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Pensions | 12 Months Ended
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Dec. 31, 2013
Compensation and Retirement Disclosure [Abstract] |
Pensions | PENSIONS The Company and its subsidiaries sponsor a number of defined benefit pension plans covering certain 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 following table summarizes net periodic pension expense for U.S. and non-U.S. benefit plans:
| U.S. Benefit Plan |  | Non-U.S. Benefit Plans
(in millions) | 2013 |  | 2012 |  | 2011 |  | 2013 |  | 2012 |  | 2011
Company-sponsored plans: |  |  |  |  |  |  |  |  |  |  |
Service cost | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 0.3 |  |  | $ | 0.2 |  |  | $ | 0.1 |
Interest cost | 7.3 |  |  | 7.4 |  |  | 7.4 |  |  | 2.5 |  |  | 2.6 |  |  | 2.9 |
Expected return on plan assets | (8.8 | ) |  | (8.1 | ) |  | (7.2 | ) |  | (2.6 | ) |  | (2.6 | ) |  | (3.3 | )
Amortization of actuarial loss | 7.5 |  |  | 5.5 |  |  | 4.5 |  |  | 0.9 |  |  | 0.8 |  |  | 0.9 |
Total company-sponsored plans | 6.0 |  |  | 4.8 |  |  | 4.7 |  |  | 1.1 |  |  | 1.0 |  |  | 0.6 |
Multi-employer plans | 0.2 |  |  | 0.3 |  |  | 0.3 |  |  | — |  |  | — |  |  | — |
Net periodic pension expense | $ | 6.2 |  |  | $ | 5.1 |  |  | $ | 5.0 |  |  | $ | 1.1 |  |  | $ | 1.0 |  |  | $ | 0.6 |
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 $0.2 million, $0.3 million, and $0.3 million for 2013, 2012, and 2011, respectively. The following table summarizes the weighted-average assumptions used in determining pension costs:
| U.S. Benefit Plan |  | Non-U.S. Benefit Plans
| 2013 |  | 2012 |  | 2011 |  | 2013 |  | 2012 |  | 2011
Discount rate | 4.2 | % |  | 5.0 | % |  | 5.8 | % |  | 4.1 | % |  | 4.6 | % |  | 5.4 | %
Rate of increase in compensation levels | 3.5 | % |  | 3.5 | % |  | 3.5 | % |  | — |  |  | — |  |  | — |
Expected long term rate of return on plan assets | 7.9 | % |  | 8.1 | % |  | 8.2 | % |  | 5.1 | % |  | 5.3 | % |  | 6.5 | %
The following table summarizes the changes in the projected benefit obligation and plan assets:
| U.S. Benefit Plan |  | Non-U.S. Benefit Plans
(in millions) | 2013 |  | 2012 |  | 2013 |  | 2012
Benefit obligation, beginning of year | $ | 179.7 |  |  | $ | 156.6 |  |  | $ | 65.6 |  |  | $ | 57.1 |
Service cost | — |  |  | — |  |  | 0.3 |  |  | 0.2 |
Interest cost | 7.3 |  |  | 7.7 |  |  | 2.5 |  |  | 2.6 |
Actuarial (gain) loss | (17.6 | ) |  | 22.4 |  |  | (5.3 | ) |  | 5.9 |
Benefits and expenses paid | (10.1 | ) |  | (7.0 | ) |  | (3.1 | ) |  | (2.9 | )
Translation and other | — |  |  | — |  |  | 1.0 |  |  | 2.7 |
Benefit obligation, end of year | $ | 159.3 |  |  | $ | 179.7 |  |  | $ | 61.0 |  |  | $ | 65.6 |
Accumulated benefit obligation, end of year | $ | 157.3 |  |  | $ | 177.2 |  |  | $ | 60.4 |  |  | $ | 65.6 |
The following table summarizes the weighted-average assumptions used in determining benefit obligations as of December 31:
| U.S. Benefit Plan |  | Non-U.S. Benefit Plans
| 2013 |  | 2012 |  | 2013 |  | 2012
Discount rate | 5.1 | % |  | 4.2 | % |  | 4.5 | % |  | 4.1 | %
Rate of increase in compensation levels | 3.5 | % |  | 3.5 | % |  | — |  |  | — |
The following summarizes the changes in the fair value of plan assets:
| U.S. Benefit Plan |  | Non-U.S. Benefit Plans
(in millions) | 2013 |  | 2012 |  | 2013 |  | 2012
Fair value of plan assets, beginning of year | $ | 112.2 |  |  | $ | 97.0 |  |  | $ | 54.8 |  |  | $ | 47.9 |
Actual return on plan assets | 20.5 |  |  | 13.0 |  |  | 7.6 |  |  | 5.3 |
Company contribution | 6.8 |  |  | 9.2 |  |  | 1.7 |  |  | 2.3 |
Benefits and expenses paid | (10.1 | ) |  | (7.0 | ) |  | (3.1 | ) |  | (2.9 | )
Translation and other | — |  |  | — |  |  | 1.4 |  |  | 2.2 |
Fair value of plan assets, end of year | $ | 129.4 |  |  | $ | 112.2 |  |  | $ | 62.4 |  |  | $ | 54.8 |
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 plans. As more fully described within Note 1, Significant Accounting Policies, the Company uses a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. Following is a description of the valuation methodologies used for assets measured at fair value for the U.S. benefit plan:
• | Cash and cash equivalents are comprised of cash on deposit and a money market fund, that invests principally in short-term instruments. The money-market fund is valued at the net asset value ("NAV") of the shares in the fund.
