Washington Post 2010 Annual Report Download - page 98

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 January 2, 2011,
January 3, 2010 and December 28, 2008:
Pension Plans SERP
2010 2009 2008 2010 2009 2008
Discount rate ..... 6.0% 5.75% 6.0% 6.0% 5.75% 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 January 2, 2011 and January 3, 2010, accumulated other
comprehensive income (AOCI) includes the following components
of unrecognized net periodic cost for the defined benefit plans:
Pension Plans SERP
(in thousands) 2010 2009 2010 2009
Unrecognized
actuarial (gain)
loss .......... $(112,096) $ 14,472 $18,742 $17,155
Unrecognized prior
service cost .... 21,089 27,659 506 720
Unrecognized
transition asset . . —(29) ——
Gross amount .... (91,007) 42,102 19,248 17,875
Deferred tax liability
(benefit) ....... 36,403 (16,841) (7,698) (7,150)
Net amount ...... $ (54,604) $ 25,261 $11,550 $10,725
During 2011, the Company expects to recognize the following
amortization components of net periodic cost for the defined benefit
plans:
2011
(in thousands) Pension Plans SERP
Actuarial loss recognition ........... $ — $1,187
Prior service cost recognition ........ $3,527 $ 238
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,
2010 and December 31, 2009, the assets of the Company’s
pension plans were allocated as follows:
Pension Plan Asset Allocations
December 31,
2010 December 31, 2009
U.S. equities ................. 66% 74%
U.S. fixed income ............. 19% 18%
International equities ........... 15% 8%
Total ...................... 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,
2010, the managers can invest no more than 13% of the assets in
international stocks at the time the investment is made, and no less
than 9% of the assets could be invested in fixed-income securities. In
January 2011, the Company increased the limit on international
stocks to no more than 22% of the assets at the time of the
investment. 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 performance 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 plans’ asset
portfolios for the existence of significant concentrations (defined as
greater than 10% of plan assets) of credit risk as of January 2,
2011. 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. Included in the assets
are $161.6 million and $274.3 million of Berkshire Hathaway
Class A and Class B common stock at December 31, 2010 and
December 31, 2009, respectively. Approximately 52% of the
Berkshire Hathaway common stock held at December 31, 2009
was sold during the first six months of 2010.
Fair value measurements are determined based on the assumptions
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.
82 THE WASHINGTON POST COMPANY