Washington Post 2012 Annual Report Download - page 99

The costs for the Company’s defined benefit pension plans are
actuarially determined. Below are the key assumptions utilized to
determine periodic cost for the years ended December 31, 2012
and 2011, and January 2, 2011:
Pension Plans SERP
2012 2011 2010 2012 2011 2010
Discount rate ...... 4.7% 5.6% 6.0% 4.7% 5.6% 6.0%
Expected return on
plan assets ...... 6.5% 6.5% 6.5% ———
Rate of compensation
increase ........ 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
At December 31, 2012 and 2011, accumulated other compre-
hensive income (AOCI) includes the following components of
unrecognized net periodic cost for the defined benefit plans:
Pension Plans SERP
(in thousands) 2012 2011 2012 2011
Unrecognized
actuarial (gain)
loss .......... $(193,469) $(105,051) $ 33,725 $ 26,385
Unrecognized prior
service cost .... 15,931 19,626 191 245
Gross Amount .... (177,538) (85,425) 33,916 26,630
Deferred tax liability
(asset) ........ 71,015 34,170 (13,566) (10,652)
Net Amount ..... $(106,523) $ (51,255) $ 20,350 $ 15,978
During 2013, the Company expects to recognize the following amor-
tization components of net periodic cost for the defined benefit plans:
2013
(in thousands) Pension Plans SERP
Actuarial loss recognition ............. $8,588 $2,569
Prior service cost recognition ........... $3,635 $ 54
Defined Benefit Plan Assets. The Company’s defined benefit
pension obligations are funded by a portfolio made up of a
relatively small number of stocks and high-quality fixed-income
securities that are held by a third-party trustee. As of December 31,
2012 and 2011, the assets of the Company’s pension plans were
allocated as follows:
December 31,
2012 2011
U.S. equities ............................ 64% 69%
U.S. fixed income ........................ 13% 10%
International equities ....................... 23% 21%
100% 100%
Essentially all of the assets are actively managed by two investment
companies. The goal of the investment managers is to produce
moderate long-term growth in the value of these assets, while
protecting them against large decreases in value. Both of these
managers may invest in a combination of equity and fixed-income
securities and cash. The managers are not permitted to invest in
securities of the Company or in alternative investments. The
investment managers cannot invest more than 20% of the assets at
the time of purchase in the stock of Berkshire Hathaway or more
than 10% of the assets in the securities of any other single issuer,
except for obligations of the U.S. Government, without receiving
prior approval by the Plan administrator. As of December 31,
2012, the managers can invest no more than 24% of the assets in
international stocks at the time the investment is made, and no less
than 10% of the assets could be invested in fixed-income securities.
None of the assets is managed internally by the Company.
In determining the expected rate of return on plan assets, the Company
considers the relative weighting of plan assets, the historical perform-
ance of total plan assets and individual asset classes and economic
and other indicators of future performance. In addition, the Company
may consult with and consider the input of financial and other
professionals in developing appropriate return benchmarks.
The Company evaluated its defined benefit pension plan asset
portfolio for the existence of significant concentrations (defined as
greater than 10% of plan assets) of credit risk as of December 31,
2012. Types of concentrations that were evaluated include, but are
not limited to, investment concentrations in a single entity, type of
industry, foreign country and individual fund. At December 31,
2012 and 2011, the pension plan held common stock in one
investment that exceeded 10% of total plan assets. This investment
was valued at $223.1 million and $222.4 million at December 31,
2012 and 2011, respectively, or approximately 11% and 12%,
respectively, of total plan assets. Assets also included $179.9 million
and $154.0 million of Berkshire Hathaway Class A and Class B
common stock at December 31, 2012 and 2011, respectively. At
December 31, 2012 and 2011, the pension plan held investments
in one foreign country that exceeded 10% of total plan assets. These
investments were valued at $240.4 million and $241.4 million at
December 31, 2012 and 2011, respectively, or approximately 12%
and 13%, respectively, of total plan assets.
Fair value measurements are determined based on the assumption
that a market participant would use in pricing an asset or liability
based on a three-tiered hierarchy that draws a distinction between
market participant assumptions based on (i) observable inputs, such
as quoted prices in active markets (Level 1); (ii) inputs other than
quoted prices in active markets that are observable either directly or
indirectly (Level 2); and (iii) unobservable inputs that require the
Company to use present value and other valuation techniques in
the determination of fair value (Level 3). Financial assets and
liabilities are classified in their entirety based on the lowest level of
input that is significant to the fair value measure. The Company’s
assessment of the significance of a particular input to the fair value
measurements requires judgment and may affect the valuation of the
assets and liabilities being measured and their placement within the
fair value hierarchy.
The Company’s pension plan assets measured at fair value on a
recurring basis were as follows:
(in thousands) Level 1 Level 2 Total
At December 31, 2012
Cash equivalents and other
short-term investments ... $ 195,389 $62,922 $ 258,311
Equity securities
U.S. equities ............ 1,315,378 — 1,315,378
International equities .... 482,431 — 482,431
Fixed-income securities
Corporate debt
securities ............ — 6,054 6,054
Other fixed income ...... 2,501 313 2,814
Total Investments ......... $1,995,699 $69,289 $2,064,988
Receivables .............. 6,157
Total .................... $2,071,145
2012 FORM 10-K 87