• | Equity investments represent domestic and foreign securities, including common stock, which are publicly traded on active exchanges and are valued based on quoted market prices.
• | Fixed income investments include treasury bonds, which are valued based on quoted market prices in active markets, as well as investments in asset-backed securities, which are valued using models with readily observable market data as inputs.
• | Mutual funds are valued by obtaining quoted prices from nationally recognized securities exchanges.
Following is a description of the valuation methodologies used for assets measured at fair value for the non-U.S. benefit plan:
• | Equity investments represent domestic and foreign securities, which are publicly traded on active exchanges and are valued based on quoted market prices. The inputs used to value certain other non-U.S. investments in equity securities both in the U.K. and other overseas markets are based on observable market information consistent with Level 2 of the fair value hierarchy inputs. Specifically, they are valued using the NAV as of the last business day of the year. The NAV is based on the underlying value of the assets owned by the fund minus its liabilities, and then divided by the number of shares outstanding. The value of the underlying assets is based on quoted prices in active markets.
• | Fixed income investments include treasury securities and corporate bonds, which are valued based on quoted market prices in active markets.
The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. The following summarizes the Company’s pension assets in a three-tier fair value hierarchy for its benefit plans:
| U. S. Benefit Plan
| 2013 |  | 2012
(in millions) | Level 1 |  | Level 2 |  | Level 3 |  | Total |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Cash and cash equivalents | $ | 2.9 |  |  | $ | — |  |  | $ | — |  |  | $ | 2.9 |  |  | $ | 3.7 |  |  | $ | — |  |  | $ | — |  |  | $ | 3.7 |
Equity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Large Cap | 37.1 |  |  | — |  |  | — |  |  | 37.1 |  |  | 32.7 |  |  | — |  |  | — |  |  | 32.7 |
U.S. Small and Mid Cap | 15.3 |  |  | — |  |  | — |  |  | 15.3 |  |  | 11.9 |  |  | — |  |  | — |  |  | 11.9 |
Federal Signal common stock | 13.6 |  |  | — |  |  | — |  |  | 13.6 |  |  | 7.1 |  |  | — |  |  | — |  |  | 7.1 |
Developed international | 9.6 |  |  | 0.1 |  |  | — |  |  | 9.7 |  |  | 6.6 |  |  | — |  |  | — |  |  | 6.6 |
Emerging markets | 2.7 |  |  | — |  |  | — |  |  | 2.7 |  |  | 4.5 |  |  | — |  |  | — |  |  | 4.5 |
Fixed income: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government securities | 6.8 |  |  | — |  |  | — |  |  | 6.8 |  |  | 5.7 |  |  | — |  |  | — |  |  | 5.7 |
Asset-backed securities | — |  |  | 3.5 |  |  | — |  |  | 3.5 |  |  | — |  |  | 5.9 |  |  | — |  |  | 5.9 |
Mutual funds | 18.0 |  |  | — |  |  | — |  |  | 18.0 |  |  | 12.2 |  |  | — |  |  | — |  |  | 12.2 |
Other investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mutual funds | 19.8 |  |  | — |  |  | — |  |  | 19.8 |  |  | 21.9 |  |  | — |  |  | — |  |  | 21.9 |
Total assets at fair value | $ | 125.8 |  |  | $ | 3.6 |  |  | $ | — |  |  | $ | 129.4 |  |  | $ | 106.3 |  |  | $ | 5.9 |  |  | $ | — |  |  | $ | 112.2 |
| Non-U. S. Benefit Plans
| 2013 |  | 2012
(in millions) | Level 1 |  | Level 2 |  | Level 3 |  | Total |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Cash | $ | 10.7 |  |  | $ | — |  |  | $ | — |  |  | $ | 10.7 |  |  | $ | 10.6 |  |  | $ | — |  |  | $ | — |  |  | $ | 10.6 |
Equity securities | 6.3 |  |  | 36.9 |  |  | — |  |  | 43.2 |  |  | 4.8 |  |  | 29.7 |  |  | — |  |  | 34.5 |
Fixed income: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government securities | 4.0 |  |  | — |  |  | — |  |  | 4.0 |  |  | 4.1 |  |  | — |  |  | — |  |  | 4.1 |
Corporate bonds | 4.5 |  |  | — |  |  | — |  |  | 4.5 |  |  | 5.6 |  |  | — |  |  | — |  |  | 5.6 |
Total assets at fair value | $ | 25.5 |  |  | $ | 36.9 |  |  | $ | — |  |  | $ | 62.4 |  |  | $ | 25.1 |  |  | $ | 29.7 |  |  | $ | — |  |  | $ | 54.8 |
