RETIREMENT PLANS

The Company sponsors defined benefit pension plans which cover hourly workers at its West Salem, Ohio plant, and hourly union employees at its Woodbridge, New Jersey plant as well as a defined benefit retirement plan covering U.S. salaried employees, which was frozen in 1998 and subsequently replaced with a defined contribution plan (the “Domestic Plans”). In 2013, the pension plan for West Salem was amended to reflect an increase in the pension multiplier. Employees who were covered by the pension plan prior to the amendment were provided an opportunity to irrevocably freeze their pension, along with any vested benefits associated with the plan, and elect to participate in a defined contribution plan. In addition, the amendment effectively closed the plan to any new employees hired after November 4, 2013.

The Company also sponsors a defined benefit pension plan covering the Canadian salaried employees and hourly union employees at the Lambeth, Ontario plant, a defined benefit pension plan for the hourly union employees at its Burlington, Ontario plant, and a defined benefit pension plan for the hourly union employees at its Pointe Claire, Quebec plant (the “Foreign Plans”). In 2014, the pension plans for Pointe Claire and Burlington were amended to reflect an increase in benefits, effective November 15, 2015 and September 1, 2016, respectively. Also, lump sum payments made to members of the Pointe Claire plan in 2014 and 2013 upon termination and retirement, totaled more than the sum of the service cost and interest costs and as a result, the Company recorded settlement losses of $0.1 million and $0.6 million in 2014 and 2013, respectively. The Company does not expect to incur this type of loss in 2015 and beyond, due to a current year amendment disallowing the lump sum payment feature that triggered the settlement losses in each respective year.

The Company also provides postretirement benefits other than pension (“OPEB plans”) including health care or life insurance benefits to certain U.S. and Canadian retirees and in some cases, their spouses and dependents. The Company’s postretirement benefit plans in the U.S. include an unfunded health care plan for hourly workers at the Company’s former steel siding plant in Cuyahoga Falls, Ohio. With the closure of this facility in 1991, no additional employees are eligible to participate in this plan. There are three other U.S. unfunded plans covering either life insurance or health care benefits for small frozen groups of retirees. The Company’s foreign postretirement benefit plan provides life insurance benefits to active members at its Pointe Claire, Quebec plant and a closed group of Canadian salaried retirees. The actuarial valuation measurement date for the defined pension plans and postretirement benefits other than pension is December 31.

The Company sponsors defined contribution plans, which are qualified as tax-exempt plans. The plans cover all full-time, non-union employees with matching contributions of up to 3.5% of eligible compensation in both the U. S. and Canada, depending on length of service and levels of contributions. The Company’s pre-tax contributions to its defined contribution plans were $2.7 million, $2.6 million and $2.4 million for the years ended January 3, 2015, December 28, 2013 and December 29, 2012, respectively.

The change in benefit obligation and plan assets for the Company’s defined benefit pension and OPEB plans are as follows (in thousands):



	January 3, 2015									December 28, 2013
	Domestic Plans			Foreign Plans			OPEB Plans			Domestic Plans			Foreign Plans			OPEB Plans
Change in projected benefit obligation:
Projected benefit obligation at beginning of period	$	67,162		$	76,961		$	4,856		$	74,223		$	85,694		$	6,067
Service cost	1,233			2,373			11			1,033			2,785			12
Interest cost	3,189			3,616			186			2,902			3,769			185
Plan amendments	—			133			—			112			—			(51		)
Actuarial loss (gain)	14,218			11,442			343			(7,323		)	(4,322		)	(818		)
Settlements	—			(688		)	—			—			(1,855		)	—
Participant contributions	—			333			17			—			288			9
Benefits paid	(3,809		)	(3,610		)	(474		)	(3,785		)	(3,599		)	(561		)
Retiree drug subsidy reimbursement	—			—			43			—			—			41
Effect of foreign exchange	—			(7,848		)	(34		)	—			(5,799		)	(28		)
Projected benefit obligation at end of period	81,993			82,712			4,948			67,162			76,961			4,856
Change in plan assets:
Fair value of assets at beginning of period	54,502			67,964			—			47,922			61,965			—
Actual return on plan assets	4,297			7,191			—			7,453			9,006			—
Settlements	—			(688		)	—			—			(1,855		)	—
Employer contributions	3,641			5,998			457			2,912			6,768			552
Participant contributions	—			333			17			—			288			9
Benefits paid	(3,809		)	(3,610		)	(474		)	(3,785		)	(3,599		)	(561		)
Effect of foreign exchange	—			(6,766		)	—			—			(4,609		)	—
Fair value of assets at end of period	58,631			70,422			—			54,502			67,964			—
Funded status	$	(23,362	)	$	(12,290	)	$	(4,948	)	$	(12,660	)	$	(8,997	)	$	(4,856	)

