NL INDUSTRIES INC - 10-K filing on 2017-03-10

Employee Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2016

We expect to contribute approximately $.3 million to all of our defined benefit pension plans during 2017. Benefit payments to all plan participants out of plan assets are expected to be the equivalent of:

Years ending December 31,	Amount
	(In thousands)
2017	$	3,615
2018		3,642
2019		3,629
2020		3,658
2021		3,724
Next 5 years		17,931

Funded Status of Defined Benefit Plans

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

	December 31,
	2015			2016
	(In thousands)
Change in projected benefit obligations (PBO):
Benefit obligations at beginning of the year	$	61,225		$	57,086
Interest cost		2,376			2,302
Participant contributions		8			6
Actuarial losses (gains)		(2,579	)		292
Change in currency exchange rates		(471	)		(1,804	)
Benefits paid		(3,473	)		(3,621	)
Benefit obligations at end of the year		57,086			54,261

Change in plan assets:
Fair value of plan assets at beginning of the year		48,816			44,067
Actual return on plan assets		(1,572	)		3,278
Employer contributions		800			565
Participant contributions		8			6
Change in currency exchange rates		(512	)		(2,027	)
Benefits paid		(3,473	)		(3,621	)
Fair value of plan assets at end of year		44,067			42,268
Funded status	$	(13,019	)	$	(11,993	)

Amounts recognized in the balance sheet:
Noncurrent pension asset	$	1,303		$	1,037
Accrued pension costs:
Current		(167	)		(156	)
Noncurrent		(14,155	)		(12,874	)
Total	$	(13,019	)	$	(11,993	)

Accumulated other comprehensive loss - actuarial losses, net	$	34,137		$	32,514
Total	$	21,118		$	20,521
Accumulated benefit obligations (ABO)	$	57,086		$	54,261

Changes in Other Comprehensive Income

The amounts shown in the table above for actuarial losses (gains) at December 31, 2015 and 2016 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, 2015 and 2016. We expect that $1.6 million of the unrecognized actuarial losses will be recognized as a component of our periodic defined benefit pension cost in 2017.

The table below details the changes in other comprehensive income during 2014, 2015 and 2016.

	Years ended December 31,
	2014			2015			2016
	(In thousands)
Changes in plan assets and benefit obligations recognized in other comprehensive income (loss):
Net actuarial gain (loss) arising during the year	$	(9,519	)	$	(2,373	)	$	122
Amortization of unrecognized net actuarial loss		934			1,340			1,474

Total	$	(8,585	)	$	(1,033	)	$	1,596

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 2014, 2015 and 2016, net of deferred income taxes, was recognized as a component of our accumulated other comprehensive income (loss) at December 31, 2013, 2014 and 2015, respectively.

	Years ended December 31,
	2014			2015			2016
	(In thousands)
Net periodic pension cost:
Interest cost on PBO	$	2,538		$	2,376		$	2,302
Expected return on plan assets		(3,409	)		(3,353	)		(2,911	)
Recognized actuarial losses		934			1,340			1,474

Total	$	63		$	363		$	865

Information Concerning Defined Benefit Pension Plans (Including Certain Plans for Which ABO Exceeds Fair Value of Plan Assets)

Certain information concerning our defined benefit pension plans (including information concerning certain plans for which ABO exceeds the fair value of plan assets as of the indicated date) is presented in the table below.

