Pension Plans

12 Months Ended

Sep. 30, 2011

Pension Plans [Abstract]

Pension Plans

M. Pension Plans

We maintain defined benefit pension plans primarily covering certain employees of Computervision, which we acquired in 1998, and of CoCreate, which we acquired in 2008. Benefits are based upon length of service and average compensation with vesting after one to five years of service. The pension cost was actuarially computed using assumptions applicable to each subsidiary plan and economic environment. We adjust our pension liability related to our plans due to changes in actuarial assumptions and performance of plan investments, as shown below.

Effective April 1, 1990, the benefits under the U.S. pension plan were frozen indefinitely. We contribute all amounts deemed necessary on an actuarial basis to satisfy IRS funding requirements. Effective in 1998, benefits under one of the international plans were frozen indefinitely.

The following table presents the actuarial assumptions used in accounting for the pension plans:

	U.S. Plan									International Plans
	2011			2010			2009			2011			2010			2009
Weighted average assumptions used to determine benefit obligations at September 30 measurement date:
Discount rate		4.50	%		5.00	%		5.50	%		4.8	%		4.0	%		5.1	%
Rate of increase in future compensation (1)		—			—			—			3.0	%		2.1	%		2.1	%
Weighted average assumptions used to determine net periodic pension cost for fiscal years ended September 30:
Discount rate		5.00	%		5.50	%		7.50	%		4.0	%		5.1	%		5.7	%
Rate of increase in future compensation		—			—			—			2.7	%		2.1	%		2.2	%
Rate of return on plan assets		7.25	%		7.50	%		7.50	%		5.6	%		6.1	%		6.2	%

(1) The rate of increase in future compensation is weighted for all plans, ongoing and frozen (with a 0% increase for frozen plans). The weighted rate of increase for ongoing non-U.S. plans was 2.7% at September 30, 2011 and 2010.

In selecting the expected long-term rate of return on assets, we considered the current investment portfolio and the investment return goals in the plans' investment policy statements. We, with input from the plans' professional investment managers, also considered the average rate of earnings expected on the funds invested or to be invested to provide plan benefits. This process included determining expected returns for the various asset classes that comprise the plans' target asset allocation. This basis for selecting the long-term asset return assumptions is consistent with the prior year. Using generally accepted diversification techniques, the plans' assets, in aggregate and at the individual portfolio level, are invested so that the total portfolio risk exposure and risk-adjusted returns best meet the plans' long-term liabilities to employees. Plan asset allocations are reviewed periodically and rebalanced to achieve target allocation among the asset categories when necessary.

As of September 30, 2011, for the U.S. plan and the international plans, the weighted long-term rate of return assumption is 7.25% and 5.60%, respectively. These rates of return, together with the assumptions used to determine the benefit obligations as of September 30, 2011 in the table above, will be used to determine our 2012 net periodic pension cost, which we expect to be approximately $6 million.

The actuarially computed components of net periodic pension cost recognized in our consolidated statements of operations for each year are shown below:

	U.S. Plan									International Plans
	2011			2010			2009			2011			2010			2009
	(in thousands)
Interest cost of projected benefit obligation	$	5,627		$	5,626		$	5,695		$	2,382		$	2,401		$	2,312
Service cost		—			—			—			1,782			1,563			1,410
Expected return on plan assets		(5,373	)		(4,881	)		(4,974	)		(2,254	)		(2,291	)		(1,903	)
Amortization of prior service cost		—			—			—			—			—			—
Settlement gain		—			—			—			—			—			—
Recognized actuarial loss (gain)		2,549			2,344			1,226			334			(26	)		(102	)
Net periodic pension cost	$	2,803		$	3,089		$	1,947		$	2,244		$	1,647		$	1,717

The following tables display the change in benefit obligation and the change in the plan assets and funded status of the plans as well as the amounts recognized in our consolidated balance sheets:

	U.S. Plan						International Plans						Total
	Year ended September 30,
	2011			2010			2011			2010			2011			2010
	(in thousands)
Change in benefit obligation:
Projected benefit obligation—beginning of year	$	113,558		$	103,068		$	58,828		$	50,423		$	172,386		$	153,491
Service cost		—			—			1,782			1,563			1,782			1,563
Interest cost		5,627			5,626			2,382			2,401			8,009			8,027
Actuarial loss		8,467			8,416			(6,416	)		8,518			2,051			16,934
Foreign exchange impact		—			—			39			(2,505	)		39			(2,505	)
Participant contributions		—			—			445			400			445			400
Benefits paid		(4,007	)		(3,552	)		(1,605	)		(1,972	)		(5,612	)		(5,524	)
Plan Amendments		—			—			(73	)		—			(73	)		—
Projected benefit obligation—end of year	$	123,645		$	113,558		$	55,382		$	58,828		$	179,027		$	172,386
Change in plan assets and funded status:
Plan assets at fair value—beginning of year	$	75,953		$	65,735		$	39,167		$	39,336		$	115,120		$	105,071
Actual return on plan assets		2,421			6,660			(4,022	)		1,008			(1,601	)		7,668
Employer contributions		—			7,110			2,206			2,101			2,206			9,211
Participant contributions		—			—			445			400			445			400
Foreign exchange impact		—			—			223			(1,706	)		223			(1,706	)
Benefits paid		(4,007	)		(3,552	)		(1,605	)		(1,972	)		(5,612	)		(5,524	)
Plan assets at fair value—end of year		74,367			75,953			36,414			39,167			110,781			115,120
Projected benefit obligation—end of year		123,645			113,558			55,382			58,828			179,027			172,386
Underfunded status	$	(49,278	)	$	(37,605	)	$	(18,968	)	$	(19,661	)	$	(68,246	)	$	(57,266	)
Accumulated benefit obligation—end of year	$	123,645		$	113,558		$	51,083		$	54,991		$	174,728		$	168,549
Amounts recognized in the balance sheet:
Non-current liability	$	(49,278	)	$	(37,605	)	$	(18,968	)	$	(19,661	)	$	(68,246	)	$	(57,266	)
Amounts in accumulated other comprehensive loss:
Unrecognized actuarial loss	$	78,470		$	69,600		$	7,722		$	8,272		$	86,192		$	77,872

We expect to recognize approximately $3.4 million of the unrecognized actuarial loss as of September 30, 2011 as a component of net periodic pension cost in 2012.