Accumulated Benefit Obligation	$	81,993		$	76,472		$	4,948		$	67,162		$	72,153		$	4,856

The amounts recognized in consolidated balance sheets and other comprehensive loss (income) for the Company’s defined benefit pension and OPEB plans are as follows (in thousands):



	January 3, 2015									December 28, 2013
	Domestic Plans			Foreign Plans			OPEB Plans			Domestic Plans			Foreign Plans			OPEB Plans
Balance sheets:
Accrued liabilities	$	—		$	—		$	(462	)	$	—		$	—		$	(515	)
Other liabilities	(23,362		)	(12,290		)	(4,486		)	(12,660		)	(8,997		)	(4,341		)
Total recognized	$	(23,362	)	$	(12,290	)	$	(4,948	)	$	(12,660	)	$	(8,997	)	$	(4,856	)
Accumulated other comprehensive loss (income):
Net actuarial loss (gain)	$	11,839		$	12,735		$	(280	)	$	(2,137	)	$	4,883		$	(712	)
Net prior service cost (credit)	106			479			(43		)	116			380			(51		)
Total recognized	$	11,945		$	13,214		$	(323	)	$	(2,021	)	$	5,263		$	(763	)

For the defined benefit pension plans, the estimated net actuarial loss and prior service cost to be amortized from accumulated other comprehensive loss into periodic benefit cost over the next fiscal year is $0.7 million. For the OPEB plans, the estimated actuarial gain and prior service credit to be amortized from accumulated other comprehensive income into periodic benefit cost over the next fiscal year is immaterial.

The components of net periodic benefit cost for the Company’s pension benefit plans are as follows (in thousands):



	Years Ended
	January 3, 2015						December 28, 2013						December 29, 2012
	Domestic Plans			Foreign Plans			Domestic Plans			Foreign Plans			Domestic Plans			Foreign Plans
Service cost	$	1,233		$	2,373		$	1,033		$	2,785		$	752		$	2,421
Interest cost	3,189			3,616			2,902			3,769			3,056			3,925
Expected return on assets	(4,055		)	(4,275		)	(3,548		)	(3,900		)	(3,224		)	(3,726		)
Loss recognized due to settlements	—			117			—			599			—			—
Amortization of prior service cost	10			26			1			20			—			21
Amortization of net actuarial loss (gain)	—			54			240			508			4			45
Net periodic benefit cost	$	377		$	1,911		$	628		$	3,781		$	588		$	2,686

The components of other comprehensive loss (income) for the Company’s pension benefit plans are as follows (in thousands):



	Years Ended
	January 3, 2015						December 28, 2013						December 29, 2012
	Domestic Plans			Foreign Plans			Domestic Plans			Foreign Plans			Domestic Plans			Foreign Plans
Net actuarial loss (gain)	$	13,976		$	8,023		$	(11,228	)	$	(9,121	)	$	3,447		$	8,040
Prior service cost	—			125			112			—			5			—
Loss recognized due to settlements	—			(117		)	—			(599		)	—			—
Amortization of prior service cost	(10		)	(26		)	(1		)	(20		)	—			(21		)
Amortization of net actuarial (loss) gain	—			(54		)	(240		)	(508		)	(4		)	(45		)
Total recognized	$	13,966		$	7,951		$	(11,357	)	$	(10,248	)	$	3,448		$	7,974

The components of net periodic benefit cost for the Company’s OPEB Plans are as follows (in thousands):



