Pension and Other Post-Retirement Plans

12 Months Ended

Dec. 31, 2011

Pension and Other Post-Retirement Plans

Pension and Other Post-Retirement Plans

(13) Pension and Other Post-Retirement Plans

        We have defined benefit pension plans for our U.K.-based union employees (the "U.K. Plan") and certain Canadian-based employees (the "Canadian Plan"). As a result of the sale of the Racing Business on October 5, 2010, our defined benefit pension plan for U.S.-based Racing Business employees (the "U.S. Plan") was transferred to Sportech, the purchaser of the Racing Business. See Note 22 (Acquisitions and Dispositions) for additional information. The U.S. Plan transfer was treated as a curtailment in the amount of $4,519 for the pension benefit obligation. Plan assets were curtailed by $3,942 as a result of the sale of the Racing Business. Net periodic cost curtailments include $1,644 due to the sale of the Racing Business. Retirement benefits under the U.K. Plan are based on an employee's average compensation over the two years preceding retirement. Retirement benefits under the Canadian Plan are generally based on the number of years of credited service. Our policy is to fund the minimum contribution permissible by the respective authorities. We estimate that approximately $3,104 will be contributed to the pension plans in fiscal year 2012.

        We used to maintain an unfunded, nonqualified Supplemental Executive Retirement Plan (the "SERP"), which had been a means of providing supplemental retirement benefits to a limited number of our senior executives. In December 2005, we discontinued the SERP and benefit accruals under the plan were frozen in amounts based on the then present value of each participant's aggregate benefit under an agreed-upon calculation. Although the aggregate benefit for each participant was frozen at that time, participants were credited with interest at a rate of 4% per annum, compounded annually, from December 31, 2005 until the benefit was distributed. We recorded a charge of $12,363 in our consolidated statement of operations for the year ended December 31, 2005 in connection with the discontinuance of the SERP. In 2003, to provide a source for the payment of certain benefits under the SERP, we made an initial $14,700 cash payment to a rabbi trust, which in turn made a $14,700 payment for whole-life insurance policies on the participants. These policies were placed in a rabbi trust. During the third and fourth quarters of 2009, a portion of the remaining life insurance policies was cashed in for the cash surrender value thereof and the resulting cash was placed in a government fund account. In November 2011, the remaining benefit of approximately $3,101 under the SERP was distributed. The remaining distribution consisted of the cash value in a government fund account of approximately $902 and the cash value of the remaining life insurance policies of approximately $2,199. The cash value in the government fund account as of December 31, 2010 was approximately $902. The cash value of the remaining life insurance policies as of December 31, 2010 was approximately $2,228.

        The following table sets forth the combined funded status of the pension plans and their reconciliation with the related amounts recognized in our Consolidated Financial Statements at our December 31 measurement dates:

	December 31,
	2011			2010
Change in benefit obligation:
Benefit obligation at beginning of year	$	88,873		$	87,585
Service cost		2,097			1,750
Interest cost		4,576			4,799
Prior Service Cost		—			(1,405	)
Participant contributions		1,079			1,153
Curtailments		—			(4,329	)
Actuarial (gain) loss		794			5,117
Benefits paid		(2,440	)		(2,734	)
Settlement payments		(3,101	)		(2,978	)
Other, principally foreign exchange		(608	)		(85	)
Benefit obligation at end of year		91,270			88,873
Change in plan assets:
Fair value of plan assets at beginning of year		73,200			68,663
Business sale		—			(3,942	)
Actual gain (loss) on plan assets		(876	)		7,334
Employer contributions		2,859			2,907
Participant contributions		1,079			1,153
Benefits paid		(2,440	)		(2,734	)
Settlement payments		—			—
Other, principally foreign exchange		(626	)		(181	)
Fair value of assets at end of year		73,196			73,200
Amounts recognized in the consolidated balance sheets:
Funded status (current)		—			(2,998	)
Funded status (noncurrent)		(18,074	)		(12,675	)
Accumulated other comprehensive income (pre-tax):
Unrecognized actuarial loss		16,537			9,045
Unrecognized prior service cost		(1,088	)		—
Net amount recognized	$	(2,625	)	$	(6,628	)

        The following are the components of our net periodic pension cost:

	December 31,
	2011			2010			2009
Components of net periodic pension benefit cost:
Service cost	$	2,097		$	1,750		$	1,553
Interest cost		4,576			4,799			4,671
Expected return on plan assets		(5,170	)		(4,767	)		(3,921	)
Amortization of actuarial gains/losses		382			503			522
Curtailments		—			1,692			(249	)
Amortization of unrecognized prior service cost		(79	)		(51	)		43
Net periodic cost	$	1,806		$	3,926		$	2,619

        The accumulated benefit obligation for all defined benefit pension plans was $83,874 and $78,184 as of December 31, 2011 and 2010, respectively. The underfunded status of our post-retirement benefit plans recorded as a liability in our Consolidated Balance Sheets as of December 31, 2011 and 2010 was approximately $18,074 and $15,673, respectively.

