Employee Retirement Plans

12 Months Ended

Dec. 31, 2011

Employee Retirement Plans

Employee Retirement Plans

12. Employee Retirement Plans

Pension benefits

        The Company provides noncontributory defined benefit pension plans for most employees. Plans covering salaried employees generally provide pension benefits that are based on the employee's average earnings and credited service. Plans covering hourly employees generally provide benefits of stated amounts for each year of service. The Company's funding policy for the plans is to contribute amounts sufficient to meet the minimum funding requirement of the Employee Retirement Income Security Act of 1974, plus any additional amounts that the Company may determine to be appropriate.

        The reconciliation of the beginning and ending balances of the fair value of plan assets, funded status of plans, and amounts recognized in the consolidated balance sheets consisted of the following:

	December 31
	2011			2010
Change in projected benefit obligation:
Benefit obligation at beginning of year	$	28,557		$	24,723
Service cost		961			800
Interest cost		1,539			1,432
Actuarial loss		4,126			2,884
Benefits paid		(975	)		(956	)
Effect of curtailment		(1,408	)		(326	)
Benefit obligation at end of year		32,800			28,557
Change in plan assets:
Fair value of plan assets at beginning of year		17,804			15,766
Actual return on plan assets		(109	)		2,085
Employer contributions through December 31		1,917			909
Benefits paid		(975	)		(956	)
Fair value of plan assets at end of year		18,637			17,804
Funded Status: accrued pension liability	$	(14,163	)	$	(10,753	)

        In May 2010, in connection with the closure of the Company's manufacturing facility in Johnson City, TN substantially all the employees at this facility were terminated. This resulted in a cessation of all future benefit accruals for these employees under the Company's pension plans. A liability gain of $326 from the curtailment was recognized as a reduction to the net actuarial loss, as the liability gain was less than the unrecognized net actuarial loss prior to the curtailment for the pension plan in the year ended December 31, 2010. Therefore, this did not impact the consolidated statement of income for the year ended December 31, 2010.

        In November 2011, the Company took the following actions with respect to its pension plans effective as of December 31, 2011: It froze benefits as of January 1, 2012 for all employees under the Company's Pension Plan for Hourly Employees, froze benefits as of January 1, 2012 for all employees under the Company's Salaried Pension Plan for employees with less than five years of service and grandfathered employees (other than certain highly compensated employees) under the Company's Salaried Pension Plan with five or more years of service, but reduced the benefit accrual from 1.67% of pay to 1.00% of pay. In order to offset the loss of these benefit to employees, the Company has enhanced its defined contribution plan. The company also established a nonqualified deferred compensation plan effective as of January 1, 2012, for certain highly compensated employees whose participation in the qualified plan is restricted. A liability gain of $1,408 from this curtailment was recognized as a reduction to the net actuarial loss, as the liability gain was less than the unrecognized net actuarial loss prior to the curtailment for the pension plan in the year ended December 31, 2011. Therefore, this did not impact the consolidated statement of income for the year ended December 31, 2011.

        The components of net periodic pension cost consisted of the following for the years ended December 31,

	2011			2010			2009
Component of net periodic pension cost:
Service cost	$	961		$	800		$	820
Interest cost		1,539			1,432			1,355
Expected return on plan assets		(1,357	)		(1,162	)		(984	)
Amortization of net loss		454			324			519
Net periodic pension cost	$	1,597			1,394		$	1,710

        The accumulated benefit obligation for all pension plans as of December 31, 2011 and 2010, was $31,322 and $26,078, respectively.

        In accordance with its adoption of ASC 715-20, the Company uses December 31, as its measurement date for all periods presented. Assumptions used in determining net periodic pension cost for the plans consisted of the following:

	Year ended December 31
	2011			2010			2009
Discount rates		5.5	%		6.0	%		6.0	%
Rates of increase in compensation levels:
Salaried		3.5			3.5			3.5
Hourly		N/A			N/A			N/A
Expected long-term rate of return on assets		8.0			8.0			8.0

        The discount rate used to determine the benefit obligation at December 31, 2011 and 2010 is 4.6% and 5.5%, respectively.

