance as well as current market conditions such as inflation, interest rates and equity market performance. The rate of compensation increase is determined by the Company based upon annual reviews. Pension Plans' Assets The primary objective of the pension plans' investment policy is to ensure sufficient assets are available to provide benefit obligations when such obligations mature. Investment management practices must comply with ERISA or any other applicable regulations and rulings. The overall investment strategy for the defined benefit pension plans' assets is to achieve a rate of return over a normal business cycle relative to an acceptable level of risk that is consistent with the long-term objectives of the portfolio. The target allocation for plan assets is 60% to 70% equity securities and 30% to 40% debt securities. The following table sets forth, by level within the fair value hierarchy, the pension plans' assets as of December 31, 2012:
|  | Pension Plans' Assets at Fair Value as of December 31, 2012
|  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total
Corporate stock (1) |  | $ | 107,763 |  |  | $ | — |  |  | $ | — |  |  | $ | 107,763 |
Cash and cash equivalents |  | 5,170 |  |  | — |  |  | — |  |  | 5,170 |
Corporate and other obligations (2) |  | — |  |  | 412 |  |  | — |  |  | 412 |
Common trusts and 103-12 investments (3) |  | — |  |  | 673,469 |  |  | — |  |  | 673,469 |
Private equity funds (4) |  | — |  |  | — |  |  | 27,083 |  |  | 27,083 |
Total assets at fair value |  | $ | 112,933 |  |  | $ | 673,881 |  |  | $ | 27,083 |  |  | $ | 813,897 |
The following table sets forth, by level within the fair value hierarchy, the pension plans' assets as of December 31, 2011:
|  | Pension Plans' Assets at Fair Value as of December 31, 2011
|  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total
Corporate stock (1) |  | $ | 94,407 |  |  | $ | — |  |  | $ | — |  |  | $ | 94,407 |
Cash and cash equivalents |  | 1,582 |  |  | — |  |  | — |  |  | 1,582 |
Insurance company nonpooled separate account (5) |  |  |  |  |  |  |  |
Cash and cash equivalents |  | — |  |  | 15,371 |  |  | — |  |  | 15,371 |
Corporate and other obligations |  | — |  |  | 8,288 |  |  | 650 |  |  | 8,938 |
Common trusts and 103-12 investments (3) |  | — |  |  | 611,361 |  |  | — |  |  | 611,361 |
Private equity funds (4) |  | — |  |  | — |  |  | 17,797 |  |  | 17,797 |
Total assets at fair value |  | $ | 95,989 |  |  | $ | 635,020 |  |  | $ | 18,447 |  |  | $ | 749,456 |
_______________________________________________________________________________
(1) | This investment category includes publicly traded equity investments directly held by the plans. Investments are valued at the unadjusted quoted close prices reported on the reporting date.
(2) | This investment category is composed of publicly traded bonds and asset backed securities which are valued at the quoted closing market prices on the reporting date.
(3) | Common trusts and 103-12 investments are comprised of a number of investment funds that invest in a diverse portfolio of assets including equity securities, corporate and governmental bonds, equity and credit indexes, and money markets. Trusts are valued at the net asset value ("NAV") as determined by their custodian. NAV represent the accumulation of the unadjusted quoted close prices on the reporting date for the underlying investments divided by the total shares outstanding at the reporting dates.
(4) | Private equity funds consist of four funds seeking capital appreciation by investing in private equity investment partnerships and venture capital companies. Funds are comprised of unrestricted and restricted publicly traded securities and privately held securities. Unrestricted securities are valued at the closing market price on the reporting date. Restricted securities may be valued at a discount from such closing public market price, depending on facts and circumstances. Privately held securities are valued at fair value as determined by the fund directors and general partners.
(5) | The insurance company nonpooled separate account is focused on capital preservation and invests in fixed-income securities and money market instruments. The account is composed of publicly traded and privately held corporate bonds, money market and mortgage backed assets. Publicly traded bonds, money market and mortgage backed securities are valued at the closing market price on the reporting date. Privately held bonds are valued at fair value as determined by the fund directors and general partners.
The table below sets forth a summary of changes in the fair value of the Level 3 pension plans' assets for the year ended December 31, 2012:
|  | Insurance Company Nonpooled Separate Account |  | Private Equity Funds |  | Total
Balance at the beginning of year |  | $ | 650 |  |  | $ | 17,797 |  |  | $ | 18,447 |
Purchases, sales, issuances and settlements |  | (650 | ) |  | 7,318 |  |  | 6,668 |
Realized and unrealized gains |  | — |  |  | 1,968 |  |  | 1,968 |
Balance at the end of year |  | $ | — |  |  | $ | 27,083 |  |  | $ | 27,083 |
The amount of total gains during the period attributable to the change in unrealized gains relating to Level 3 net assets still held at the reporting date |  | $ | — |  |  | $ | 1,135 |  |  | $ | 1,135 |
Supplemental Executive Retirement Plan The Company maintains a domestic unfunded supplemental executive retirement plan ("SERP") under which non-qualified supplemental pension benefits are paid to certain employees in addition to amounts received under the Company's qualified retirement plan which is subject to Internal Revenue Service ("IRS") limitations on covered compensation. The annual cost of this program has been included in the determination of total net pension costs shown above and was $2,254, $2,110 and $2,118 in 2012, 2011 and 2010, respectively. The projected benefit obligation associated with this plan is also included in the pension disclosure shown above and was $25,646, $23,930 and $21,412 at December 31, 2012, 2011 and 2010, respectively. Defined Contribution Plans Substantially all U.S. employees are covered under a 401(k) savings plan in which they may invest 1% or more of eligible compensation, limited to maximum amounts as determined by the IRS. For most participants the plan provides for Company matching contributions of 35% of the first 6% of employee compensation contributed to the plan. The plan also includes a feature in which all participants hired after November 1, 1997 receive an annual Company contribution of 2% of their base pay. The plan allowed employees hired before November 1, 1997, at their election, to receive this contribution in exchange for forfeiting certain benefits under the pension plan. In 2006, the plan was amended to include a feature in which all participants receive an annual Company contribution ranging from 4% to 10% of base pay based on years of service. The annual costs recognized for defined contribution plans were $9,405, $8,478 and $7,039 in 2012, 2011 and 2010, respectively. Multi-Employer Plans The Company participates in multi-employer plans for several of its operations in Europe. Costs for these plans are recognized as contributions are funded. The Company's risk of participating in these plans is limited to the annual premium as determined by the plan. The annual costs of these programs were $972, $966 and $1,052 in 2012, 2011 and 2010, respectively. Other Benefits The Cleveland, Ohio, area operations have a Guaranteed Continuous Employment Plan covering substantially all employees which, in general, provides that the Company will provide work for at least 75% of every standard work week (presently 40 hours). This plan does not guarantee employment when the Company's ability to continue normal operations is seriously restricted by events beyond the control of the Company. The Company has reserved the right to terminate this plan effective at the end of a calendar year by giving notice of such termination not less than six months prior to the end of such year.

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- Definition The entire disclosure for pension and other postretirement benefits. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 158 -Paragraph 7, 21, 22 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name FASB Staff Position (FSP) -Number FAS106-2 -Paragraph 20, 21, 22 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Implementation Guide (Q and A) -Number FAS88 -Paragraph 63 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 106 -Paragraph 518 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 715 -URI http://asc.fasb.org/topic&trid=2235017 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 132R -Paragraph 5, 6, 7, 8 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. 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