Pension Plans and Postretirement Benefits

12 Months Ended

Jan. 01, 2012

Pension Plans and Postretirement Benefits [Abstract]

Pension Plans and Postretirement Benefits

Note 12.    Pension Plans and Postretirement Benefits

Pension Plans

Teledyne has a defined benefit pension plan covering substantially all U.S. employees hired before January 1, 2004 or approximately 27% of Teledyne’s employees. As of January 1, 2004, non-union new hires participate in an enhanced defined contribution plan as opposed to the Company’s existing defined benefit plan. The plan was closed to all union new hires as of February 2007. As a result of the sale of the piston engine businesses, plan liabilities and assets were re-measured as of the April 19, 2011 sale date. Plan liabilities and expense for the remainder of the year after the sale date were measured using a discount rate of 6.15%, updated from 5.90% that was used from the beginning of the year through the sale date. In addition, for covered active salaried employees, in 2011 the Company approved a plan amendment to change the rate at which pension benefits will accrue on or after March 1, 2012. The pension benefit formula will be changed from a “final average pay” calculation to a “career average pay” approach. This amendment reduced the pension benefit obligation by $43.3 million in 2011.

In connection with the acquisition of Intelek, the Company assumed responsibility for a defined benefit pension plan based in the United Kingdom covering certain employees of Intelek. The plan was closed to new members in January 2000 and ceased further service accruals to members in September 2002.

Teledyne’s pension expense was $6.7 million in 2011, $4.8 million in 2010 and $21.4 million in 2009. In accordance with U.S. Government Cost Accounting Standards (“CAS”), $12.6 million, $9.6 million and $12.4 million was recoverable from certain government contracts, for 2011, 2010 and 2009, respectively. These amounts do not include pension expense for discontinued operations. Teledyne made pretax contributions to its pension plans of $69.0 million in 2011 and $37.0 million in 2010, prior to any recovery from the U.S. Government. On January 9, 2012, the Company made a $50.0 million pretax contribution to its pension plan and expects to make an additional cash contribution of $42.8 million in the third quarter of 2012.

The Company’s contribution associated with 401(k) plans were $7.5 million, $7.4 million and $7.4 million, for 2011, 2010 and 2009, respectively.

The following table sets forth the components of net period pension benefit expense for Teledyne’s defined benefit pension plans for 2011, 2010 and 2009 (in millions):

	Pension Benefits - Domestic Plans									Pension Benefits - Foreign Plan
	2011			2010			2009			2011			2010
Service cost — benefits earned during the period	$	13.1		$	13.7		$	14.8		$	—		$	—
Interest cost on benefit obligation		42.5			40.6			40.1			1.7			0.7
Expected return on plan assets		(62.7	)		(57.2	)		(48.6	)		(1.7	)		(0.6	)
Amortization of prior service cost		0.2			0.4			0.4			—			—
Recognized actuarial loss		13.6			7.7			15.8			—			—
Net periodic benefit expense	$	6.7		$	5.2		$	22.5		$	—		$	0.1
Less: expense attributable to discontinued operations		—			0.4			1.1			—			—
Net periodic benefit expense — continuing operations	$	6.7		$	4.8		$	21.4		$	—		$	0.1

The following table sets forth the reconciliation of the beginning and ending balances of the benefit obligation of the defined benefit pension plans (in millions):

	Pension Benefits - Domestic Plans						Pension Benefits - Foreign Plan
	2011			2010			2011			2010
Changes in benefit obligation:
Benefit obligation — beginning of year	$	722.9		$	669.3		$	31.1		$	—
Service cost — benefits earned during the year		13.1			13.7			—			—
Interest cost on projected benefit obligation		42.5			40.6			1.7			0.7
Actuarial (gain) loss		45.0			35.1			2.4			0.9
Benefits paid		(40.6	)		(35.8	)		(2.2	)		(0.8	)
Other — foreign currency		—			—			(0.1	)		0.1
Plan amendments(a)		(43.3	)		—			—			—
Divestiture		3.8			—			—			—
Business combination		—			—			—			30.2
Benefit obligation — end of year	$	743.4		$	722.9		$	32.9		$	31.1
Accumulated benefit obligation — end of year	$	742.3		$	678.1		$	32.9		$	31.1

(a) impact of changing the calculation of applicable wages for the determination of the benefit obligation.

