Pension and Other Postretirement Benefits

The accounting standards related to employers’ accounting for defined benefit pension and other postretirement plans requires the Company to recognize the overfunded or underfunded status of its defined benefit postretirement plans as assets or liabilities in the accompanying consolidated balance sheets and to recognize changes in the funded status of the plans in comprehensive income.

The Company has various defined contribution plans, the largest of which is its Retirement Savings Plan. Most U.S. salaried and non-union hourly employees are eligible to participate in this plan. See Note 16 for further discussion of the Retirement Savings Plan. The Company also maintains various defined contribution plans which cover certain other employees. Company contributions under these plans are based primarily on the performance of the business units and employee compensation. Contribution expense under these other defined contribution plans was $5,319, $5,106 and $3,717 in 2012, 2011 and 2010, respectively.

Defined benefit pension plans in the U.S. cover a majority of the Company’s U.S. employees at the Associated Spring business of Industrial, the Company’s Corporate Office and certain other U.S. employees at the businesses within Distribution. Plan benefits for salaried and non-union hourly employees are based on years of service and average salary. Plans covering union hourly employees provide benefits based on years of service. In 2012, the Company closed the U.S. salaried defined benefit pension plan to employees hired on or after January 1, 2013, with no impact to the benefits of existing participants. Certain salaried employees hired on or after January 1, 2013 will receive additional contributions through the Retirement Savings Plan. The Company funds U.S. pension costs in accordance with the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). Non-U.S. defined benefit pension plans cover certain employees of certain international locations in Europe and Canada.

The Company provides other medical, dental and life insurance postretirement benefits for certain of its retired employees in the U.S. and Canada. It is the Company’s practice to fund these benefits as incurred.

The accompanying balance sheets reflect the underfunded status of the Company’s defined benefit pension plans at December 31, 2012 and 2011, respectively. Reconciliations of the obligations and underfunded status of the plans follow:



	2012									2011
	U.S.			Non-U.S.			Total			U.S.			Non-U.S.			Total
Benefit obligation, January 1	$	377,982		$	63,444		$	441,426		$	343,425		$	71,548		$	414,973
Service cost	5,860			670			6,530			4,794			1,129			5,923
Interest cost	18,800			2,824			21,624			18,906			3,546			22,452
Amendments	158			—			158			117			—			117
Actuarial loss	43,155			4,820			47,975			33,078			1,231			34,309
Benefits paid	(22,408		)	(3,740		)	(26,148		)	(22,338		)	(4,453		)	(26,791		)
Transfers in	—			2,588			2,588			—			951			951
Plan Curtailments	—			—			—			—			(2,106		)	(2,106		)
Plan Settlements	—			(769		)	(769		)	—			(7,757		)	(7,757		)
Participant contributions	—			469			469			—			598			598
Foreign exchange rate changes	—			2,463			2,463			—			(1,243		)	(1,243		)
Benefit obligation, December 31	423,547			72,769			496,316			377,982			63,444			441,426
Fair value of plan assets, January 1	283,538			56,832			340,370			298,910			58,983			357,893
Actual return on plan assets	42,755			4,158			46,913			(5,808		)	1,828			(3,980		)
Company contributions	19,826			2,591			22,417			12,774			4,706			17,480
Participant contributions	—			469			469			—			598			598
Benefits paid	(22,408		)	(3,740		)	(26,148		)	(22,338		)	(4,453		)	(26,791		)
Plan Settlements	—			(769		)	(769		)	—			(5,131		)	(5,131		)
Transfers in	—			2,086			2,086						951			951
Foreign exchange rate changes	—			2,215			2,215			—			(650		)	(650		)
Fair value of plan assets, December 31	323,711			63,842			387,553			283,538			56,832			340,370
Underfunded status, December 31	$	(99,836	)	$	(8,927	)	$	(108,763	)	$	(94,444	)	$	(6,612	)	$	(101,056	)

In 2012, "transfers in" relate to the defined benefit pension plan associated with the acquisition of Synventive. See Note 3 of the Consolidated Financial Statements. In 2011, plan curtailments and settlements relate primarily to the sale of the BDE business. See Note 2 of the Consolidated Financial Statements.