        For 2012, the expected long-term rate of return on plan assets is 7.25%. To determine the long-term rate of return assumption for plan assets, the Company studies historical markets and preserves the long-term historical relationships between equities and fixed-income securities consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. The Company evaluates current market factors such as inflation and interest rates before it determines long-term capital market assumptions and reviews peer data and historical returns to check for reasonableness and appropriateness.

        The expected benefit payments under the pension plans are as follows:

2012	$	1,260
2013		1,310
2014		1,340
2015		1,360
2016		1,380
2017 - 2020		8,020

        The Company made required minimum pension funding contributions of $1,917 to the pension plans in 2011 and currently expects to make $2,512 required minimum pension funding contributions in 2012.

        The Company maintains target allocation percentages among various asset classes based on an investment policy established for the pension plans, which is designed to achieve long-term objectives of return, while mitigating downside risk and considering expected cash flows. The current weighted-average target asset allocations are reflective of actual investments at December 31, 2011 and 2010. The investment policy is reviewed periodically in order to achieve overall objectives in light of current circumstances.

        The Company's weighted-average asset allocation and actual allocation for the qualified pension plans by asset category at December 31 is as follows:

	Target			2011				2010
Large Cap Equity		37	%	$	5,901	32	%	$	6,297	35	%
Mid Cap Equity		4	%		750	4	%		799	5	%
Small Cap Equity		3	%		783	4	%		772	4	%
International Equity		12	%		2,041	11	%		2,379	13	%
Emerging markets Equity		2	%		353	2	%		284	2	%
Fixed Income and Cash Equivalents		34	%		6,966	37	%		6,148	35	%
Real Estate		8	%		1,843	10	%		1,125	6	%
Total		100	%	$	18,637	100	%	$	17,804	100	%

        The investment strategy is to build an efficient, well-diversified portfolio based on a long-term, strategic outlook of the investment markets. The investment market outlook utilizes both historical-based and forward-looking return forecasts to establish future return expectations for various asset classes. These return expectations are used to develop a core asset allocation based on the needs of the plan. The core asset allocation utilizes investment portfolios of various asset classes and multiple investment managers in order to help maximize the plan's return while providing multiple layers of diversification to help minimize risk.

        The following table presents the fair values of the plan assets related to the Company's pension plans within the fair value hierarchy as defined in Note 2.

        The fair values of the Company's pension plan assets as of December 31, 2011 are as follows:

	Balance 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)
Assets:
Equity holdings	$	10,575	$	—	$	10,575	$	—
Fixed-income holdings		6,966		—		6,966		—
Alternative investments		1,096		—		—		1,096
Total pension plan assets	$	18,637	$	—	$	17,541	$	1,096

        The fair values of the Company's pension plan assets as of December 31, 2010 are as follows:

	Balance as of December 31, 2010		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Equity holdings	$	10,938	$	—	$	10,938	$	—
Fixed-income holdings		6,148		—		6,148		—
Alternative investments		718		—		—		718
Total pension plan assets	$	17,804	$	—	$	17,086	$	718

        Level 2 investments are based on quoted prices for similar assets in markets that are not active while Level 3 investments are comprised of a real estate fund for which the fair value is determined by taking the appraised values of the properties on hand plus other assets and subtracting mortgage loans and other liabilities.

        The following table presents a reconciliation of the fair value measurements using significant unobservable inputs (Level 3):

	December 31,
	2011			2010
Balance, beginning of year	$	718		$	619
Deposits		408			—
Actual return on plan assets held at reporting date		129			99
Withdrawals		(159	)		—
Balance, end of year	$	1,096		$	718

Postretirement benefits

        The Company provides postretirement healthcare benefits for certain employee groups. The postretirement healthcare plans are contributory and contain certain other cost-sharing features such as deductibles and coinsurance. The plans are unfunded. Employees do not vest until they retire from active employment with the Company and have at least twelve years of service. These benefits can be amended or terminated at anytime and are subject to the same ongoing changes as our healthcare benefits for employees with respect to deductible, co-insurance and participant contributions.

        Effective January 1, 2004, the postretirement healthcare benefits were extended to all active employees of the Company as of December 31, 2003. The period of coverage was reduced and the retiree contribution percentage was increased in order to keep the cost of the plan equivalent to the previous plan design.

        Maximum coverage under the plan is limited to ten years. All benefits terminate upon the death of the retiree. Employees who began working for the Company after December 31, 2003, are not eligible for postretirement healthcare benefits.