        The amounts included in accumulated other comprehensive income as of December 31, 2011 expected to be recognized as components of net periodic pension cost during the fiscal year ending December 31, 2012 are as follows:

Net gain or loss	$	(78	)
Net prior service cost		885
Net amount expected to be recognized	$	807

        The U.K. Plan investment policy is to maximize long-term financial return commensurate with security and minimizing risk. This is achieved by holding a portfolio of marketable investments that avoids over-concentration of investment and spreads assets both over industry and geography. In setting investment strategy, the trustees considered the lowest risk strategy that they could adopt in relation to the U.K. Plan's liabilities and designed their asset allocation to achieve a higher return while maintaining a cautious approach to meeting the plan's liabilities. The trustees undertook a review of investment strategy and took advice from their investment advisors. They considered a full range of asset classes, the risks and rewards of a range of alternative asset allocation strategies, the suitability of each asset class and the need for appropriate diversification. The current strategy is to hold approximately 35% in a global return fund, approximately 20% in U.K. equities, approximately 15% in non-U.K. equities, approximately 15% in long lease property, approximately 10% in corporate bonds and approximately 5% in real estate.

        The fair value of our U.K. Plan assets at December 31, 2011 by asset category is as follows:

Asset Category	Market Value at 12/31/2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Equity securities in U.K. companies (a)	$	7,056	$	—	$	7,056	$	—
Equity securities in non-U.K. companies (a)		6,326		—		6,326		—
Global Return Fund (a)		15,386		—		15,386		—
Fixed-income U.K. government bonds (a)		—		—		—		—
Corporate bonds (a)		4,243		—		4,243		—
Real estate		9,356		—		—		9,356
Cash (b)		171		171		—		—
Total pension assets	$	42,538	$	171	$	33,011		9,356

(a)

The assets are invested through managed funds that are valued using inputs derived principally from quoted prices in active markets for the underlying assets in the fund.

(b)

The fair value of cash equals its book value.

        The change in fair value of the pension assets valued using significant unobservable inputs (Level 3) was due to the following:

	General Account
Beginning balance at December 31, 2010	$	2,416
Purchases		6,616
Unrealized gain on asset still held at December 31, 2011		324
Ending balance at December 31, 2011	$	9,356

        The fair value of our U.K. Plan assets at December 31, 2010 by asset category is as follows:

Asset Category	Market Value at 12/31/2010		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Equity securities in U.K. companies (a)	$	16,785	$	—	$	16,785	$	—
Equity securities in non-U.K. companies (a)		15,206		—		15,206		—
Fixed-income U.K. government bonds (a)		3,963		—		3,963		—
Corporate bonds (a)		5,384		—		5,384		—
Real estate		2,416		—		—		2,416
Cash (b)		189		189		—		—
Total pension assets	$	43,943	$	189	$	41,338	$	2,416

(a)

The assets are invested through managed funds that are valued using inputs derived principally from quoted prices in active markets for the underlying assets in the fund.

(b)

The fair value of cash equals its book value.

        The change in fair value of the pension assets valued using significant unobservable inputs (Level 3) was due to the following:

	General Account
Beginning balance at December 31, 2009	$	1,686
Purchases		507
Unrealized gain on asset still held at December 31, 2010		223
Ending balance at December 31, 2010	$	2,416

        The Canadian Plan investment policy is to maximize long-term financial return commensurate with security and minimizing risk. This is achieved by holding a portfolio of marketable investments that avoids over-concentration of investment and spreads assets both over industry and geography. In setting investment strategy, the Company considered the lowest risk strategy that it could adopt in relation to the Canadian Plan's liabilities and designed the asset allocation to achieve a higher return while maintaining a cautious approach to meeting the plan's liabilities. The Company considered a full range of asset classes, the risks and rewards of a range of alternative asset allocation strategies, the suitability of each asset class and the need for appropriate diversification. The current strategy is to hold approximately 32% in Canadian equities, approximately 28% in non-Canadian equities and approximately 40% in bonds.