Projected benefit obligations related to pension plans with benefit obligations in excess of plan assets follow:



	2012						2011
	U.S.		Non-U.S.		Total		U.S.		Non-U.S.		Total
Projected benefit obligation	$	396,695	$	72,769	$	469,464	$	354,287	$	62,831	$	417,118
Fair value of plan assets	294,040		63,842		357,882		256,518		55,933		312,451

Information related to pension plans with accumulated benefit obligations in excess of plan assets follows:



	2012						2011
	U.S.		Non-U.S.		Total		U.S.		Non-U.S.		Total
Projected benefit obligation	$	396,695	$	62,831	$	459,526	$	354,287	$	62,831	$	417,118
Accumulated benefit obligation	382,023		62,355		444,378		343,596		62,548		406,144
Fair value of plan assets	294,040		54,350		348,390		256,518		55,933		312,451

The accumulated benefit obligation for all defined benefit pension plans was $480,027 and $430,136 at December 31, 2012 and 2011, respectively.

Amounts related to pensions recognized in the accompanying balance sheets consist of:



	2012									2011
	U.S.			Non-U.S.			Total			U.S.			Non-U.S.			Total
Other assets	$	2,819		$	—		$	2,819		$	3,325		$	286		$	3,611
Accrued liabilities	2,720			389			3,109			2,705			386			3,091
Accrued retirement benefits	99,935			8,538			108,473			95,064			6,512			101,576
Accumulated other non-owner changes to equity, net	(116,305		)	(23,803		)	(140,108		)	(104,960		)	(20,092		)	(125,052		)

Amounts related to pensions recognized in accumulated other non-owner changes to equity, net of tax, at December 31, 2012 and 2011, respectively, consist of:



	2012									2011
	U.S.			Non-U.S.			Total			U.S.			Non-U.S.			Total
Net actuarial loss	$	(114,748	)	$	(23,318	)	$	(138,066	)	$	(103,025	)	$	(19,543	)	$	(122,568	)
Prior service costs	(1,557		)	(485		)	(2,042		)	(1,935		)	(549		)	(2,484		)
	$	(116,305	)	$	(23,803	)	$	(140,108	)	$	(104,960	)	$	(20,092	)	$	(125,052	)

The accompanying balance sheets reflect the underfunded status of the Company’s other postretirement benefit plans at December 31, 2012 and 2011. Reconciliations of the obligations and underfunded status of the plans follow:



	2012			2011
Benefit obligation, January 1	$	54,587		$	55,188
Service cost	273			286
Interest cost	2,532			2,831
Amendments	—			(2,376		)
Actuarial loss	745			5,728
Benefits paid	(6,922		)	(9,734		)
Curtailment gain	—			—
Participant contributions	2,782			2,679
Foreign exchange rate changes	(9		)	(15		)
Benefit obligation, December 31	53,988			54,587
Fair value of plan assets, January 1	—			—
Company contributions	4,140			7,055
Participant contributions	2,782			2,679
Benefits paid	(6,922		)	(9,734		)
Fair value of plan assets, December 31	—			—
Underfunded status, December 31	$	53,988		$	54,587

Amounts related to other postretirement benefits recognized in the accompanying balance sheets consist of:



	2012			2011
Accrued liabilities	$	5,075		$	5,314
Accrued retirement benefits	48,913			49,273
Accumulated other non-owner changes to equity, net	(6,286		)	(5,601		)

Amounts related to other postretirement benefits recognized in accumulated other non-owner changes to equity, net of tax, at December 31, 2012 and 2011 consist of:



	2012			2011
Net actuarial loss	$	(9,895	)	$	(10,194	)
Prior service credits	3,609			4,593
	$	(6,286	)	$	(5,601	)

The sources of changes in accumulated other non-owner changes to equity, net, during 2012 were:



	Pension			Other Postretirement Benefits
Prior service cost	$	(98	)	$	—
Net loss	(22,339		)	(373		)
Amortization of prior service costs (credits)	554			(984		)
Amortization of actuarial loss	8,241			671
Foreign exchange rate changes	(912		)	1
Acquisition	(502		)	—
	$	(15,056	)	$	(685	)

Weighted-average assumptions used to determine benefit obligations at December 31, are:



	2012		2011
U.S. plans:
Discount rate	4.25	%	5.05	%
Increase in compensation	3.71	%	3.71	%
Non-U.S. plans:
Discount rate	3.73	%	4.46	%
Increase in compensation	2.69	%	2.76	%

The investment strategy of the plans is to generate a consistent total investment return sufficient to pay present and future plan benefits to retirees, while minimizing the long-term cost to the Company. Target allocations for asset categories are used to earn a reasonable rate of return, provide required liquidity and minimize the risk of large losses. Targets may be adjusted, as necessary within certain guidelines, to reflect trends and developments within the overall investment environment. The weighted-average target investment allocations by asset category are as follows: 70% in equity securities, 20% in fixed income securities, 5% in real estate and 5% in other investments, including cash.

