Washington Post 2014 Annual Report Download - page 96

The net periodic cost (benefit) for the Company’s pension plans, as
reported above, includes pension cost of $0.2 million, $18.9 million
and $24.6 million reported in discontinued operations for 2014,
2013 and 2012, respectively. The net periodic cost for the
Company’s SERP, as reported above, includes cost of $0.2 million,
$1.0 million and $0.9 million reported in discontinued operations for
2014, 2013 and 2012, respectively. The early retirement programs
and special separation benefit expenses are also included in
discontinued operations for 2013 and 2012. The 2013 curtailments
and settlements are included in the gain on sale of Publishing
Subsidiaries, which is also reported in discontinued operations.
The costs for the Company’s defined benefit pension plans are
actuarially determined. Below are the key assumptions utilized to
determine periodic cost:
Pension Plans SERP
Year Ended December 31Year Ended December 31
2014 2013 2012 2014 2013 2012
Discount rate .... 4.8% 4.0% 4.7% 4.8% 4.0% 4.7%
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%
Accumulated other comprehensive income (AOCI) includes the
following components of unrecognized net periodic cost for the
defined benefit plans:
Pension Plans SERP
As of December 31 As of December 31
(in thousands) 2014 2013 2014 2013
Unrecognized actuarial
(gain) loss ........ $(685,895) $(840,273) $ 36,890 $19,266
Unrecognized prior
service cost ....... 1,033 1,362 1,689 136
Gross Amount ....... (684,862) (838,911) 38,579 19,402
Deferred tax liability
(asset) ........... 273,945 335,564 (15,432) (7,761)
Net Amount ......... $(410,917) $(503,347) $ 23,147 $11,641
During 2015, the Company expects to recognize the following
amortization components of net periodic cost for the defined benefit plans:
2015
(in thousands) Pension Plans SERP
Actuarial loss recognition ............. $ — $3,449
Prior service cost recognition ........... $324 $ 457
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. The assets of the Company’s pension plans
were allocated as follows:
As of December 31
2014 2013
U.S. equities .......................... 59% 58%
U.S. fixed income ...................... 13% 12%
International equities ..................... 28% 30%
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%oftheassetsatthetimeofpurchaseinthestockofBerkshireHath-
away 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, 2014, 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 Com-
pany 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 plan asset port-
folio for the existence of significant concentrations (defined as
greater than 10% of plan assets) of credit risk as of December 31,
2014. 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,
2014, the pension plan held common stock in two investments that
exceeded 10% of total plan assets, valued at $730.6 million, or
30% of total plan assets. At December 31, 2013, the pension plan
held common stock in one investment that exceeded 10% of total
plan assets, valued at $382.1 million, or 16% of total plan assets.
At December 31, 2014 and 2013, the pension plan held invest-
ments in one foreign country that exceeded 10% of total plan
assets. These investments were valued at $468.0 million and
$398.9 million at December 31, 2014 and 2013, respectively, or
approximately 19% and 17%, respectively, of total plan assets.
The Company’s pension plan assets measured at fair value on a
recurring basis were as follows:
As of December 31, 2014
(in thousands) Level 1 Level 2 Total
Cash equivalents and other
short-term investments ......$ 275,963 $141,083 $ 417,046
Equity securities
U.S. equities .............. 1,454,011 — 1,454,011
International equities ....... 691,505 — 691,505
Total Investments ............$2,421,479 $141,083 $2,562,562
Payable for settlement of
investments purchased ...... (92,594)
Total ...................... $2,469,968
As of December 31, 2013
(in thousands) Level 1 Level 2 Total
Cash equivalents and other
short-term investments ......$ 196,757 $84,706 $ 281,463
Equity securities
U.S. equities ............ 1,383,738 — 1,383,738
International equities ....... 699,649 — 699,649
Fixed-income securities .......
Corporate debt securities . . . — 5,147 5,147
Total Investments ........... $2,280,144 $89,853 $2,369,997
Receivables ............... 1,852
Total ..................... $2,371,849
80 GRAHAM HOLDINGS COMPANY