        The fair value of our Canadian Plan assets at December 31, 2011 by asset category is as follows:

Asset Category	Value at 12/31/2011		Markets for Identical Assets (Level 1)		Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Equity securities in Canadian companies (a)	$	9,759	$	9,049	$	710	$	—
Equity securities in non-Canadian companies (a)		9,169		4,773		4,396		—
Government bonds		4,629		4,629		—		—
Corporate bonds		6,470		6,470		—		—
Other short-term investment (b)		377		—		377		—
Cash and cash equivalents (c)		254		254		—		—
Total pension assets	$	30,658	$	25,175	$	5,483	$	—

(a)

Direct investments in equity securities are valued at quoted prices in active markets for identical assets. Equity securities invested through pooled funds are valued using inputs derived principally from the quoted prices in active markets for the underlying assets in the pool.

(b)

Other short-term investments are investments in pooled money market funds that are valued using inputs derived principally from the quoted prices in active markets for the underlying assets in the pool.

(c)

The carrying value of cash and cash equivalents approximates fair value because of the short-term maturity of these instruments.

        The fair value of our Canadian Plan assets at December 31, 2010 by asset category is as follows:

Asset Category	Market Value at 12/31/2010		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Equity securities in Canadian companies (a)	$	9,634	$	8,927	$	707		—
Equity securities in non-Canadian companies (a)		8,841		8,841		—		—
Government bonds		2,998		2,998		—		—
Corporate bonds		6,187		6,187		—		—
Other short-term investment (b)		1,423		—		1,423		—
Cash and cash equivalents (c)		174		174		—		—
Total pension assets	$	29,257	$	27,127	$	2,130	$	—

(a)

Direct investments in equity securities are valued at quoted prices in active markets for identical assets. Equity securities invested through pooled funds are valued using inputs derived principally from the quoted prices in active markets for the underlying assets in the pool.

(b)

Other short-term investments are investments in pooled money market funds that are valued using inputs derived principally from the quoted prices in active markets for the underlying assets in the pool.

(c)

The carrying value of cash and cash equivalents approximates fair value because of the short-term maturity of these instruments.

        The table below provides the weighted-average actuarial assumptions used to determine the benefit obligation and net periodic benefit cost.

	U.K. Plan									Canadian Plan
	2011			2010			2009			2011			2010			2009
Discount rates:
Benefit obligation		4.80	%		5.40	%		5.80	%		5.30	%		5.50	%		6.40	%
Net periodic pension cost		5.40	%		5.80	%		6.20	%		5.50	%		6.40	%		7.50	%
Rate of compensation increase		3.50	%		4.00	%		3.60	%		3.25	%		3.25	%		3.25	%
Expected return on assets		7.50	%		7.80	%		6.62	%		7.00	%		7.00	%		7.00	%

        The overall expected long-term rate of return on assets assumption for the U.K. Plan has been determined as a weighted-average of the expected returns on the above asset classes for the U.K. Plan. The expected return on bonds is taken as the current redemption yield on the appropriate index. The expected return on equities and property is determined by assuming a measure of outperformance over the gilt-yield. The expected return on cash is related to the Bank of England base rate. Returns so determined are reduced to allow for investment manager expenses.

        The overall expected long-term rate of return on assets assumption for the Canadian Plan has been determined by consideration of the current level of expected returns on risk-free investments (primarily government bonds), the historical level of the risk premium associated with the other asset classes in which the portfolio is invested and the expectations for future returns of each asset class. Since our investment policy is to actively manage certain asset classes where the potential exists to outperform the broader market, the expected returns for those asset classes were adjusted to reflect the expected additional returns. The expected return for each asset class was then weighted based on the target asset allocation to develop the expected long-term rate of return on assets assumption for the portfolio. Finally, we have adjusted the expected long-term rate of return on assets to allow for investment and administration expenses paid from the pension fund.

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

Year	U.K. Plan		Canadian Plan
2012	$	824	$	1,244
2013	$	839	$	1,352
2014	$	870	$	1,391
2015	$	901	$	1,499
2016	$	917	$	1,611
2017 - 2021	$	5,051	$	10,571

        We have a 401(k) plan for U.S.-based employees. Those employees that participate in our 401(k) plan are eligible to receive matching contributions from us for the first 6% of participant contributions. Effective February 28, 2009, we reduced the matching contributions from 50 to 25 cents on the dollar for the first 6% of participant contributions for a match of up to 1.5% of eligible compensation. Effective January 1, 2010, we increased the matching contributions to 37.5 cents on the dollar for the first 6% of contributions for a match of up to 2.25% of eligible compensation. Contribution expense for the years ended December 31, 2011, 2010 and 2009 amounted to approximately $1,412, $1,718 and $1,272, respectively.