The fair values of the Company’s pension plan assets at December 31, 2012 and 2011, by asset category are as follows:



			Fair Value Measurements Using
Asset Category	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2012
Cash and short-term investments	$	14,633	$	14,633	$	—	$	—
Equity securities:
U.S. large-cap	95,145		43,388		51,757		—
U.S. mid-cap	41,090		41,090		—		—
U.S. small-cap	42,558		42,558		—		—
International equities	77,111		—		77,111		—
Fixed income securities:
U.S. bond funds	66,276		—		66,276		—
International bonds	29,032		—		29,032		—
Real estate securities	20,174		—		20,174		—
Other	1,534		—		—		1,534
	$	387,553	$	141,669	$	244,350	$	1,534
December 31, 2011
Cash and short-term investments	$	10,227	$	10,227	$	—	$	—
Equity securities:
U.S. large-cap	86,709		41,419		45,290		—
U.S. mid-cap	33,264		33,264		—		—
U.S. small-cap	36,079		36,079		—		—
International equities	69,163		—		69,163		—
Fixed income securities:
U.S. bond funds	61,974		—		61,974		—
International bonds	27,221		—		27,221		—
Real estate securities	15,432		—		15,432		—
Other	301		—		301		—
	$	340,370	$	120,989	$	219,381	$	—

The fair values of the Level 1 assets are based on quoted market prices from various financial exchanges. The fair values of the Level 2 assets are based primarily on quoted prices in active markets for similar assets or liabilities. The Level 2 assets are comprised primarily of commingled funds and fixed income securities. Commingled equity funds are valued at their net asset values based on quoted market prices of the underlying assets. Fixed income securities are valued using a market approach which considers observable market data for the underlying asset or securities. The Level 3 assets relate to the defined benefit pension plan of the acquired Synventive business and were transferred to the Company on August 27, 2012, the date of the acquisition. The pension assets are fully insured and have been estimated based on the accrued pension rights and actuarial rates at December 31, 2012. The pension assets are limited to fulfilling the Company's pension obligations.

The Company expects to contribute approximately $5,948 to the pension plans in 2013.

The following are the estimated future net benefit payments, which include future service, over the next 10 years:



	Pensions		Other Postretirement Benefits
2013	$	28,180	$	5,075
2014	28,566		4,924
2015	29,177		4,820
2016	29,710		4,646
2017	30,671		4,417
Years 2018-2022	155,697		18,821
Total	$	302,001	$	42,703

Pension and other postretirement benefit expenses consist of the following:



	Pensions									Other Postretirement Benefits
	2012			2011			2010			2012			2011			2010
Service cost	$	6,530		$	5,923		$	6,155		$	273		$	286		$	357
Interest cost	21,624			22,452			22,943			2,532			2,831			3,182
Expected return on plan assets	(32,827		)	(32,041		)	(30,938		)	—			—			—
Amortization of prior service cost (credit)	845			1,124			937			(1,585		)	(1,541		)	(970		)
Recognized losses	12,048			5,725			2,495			1,082			806			421
Curtailment gain	—			(1,884		)	—			—			—			(950		)
Settlement loss	92			304			—			—			—			—
Net periodic benefit cost	$	8,312		$	1,603		$	1,592		$	2,302		$	2,382		$	2,040

The estimated net actuarial loss and prior service cost for the defined benefit pension plans that will be amortized from accumulated other non-owner changes to equity into net periodic benefit cost in 2013 are $16,418 and $814, respectively. The estimated net actuarial loss and prior service credit for other defined benefit postretirement plans that will be amortized from accumulated other non-owner changes to equity into net periodic benefit cost in 2013 are $1,158 and $(1,579), respectively.

