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Benefit Plans And Obligations For Termination Indemnity | 12 Months Ended
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Dec. 31, 2011
Benefit Plans And Obligations For Termination Indemnity [Abstract] |
Benefit Plans And Obligations For Termination Indemnity |
Note 17 - | BENEFIT PLANS AND OBLIGATIONS FOR TERMINATION INDEMNITY
The Company's subsidiaries ESA, Telefunken and a European subsidiary sponsor benefit plans for their employees in the U.S., Germany and Belgium, respectively, as follows: Defined Benefit Retirement Plan based on Employer's Contributions
| a) | ESA has three defined benefit pension plans (the "Plans") which cover the employees of ESA's subsidiaries EFW and Kollsman. Monthly benefits are based on years of benefit service and annual compensation. Annual contributions to the Plans are determined using the unit credit actuarial cost method and are equal to or exceed the minimum required by law. Pension fund assets of the Plans are invested primarily in stock, bonds and cash through a financial institution, as the investment manager of the Plans' assets. Pension expense is allocated between cost of sales and general and administrative expenses, depending on the responsibilities of the employee. The measurement date for the EFW and Kollsman benefit obligation is December 31.
Participation in ESA's qualified defined benefit plans was frozen as of January 1, 2010 for non-represented employees. Current participants will continue to accrue benefits; however no new non-represented employees will be allowed to enter the plan.
| b) | Telefunken Radio Communication Systems GmbH & Co. ("Telefunken"), a wholly-owned German subsidiary, has mainly one defined benefit pension plan (the "P3-plan") which covers all employees. The P3-plan provides for yearly cash balance credits equal to a percentage of a participant's compensation, which accumulate together with the respective interest credits on the employee's cash balance accounts. In case of an insured event (retirement, death or disability) the benefits can be paid as a lump sum, in installments or as a life-long annuity. The P3-plan is an unfunded plan.
| c) | A wholly-owned European subsidiary in Belgium has a defined benefit pension plan, which is divided into two categories:
| 1) | Normal retirement benefit plan, with eligibility at age 65. The lump sum is based on employee contributions of 2% of the final pensionable salary up to a certain breakpoint, plus 6% exceeding the breakpoint at a maximum of 5% of pensionable salary, and the employer contributions, with a maximum of 40 years. The vested benefit is equal to the retirement benefit calculated with the pensionable salary and pensionable service observed at the date of leaving service.
| 2) | Pre-retirement death benefit to employees.
The plan is funded and includes profit sharing. The following table sets forth the Plans' funded status and amounts recognized in the consolidated financial statements for the years ended December 31, 2011 and 2010:
|  | December 31, |
Changes in benefit obligation: |  | 2011 |  |  | 2010 |
Benefit obligation at beginning of year |  | $ | 119,983 |  |  | $ | 103,134 |
Service cost |  |  | 8,058 |  |  |  | 7,031 |
Interest cost |  |  | 6,362 |  |  |  | 5,858 |
Exchange rate differences |  |  | (508 | ) |  |  | (1,023 | )
Actuarial losses |  |  | 21,459 |  |  |  | 7,374 |
Benefits paid |  |  | (2,257 | ) |  |  | (2,391 | )
Benefit obligation at end of year |  | $ | 153,097 |  |  | $ | 119,983 |
Changes in the Plans 'Assets: |  |  |  |  |  |  |  |
Fair value of Plans' assets at beginning of year |  |  | 69,493 |  |  |  | 62,790 |
Actual return on Plans' assets (net of expenses) |  |  | (785 | ) |  |  | 6,326 |
Employer contribution |  |  | 15,266 |  |  |  | 2,679 |
Benefits paid |  |  | (2,194 | ) |  |  | (2,302 | )
Fair value of Plans' assets at end of year |  | $ | 81,780 |  |  | $ | 69,493 |
Accrued benefit cost, end of year: |  |  |  |  |  |  |  |
