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Postretirement Benefits
 12 Months Ended
Dec. 31, 2011
Postretirement Benefits [Abstract]  
POSTRETIREMENT BENEFITS

NOTE 8 — POSTRETIREMENT BENEFITS

The Company and its subsidiaries sponsor a number of defined benefit retirement plans covering certain of its salaried and hourly employees. Benefits under these plans are primarily based on final average compensation and years of service as defined within the provisions of the individual plans. The Company also participates in a retirement plan that provides defined benefits to employees under certain collective bargaining agreements.

The Company uses a December 31 measurement date for its U.S. and non-U.S. benefit plans in accordance with ASC Topic 715, Compensation — Retirement Benefits.

 

The components of net periodic pension expense for each of the three years in the period ended December 31, are summarized as follows ($ in millions):

 

                                                 
    U.S. Benefit Plans     Non-U.S. Benefit Plan  
    2011     2010     2009     2011     2010     2009  

Company-sponsored plans

                                                

Service cost

   $   -         $   -         $   -         $     0.1     $     0.2     $     0.2  

Interest cost

     7.8       7.9       8.0       2.9       2.7       2.6  

Expected return on plan assets

     (7.6 )      (8.7 )      (9.5 )      (3.3 )      (3.1 )      (2.7 ) 

Amortization of actuarial loss

     4.8       3.6       2.0       0.9       0.8       1.1  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
      5.0       2.8       0.5       0.6       0.6       1.2  

Multi-employer plans

     0.3       0.2       0.2       -           -           -      
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net periodic pension expense

     $  5.3       $  3.0       $  0.7       $    0.6       $    0.6       $    1.2  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

The Company, through its subsidiaries, participates in certain multiemployer pension plans under U.S. collective bargaining agreements. None of these plans are considered individually significant to the Company. Contributions to these plans totaled $0.3 million, $0.2 million, and $0.2 million for 2011, 2010, and 2009, respectively.

The following table summarizes the weighted-average assumptions used in determining pension costs in each of the three years for the period ended December 31:

 

                                                 
    U.S. Benefit Plans     Non-U.S. Benefit Plan  
    2011     2010     2009     2011     2010     2009  

Discount rate

     5.8 %      6.0 %      6.5 %      5.4 %      5.7 %      5.7 % 

Rate of increase in compensation levels *

     3.5 %      3.5 %      3.5 %      N/A       N/A       N/A  

Expected long term rate of return on plan assets

     8.2 %      8.5 %      8.5 %      6.5 %      6.5 %      6.8 % 

 

* Non-U.S. plan benefits are not adjusted for compensation level changes.

The following summarizes the changes in the projected benefit obligation and plan assets, the funded status of the Company-sponsored plans, and the major assumptions used to determine these amounts at December 31 ($ in millions):

 

                                 
    U.S. Benefit Plans     Non-U.S. Benefit Plan  
        2011             2010             2011             2010      

Change in Benefit Obligation

                                

Benefit obligation, beginning of year

   $ 138.4     $ 133.5     $ 52.6     $ 50.0  

Service cost

     -           -           0.1       0.2  

Interest cost

     7.8       7.9       2.9       2.7  

Actuarial loss

     17.4       6.1       4.9       3.0  

Benefits paid

     (7.0 )      (9.1 )      (2.5 )      (2.4 ) 

Translation and other

     -           -           (0.9 )      (0.9 ) 
   

 

 

    

 

 

    

 

 

    

 

 

  

Benefit obligation, end of year

   $ 156.6     $ 138.4     $ 57.1     $ 52.6  
   

 

 

    

 

 

    

 

 

    

 

 

  

Accumulated benefit obligation, end of year

   $ 154.5     $ 136.5     $ 57.1     $ 52.6  
   

 

 

    

 

 

    

 

 

    

 

 

  

 

The following table summarizes the weighted-average assumptions used in determining benefit obligations as of December 31:

 

                                 
    U.S. Benefit Plans     Non-U.S. Benefit Plan  
        2011             2010             2011             2010      

Discount rate

     5.0 %      5.8 %      4.6 %      5.4 % 

Rate of increase in compensation levels

     3.5 %      3.5 %      N/A       N/A  

 

                                 
    U.S. Benefit Plans     Non-U.S. Benefit Plan  
        2011             2010             2011             2010      