        The reconciliation of the beginning and ending balances of the projected benefit obligation for the Company consisted of the following:

	December 31
	2011			2010
Change in projected benefit obligation:
Benefit obligation at beginning of year	$	7,576		$	8,198
Service cost		263			308
Interest cost		407			455
Participant contributions		95			94
Changes in actuarial assumptions		426			(154	)
Benefits paid		(365	)		(294	)
Plan Curtailment		—			(1,031	)
Projected benefit obligation at end of year	$	8,402		$	7,576
Amounts recognized in the consolidated balance sheets consisted
Accrued expenses and other current liabilities	$	349		$	341
Retiree health benefit obligation		8,053			7,235
	$	8,402		$	7,576

        In May 2010, in connection with the closure of the Company's manufacturing facility in Johnson City, TN substantially all the employees at this facility were terminated. This resulted in a cessation of all future benefit accruals for these employees under the Company's other post employment benefit ("OPEB") plan. The liability gain for the OPEB plan exceeded the unrecognized net actuarial loss prior to the curtailment and resulted in a gain of $1,031 of which $667 was recorded in selling, general and administrative expense in the consolidated statement of income for the year ended December 31, 2010 and $364 (before taxes) was recognized as a reduction to the net actuarial loss in accumulated other comprehensive loss at December 31, 2010.

        The components of postretirement healthcare benefit cost consisted of the following for the years ended December 31,

	2011			2010			2009
Component of net postretirement health benefit cost:
Service cost	$	263		$	308		$	305
Interest cost		407			455			419
Amortization of net gain		(61	)		(6	)		(73	)
Curtailment gain		—			(667	)		—
Net postretirement healthcare benefit cost	$	609		$	90		$	651

        The assumed discount and healthcare cost trend rates are summarized as follows:

	Year Ended December 31
	2011			2010			2009
Discount rate		5.5	%		6.0	%		6.0	%
Immediate healthcare cost trend rate		9.0			9.0			8.5
Ultimate healthcare cost trend rate		5.0			5.0			5.0
Assumed annual reduction in trend rate		*			0.5			0.5
Participation		80			80			80

*

Health Care Cost Trend rate is assumed to be 9.0% beginning in 2011 gradually reducing to an ultimate rate of 5.0% in 2017.

        The discount rate used to determine the benefit obligation at December 31, 2011 and 2010 is 4.4% and 5.5%, respectively. For the years ending December 31, 2009 and 2010 the combination of pension and postretirement benefit cash flows were used to develop a single equivalent discount rate as the results were materially the same. For 2011, a separate discount rate was determined for pension and postretirement benefits. For December 31, 2011, the health care cost trend rate is assumed to be 8.0% beginning in 2012 gradually reducing to an ultimate rate of 4.5% in 2019.

        A one percentage point change in the healthcare cost trend rate would have the following effect at December 31, 2011:

	1% Increase		1% Decrease
Effect on total service and interest cost	$	96	$	(81	)
Effect on postretirement benefit obligation		1,013		(866	)

        Amounts included in other comprehensive loss, net of tax, at December 31, 2011, which have not yet been recognized in net periodic pension or OPEB cost, were net actuarial gain (loss) of ($7,185) and $96 for the pension plans and postretirement healthcare benefits, respectively. The estimated actuarial gain (loss) for the defined benefit plans that will be amortized from accumulated other comprehensive loss into net periodic pension or OPEB cost during 2012 are ($770) and $16 for the pension plans and postretirement healthcare benefits, respectively.

Defined contribution plan

        The Company has a defined contribution plan, which qualifies under Section 401(k) of the Internal Revenue Code and provides substantially all employees an opportunity to accumulate personal funds for their retirement. Contributions are made on a before-tax basis to these plans.

        As determined by the provisions of the plan, the Company matches a portion of the employees' basic voluntary contributions. The Company matching contributions to the plan were approximately $140, $123 and $137 for the years ended December 31, 2011, 2010 and 2009, respectively. Beginning January 1, 2012, the Company amended its defined contribution plan to permit non-discretionary employer contributions. This enhancement of the defined contribution plan occurred contemporaneously with the pension plan amendments noted within this footnote under "Pension benefits".