The following table set forth the reconciliation of the beginning and ending balances of the fair value of plan assets for Teledyne’s defined benefit pension plans (in millions):

	Domestic Plans						Foreign Plan
	2011			2010			2011			2010
Changes in plan assets:
Fair value of plan assets — beginning of year	$	657.6		$	584.5		$	29.7		$	—
Business combination		—			—			—			20.5
Actual return on plan assets		(8.2	)		70.8			(1.1	)		2.0
Employer contribution — defined benefit plan		69.0			37.0			0.3			8.1
Employer contribution — other benefit plan		1.1			1.1			—			—
Foreign currency changes		—			—			0.1			(0.1	)
Benefits paid		(40.6	)		(35.8	)		(2.2	)		(0.8	)
Fair value of net plan assets — end of year	$	678.9		$	657.6		$	26.8		$	29.7

The measurement date for the Company’s pension plans is December 31.

The following table sets forth the funded status and amounts recognized in Teledyne’s consolidated balance sheets for its pension plans at year end 2011 and 2010 (in millions):

	Domestic Plans - Pension Benefits						Foreign Plan - Pension Benefits
	2011			2010			2011			2010
Funded status	$	(64.5	)	$	(65.3	)	$	(6.1	)	$	(1.4	)
Amounts recognized in the consolidated balance sheets:
Accrued pension obligation (long-term)	$	(59.9	)	$	(60.7	)	$	(6.1	)	$	(1.4	)
Accrued pension obligation (short-term)		(1.5	)		(1.5	)		—			—
Other liabilities		(3.1	)		(3.1	)		—			—
Net amount recognized	$	(64.5	)	$	(65.3	)	$	(6.1	)	$	(1.4	)
Amounts recognized in accumulated other comprehensive loss:
Unrecognized prior service cost	$	(42.4	)	$	1.4		$	—		$	—
Unrecognized net (gain) loss		377.8			275.6			4.5			(0.6	)
Net amount recognized, before tax effect	$	335.4		$	277.0		$	4.5		$	(0.6	)

At year-end 2011 and 2010 the Company had a non-cash reduction to stockholders’ equity of $204.9 million and $162.8 million, respectively. The non-cash reductions to stockholders’ equity did not affect net income and were recorded net of deferred taxes of $129.8 million in 2011 and $105.4 million in 2010.

At January 1, 2012, the estimated amounts of the minimum liability adjustment that are expected to be recognized as components of net periodic benefit cost during 2012 for the pension plans are: net loss $24.4 million and net prior service credit $4.6 million.

The following table presents the estimated future benefit payments for the Company’s pension plans (in millions):

	Domestic Plans		Foreign Plan
2012	$	44.3	$	1.9
2013		43.6		2.0
2014		45.3		1.9
2015		46.9		1.8
2016		48.6		1.8
2017-2021		265.1		9.7
Total	$	493.8	$	19.1

The following table set forth the percentage of year-end market value by asset class for Teledyne’s defined benefit pension plans:

	Domestic Plans Plan  Assets % to Total						Foreign Plan Plan Assets % to Total
	2011			2010			2011			2010
Equity instruments		63.0	%		67.0	%		61.0	%		59.0	%
Fixed income instruments		33.0	%		30.0	%		39.0	%		41.0	%
Other		4.0	%		3.0	%		—			—
Total		100.0	%		100.0	%		100.0	%		100.0	%

The Company has an active management policy for a portion of its pension assets for the domestic pension plans. The investment policy includes a target allocation percentage of 70% in equity instruments and 30% in domestic fixed income instruments. The balance in equity instruments can range from 45% to 75% before rebalancing is required under the Company’s policy. The investment policy for the foreign plan is set by the Company along with the trustees of the foreign plan. The current long-term asset allocation target of the foreign plan is 60% equity instruments and 40% fixed income instruments and alternative investments.

The plan’s investments are stated at fair value. A total of $370.8 million in plan investments for the domestic pension plan are considered a level 1 fair value hierarchy and are valued at quoted market prices in active markets. A total of $305.1 million in plan investments for the domestic pension plan are considered a level 2 fair value hierarchy and are valued based on observable market data. The plan has $0.1 million in investments that would be considered a level 3 fair value hierarchy.

A total of $26.0 million in plan investments for the foreign pension plan are considered a level 1 fair value hierarchy and are valued at quoted market prices in active markets. A total of $0.8 million in plan investments for the foreign pension plan are considered a level 2 fair value hierarchy and are valued based on observable market data. The plan has no investments that would be considered a level 3 fair value hierarchy.

The expected long-term rate of return on plan assets is reviewed annually, taking into consideration the Company’s asset allocation, historical returns on the types of assets held, and the current economic environment. We determined the discount rate based on a model which matches the timing and amount of expected benefit payments to maturities of quality bonds priced as of the pension plan measurement date. For some years, there were no bonds maturing. In these instances, we chose to estimate the missing bond by using bonds that have similar features as the prior year’s bond. The yields on the bonds are used to derive a discount rate for the liability.

