Pension Plans

12 Months Ended

Dec. 31, 2011

7. Pension Plans

The Company sponsors several noncontributory defined benefit pension plans covering most of the Company’s employees. Benefits under the plans are based on years of service and employee compensation. Amounts funded annually by the Company are actuarially determined using the projected unit credit and unit credit methods and are equal to or exceed the minimum required by government regulations.

The Company also maintains nonqualified supplemental employee retirement plans (“SERPs”) for certain current and former employees. The aggregate projected benefit obligations of these SERPs was $703 thousand and $648 thousand at December 31, 2011 and 2010, respectively. The plans are unfunded plans, and Company contributions made for benefits paid were $42 thousand in each of the years 2011 and 2010. The Company’s benefit obligation and pension expense related to these SERPs have been included in the tables below.

The tables below summarize the change in the benefit obligation, the change in plan assets, reconciliation to the amounts recognized in the balance sheets for the pension benefits and other benefits plans, and the funded status of the plans. The measurement date for all items set forth below is the last day of the fiscal year presented.

	2011			2010
	(in thousands)
Change in Benefit Obligation:
Benefit obligation at beginning of year	$	32,923		$	28,656
Service cost		862			811
Interest cost		1,835			1,750
Plan participants contributions		198			189
Actuarial (gain) loss		4,305			1,748
Foreign currency exchange rate changes and other		(424	)		1,217
Benefits paid		(1,847	)		(1,448	)

Benefit obligation at end of year	$	37,852		$	32,923

Change in Plan Assets:
Fair value of plan assets at beginning of year	$	27,320		$	24,082
Actual return on plan assets		(115	)		2,325
Employer contribution		1,975			1,330
Plan participants contribution		198			189
Foreign currency exchange rate changes		(384	)		842
Benefits paid		(1,847	)		(1,448	)

Fair value of plan assets at end of year	$	27,147		$	27,320

The weighted-average assumptions used to determine benefit obligation for the pension benefits as of December 31, 2011 and 2010 were as follows:

	2011		2010
Discount rate		4.50% - 5.00%	5.50%
Rate of compensation increase		3.00%	3.00% - 3.50%

The funded status of the plans and the unrecognized amounts included in accumulated other comprehensive loss as of December 31, 2011 and 2010 were as follows (in thousands):

	2011			2010

Unfunded status	$	(10,704	)	$	(5,603	)
Unrecognized net actuarial loss		6,785			728
Unamortized prior service cost		663			800

Net amount recognized	$	(3,256	)	$	(4,075	)

The amounts recorded in the consolidated balance sheets as of December 31, 2011 and 2010 were as follows (in thousands):

		Pension Benefits
		2011			2010

Other assets (noncurrent)		–		$	1,413
Accrued benefit liability – current	$	(41	)		(44	)
Accrued benefit liability – non-current		(10,663	)		(6,973	)
Accumulated other comprehensive loss		7,448			1,529

Net amount recorded	$	(3,256	)	$	(4,075	)

At December 31, 2010, some of the Company’s pension plans had projected benefit obligations (PBO) and accumulated benefit obligations (ABO) in excess of plan assets. The aggregate benefit obligations and fair value of plans assets for plans that were overfunded and underfunded as of December 31, 2011 and 2010 are as follows (in thousands):

	2011			2010
Underfunded plans
PBO	$	37,852		$	17,057
Fair value of plan assets		27,147			10,041
Funded status		(10,705	)		(7,016	)
ABO		33,957			15,643
Overfunded plan
PBO		–		$	15,866
Fair value of plan assets		–			17,279
Funded status		–			1,413
ABO		–			14,267
All plans
PBO	$	37,852		$	32,923
Fair value of plan assets		27,147			27,320
Funded status		(10,705	)		(5,603	)
ABO		33,957			29,910

The components of net periodic benefit cost for the years ended December 31, 2011 and 2010 are as follows (in thousands):

	Pension Benefits
	2011			2010

Service cost	$	862		$	811
Interest cost		1,835			1,750
Expected return on plan assets		(1,878	)		(1,666	)
Amortization of net loss		113			109
Amortization of prior service cost		11			12
Recognized net actuarial (gain) loss		19			(33	)

Net periodic benefit cost	$	962		$	983

Changes recognized in Other Comprehensive Income for the years ended December 31, 2011 and 2010 are as follows (in thousands):

	2011			2010

Net actual (gain) loss	$	6,023		$	997
Recognized actuarial gain		(19	)		33
Prior service (credit) cost		(113	)		(113	)
Recognized prior service credit		(11	)		(13	)
Foreign exchange		39			52
Total changes recognized in Other Comprehensive Income (before tax effect)	$	5,919		$	956

The Company’s estimated net loss and prior service cost to be amortized from accumulated other comprehensive loss during 2012 is expected to be $473 thousand and $122 thousand, respectively.