The Company maintains a structured derisking investment strategy for the U.S. pension plan to improve alignment of assets and liabilities that includes: (i) maintaining a diversified portfolio that can provide a near-term weighted-average target return of approximately 7.6% or more; (ii) maintaining liquidity to meet obligations; and (iii) prudently managing administrative and management costs. The target asset allocations for the U.S. pension plan are between 40% and 60% equity securities, between 25% and 38% fixed income securities, and between 15% and 25% in other investments, with the remainder represented by cash and cash equivalents. Other investments may include mutual funds investing in real estate, commodities, or hedge funds. Plan assets for the non-U.S. benefit plans consist principally of a diversified portfolio of equity securities, U.K. government securities, company bonds and debt securities. The target asset allocations for the non-U.S. benefit plan assets are between 50% and 70% equity securities and between 30% and 50% debt securities. As of December 31, 2013 and 2012, equity securities included 0.9 million shares of the Company’s common stock valued at $13.6 million and $7.1 million, respectively. No dividends were paid on the Company’s common stock to the pension trusts in the years ended December 31, 2013 or 2012. The following summarizes the funded status of the Company-sponsored plans:
| U.S. Benefit Plan |  | Non-U.S. Benefit Plans
(in millions) | 2013 |  | 2012 |  | 2013 |  | 2012
Fair value of plan assets | $ | 129.4 |  |  | $ | 112.2 |  |  | $ | 62.4 |  |  | $ | 54.8 |
Benefit obligations | 159.3 |  |  | 179.7 |  |  | 61.0 |  |  | 65.6 |
Funded status | $ | (29.9 | ) |  | $ | (67.5 | ) |  | $ | 1.4 |  |  | $ | (10.8 | )
The funded status of non-U.S. benefit plans where the accumulated benefit obligation was in excess of the fair value of plan assets was $1.1 million at December 31, 2013. The following summarizes the amounts recognized within our consolidated balance sheets:
| U.S. Benefit Plan |  | Non-U.S. Benefit Plans
(in millions) | 2013 |  | 2012 |  | 2013 |  | 2012
Amounts recognized in the balance sheet include: |  |  |  |  |  |  |
Deferred charges and other assets | $ | — |  |  | $ | — |  |  | $ | 2.5 |  |  | $ | — |
Long term pension liabilities | (29.9 | ) |  | (67.5 | ) |  | (1.1 | ) |  | (10.8 | )
Net (liability) asset recorded | $ | (29.9 | ) |  | $ | (67.5 | ) |  | $ | 1.4 |  |  | $ | (10.8 | )
Amounts recognized in accumulated other comprehensive loss include: |  |  |  |  |  |  |
Net actuarial loss | $ | 54.7 |  |  | $ | 91.5 |  |  | $ | 15.6 |  |  | $ | 26.8 |
Net amount recognized, pre-tax | $ | 54.7 |  |  | $ | 91.5 |  |  | $ | 15.6 |  |  | $ | 26.8 |
The Company expects $5.2 million relating to amortization of the actuarial loss to be amortized from accumulated other comprehensive loss into net periodic benefit cost in 2014. The Company expects to contribute up to $8.8 million to the U.S. benefit plan and up to $1.3 million to the non-U.S. benefit plans in 2014. Future contributions to the plans will be based on such factors as annual service cost, the financial return on plan assets, interest rate movements that affect discount rates applied to plan liabilities, and the value of benefit payments made. The following summarizes 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 Plan |  | Non-U.S. Benefit Plans
2014 | $ | 8.0 |  |  | $ | 2.7 |
2015 | 8.6 |  |  | 2.8 |
2016 | 8.5 |  |  | 2.9 |
2017 | 9.1 |  |  | 3.0 |
2018 | 9.8 |  |  | 3.1 |
2019-2023 | 52.7 |  |  | 16.9 |
The Company also sponsors a defined contribution retirement plan 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. The cost of these plans during each of the three years in the period ended December 31, 2013, was $7.0 million in 2013, $6.3 million in 2012 and $5.8 million in 2011. Prior to September 30, 2003, the Company also provided medical benefits to certain eligible retired employees. These benefits are funded when the claims are incurred. Participants generally became eligible for these benefits at age 60 after completing at least 15 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 post-retirement benefit liabilities of $0.5 million and $1.0 million at December 31, 2013 and 2012, respectively, were fully accrued. The net periodic post-retirement benefit costs have not been significant during the three-year period ended December 31, 2013.

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