	Years Ended
	January 3, 2015			December 28, 2013			December 29, 2012
Service cost	$	11		$	12		$	13
Interest cost	186			185			233
Amortization of prior service credit	(8		)	—			—
Amortization of net actuarial (gain) loss	(88		)	(8		)	1
Net periodic benefit cost	$	101		$	189		$	247

The components of other comprehensive loss (income) for the Company’s OPEB Plans are as follows (in thousands):



	Years Ended
	January 3, 2015		December 28, 2013			December 29, 2012
Net actuarial loss (gain)	$	342	$	(817	)	109
Prior service credit	—		(51		)	—
Amortization of prior service credit	8		—			—
Amortization of net actuarial gain (loss)	88		8			(1	)
Total recognized	$	438	$	(860	)	108

The weighted average assumptions used to determine projected benefit obligation for the Company’s pension and OPEB plans are:



	January 3, 2015		December 28, 2013
Discount rate:
Domestic plans	4.02	%	4.81	%
Foreign plans	4.00	%	4.78	%
OPEB plans	3.69	%	4.25	%
Compensation increases:
Domestic plans	—	%	—	%
Foreign plans	3.50	%	3.50	%

The weighted average assumptions used to determine projected net periodic benefit cost for the Company’s pension and OPEB plans are:



	Years Ended
	January 3, 2015		December 28, 2013		December 29, 2012
Discount rate:
Domestic plans	4.81	%	3.97	%	4.54	%
Foreign plans	4.78	%	4.48	%	5.17	%
OPEB plans	4.25	%	3.43	%	4.10	%
Long-term rate of return on assets:
Domestic plans	7.50	%	7.50	%	7.50	%
Foreign plans	6.30	%	6.25	%	6.50	%
Compensation increases:
Domestic plans	—	%	—	%	—	%
Foreign plans	3.50	%	3.50	%	3.50	%

The following table presents health care cost trend rates used to determine net periodic benefit cost for the Company’s OPEB plans, as well as information regarding the ultimate cost trend and the year in which their ultimate rate is reached:



	Years Ended
	January 3, 2015		December 28, 2013		December 29, 2012
Assumed health care cost trend rate medical claims	6.8	%	7.0	%	7.5	%
Ultimate health care cost trend	5.0	%	5.0	%	5.0	%
Ultimate year health care cost trend rate is achieved	2023		2022		2018

A one-percentage-point increase (decrease) in the assumed health care cost trend rates has the following effects on postretirement obligations at January 3, 2015 (in thousands):



	1% Increase		1% Decrease
Increase (decrease) in accumulated postretirement benefit obligation	$	325	$	(280	)
Increase (decrease) in aggregate service and interest cost	10		(8		)

The discount rates used for the Company’s domestic plans were set on a plan by plan basis and reflect the market rate for high-quality fixed-income U.S. debt instruments that are rated AA or higher by a recognized ratings agency as of the annual measurement date. The discount rate is subject to change each year. In selecting the assumed discount rate, the Company considered current available rates of return expected to be available during the period to maturity of the pension and other postretirement benefit obligations. The discount rate for the Company’s foreign plans was selected on the same basis as described above for the domestic plans, except that the discount rate was evaluated using the spot rates generated by a Canadian corporate AA bond yield curve.

The Company’s financial objectives with respect to its pension plan assets are to provide growth, income from plan assets and benefits to its plan participants. The investment portfolio is designed to maximize investment returns within reasonable and prudent levels of risk, and to maintain sufficient liquidity to meet benefit obligations on a timely basis. The expected return on plan assets takes into consideration expected long-term inflation, historical returns and estimated future long-term returns based on capital market assumptions applied to the asset allocation strategy. The expected return on plan assets assumption considers asset returns over a full market cycle. Target allocations for the Domestic Plans are 60% equities, 35% fixed income and 5% cash and cash equivalents. For the Foreign Plans, allocations were previously targeted at 60% equities and 40% fixed income. However, in 2014, the Company restructured the Foreign Plans, establishing new target allocations of 30% equity and 70% fixed income in an effort to reduce plan exposure to the volatility of equity investments in favor of long-term fixed income. To attain these new target allocations, the Company has adopted a transition methodology, which uses a combination of interest rate changes and passage of time until the targeted allocation percentages are reached.