Change in Plan Assets ($ in millions)

                                

Fair value of plan assets, beginning of year

   $ 104.8     $ 101.0     $ 50.6     $ 48.2  

Actual return on plan assets

     (3.5 )      12.9       (0.8 )      4.6  

Company contribution

     2.7       -           1.1       1.1  

Benefits and expenses paid

     (7.0 )      (9.1 )      (2.5 )      (2.4 ) 

Translation and other

     -           -           (0.5 )      (0.9 ) 
   

 

 

    

 

 

    

 

 

    

 

 

  

Fair value of plan assets, end of year

   $ 97.0     $ 104.8     $ 47.9     $ 50.6  
   

 

 

    

 

 

    

 

 

    

 

 

  

The amounts included in translation and other in the preceding tables reflect the impact of the foreign exchange translation for the non-U.S. benefit plan.

The plan asset’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Following is a description of the valuation methodologies used for assets measured at fair value for U.S. plan:

Cash and Cash Equivalents — Valued at net asset value as provided by the administrator of the fund.

U.S. Government and agency securities — Valued at the closing price reported on the active market on which the security is traded or valued by the trustee at year-end using various pricing services of financial institutions.

Common stock — Valued at the closing price reported on the active market on which the security is traded.

Collective/Common trust — Valued at the net asset value, based on quoted market value of the underlying assets, of shares held by the plan at year end.

Mutual funds — Valued at the net asset value, based on quoted market prices in active markets, of shares held by the plan at year end.

Plan assets for the non-U.S. benefit plans are based on quoted prices in active markets for identical assets.

 

The following table summarizes the Company’s pension assets in a three-tier fair value hierarchy for its benefit plan as of December 31 ($ in millions):

 

                                                                 
    U. S. Benefit Plans  
    2011     2010  
    Level 1     Level 2     Level 3     Total     Level 1     Level 2     Level 3     Total  

Cash and Cash Equivalents

   $ -         $ 3.9     $   -         $ 3.9     $ -         $ 1.5       $  -         $ 1.5  

Equities

                                                                

U.S. Large Cap

     27.7       -           -           27.7       27.0       -           -           27.0  

U.S. Small and Mid Cap

     9.9       -           -           9.9       11.8       0.4       -           12.2  

Developed International

     3.7       -           -           3.7       5.1       0.1       -           5.2  

Emerging Markets

     3.3       -           -           3.3       3.5       -           -           3.5  

Fixed Income

                                                                

Government Bonds

     4.5       -           -           4.5       6.8       -           -           6.8  

Asset-backed Securities

     -           6.7       -           6.7       -           4.8       -           4.8  

Federal Signal Common Stock

     3.9       -           -           3.9       6.4       0.2       -           6.6  

Collective/Common Trust and Other

                                                                

Mutual Funds

     33.3       0.1       -           33.4       36.2       1.0       -           37.2  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total assets at fair value

   $ 86.3     $ 10.7     $ -         $ 97.0     $ 96.8     $ 8.0     $   -         $ 104.8  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

                                                                 
    Non-U. S. Benefit Plan  
    2011     2010  
    Level 1     Level 2     Level 3     Total     Level 1     Level 2     Level 3     Total  

Equity Securities

   $ 29.1     $   -         $   -         $ 29.1     $ 31.0     $   -         $   -         $ 31.0  

Government Securities

     4.9                       4.9       4.7                       4.7  

Company Bonds and Debt Securities

     5.3       -           -           5.3       5.4       -           -           5.4  

Insurance Policy

     -           -           -           -           0.3       -           -           0.3  

Cash

     8.6       -           -           8.6       9.2       -           -           9.2  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 47.9     $ -         $ -         $ 47.9     $ 50.6     $ -         $ -         $ 50.6  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

During 2010, the Company adopted a structured derisking investment strategy for the U.S. pension plans to improve alignment of assets and liabilities that includes: (1) maintain a diversified portfolio that can provide a near-term weighted-average target return of 8.2% or more; (2) maintain liquidity to meet obligations; and (3) prudently manage administrative and management costs. The plan invests in equity, mutual funds, and fixed income instruments.

Plan assets for the non-U.S. benefit plan consist principally of a diversified portfolio of equity securities, U.K. government securities, company bonds and debt securities.