Weighted-average assumptions used to determine net benefit expense for years ended December 31, are:



	2012		2011		2010
U.S. plans:
Discount rate	5.05	%	5.65	%	6.20	%
Long-term rate of return	9.00	%	9.00	%	9.00	%
Increase in compensation	3.71	%	3.71	%	3.71	%
Non-U.S. plans:
Discount rate	4.46	%	4.89	%	5.59	%
Long-term rate of return	5.79	%	5.87	%	6.01	%
Increase in compensation	2.76	%	2.72	%	2.71	%

The expected long-term rate of return is based on the actual historical rates of return of published indices that are used to measure the plans’ target asset allocation. The historical rates are then discounted to consider fluctuations in the historical rates as well as potential changes in the investment environment.

The Company’s accumulated postretirement benefit obligations, exclusive of pensions, take into account certain cost-sharing provisions. The annual rate of increase in the cost of covered benefits (i.e., health care cost trend rate) is assumed to be 7.35% and 7.60% at December 31, 2012 and 2011, respectively, decreasing gradually to a rate of 4.5% by December 31, 2029. A one percentage point change in the assumed health care cost trend rate would have the following effects:



	One Percentage Point Increase		One Percentage Point Decrease
Effect on postretirement benefit obligation	$	803	$	(715	)
Effect on postretirement benefit cost	36		(32		)

The Company contributes to a multi-employer defined benefit pension plan under the terms of a collective bargaining agreement. This multi-employer plan provides pension benefits to its union-represented employees at the Edison, New Jersey facility within the Barnes Distribution reporting unit. The risks of participating in this multi-employer plan are different from single-employer plans in the following aspects:

a. Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers.

b. If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.

c. If the Company chooses to stop participating in the multi-employer plan, the Company may be required to pay to this plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

The Company's participation in this plan for the annual period ended December 31, 2012 is outlined in the table below. The “EIN/Pension Plan Number” column provides the Employee Identification Number (“EIN”) and the three-digit plan number. The most recent Pension Protection Act zone status available in 2012 and 2011 relates to the plan's year-end at February 28, 2012 and February 28, 2011, respectively. The zone status is based on information that the Company received from the plan and is certified by the plan's actuary. Among other factors, plans in the red zone are generally less than 65 percent funded, plans in the yellow zone are less than 80 percent funded, and plans in the green zone are at least 80 percent funded. The “FIP/RP Status Pending/Implemented” column indicates plans for which a financial improvement plan ("FIP") or a rehabilitation plan ("RP") is either pending or has been implemented. The last column lists the expiration date of the collective bargaining agreement to which the plan is subject. Contributions made by the Company did not represent more than five percent of the total plan contributions for plan years ended February 28, 2012, 2011 and 2010. There have been no significant changes that affect the comparability of 2012, 2011 or 2010 contributions. The Company estimates that its portion of the contingent liability, in the event of a withdrawal from the multi-employer plan at the Edison, New Jersey facility, would approximate $3,900 on a pre-tax basis.



		Pension Protection Act Zone Status			Contributions by the Company
Pension Fund	EIN/Pension Plan Number	2012	2011	FIP/RP Status Pending/Implemented	2012	2011	2010	Surcharge Imposed	Expiration Date of Collective Bargaining Agreement
Teamsters Local 641 Pension Fund	22-6220288-001	Red as of March 1, 2011 for Plan year ended February 28, 2012	Red as of March 1, 2010 for Plan year ended February 28, 2011	Implemented (A)	$97	$101	$106	No Surcharge	January 31, 2014
Swedish Pension Plan (ITP2) (B)					409	292	280
			Total Contributions		$506	$393	$386

(A) Plan information is publicly available for the Local 641 Pension Fund. The Form 5500 indicates that the Plan is currently underfunded. Future contributions have increased pursuant to the collective bargaining agreement (dated January 31, 2011 and expiring on January 31, 2014) and the updated Rehabilitation Plan for the Plan year ended February 28, 2012. Per the terms of the Rehabilitation Plan, required contributions will increase by approximately 4% (annually) through 2018.

(B) The Company also contributes to a Swedish pension plan that supplements the Swedish social insurance system. The pension plan guarantees employees a pension based on a percentage of their salary and also represents a multi-employer pension plan, however the pension plan was not significant in any year presented. This pension plan is not underfunded.

The Company also contributes to a multi-employer other postretirement benefit plan under the terms of the collective bargaining agreement at the Edison, New Jersey facility. This health and welfare plan provides medical, prescription, optical and other benefits to its union-represented active employees and retirees. Company contributions to the postretirement plan approximated $171, $202 and $238 in 2012, 2011 and 2010, respectively. There have been no significant changes that affect the comparability of 2012, 2011 or 2010 contributions.