Retirement Plans

12 Months Ended

Dec. 31, 2011

Retirement Plans

14. Retirement Plans

Certain employees of the Standard Commercial business unit were participants in a defined cash balance plan covering all full-time employees who had completed at least 1,000 hours of service. This plan was frozen in March 2001 in anticipation of distribution of plan assets to members upon plan termination. All participants were vested when the plan was frozen.

The following tables provide detail of the changes in benefit obligations, components of benefit costs, weighted-average assumptions, and plan assets for the retirement plan as of and for the twelve months ending December 31, 2011, 2010 and 2009 (in thousands) using a measurement date of December 31.

	2011			2010			2009
Assumptions (end of period):
Discount rate used in determining benefit obligation		4.50	%		5.25	%		6.00	%
Rate of compensation increase		N/A			N/A			N/A
Reconciliation of funded status (end of period):
Accumulated benefit obligation	$	(12,990	)	$	(12,050	)	$	(11,301	)
Projected benefit obligation	$	(12,990	)	$	(12,050	)	$	(11,301	)
Fair value of plan assets		9,019			9,217			8,673
Funded status	$	(3,971	)	$	(2,833	)	$	(2,628	)
Net actuarial loss		(4,582	)		(3,114	)		(2,805	)
Accumulated other comprehensive loss		(4,582	)		(3,114	)		(2,805	)
Prepaid pension cost		611			281			177
Net amount recognized as of December 31	$	(3,971	)	$	(2,833	)	$	(2,628	)
Changes in projected benefit obligation:
Benefit obligation as of beginning of period	$	12,050		$	11,301		$	12,159
Interest cost		609			651			643
Actuarial liability loss (gain)		1,160			925			(631	)
Benefits paid		(829	)		(827	)		(870	)
Benefit obligation as of end of period	$	12,990		$	12,050		$	11,301
Change in plan assets:
Fair value of plan assets as of beginning of period	$	9,217		$	8,673		$	7,850
Actual return on plan assets (net of expenses)		(4	)		937			1,693
Employer contributions		635			434			-
Benefits paid		(829	)		(827	)		(870	)
Fair value of plan assets as of end of period	$	9,019		$	9,217		$	8,673
Net periodic pension cost:
Service cost - benefits earned during the period	$	-		$	-		$	-
Interest cost on projected benefit obligation		609			651			643
Expected return on plan assets		(590	)		(546	)		(485	)
Recognized actuarial loss		287			224			489
Net periodic pension cost	$	306		$	329		$	647
Discount rate		5.25	%		6.00	%		5.50	%
Expected return on plan assets		6.50	%		6.50	%		6.50	%
Rate of compensation increase		N/A			N/A			N/A

Estimated future benefit payments by fiscal year (in thousands):

2012	$	921
2013	$	921
2014	$	918
2015	$	914
2016	$	902
2017-2021	$	4,335

As of December 31, 2011, the fair value of the plan assets was composed of cash and cash equivalents of $0.4 million, bonds and notes of $2.9 million and equity securities of $5.7 million.

Our investment objectives are to preserve capital and to achieve long-term growth through a favorable rate of return equal to or greater than 5% over the long-term (60 year) average inflation rate as measured by the consumer price index. The objective of the equity portion of the portfolio is to achieve a return in excess of the Standard & Poor’s 500 index. The objective of the fixed income portion of the portfolio is to add stability, consistency, safety and total return to the total fund portfolio.

We prohibit investments in options, futures, precious metals, short sales and purchase on margin. We also restrict the investment in fixed income securities to “A” rated or better by Moody’s or Standard & Poor’s rating services and restrict investments in common stocks to only those that are listed and actively traded on one or more of the major United States stock exchanges, including NASDAQ. We manage to an asset allocation of 45% to 75% in equity securities. An investment in any single stock issue is restricted to 5% of the total portfolio value and 90% of the securities held in mutual or commingled funds must meet the criteria for common stocks.

To develop the expected long-term rate of return on assets assumption, we consider the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio. This resulted in the selection of the 6.5% long-term rate of return on assets assumption. To develop the discount rate used in determining the benefit obligation we used the Mercer Yield Curve at the measurement date to match the timing and amounts of projected future benefits.

We estimate contributing $0.9 million to the defined benefit cash balance plan during 2012. We expect our 2012 periodic pension cost to be $0.5 million, the components of which are interest cost of $0.6 million, expected return on plan assets of ($0.6) million and amortization of actuarial loss of $0.5 million.

The following table shows the weighted-average asset allocation for the defined benefit cash balance plan held as of December 31, 2011 and 2010.

	12/31/11			12/31/10
Asset Category:
Fixed income securities		32	%		32	%
Equity securities		64	%		65	%
Other		4	%		3	%
Total		100	%		100	%

ASC 820 defines fair value, establishes a consistent framework for measuring fair value and expands disclosure requirements about fair value measurements. ASC 820, among other things, requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. In addition, ASC 820 precludes the use of block discounts when measuring the fair value of instruments traded in an active market, which were previously applied to large holdings of publicly traded equity securities.

Effective January 1, 2008, we determine the fair value of our financial instruments based on the fair value hierarchy established in ASC 820. In accordance with ASC 820, we utilize the following fair value hierarchy:

· Level 1: quoted prices in active markets for identical assets;

· Level 2: inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, inputs of identical assets for less active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the instrument; and

· Level 3: inputs to the valuation methodology that are unobservable for the asset or liability.

This hierarchy requires the use of observable market data when available.

Under ASC 820, we determine fair value based on the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. It is our policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements, in accordance with the fair value hierarchy described above. Fair value measurements for assets and liabilities where there exists limited or no observable market data are calculated based upon our pricing policy, the economic and competitive environment, the characteristics of the asset or liability and other factors as appropriate. These estimated fair values may not be realized upon actual sale or immediate settlement of the asset or liability.

Where quoted prices are available on active exchanges for identical instruments, investment securities are classified within Level 1 of the valuation hierarchy. Level 1 investment securities include common and preferred stock. 

Level 2 investment securities include corporate bonds, collateralized corporate bank loans, municipal bonds, U.S. Treasury securities, other obligations of the U.S. Government and mortgage-backed securities for which quoted prices are not available on active exchanges for identical instruments. We use third party pricing services to determine fair values for each Level 2 investment security in all asset classes. Since quoted prices in active markets for identical assets are not available, these prices are determined using observable market information such as quotes from less active markets and/or quoted prices of securities with similar characteristics, among other things. We have not adjusted any prices received from third-party pricing services.

In cases where there is limited activity or less transparency around inputs to the valuation, investment securities are classified within Level 3 of the valuation hierarchy. Level 3 investments are valued based on the best available data in order to approximate fair value. This data may be internally developed and consider risk premiums that a market participant would require.

There were no transfers between Level 1 and Level 2 securities.

The following table presents for each of the fair value hierarchy levels, our plan assets that are measured at fair value on a recurring basis at December 31, 2011 (in thousands).

	Quoted Prices in		Other
	Active Markets for		Observable		Unobservable
	Identical Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Debt securities	$	-	$	2,916	$	-	$	2,916
Equity securities		5,733		-		-		5,733
Cash and equivalents		370		-		-		370
Total	$	6,103	$	2,916	$	-	$	9,019

We sponsor two defined contribution plans. Under these plans, employees may contribute a portion of their compensation on a tax-deferred basis, and we may contribute a discretionary amount each year. We contributed $0.2 million for each of the twelve months ended December 31, 2011, 2010 and 2009, respectively.