	December 31,
	2015		2016
	(In thousands)
PBO at end of the year
U.S. plan	$	47,895	$	44,967
U.K. plan		9,191		9,294

Total	$	57,086	$	54,261
Fair value of plan assets at end of the year
U.S. plan	$	33,573	$	31,937
U.K. plan		10,494		10,331

Total	$	44,067	$	42,268
Plans for which the ABO exceeds plan assets:
PBO	$	47,895	$	44,967
ABO		47,895		44,967
Fair value of plan assets		33,573		31,937

Summary of Assumptions Used to Determine Net Benefit Obligation

The weighted-average rate assumptions used in determining the net periodic pension cost for 2014, 2015 and 2016 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	2014			2015			2016

Discount rate		4.5	%		3.8	%		4.0	%
Long-term rate of return on plan assets		7.2	%		7.2	%		7.0	%

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 (or assets not subject to classification in the fair value hierarchy) were used to value approximately 91% and 92% of the assets of the CMRT at December 31, 2015 and 2016, respectively, as noted below. CMRT assets not subject to classification in the fair value hierarchy consist principally of certain investments measured at net asset value per share in accordance with ASC 820-10.

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,
	2015			2016
	(In millions)
CMRT asset value	$	648.8		$	637.8
CMRT assets comprised of:
Assets not subject to fair value hierarchy		30	%		30	%
Assets subject to fair value hierarchy:
Level 1		54			54
Level 2		7			8
Level 3		9			8

		100	%		100	%
CMRT asset mix:
Domestic equities, principally publicly traded		29	%		31	%
International equities, principally publicly traded		22			22
Fixed income securities, principally publicly traded		38			36
Privately managed limited partnerships		5			5
Hedge funds		5			5
Other, primarily cash		1			1

		100	%		100	%

The composition of our December 31, 2015 and 2016 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, 2015:
CMRT	$	33,573	$	-	$	33,573
Other		10,494		10,494		-

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

December 31, 2016:
CMRT	$	31,937	$	-	$	31,937
Other		10,331		10,331		-

Total	$	42,268	$	10,331	$	31,937

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, 2016, we currently expect to contribute approximately $.4 million to all OPEB plans during 2017. 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)
2017	$	434
2018		389
2019		346
2020		304
2021		266
Next 5 years		860

Funded Status of Defined Benefit Plans

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

	December 31,
	2015			2016
	(In thousands)
Change in accumulated OPEB obligations:
Obligations at beginning of the year	$	3,882		$	3,238
Interest cost		108			96
Actuarial gain		(336	)		(263	)
Net benefits paid		(416	)		(327	)
Obligations at end of the year		3,238			2,744
Fair value of plan assets		-			-
Funded status	$	(3,238	)	$	(2,744	)

Accrued OPEB costs recognized in the balance sheet:
Current	$	(465	)	$	(434	)
Noncurrent		(2,773	)		(2,310	)
Total	$	(3,238	)	$	(2,744	)
Accumulated other comprehensive income (loss):
Net actuarial losses	$	790		$	679
Prior service credit		(541	)		-
Total	$	249		$	679

Changes in Other Comprehensive Income

The table below details the changes in other comprehensive income during 2014, 2015 and 2016.

	Years ended December 31,
	2014			2015			2016
	(In thousands)
Changes in benefit obligations recognized in other comprehensive income (loss):
Net actuarial gain (loss) arising during the year	$	(385	)	$	336		$	263
Amortization of unrecognized:
Actuarial gain		(176	)		(101	)		(152	)
Prior service credit		(644	)		(621	)		(541	)

Total	$	(1,205	)	$	(386	)	$	(430	)

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 2014, 2015 and 2016, net of deferred income taxes, were recognized as components of our accumulated other comprehensive income at December 31, 2013, 2014 and 2015, respectively.

	Years ended December 31,
	2014			2015			2016
	(In thousands)
Net periodic OPEB cost (benefit):
Interest cost	$	114		$	108		$	96
Amortization of actuarial gain		(176	)		(101	)		(152	)
Amortization of prior service credit		(644	)		(621	)		(541	)

Total	$	(706	)	$	(614	)	$	(597	)

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, 2015 and 2016 follows:

	2015			2016
Health care inflation:
Initial rate		7.0	%		6.5	%
Ultimate rate		5.0	%		4.5	%
Year of ultimate rate achievement		2021			2021
Discount rate		3.2	%		3.1	%