14. Retirement Plans

401(k) Plan

We have a qualified retirement plan called the Analogic 401(k) Plan (the “Plan”) to provide retirement income for eligible employees through employee contributions and contributions from us. Employer contributions are discretionary and may be in the form of a direct profit sharing contribution or a discretionary matching contribution as determined and approved by the board of directors. Our contribution each year shall in no event exceed the maximum allowable under applicable provisions of the Internal Revenue Code. All contributions vest immediately.

The Plan, as allowed under Section 401(k) of the Internal Revenue Code, permits tax-deferred salary and wage deductions for eligible employees. Employees may contribute from 1% to 80% of their eligible compensation to the Plan, limited to a maximum annual amount as determined by the IRS. We matched employee contributions up to 4% of eligible compensation.

In addition to the 401(k) Plan provided to U.S. employees, we also provide benefits under defined contribution plans to our employees in Denmark and China. Our contributions to our defined contribution plans totaled $5.2 million, $4.9 million, and $4.5 million, in fiscal years 2014, 2013 and 2012, respectively.

Defined Benefit Retirement Plan

Our Canadian subsidiary, Analogic Canada Corporation, formerly known as ANRAD Corporation, sponsors a defined benefit retirement plan called the Analogic Canada Corporation Retirement Plan (the “Analogic Canada Plan”). The Analogic Canada Plan provides benefits to employees based on a formula recognizing length of service and final average earnings. The measurement date used for the plan is July 31. We recognize the periodic pension expense in our Consolidated Statements of Operations and the associated assets or liabilities on our Consolidated Balance Sheet.

The following tables provide information about benefit obligations, plan assets and funded status as of July 31, 2014 and 2013:

Change in Benefit Obligation


	Years Ended July 31,
	2014			2013
(in millions)
Balance at beginning of year	$	14.5		$	15.5
Current service cost		1.1			1.4
Foreign currency exchange gain		(0.9	)		(0.4	)
Interest cost		0.7			0.6
Net actuarial loss (gain)		3.3			(2.3	)
Plan participants contributions		0.2			0.3
Benefit payments		(0.9	)		(0.6	)
Transfers from other plans		0.1			—

Balance at end of year	$	18.1		$	14.5

Change in Plan Assets


	2014			2013
(in millions)
Fair value at beginning of year	$	13.4		$	10.9
Actual return on plan assets		2.2			1.5
Employer contributions		1.5			1.6
Plan participant contributions		0.2			0.3
Benefits paid		(0.9	)		(0.6	)
Foreign currency exchange gain		(0.8	)		(0.3	)
Transfers from other plans		0.1			—

Fair value at end of year	$	15.7		$	13.4

Funded status	$	(2.4	)	$	(1.1	)

Recognized Long-term liability	$	(2.4	)	$	(1.1	)

Accumulated Benefit Obligation (ABO)

ABO balances for the Analogic Canada Plan were $12.8 million and $10.2 million at July 31, 2014 and 2013, respectively.

Net Periodic Benefit Cost

The components of our net periodic benefit cost are as follows:


	Years Ended July 31,
	2014			2013			2012
(in millions)
Service cost	$	1.1		$	1.4		$	1.1
Interest cost		0.6			0.6			0.6
Expected return on plan assets		(0.8	)		(0.7	)		(0.7	)
Amortization of net actuarial loss recognized		0.1			0.4			0.2

Total net periodic benefit cost	$	1.0		$	1.7		$	1.2

Amounts Recognized in Accumulated Other Comprehensive Income, Pretax


	Years Ended July 31,
	2014			2013
(in millions)
Net loss	$	5.2		$	3.6
Net transition asset		(0.1	)		(0.1	)

Accumulated other comprehensive loss	$	5.1		$	3.5

The estimated net actuarial loss for the Analogic Canada Plan that is expected to be amortized from stockholders’ equity into net pension cost in fiscal year 2015 is $0.2 million.

Actuarial Assumptions

Actuarial assumptions for the Analogic Canada Plan are described below. The discount rates at July 31 were used to measure the fiscal year end benefit obligations and the earnings effects for the subsequent year. The discount rate is based on high quality corporate bond spot rates with cash flows that match the timing and amount of expected benefit payments.


	Years Ended July 31,
	2014			2013			2012
Discount rate		4.80	%		4.80	%		4.20	%
Expected return on assets		6.00	%		6.00	%		6.00	%

To determine the expected long-term rate of return on the Analogic Canada Plan assets, we considered the current and expected asset allocations, as well as historical and expected returns on various categories of plan assets. We amortize realized gains and losses, as well as the effects of changes in actuarial assumptions and plan provisions over a period no longer than the average future service of employees.

Funding Policy

The funding policy for the Analogic Canada Plan is to contribute amounts sufficient to meet minimum funding requirements as set forth in employee benefit and tax laws, plus such additional amounts as we may determine to be appropriate. During fiscal years 2014, 2013 and 2012, we made contributions to the Analogic Canada Plan of $1.6 million, $1.7 million, and $1.1 million, respectively, and made payments for benefits and administrative expenses of $1.0 million, $0.6 million, and $0.1 million, respectively. In fiscal year 2015, we expect to make contributions and payments for benefits and administrative expenses of $0.9 million and $0.4 million, respectively.

Plan Assets

The Analogic Canada Plan assets are held in trust, as follows:


	July 31, 2014						July 31, 2013
	Target allocation			Actual allocation			Actual allocation
Equity securities		60.0	%		60.9	%		65.8	%
Debt securities		40.0	%		39.1	%		34.2	%

Total		100.0	%		100.0	%		100.0	%

The Pension Committee of the Analogic Canada Plan sets investment policies and strategies for the Analogic Canada Plan. Long-term strategic investment objectives include preserving the funded status of the Analogic Canada Plan and balancing risk and return. The Pension Committee oversees the investment allocation process, which includes selecting investment managers, commissioning periodic asset-liability studies, setting long-term strategic targets and monitoring asset allocations.

Target allocation ranges are guidelines, not limitations, and occasionally the Pension Committee will approve allocations above or below a target range.

The fair value of the Analogic Canada Plan pension assets by asset category at July 31, 2014 and 2013 are as follows:


(in millions)	Fair Value Measurements at July 31, 2014
Assets	Quoted Prices in Active Markets for Indentical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Assets at Fair Value
Mutual funds (a)	$	—	$	—	$	15.7	$	15.7

Total	$	—	$	—	$	15.7	$	15.7


(in millions)	Fair Value Measurements at July 31, 2013
Assets	Quoted Prices in Active Markets for Indentical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Assets at Fair Value
Mutual funds (a)	$	—	$	—	$	13.4	$	13.4

Total	$	—	$	—	$	13.4	$	13.4

(a)	This comprises units of segregated pooled funds with an insurance company. These funds have underlying values primarily derived from mutual funds that have debt and equity securities, which are traded on an active market based on the closing price of each trading day.


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(in millions)	July 31, 2014			July 31, 2013
Balance at beginning of fiscal year	$	13.4		$	10.9
Actual return on plan assets
Relating to assets still held at end of fiscal year		2.2			1.6
Purchases, sales, and settlements		0.9			1.2
Foreign currency exchange losses		(0.8	)		(0.3	)

Balance at end of fiscal year	$	15.7		$	13.4

Estimated Future Benefit Payments

Estimated future benefit payments under the Analogic Canada Plan are as follows:


(in millions)	2015	2016	2017	2018	2019	2020-24
	$0.3	$0.4	$0.4	$0.4	$0.4	$3.1