The fair values of domestic pension plan assets as of January 3, 2015 by asset category are (in thousands):



	January 3, 2015
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Equity securities	$	35,172	$	—	$	—	$	35,172
Mutual funds	—		9,494		—		9,494
Government securities	—		11,532		—		11,532
Money funds	—		2,390		—		2,390
Cash	43		—		—		43
Total	$	35,215	$	23,416	$	—	$	58,631

The fair values of domestic pension plan assets as of December 28, 2013 by asset category are (in thousands):



	December 28, 2013
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Equity securities	$	35,089	$	—	$	—	$	35,089
Mutual funds	—		8,240		—		8,240
Government securities	—		9,063		—		9,063
Money funds	—		2,073		—		2,073
Cash	37		—		—		37
Total	$	35,126	$	19,376	$	—	$	54,502

The fair values of foreign pension plan assets as of January 3, 2015 by asset category are (in thousands):



	January 3, 2015
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Pooled funds	$	—	$	70,420	$	—	$	70,420
Cash	2		—		—		2
Total	$	2	$	70,420	$	—	$	70,422

The fair values of foreign pension plan assets as of December 28, 2013 by asset category are (in thousands):



	December 28, 2013
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Pooled funds	$	—	$	67,085	$	—	$	67,085
Cash	879		—		—		879
Total	$	879	$	67,085	$	—	$	67,964

Equity Securities: Equity securities classified as Level 1 investments primarily include common stock of large, medium and small sized corporations and international equities. These investments are comprised of securities listed on an exchange, market or automated quotation system for which quotations are readily available. The valuation of these securities was determined based on the closing price reported on the active market on which the individual securities were traded.

Mutual Funds and Government Securities: Mutual funds and government securities classified as Level 2 investments primarily include government debt securities and bonds. The valuation of investments classified as Level 2 was determined using a market approach based upon quoted prices for similar assets and liabilities in active markets based on pricing models which incorporate information from market sources and observed market movements.

Money Funds: Money funds classified as Level 2 investments seek to maintain the net asset value (“NAV”) per share at $1.00. Money funds are valued under the amortized cost method which approximates current market value. Under this method, the securities are valued at cost when purchased and thereafter, a constant proportionate amortization of any discount or premium is recorded until the maturity of the security.

Pooled Funds: Pooled funds held by the Company’s foreign plans are classified as Level 2 investments and are reported at their NAV. These pooled funds use the close or last trade price as fair value of the investments to determine the daily transactional NAV for purchases and redemptions by its unit holders as determined by the fund’s trustee based on the underlying securities in the fund.

Estimated future benefit payments are as follows (in thousands):



	Pension Plans				OPEB Plans
	Domestic Plans		Foreign Plans		Gross		Medicare Prescription Drug Subsidy
2015	$	3,527	$	3,083	$	462	$	(33	)
2016	3,635		3,417		433		(32		)
2017	3,785		3,431		410		(31		)
2018	3,923		3,389		382		(31		)
2019	4,150		3,590		366		(30		)
2020 — 2024	23,175		20,580		1,515		(131		)

The Company expects to make $3.1 million, $4.7 million and $0.5 million in contributions to the Domestic Plans, Foreign Plans and OPEB Plans, respectively, in 2015. Although a decline in market conditions, changes in current pension law and uncertainties regarding significant assumptions used in the actuarial valuations may have a material impact on future required contributions to the Company’s pension plans, the Company currently does not expect funding requirements to have a material adverse impact on current or future liquidity.

Actuarial valuations require significant estimates and assumptions made by management, primarily the funding interest rate, discount rate and expected long-term return on plan assets. These assumptions are all susceptible to changes in market conditions. The funding interest rate and discount rate are based on representative bond yield curves maintained and monitored by an independent third party. In determining the expected long-term rate of return on plan assets, the Company considers historical market and portfolio rates of return, asset allocations and expectations of future rates of return.