NL INDUSTRIES INC - 10-K filing on 2016-03-10

Employee Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2015

We expect to contribute approximately $.7 million to all of our defined benefit pension plans during 2016. Benefit payments to all plan participants out of plan assets are expected to be the equivalent of:

Years ending December 31,	Amount
	(In thousands)
2016	$	3,652
2017		3,713
2018		3,760
2019		3,773
2020		3,819
Next 5 years		19,192

Funded Status of Defined Benefit Plans

The funded status of our defined benefit pension plans is presented in the table below.

	December 31,
	2014			2015
	(In thousands)
Change in projected benefit obligations (PBO):
Benefit obligations at beginning of the year	$	54,658		$	61,225
Interest cost		2,538			2,376
Participant contributions		9			8
Actuarial losses (gains)		8,585			(2,579	)
Change in currency exchange rates		(669	)		(471	)
Benefits paid		(3,896	)		(3,473	)
Benefit obligations at end of the year		61,225			57,086

Change in plan assets:
Fair value of plan assets at beginning of the year		49,402			48,816
Actual return on plan assets		2,404			(1,572	)
Employer contributions		1,553			800
Participant contributions		9			8
Change in currency exchange rates		(656	)		(512	)
Benefits paid		(3,896	)		(3,473	)
Fair value of plan assets at end of year		48,816			44,067
Funded status	$	(12,409	)	$	(13,019	)

Amounts recognized in the balance sheet:
Noncurrent pension asset	$	-		$	1,303
Accrued pension costs:
Current		(167	)		(167	)
Noncurrent		(12,242	)		(14,155	)
Total	$	(12,409	)	$	(13,019	)

Accumulated other comprehensive loss - actuarial losses, net	$	33,135		$	34,139
Total	$	20,726		$	21,120
Accumulated benefit obligations (ABO)	$	61,225		$	57,086

Changes in Other Comprehensive Income

The amounts shown in the table above for actuarial losses (gains) at December 31, 2014 and 2015 have not been recognized as components of our periodic defined benefit pension cost as of those dates. These amounts will be recognized as components of our periodic defined benefit cost in future years. These amounts, net of deferred income taxes, are recognized in our accumulated other comprehensive income (loss) at December 31, 2014 and 2015. We expect that $1.5 million of the unrecognized actuarial losses will be recognized as a component of our periodic defined benefit pension cost in 2016.

The table below details the changes in other comprehensive income during 2013, 2014 and 2015.

	Years ended December 31,
	2013		2014			2015
	(In thousands)
Changes in plan assets and benefit obligations recognized in other comprehensive income (loss):
Net actuarial gain (loss) arising during the year	$	5,305	$	(9,519	)	$	(2,373	)
Amortization of unrecognized net actuarial loss		1,238		934			1,340

Total	$	6,543	$	(8,585	)	$	(1,033	)

Components of Net Periodic Defined Benefit Cost (Income)

The components of our net periodic defined benefit pension cost are presented in the table below. The amount shown below for the amortization of unrecognized actuarial losses in 2013, 2014 and 2015, net of deferred income taxes, was recognized as a component of our accumulated other comprehensive income (loss) at December 31, 2012, 2013 and 2014, respectively.

	Years ended December 31,
	2013			2014			2015
	(In thousands)
Net periodic pension cost:
Interest cost on PBO	$	2,161		$	2,538		$	2,376
Expected return on plan assets		(3,975	)		(3,409	)		(3,353	)
Recognized actuarial losses		1,238			934			1,340

Total	$	(576	)	$	63		$	363

Information Concerning Defined Benefit Pension Plans

Certain information concerning our defined benefit pension plans is presented in the table below.

	December 31,
	2014		2015
	(In thousands)
PBO at end of the year
U.S. plan	$	50,351	$	47,895
U.K. plan		10,874		9,191

Total	$	61,225	$	57,086
Fair value of plan assets at end of the year
U.S. plan	$	38,131	$	33,573
U.K. plan		10,685		10,494

Total	$	48,816	$	44,067
Plans for which the ABO exceeds plan assets:
PBO	$	61,225	$	47,895
ABO		61,225		47,895
Fair value of plan assets		48,816		33,573

Summary of Assumptions Used to Determine Net Benefit Obligation

The weighted-average rate assumptions used in determining the net periodic pension cost for 2013, 2014 and 2015 are presented in the table below. Such weighted-average discount rates were determined using the projected benefit obligations as of the beginning of each year and the weighted-average long-term return on plan assets was determined using the fair value of plan assets as of the beginning of each year.