Funded status |  |  | (71,317 | ) |  |  | (50,490 | )
Unrecognized net actuarial loss |  |  | 60,650 |  |  |  | 34,972 |
Unrecognized prior service cost |  |  | 584 |  |  |  | 680 |
|  | $ | (10,083 | ) |  | $ | (14,838 | )
Amount recognized in the statement of financial position: |  |  |  |  |  |  |  |
Accrued benefit liability, current |  |  | (85 | ) |  |  | (39 | )
Accrued benefit liability, non-current |  |  | (71,232 | ) |  |  | (50,451 | )
Accumulated other comprehensive income, pre-tax |  |  | 61,234 |  |  |  | 35,652 |
Net amount recognized |  | $ | (10,083 | ) |  | $ | (14,838 | )
|  | Year ended December 31, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
Components of the Plans' net periodic pension cost: |  |  |  |  |  |  |  |  |
Service cost |  | $ | 8,205 |  |  | $ | 7,031 |  |  | $ | 6,694 |
Interest cost |  |  | 6,361 |  |  |  | 5,858 |  |  |  | 5,427 |
Expected return on Plans' assets |  |  | (5,512 | ) |  |  | (4,914 | ) |  |  | (3,915 | )
Amortization of prior service cost |  |  | 104 |  |  |  | 95 |  |  |  | 97 |
Amortization of transition amount |  |  | (147 | ) |  |  | (130 | ) |  |  | (120 | )
Amortization of net actuarial loss |  |  | 1,988 |  |  |  | 1,769 |  |  |  | 2,282 |
Total net periodic benefit cost |  | $ | 10,999 |  |  | $ | 9,709 |  |  | $ | 10,465 |
Additional information |  |  |  |  |  |  |  |  |  |  |  |
Accumulated benefit obligation |  | $ | 144,682 |  |  | $ | 112,643 |  |  | $ | 95,877 |
|  | December 31, |
Weighted average assumptions: |  | 2011 |  |  | 2010 |
Discount rate as of December 31 |  |  | 4.4 | % |  |  | 5.4 | %
Expected long-term rate of return on Plans' assets |  |  | 7.3 | % |  |  | 7.3 | %
Rate of compensation increase |  |  | 2.4 | % |  |  | 2.7 | %
Asset Allocation by Category as of December 31:
|  | 2011 |  |  | 2010 |
Asset Category |  |  |  |  |  |
Equity Securities |  |  | 56.8 | % |  |  | 58.1 | %
Debt Securities |  |  | 36.1 | % |  |  | 33.6 | %
Other |  |  | 7.1 | % |  |  | 8.3 | %
Total |  |  | 100.0 | % |  |  | 100.0 | %
The investment policy of ESA is directed toward a broad range of securities. The diversified portfolio seeks to maximize investment return while minimizing the risk levels associated with investing. The investment policy is structured to consider the retirement plan's obligations and the expected timing of benefit payments. The target asset allocation for the Plan years presented is as follows:
|  | 2011 |  |  | 2010 |
Asset Category |  |  |  |  |  |
Equity Securities |  |  | 56.0 | % |  |  | 60.0 | %
Debt Securities |  |  | 41.2 | % |  |  | 37.0 | %
Other |  |  | 2.8 | % |  |  | 3.0 | %
Total |  |  | 100.0 | % |  |  | 100.0 | %
The fair value of the asset values by category at December 31, 2011 is as follows:
|  |  |  |  | Quoted Prices in Active Markets for Identical Assets |  |  | Significant Observable Inputs |  |  | Significant Unobservable Inputs |
Asset Category |  | Total |  |  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |
Cash |  | $ | 126 |  |  | $ | 126 |  |  | $ | - |  |  | $ | - |
Cash Equivalents: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money Market Funds (a) |  |  | 5,660 |  |  |  | - |  |  |  | 5,660 |  |  |  | - |
Fixed Income Securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasuries |  |  | 9,075 |  |  |  | 3,841 |  |  |  | 5,234 |  |  |  | - |
Corporate Bonds |  |  | 1,160 |  |  |  | 1,160 |  |  |  | - |  |  |  | - |
Mutual Funds (b) |  |  | 19,299 |  |  |  | 19,299 |  |  |  | - |  |  |  | - |
Equity Securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Companies (c) |  |  | 14,363 |  |  |  | 14,363 |  |  |  | - |  |  |  | - |
International Companies (d) |  |  | 2,916 |  |  |  | 2,916 |  |  |  | - |  |  |  | - |
Mutual Funds (e) |  |  | 27,015 |  |  |  | 27,015 |  |  |  | - |  |  |  | - |
Real Estate |  |  | 2,166 |  |  |  | 1,572 |  |  |  | 594 |  |  |  | - |
Total |  | $ | 81,780 |  |  | $ | 70,292 |  |  | $ | 11,488 |  |  | $ | - |
| (a) This category includes highly liquid daily traded cash-like vehicles.