The following assumptions were used to determine the benefit obligation and the net benefit cost:

	Domestic Plans									Foreign Plan
For the year	2011			2010			2009			2011			2010
Weighted average discount rate		5.90	%		6.25	%		6.25	%		5.40	%		5.60	%
Weighted average increase in future compensation levels		4.14	%		4.07	%		3.50	%		—			—
Expected weighted-average long-term rate of return		8.25	%		8.25	%		8.25	%		6.60	%		6.40	%

For its domestic pension plans the Company is projecting a long-term rate of return on plan assets of 8.25% in 2012. The discount rate used in determining the benefit obligations is expected to be 5.5% in 2012 and the expected weighted average increase in future compensation levels is 4.14%. For its foreign pension plan the Company is projecting a long-term rate of return on plan assets of 6.6% in 2012. The discount rate used in determining the benefit obligations is expected to be 4.7% in 2012.

Postretirement Plans

The Company sponsors several postretirement defined benefit plans covering certain salaried and hourly employees. The plans provide health care and life insurance benefits for certain eligible retirees.

The following table sets forth the components of net period postretirement benefit income/expense for Teledyne’s postretirement benefit plans for 2011, 2010 and 2009 (in millions):

	Postretirement Benefits
	2011			2010			2009
Service cost — benefits earned during the period	$	—		$	—		$	0.1
Interest cost on benefit obligation		1.0			1.1			1.1
Amortization of prior service cost		(0.6	)		(0.5	)		(0.5	)
Recognized actuarial gain		(0.5	)		(1.1	)		(1.3	)
Net periodic benefit income		(0.1	)		(0.5	)		(0.6	)
Less: amounts attributable to discontinued operations		—			(0.5	)		(0.6	)
Net periodic benefit income — continuing operations	$	(0.1	)	$	—		$	—

The following table sets forth the reconciliation of the beginning and ending balances of the benefit obligation of the postretirement benefit plans (in millions):

	Postretirement Benefits
	2011			2010
Changes in benefit obligation:
Benefit obligation — beginning of year	$	18.4		$	17.6
Interest cost on projected benefit obligation		1.0			1.1
Actuarial (gain) loss		(1.6	)		1.4
Benefits paid		(1.5	)		(1.7	)
Curtailment and other		(1.5	)		—
Benefit obligation — end of year	$	14.8		$	18.4

The measurement date for the Company’s postretirement plans is December 31.

The following table presents the estimated future benefit payments for the Company’s postretirement plans (in millions):

	Postretirement Benefit Plan
2012	$	1.6
2013		1.5
2014		1.5
2015		1.4
2016		1.4
2017-2021		6.0
Total	$	13.4

The following table sets forth the funded status and amounts recognized in Teledyne’s consolidated balance sheets for the postretirement plans at year end 2011 and 2010 (in millions):

	Postretirement Benefits
	2011			2010
Funded status	$	(14.8	)	$	(18.4	)
Unrecognized prior service cost		(1.2	)		(1.8	)
Unrecognized net gain		(4.0	)		(6.5	)
Accrued benefit cost	$	(20.0	)	$	(26.7	)
Accrued postretirement benefits (long-term)	$	(13.0	)	$	(16.5	)
Accrued postretirement benefits (short-term)		(1.8	)		(1.9	)
Accumulated other comprehensive income		(5.2	)		(8.3	)
Net amount recognized	$	(20.0	)	$	(26.7	)

At January 1, 2012, the amounts in the minimum liability adjustment that have not yet been recognized as components of net periodic benefit income for the retiree medical plans are: net gain $4.0 million and net prior service credit $1.3 million. At January 1, 2012, the estimated amounts in the minimum liability expected to be recognized as components of net periodic benefit income during 2012 for the retiree medical plans are: net gain $0.3 million and net prior service credit $0.5 million.

The annual assumed rate of increase in the per capita cost of covered benefits (the health care cost trend rate) for health care plans is 8.0% in 2012 and was assumed to decrease to 5.0% by the year 2018 and remain at that level thereafter. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one percentage point increase in the assumed health care cost trend rates would result in an increase in the annual service and interest costs by less than $0.1 million for 2011 and would result in an increase in the postretirement benefit obligation by $0.6 million at January 1, 2012. A one percentage point decrease in the assumed health care cost trend rates would result in a decrease in the annual service and interest costs by less than $0.1 million for 2011 and would result in a decrease in the postretirement benefit obligation by $0.5 million at January 1, 2012.