Defined Benefit Pension Plans

12 Months Ended

Jul. 31, 2013

Defined Benefit Pension Plans

(17) DEFINED BENEFIT PENSION PLANS

The Company sponsors two defined benefit pension plans covering certain of its employees in its Netherlands facility and one defined benefit pension plan covering certain of its employees in its Taiwan facility. Pension costs are actuarially determined.

The aggregate change in benefit obligation and plan assets related to these plans was as follows:

	July 31,
	2013			2012
	(in thousands)
Change in benefit obligation
Benefit obligation at beginning of year	$	17,159		$	13,791
Service cost		644			368
Interest cost		728			589
Actuarial (gain) loss		2,564			4,300
Employee contributions		296			328
Benefits and administrative expenses paid		(260	)		(404	)
Effect of curtailment		(2,258	)		—
Currency translation		1,222			(1,813	)
Benefit obligation at end of year		20,095			17,159
Change in plan assets
Fair value of plan assets at beginning of year		14,151			15,652
Actual return on plan assets		172			276
Employee contributions		296			328
Employer contributions		1,079			498
Benefits and administrative expenses paid		(260	)		(404	)
Currency translation		1,060			(2,199	)
Fair value of plan assets at end of year		16,498			14,151
Funded status
Assets		—			37
Current liability		(1	)		(1	)
Noncurrent liability		(3,596	)		(3,044	)
Net amount recognized in statement of financial position as a noncurrent asset (liability)	$	(3,597	)	$	(3,008	)

The accumulated benefit obligation was approximately $17.3 million and $13.6 million at July 31, 2013, and 2012, respectively.

Information for pension plans with an accumulated benefit obligation in excess of plan assets was as follows:

	July 31,
	2013		2012
	(in thousands)
Projected benefit obligation	$	18,664	$	2,064
Accumulated benefit obligation	$	16,454	$	1,290
Fair value of plan assets	$	15,423	$	1,024

Components of net periodic pension cost were as follows:

	Years Ended July 31,
	2013			2012			2011
	(in thousands)
Service cost	$	644		$	368		$	365
Interest costs		728			589			617
Expected return on plan assets		(538	)		(473	)		(477	)
Amortization of net actuarial (gain) loss		38			(88	)		(114	)
Curtailment gain		(504	)		—			—
Net periodic pension costs	$	368		$	396		$	391

The amount included in accumulated other comprehensive income expected to be recognized as a component of net periodic pension costs in fiscal year 2014 is approximately $0.1 million related to amortization of a net actuarial loss and prior service cost.

Assumptions:

Weighted-average assumptions used to determine benefit obligations was as follows:

	July 31,
	2013			2012			2011
Discount rate		3.61	%		3.95	%		5.50	%
Rate of compensation increase		2.07	%		2.12	%		2.00	%

Weighted-average assumptions used to determine net periodic pension cost was as follows:

	Years Ended July 31,
	2013			2012			2011
Discount rate		4.13	%		5.50	%		5.50	%
Expected long-term rate of return on plan assets		3.43	%		3.34	%		3.50	%
Rate of compensation increase		2.05	%		2.00	%		2.00	%

The discount rate reflects our best estimate of the interest rate at which pension benefits could be effectively settled as of the valuation date. It is based on the Mercer Yield Curve for the Eurozone as per July 31, 2013 for the appropriate duration of the plan.

To develop the expected long-term rate of return on assets assumptions consideration is given to the current level of expected returns on risk free investments, the historical level of risk premium associated with the other asset classes in which the portfolio is invested and the expectations for the future returns of each asset class. The expected return for each asset class was then weighted based on the target asset allocation to develop the expected long-term rate of return on assets assumption for the portfolio.

Benefit payments:

The following table summarizes expected benefit payments from the plans through fiscal year 2023. Actual benefit payments may differ from expected benefit payments. The minimum required contributions to the plan are expected to be approximately $0.1 million in fiscal year 2014.

	Pension Benefit Payments
	(in thousands)
For the fiscal years ended July 31:
2014	$	66
2015		92
2016		116
2017		157
2018		174
Next 5 years		1,335

Investment Policy:

The defined benefit plans have 100% of their assets invested in bank-managed portfolios of debt securities and other assets. Conservation of capital with some conservative growth potential is the strategy for the plans.

The Company’s pension plans are outside the United States, where asset allocation decisions are typically made by an independent board of trustees. Investment objectives are aligned to generate returns that will enable the plans to meet their future obligations. The Company acts in a consulting and governance role in reviewing investment strategy and providing a recommended list of investment managers for each plan, with final decisions on asset allocation and investment manager made by local trustees.

ASC Topic 820 provides that fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based on the highest and best use of the asset or liability. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. ASC Topic 820 requires the Company to use valuation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized as follows:

Level 1:	Observable inputs such as quoted prices for identical assets or liabilities in active markets
Level 2:	Other inputs that are observable directly or indirectly, such as quoted prices for similar assets or liabilities or market-corroborated inputs
Level 3:	Unobservable inputs for which there is little or no market data and which require the Company to develop its own assumptions about how market participants would price the assets or liabilities

The current target allocations for plan assets are 100% for debt securities. The market value of plan assets using Level 2 inputs is approximately $16.5 million.

Valuation Technique:

Benefit obligations are computed using the projected unit credit method. Benefits are attributed to service based on the plan’s benefit formula. Cumulative gains and losses in excess of 10% of the greater of the pension benefit obligation or market-related value of plan assets are amortized over the expected average remaining future service of the current active membership.