| (b) This category invests in highly liquid diverse mutual funds representing a diverse offering of debt issuance.
| (c) This category represents common stocks that are traded on major exchanges.
| (d) This change represents common stocks of companies domiciled outside of the U.S.; they can be represented by ordinary shares or ADRs.
| (e) This category represents highly liquid diverse equity mutual funds of varying asset classes and styles.
In developing the overall expected long-term rate of return on assets assumption, ESA used a building block approach in which rates of return in excess of inflation were considered separately for equity securities, debt securities, real estate and all other assets. The excess returns were weighted by the representative target allocation and added along with an approximate rate of inflation to develop the overall expected long-term rate of return. It is the policy of ESA to meet the ERISA minimum contribution requirements for a Plan year. The minimum contribution requirements for the 2011 Plan year have been satisfied as of December 31, 2011. Benefit payments over the next five years are expected to be $3,470 in 2012; $4,085 in 2013, $4,620 in 2014, $5,216 in 2015 and $5,833 in 2016. Retiree Medical Plan Effective January 1, 2003, ESA commenced offering retiree medical benefits to a limited number of retirees at EFW. The measurement date for ESA benefit obligation is December 31. The following table sets forth the retiree medical plans' funded status and amounts recognized in the consolidated financial statements for the years ended December 31, 2011 and 2010:
|  | December 31 |  |  | December 31 |
|  | 2011 |  |  | 2010 |
Change in Benefit Obligation: |  |  |  |  |  |
Benefit obligation at beginning of period |  | $ | 2,914 |  |  | $ | 2,419 |
Service cost |  |  | 252 |  |  |  | 208 |
Interest cost |  |  | 152 |  |  |  | 138 |
Actuarial (gain) loss |  |  | (63 | ) |  |  | 216 |
Employee contribution |  |  | 19 |  |  |  | 21 |
Benefits paid |  |  | (129 | ) |  |  | (88 | )
Benefit obligation at end of period |  | $ | 3,145 |  |  | $ | 2,914 |
Change in Plan Assets: |  |  |  |  |  |  |  |
Fair value of plan assets at beginning of period |  | $ | - |  |  | $ | - |
Employer contribution |  |  | 110 |  |  |  | 67 |
Employee contribution |  |  | 19 |  |  |  | 21 |
Benefits paid |  |  | (129 | ) |  |  | (88 | )
Fair value of plan assets at end of period |  | $ | - |  |  | $ | - |
|  | Year ended December 31, |
|  | 2011 |  |  | 2010 |
Accrued benefit cost, end of period: |  |  |  |  |  |
Funded status |  | $ | (3,145 | ) |  | $ | (2,914 | )
Unrecognized net actuarial loss |  |  | 455 |  |  |  | 540 |
Unrecognized prior service cost |  |  | - |  |  |  | 74 |
Accrued benefit cost, end of period |  | $ | (2,690 | ) |  | $ | (2,300 | )
Amounts recognized in the statement of financial position: |  |  |  |  |  |  |  |
Accrued benefit liability, current |  | $ | (111 | ) |  | $ | (122 | )
Accrued benefit liability, non-current |  |  | (3,034 | ) |  |  | (2,792 | )
Accumulated other comprehensive loss, pretax |  |  | 455 |  |  |  | 614 |
Net amount recognized |  | $ | (2,690 | ) |  | $ | (2,300 | )
Components of net periodic pension cost (for period): |  |  |  |  |  |
Service cost |  | $ | 253 |  |  | $ | 208 |
Interest cost |  |  | 152 |  |  |  | 138 |
Amortization of prior service cost |  |  | 74 |  |  |  | 150 |