The weighted-average assumptions used to determine net periodic benefit cost related to the pension benefits were as follows:

	2011	2010

Discount rate	5.00% - 5.50%	5.75% - 6.25%
Expected long-term return on plan assets	6.75% - 7.00%	6.75% - 7.00%
Rate of compensation increase	3.00%	3.00% - 3.50%

In developing the overall expected long-term return on plan assets assumption, a building block approach was used in which rates of return in excess of inflation were considered separately for equity securities, debt securities, and other assets. The excess returns were weighted by the representative target allocation and added along with an appropriate rate of inflation to develop the overall expected long-term return on plan assets assumption.

The Company has an investment strategy for its pension plans that emphasizes total return; that is, the aggregate return from capital appreciation and dividend and interest income. The primary investment management objective for the plans’ assets is long-term capital appreciation primarily through investment in equity and debt securities with an emphasis on consistent growth; specifically, growth in a manner that protects each plan’s assets from excessive volatility in market value from year to year. The investment policy takes into consideration the benefit obligations, including timing of distributions. The Company selects professional money managers whose investment policies are consistent with the Company’s investment strategy and monitors their performance against appropriate benchmarks. The Company’s target asset allocation is consistent with the weighted-average allocation at December 31, 2011.

Our defined benefit pension assets are invested with the objective of achieving a total rate of return over the long-term that is sufficient to fund future pension obligations. Overall investment risk is intended to be mitigated by maintaining a diversified portfolio of assets.

Investments are stated at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). Following is a description of the valuation methodologies used for assets measured at fair value:

Money market funds: Valued at the quoted market price reported on the active market on which the individual funds are traded on the last business day of the year.

Mutual funds: Valued at the quoted market prices which represent the net asset value of shares held by the pension plans at year end.

Common stocks: Valued at the quoted market price reported on the active market on which the individual securities are traded on the last business day of the year.

Government agency securities and treasury obligations: Valued at the closing price reported on the active market in which securities similar to those held by the pension plans are traded.

Corporate bonds: Certain corporate bonds are based on yields currently available on comparable securities of issuers with similar credit ratings. When quoted prices are not available for identical or similar bonds, the bond is valued under a discounted cash flows approach that maximizes observable inputs, such as current yields of similar instruments, but includes adjustments for certain risks that may not be observable, such as credit and liquidity risks.

The accounting guidance for fair value measurements establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Plans assets do not include any Level 3 investments. The following tables set forth by level, within the fair value hierarchy, the assetscarried at fair value as of December 31, 2011 and 2010.

	December 31, 2011
	Level 1		Level 2		Total
	(In thousands)

Cash and money market funds	$	239	$	-	$	239	0.9%
Equity mutual funds		7,198		2,163		9,361	34.4
Fixed income mutual funds		2,948		-		2,948	10.9
Common stocks		7,210		-		7,210	26.6
Government agencies		-		1,748		1,748	6.4
Treasury obligations		-		643		643	2.4
Corporate bonds		-		4,998		4,998	18.4

	$	17,595	$	9,552	$	27,147	100.0%

	December 31, 2010
	Level 1		Level 2		Total
	(In thousands)

Cash and money market funds	$	167	$	-	$	167	0.6%
Equity mutual funds		3,290		3,799		7,089	25.9
Fixed income mutual funds		2,967		-		2,967	10.9
Common stocks		9,874		-		9,874	36.1
Government agencies		-		1,890		1,890	6.9
Treasury obligations		-		451		451	1.7
Corporate bonds		-		4,882		4,882	17.9

	$	16,298	$	11,022	$	27,320	100.0%

Contributions

American Biltrite expects to contribute $2.5 million to its pension plans in 2012.

Estimated Future Benefit Payments

The following benefit payments, which reflect future service as appropriate, are expected to be paid. The benefit payments are based on the same assumptions used to measure the Company’s benefit obligation at the end of fiscal 2011.

(in thousands)
2012	$	1,686
2013		1,673
2014		1,771
2015		1,826
2016		1,864
2017 - 2021		11,031

Defined Contribution Plans

The Company also has three 401(k) defined contribution retirement plans that cover substantially all employees. Eligible employees may contribute up to 15% to 20% of compensation (subject to annual Internal Revenue Code limits) with the Company partially matching contributions. Defined contribution pension expense for the Company was $350 thousand and $372 thousand for the years ended December 31, 2011 and 2010, respectively.

AMERICAN BILTRITE INC 10-K/A