Pension and Other Postretirement Benefit Plans

12 Months Ended

Dec. 31, 2012

Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract]

Pension and Other Postretirement Benefit Plans

Pension and Other Postretirement Benefit Plans

Foreign Plan

The Compensation—Retirement Benefits Subtopic of the FASB ASC requires balance sheet recognition of the total over funded or under funded status of pension and postretirement benefit plans. Under the guidance, actuarial gains and losses, prior service costs or credits, and any remaining transition assets or obligations that have not been recognized under previous accounting standards must be recognized as a component of accumulated other comprehensive income within stockholders’ equity, net of tax effects, until they are amortized as a component of net periodic benefit cost (income).

The Company’s plan is regulated by the Swiss Government and is funded by the employees and the Company. The pension benefit is based on compensation, length of service and credited investment earnings. The plan guarantees both a minimum rate of return as well as minimum annuity purchase rates. The Company’s funding policy with respect to the pension plan is to contribute the amount required by Swiss law, using the required percentage applied to the employee’s compensation. In addition, participating employees are required to contribute to the pension plan. The Company made pension contributions of $732,000, $778,000 and $635,000 in 2012, 2011 and 2010, respectively; 45% of the total contributions to the plan each year are made by the employees. This plan has a measurement date of December 31. The Company does not have any rights to the assets of the plan.

The reported pension asset increased from $6.4 million to $6.9 million during the year ended December 31, 2012. The asset increase is a combination of an actuarial gain due to participant experience, employee funding received by the plan related to the transfer of assets from another employee benefit plan, an actuarial loss due to assumption changes, and a higher than expected overall asset return rate which resulted in a gain.

The accumulated benefit obligation was approximately $28.1 million and $25.2 million as of December 31, 2012 and 2011, respectively.

The following table reflects changes in the pension benefit obligation and plan assets for the years ended and as of December 31, 2012 and 2011 (in thousands):

	Pension Benefits
	Years ended December 31,
	2012			2011
Change in benefit obligation:
Benefit obligation at beginning of year	$	26,723		$	25,340
Service cost	671			793
Interest cost	651			717
Plan participant contributions	1,602			637
Benefits paid	(668		)	(1,254		)
Actuarial loss	1,659			735
Administrative expenses paid	—			(79		)
Settlements	(1,417		)	—
Effect of foreign currency translation	735			(166		)
Projected benefit obligation at end of year	29,956			26,723
Changes in plan assets:
Fair value of plan assets at beginning of year	33,082			30,662
Actual return on plan assets	2,670			2,581
Company contributions	732			778
Plan participant contributions	1,602			637
Benefits paid	(668		)	(1,254		)
Administrative expenses paid	—			(79		)
Settlements	(1,417		)	—
Effect of foreign currency translation	894			(243		)
Fair value of plan assets at end of year	36,895			33,082
Funded status at end of year	$	6,939		$	6,359

Amounts recognized in the consolidated balance sheets consist of (in thousands):

	As of December 31,
	2012		2011
Net long-term pension asset	$	6,939	$	6,359
Accumulated other comprehensive loss consists of the following:
Net prior service cost	216		262
Net loss	4,770		4,851
Accumulated other comprehensive loss before taxes	$	4,986	$	5,113

The components of net periodic pension cost (income) and other amounts recognized in other comprehensive income (loss) before taxes are as follows (in thousands):

	Years ended December 31,
	2012			2011			2010
Components of net periodic pension cost (income):
Service cost	$	671		$	793		$	629
Interest cost	651			717			614
Expected return on plan assets	(1,403		)	(1,616		)	(1,491		)
Prior service cost amortization	44			46			39
Deferred loss amortization	216			309			—
Settlement cost	258			—			—
Net periodic pension cost (income)	$	437		$	249		$	(209	)
Other amounts recognized in other comprehensive income (loss) before income taxes are as follows:
Prior service cost amortization	$	(44	)	$	(46	)	$	(39	)
Loss (gain) on value of plan assets	(1,268		)	(965		)	1,592
Actuarial loss on benefit obligation	1,659			735			2,068
Settlement	(258		)	—			—
Deferred loss amortization	(216		)	(309		)	—
Total recognized in other comprehensive income (loss), before taxes	$	(127	)	$	(585	)	$	3,621
Total recognized in net periodic pension cost (income) and other comprehensive income (loss), before taxes	$	310		$	(336	)	$	3,412

Assumptions used to determine the benefit obligation and net periodic pension cost (income) are as follows:

	Pension Benefits
	Years ended December 31,
	2012		2011
Weighted-average assumptions used to determine benefit obligation:
Discount rate	1.75	%	2.50	%
Rate of compensation increase	2.50	%	2.50	%
Measurement date	12/31/2012		12/31/2011
Weighted-average assumptions used to determine net periodic pension cost (income):
Discount rate	2.50	%	2.75	%
Expected long-term return on plan assets	4.25	%	5.00	%
Rate of compensation increase	2.50	%	2.50	%
Percentage of the fair value of total plan assets held in each major category of plan assets:
Equity securities	35	%	82	%
Debt securities	21	%	4	%
Real estate	39	%	12	%
Other	5	%	2	%
Total	100	%	100	%

The pension plan’s overall strategy and investment policy is managed by the board of the plan. The overall long-term rate is based on the target asset allocation of 15% Swiss bonds, 13% non-Swiss hedged bonds, 10% Swiss equities, 15% global equities, 36% real estate, 6% emerging market equities, 3% alternative investments and 2% cash and other short-term investments.

The 2013 expected future long-term rate of return is estimated to be 4.25%, which is based on historical asset rates of returns for each asset allocation classification at a 0.4% rate for Swiss bonds, 1.0% for hedged foreign bonds, 4.8% for real estate, 5.6% for Swiss equities, 6.5% for unhedged global equities, 7.4% unhedged emerging markets, 2.80% for alternative investments and 1.4% for cash. The 2012 expected long-term rate of return was 4.25% and was based on the historical asset rates of return of 1.8% for Swiss bonds, 2.0% for unhedged foreign bonds, 1.5% for hedged foreign bonds, 4.3% for real property, 5.6% for Swiss equities and 6.9% for unhedged global equities, 4.6% for alternative investments and 1.3% for cash.

Expected amortization during the year ending December 31, 2013 is as follows (in thousands):
Amortization of net prior service costs	$	45
Amortization of deferred loss	182

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid (in thousands):

2013	$	1,643
2014	1,969
2015	1,772
2016	1,869
2017	1,547
Years 2018 through 2022	8,116
Total	$	16,916

The Company expects to contribute approximately $677,000 to the pension plan in 2013.

Investment objectives:

The primary investment goal of the pension plan is to achieve a total annualized return of 4.25% over the long-term. The investments are evaluated, compared and benchmarked to plans with similar investment strategies. The plan also attempts to minimize risk by not having any single security or class of securities with a disproportionate impact on the plan. As a guideline, assets are diversified by asset classes (equity, fixed income, real estate, and alternative investments).

The fair values of the plans assets at December 31, 2012, by asset category, are as follows (in thousands):

			Fair Value Measurements at
			December 31, 2012
	Total		Active Market Prices (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Asset category
Cash:
Held in Swiss Franc, Euro and USD	$	848	$	848	$	—	$	—
Equity securities:			—		—		—
Investment funds	19,867		19,867		—		—
Real estate investment fund	10,733		—		—		10,733
Fixed income / Bond Securities
Fixed income / Bond securities:	1,263		1,263		—		—
Real estate investments:
Real estate investment in specific properties 100% owned by the plan	4,098		—		—		4,098
Other assets (accounts receivable, assets at real estate management company)	86		—		86		—
Net assets of pension plan	$	36,895	$	21,978	$	86	$	14,831

Fair Value of Assets

Level 1: Observable inputs such as quoted prices in active markets for identical assets.

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions. These investments can include; real estate owned by the Pension Plan stated at appraised value obtained from an independent source to the Plan and the Company; real estate investment that has potential long term investment liquidation processes; hedge funds that might have monthly, quarterly or annual restraints on redemptions or may require advance notice for a redemption

For those financial instruments with significant Level 3 inputs, the following table summarizes the activity for the year by investment type:

Description	Real estate investments
Beginning balance, December 31, 2011	$	13,856
Total unrealized gains included in net gain(1)	665
Foreign currency translation adjustments	310
Ending balance, December 31, 2012	$	14,831

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(1) Total unrealized gains are reported as a component of the pension adjustment in accumulated other comprehensive income in the consolidated statement of stockholders’ equity.

U.S. Plan

The Company has postretirement benefit plans covering its employees in the United States. Substantially all U.S. employees are eligible to elect coverage under a contributory employee savings plan which provides for Company matching contributions based on one-half of employee contributions up to certain plan limits. The Company’s matching contributions under this plan totaled $486,000, $415,000 and $379,000 for the years ended December 31, 2012, 2011 and 2010, respectively.