Amortization of net actuarial loss |  |  | 21 |  |  |  | 7 |
Total net periodic benefit cost |  | $ | 500 |  |  | $ | 503 |
Assumptions as of end of period: |  |  |  |  |
Discount rate |  |  | 3.78 | % |  |  | 5.32 | %
Health care cost trend rate assumed for next year |  |  | 8.50 | % |  |  | 8.00 | %
Ultimate health care cost trend rate |  |  | 5.00 | % |  |  | 5.00 | %
The effect of a 1% change in the health care cost trend rate at December 31, 2011 is as follows:
|  | 1% increase |  |  | 1% decrease |
Net periodic benefit cost |  | $ | 48 |  |  | $ | (42 | )
Benefit obligation |  | $ | 281 |  |  | $ | (250 | )
Defined Contribution Plan The 401(k) savings plan ("401(k) plan") is a defined contribution retirement plan that covers all eligible ESA employees, as defined in section 401(k) of the U.S. Internal Revenue Code. Employees may elect to contribute a percentage of their annual gross compensation to the 401(k) plan. ESA may make discretionary matching contributions as determined by ESA. Total expense under the 401(k) plan amounted to $4,436, $3,896 and $3,577 for the years ended December 31, 2011, 2010 and 2009, respectively. Expense for the deferred 401(k) plan is allocated between cost of sales and general and administrative expenses depending on the responsibilities of the related employees. Non-Qualified Defined Contribution Plan In 2007, ESA implemented two new benefit plans for the executives of the organization. The non-qualified, defined contribution plan is structured under Section 409(A). The plan provides the employees at vice president level and above the opportunity to defer up to 100% of their salary and bonus or any amount below that to the 409(A) plan. ESA provides a match of 50 cents on the dollar up to 10% of the employees' total salary and incentive based compensation. The contribution can be made into the 401(k) plan, the 409(A) plan or both plans. The purpose is to provide comparable defined contribution plan benefits for the senior management across three ESA locations. The 409(A) plan funds are contributed to several life insurance policies. Participant contributions transferred into the plan totaled $441 in 2011, and the total ESA contribution to the plan was $100 for 2011. The cash and cash surrender value of these life insurance policies at December 31, 2011 was $3,566. The total liability related to the 409(A) plan was $3,401 at December 31, 2011. The second plan implemented is a non-qualified, defined benefit plan for the top three executives of ESA. The plan provides a calculated, guaranteed payment in addition to their regular pension through the company upon retirement. The plan is funded with several life insurance policies. They are not segregated into a trust or otherwise effectively restricted. These policies are corporate owned assets that are subject to the claims of general creditors and cannot be considered as formal plan assets. The defined benefit plan put in place meets the ERISA definition of an unfunded deferred compensation plan maintained for the benefit of a select group of management or highly compensated employees. The plan assets of life insurance policies have a cash surrender of $1,861 at December 31, 2011. Related liability for the pension payments is $2,731 at December 31, 2011. As of December 31, 2011, all executives had partially vested balances in the plan.

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