The following table shows the percentage of total plan assets for each major category of plan assets:

	U.S. Plan						International Plans
	September 30,
	2011			2010			2011			2010
Asset category:
Equity securities		60	%		60	%		41	%		42	%
Fixed income securities		40	%		40	%		31	%		37	%
Other		—			—			28	%		21	%
		100	%		100	%		100	%		100	%

We periodically review the pension plans' investments in the various asset classes. The current asset allocation target is 60% equity securities and 40% fixed income securities for the U.S. plan and a CoCreate plan in Germany, and 100% fixed income securities for the other international plans. The fixed income securities for the other international plans primarily include investments held with insurance companies with fixed returns. The plans' investment managers are provided specific guidelines under which they are to invest the assets assigned to them. In general, investment managers are expected to remain fully invested in their asset class with further limitations on risk as related to investments in a single security, portfolio turnover and credit quality.

          The U.S. plan and the German CoCreate plan investment policies prohibit the use of derivatives associated with leverage and speculation or investments in securities issued by PTC, except through index-related strategies and/or commingled funds. An investment committee oversees management of the pension plans' assets. Plan assets consist primarily of investments in mutual funds invested in equity and fixed income securities.

In 2011, our actual return on plan assets was a loss of $1.6 million compared to a gain of $7.7 million and $1.8 million, in 2010 and 2009, respectively. Distress in the financial markets has caused, among other things, extreme volatility in security prices, severely diminished liquidity and credit availability, rating downgrades of certain investments and declining valuation of others. Lower than expected returns has impacted and may continue to impact the amount and timing of future contributions and expense for these plans.

Based on actuarial valuations and additional voluntary contributions, we contributed $2.2 million, $9.2 million, and $6.9 million in 2011, 2010 and 2009, respectively, to the plans. We expect to make contributions totaling approximately $7.5 million in 2012.

As of September 30, 2011, benefit payments expected to be paid over the next ten years are outlined in the following table:

	U.S. Plan		International Plans		Total
	(in thousands)
Year ending September 30,
2012	$	4,001	$	1,691	$	5,692
2013		4,369		1,696		6,065
2014		4,801		1,755		6,556
2015		5,236		1,889		7,125
2016		5,676		2,067		7,743
2017 to 2021		36,180		14,415		50,595

Fair Value of Plan Assets

The U.S. Plan assets are comprised primarily of investments in common/collective trusts. Common/collective trusts are valued at the net asset value of shares held as reported by the trustee. The underlying investments in the common/collective trusts are publicly traded U.S. and international stocks, U.S. treasury securities and other fixed-income securities. Although the net asset values of the common/collective funds are determined by observable prices of the underlying securities, they are classified as Level 2 because the units of the common/collective trusts do not trade in open public markets. The fair value of the underlying investments in common/collective equity securities are based upon stock-exchange prices. The fair value of the underlying investments in common/collective fixed income securities are based on evaluated prices that reflect significant observable market information such as reported trades, actual trade information of similar securities, benchmark yields, broker/dealer quotes, issuer spreads, bids, offers and relevant credit information.

	September 30, 2011
	Level 1		Level 2		Level 3		Total
	(in thousands)
U.S. plan assets-common/collective trusts:
Fixed income securities:
U.S. Treasury, agency and other local government and non-corporate	$	—	$	9,991	$	—	$	9,991
Mortgage-backed		—		8,678		—		8,678
Corporate investment grade		—		10,948		—		10,948
U.S. equity securities:
Large capitalization stocks		—		33,368		—		33,368
Small capitalization stocks		—		4,936		—		4,936
U.S. real estate investment trusts		—		712		—		712
International equity securities:
Large/mid capitalization stocks		—		4,913		—		4,913
Small capitalization stocks		—		72		—		72
Emerging large/mid capitalization stocks		—		686		—		686
Commodities		—		63		—		63
	$	—	$	74,367	$	—	$	74,367

The International Plan assets are comprised primarily of investments in a trust and an insurance company. The underlying investments in the trust are primarily publicly traded European DJ EuroStoxx50 equities and European governmental fixed income securities. They are classified as Level 1 because the underlying units of the trust are traded in open public markets. The fair value of the underlying investments in equity securities and fixed income are based upon publicly traded exchange prices

	September 30, 2011
	Level 1		Level 2		Level 3		Total
	(in thousands)
International plan assets:
Fixed income securities:
Government	$	7,062	$	—	$	—	$	7,062
Europe corporate investment grade		4,299		—		—		4,299
Europe large capitalization stocks		14,984		—		—		14,984
Insurance company funds (1)		—		9,223		—		9,223
Cash		846		—		—		846
	$	27,191	$	9,223	$	—	$	36,414

(1) These investments are comprised primarily of fixed income security funds invested with an insurance company in Japan.