	Years ended December 31,
Rate	2013		2014		2015
Discount rate		3.7%		4.5%		3.8%
Long-term return on plan assets		9.2%		7.2%		7.2%

Aggregate Fair Value of CMRT Pension Plan Assets by Fair Value Level

The CMRT unit value is determined semi-monthly, and the plans have the ability to redeem all or any portion of their investment in the CMRT at any time based on the most recent semi-monthly valuation. However, the plans do not have the right to individual assets held by the CMRT and the CMRT has the sole discretion in determining how to meet any redemption request. For purposes of our plan asset disclosure, we consider the investment in the CMRT as a Level 2 input because (i) the CMRT value is established semi-monthly and the plans have the right to redeem their investment in the CMRT, in part or in whole, at any time based on the most recent value and (ii) observable inputs from Level 1 or Level 2 were used to value approximately 80% and 81% of the assets of the CMRT at December 31, 2014 and 2015, respectively, as noted below. The aggregate fair value of all of the CMRT assets, including funds of Contran and its other affiliates that also invest in the CMRT, and supplemental asset mix details of the CMRT are as follows:

	December 31,
	2014			2015
	(In millions)
CMRT asset value	$	715.5		$	648.8
CMRT fair value input:
Level 1		67	%		54	%
Level 2		13			27
Level 3		20			19

		100	%		100	%
CMRT asset mix:
Domestic equities, principally publicly traded		48	%		29	%
International equities, principally publicly traded		11			22
Fixed income securities, principally publicly traded		32			38
Privately managed limited partnerships		7			5
Hedge funds		-			5
Other, primarily cash		2			1

		100	%		100	%

The composition of our December 31, 2014 and 2015 pension plan assets by fair value level is shown in the table below.

	Fair Value Measurements
	Total		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)
	(In thousands)
December 31, 2014:
CMRT	$	38,131	$	-	$	38,131
Other		10,685		10,685		-

Total	$	48,816	$	10,685	$	38,131

December 31, 2015:
CMRT	$	33,573	$	-	$	33,573
Other		10,494		10,494		-

Total	$	44,067	$	10,494	$	33,573

OPEB

Expected Benefit Payments

Postretirement benefits other than pensions - We provide certain health care and life insurance benefits for eligible retired employees. These plans are closed to new participants, and no additional benefits accrue to existing plan participants. The majority of all retirees are required to contribute a portion of the cost of their benefits and certain current and future retirees are eligible for reduced health care benefits at age 65. We have no OPEB plan assets, rather, we fund postretirement benefits as they are incurred, net of any contributions by the retiree. At December 31, 2015, we currently expect to contribute approximately $.5 million to all OPEB plans during 2016. Contribution to our OPEB plans to cover benefit payments expected to be paid to OPEB plan participants are summarized in the table below:

Years ending December 31,	Amount
	(In thousands)
2016	$	465
2017		425
2018		386
2019		347
2020		311
Next 5 years		1,076

Funded Status of Defined Benefit Plans

The funded status of our OPEB plans is presented in the table below.

	December 31,
	2014			2015
	(In thousands)
Change in accumulated OPEB obligations:
Obligations at beginning of the year	$	3,864		$	3,882
Interest cost		114			108
Actuarial (gain) loss		385			(336	)
Net benefits paid		(481	)		(416	)
Obligations at end of the year		3,882			3,238
Fair value of plan assets		-			-
Funded status	$	(3,882	)	$	(3,238	)

Accrued OPEB costs recognized in the balance sheet:
Current	$	(541	)	$	(465	)
Noncurrent		(3,341	)		(2,773	)
Total	$	(3,882	)	$	(3,238	)
Accumulated other comprehensive income (loss):
Net actuarial losses	$	1,025		$	790
Prior service credit		(1,162	)		(541	)
Total	$	(137	)	$	249

Changes in Other Comprehensive Income

The table below details the changes in other comprehensive income during 2013, 2014 and 2015.

	Years ended December 31,
	2013			2014			2015
	(In thousands)
Changes in benefit obligations recognized in other comprehensive income (loss):
Net actuarial gain (loss) arising during the year	$	240		$	(385	)	$	336
Amortization of unrecognized:
Actuarial gain		(146	)		(176	)		(101	)
Prior service credit		(688	)		(644	)		(621	)

Total	$	(594	)	$	(1,205	)	$	(386	)

Components of Net Periodic Defined Benefit Cost (Income)

The components of our periodic OPEB cost are presented in the table below. The amounts shown below for the amortization of unrecognized actuarial gains and prior service credit in 2013, 2014 and 2015, net of deferred income taxes, were recognized as components of our accumulated other comprehensive income at December 31, 2012, 2013 and 2014 respectively.

	Years ended December 31,
	2013			2014			2015
	(In thousands)
Net periodic OPEB cost (income):
Interest cost	$	105		$	114		$	108
Amortization of actuarial gain		(146	)		(176	)		(101	)
Amortization of prior service credit		(688	)		(644	)		(621	)

Total	$	(729	)	$	(706	)	$	(614	)

Summary of Assumptions Used to Determine Net Benefit Obligation

A summary of our key actuarial assumptions used to determine the net benefit obligation as of December 31, 2014 and 2015 follows:

	2014			2015
Health care inflation:
Initial rate		7.0	%		7.0	%
Ultimate rate		5.0	%		5.0	%
Year of ultimate rate achievement		2021			2021
Discount rate		3.0	%		3.2	%