As of December 31, 2011 and 2010, equity securities included 0.9 million and 0.9 million shares of the Company’s common stock valued at $3.9 million and $6.4 million, respectively. Dividends paid on the Company’s common stock to the pension trusts aggregated $0.1 million and $0.2 million in each of the years ended December 31, 2011 and 2010, respectively.

 

                                 
    U.S. Benefit Plans     Non-U.S. Benefit Plan  
        2011             2010             2011             2010      

Funded status, end of year ($ in millions):

                                

Fair value of plan assets

   $ 97.0     $ 104.8     $ 47.9     $ 50.6  

Benefit obligations

       156.6         138.4       57.1       52.6  
   

 

 

    

 

 

    

 

 

    

 

 

  

Funded status

   $ (59.6 )    $ (33.6 )    $ (9.2 )    $ (2.0 ) 
   

 

 

    

 

 

    

 

 

    

 

 

  

 

                                 
    U.S. Benefit Plans     Non-U.S. Benefit Plan  
        2011             2010             2011             20010      

Amounts recognized in the Balance Sheet consist of ($ in millions):

                                

Long term pension liabilities

   $ (59.6 )    $ (33.6 )    $ (9.2 )    $ (2.0 ) 

Accumulated other comprehensive loss, pre-tax

     79.3       55.4       23.2       15.6  
   

 

 

    

 

 

    

 

 

    

 

 

  

Net amount recognized

   $ 19.7     $ 21.8     $ 14.0     $ 13.6  
   

 

 

    

 

 

    

 

 

    

 

 

  
     
    U.S. Benefit Plans     Non-U.S. Benefit Plan  
        2011             2010             2011             2010      

Amounts recognized in Accumulated Other Comprehensive Income consist of ($ in millions):

                                

Net actuarial loss

   $ 79.3     $ 55.4     $ 23.2     $ 15.6  

Prior service cost

     -           -           -           -      
   

 

 

    

 

 

    

 

 

    

 

 

  

Net amount recognized, pre-tax

   $ 79.3     $ 55.4     $ 23.2     $ 15.6  
   

 

 

    

 

 

    

 

 

    

 

 

  

The Company expects $6.2 million relating to amortization of the actuarial loss to be amortized from Accumulated Other Comprehensive Loss into Net Periodic Benefit Cost in 2012.

The Company expects to contribute up to $11.2 million to the U.S. benefit plans and up to $1.5 million to the non-U.S. plan in 2012. Future contributions to the plans will be based on such factors as annual service cost as well as return on plan asset values, interest rate movements, and benefit payments.

The following table presents the benefits expected to be paid under the Company’s defined benefit plans in each of the next five years, and in aggregate for the five years thereafter ($ in millions):

 

                 
    U.S. Benefit
Plans		     Non-U.S.
Benefit Plan		  

2012

   $ 7.1     $ 2.4  

2013

     7.5       2.5  

2014

     7.7       2.6  

2015

     8.4       2.7  

2016

     8.7       2.8  

2017-2021

     48.6       15.5  

The Company also sponsors a number of defined contribution pension plans covering a majority of its employees. Participation is via automatic enrollment; employees may elect to opt out of the plan. Company contributions to the plan are based on employees’ age and service as well as a percentage of employee contributions. In January 1, 2009, the Company suspended the Company match of Federal Signal non-union employees’ 401(k) contribution to the plans. Effective January 1, 2010, the Company reinstated the company matching contribution.

The cost of these plans during each of the three years in the period ended December 31, 2011, was $7.0 million in 2011, $6.3 million in 2010 and $4.8 million in 2009.

Prior to September 30, 2003, the Company also provided medical benefits to certain eligible retired employees. These benefits were funded when the claims were incurred. Participants generally became eligible for these benefits at age 60 after completing at least fifteen years of service. The plan provided for the payment of specified percentages of medical expenses reduced by any deductible and payments made by other primary group coverage and government programs. Effective September 30, 2003, the Company amended the retiree medical plan and effectively canceled coverage for all eligible active employees except for retirees and a limited group that qualified under a formula based on age and years of service. Accumulated postretirement benefit liabilities of $1.0 million and $1.2 million at December 31, 2011 and 2010, respectively, were fully accrued. The net periodic postretirement benefit costs have not been significant during the three-year period ended December 31, 2011.