Employee Pension Plans

17 Months Ended

May 31, 2022

Compensation And Retirement Disclosure [Abstract]

Employee Pension Plans

Note M – Employee Pension Plans

Defined benefit pension and other post-employment benefit ("OPEB") plan obligations are remeasured at least annually as of May 31 based on the present value of projected future benefit payments for all participants for services rendered to date. The measurement of projected future benefits is dependent on the provisions of each specific plan, demographics of the group covered by the plan, and other key measurement assumptions.

Net periodic benefit costs, including service cost, interest cost, and expected return on assets, are determined using assumptions regarding the benefit obligation and the fair value of plan assets as of the beginning of each year. The funded status of the benefit plans, which represents the difference between the benefit obligation and the fair value of plan assets, is calculated on a plan-by-plan basis. The benefit obligation and related funded status are determined using assumptions as of the end of each year. Net periodic benefit cost is included in other income (expense) in our consolidated statements of earnings, except for the service cost component, which is recorded in SG&A expense.

A curtailment results from an event that significantly reduces the expected years of future service or eliminates the accrual of defined benefits for the future services of a significant number of employees. A curtailment gain is recorded when the employees who are entitled to a benefit terminate their employment, or when a plan suspension or amendment that results in a curtailment gain is adopted. A curtailment loss is recorded when it becomes probable a curtailment loss will occur. We recognize settlement expense when the costs associated with all settlements during the year exceed the interest component of net periodic cost for the affected plan. Expense from curtailments and settlements is recorded in other income (expense) in our consolidated statements of earnings.

Defined Contribution Retirement Plans

We provide retirement benefits to employees mainly through defined contribution retirement plans. Eligible participants make pre-tax contributions based on elected percentages of eligible compensation, subject to annual addition and other limitations imposed by the Internal Revenue Code and the various plans’ provisions. Company contributions consist of employer company matching contributions, annual or monthly employer contributions and discretionary contributions, based on individual plan provisions.

Defined Benefit Pension Plans

The Gerstenslager Company Bargaining Unit Employees’ Pension Plan (the “Gerstenslager Plan”) is a non‑contributory pension plan, which covers certain employees based on age and length of service. Our contributions have complied with ERISA's minimum funding requirements. Effective May 9, 2011, in connection with the formation of the ArtiFlex joint venture, the Gerstenslager Plan was frozen, which qualified as a curtailment under the applicable accounting guidance. We did not recognize a gain or loss in connection with the curtailment of the Gerstenslager Plan. During fiscal 2019, the Gerstenslager Plan was amended to allow certain inactive participants to take a lump sum settlement.

As a result of the acquisition of Tempel on December 1, 2021, we assumed approximately $40,160,000 of net pension and other postretirement benefit obligations under Tempel's defined benefit domestic funded pension plan, an unfunded supplemental executive retirement (SERP) plan, and a domestic unfunded postretirement plan. Effective December 31, 2010, Tempel froze its defined benefit domestic funded pension plan. Participants will receive the benefit they had accrued as of July 16, 2018 upon their retirement. No further pension benefit will be earned by the participants of this plan after December 31, 2010. See "Note Q - Acquisitions" for additional information related to the acquisition of Tempel.

Net Periodic Pension Costs

The following table summarizes the components of net periodic pension for our defined benefit pension and other postretirement benefit plans for the fiscal years ended May 31:

(in thousands)	2022			2021			2020
Defined benefit plans:
Interest cost		2,621			1,205			1,352
Return on plan assets		(4,473	)		(4,289	)		(1,928	)
Net amortization and deferral costs		546			3,058			628
Settlement cost (2)		1,357			18			-
Defined contribution plans		18,036			17,562			16,495
Net periodic benefit cost (1)	$	18,087		$	17,554		$	16,547

(1)During fiscal year 2022, we also incurred $85 (in thousands) in net periodic benefit cost related to the Tempel Steel Company Postretirement Benefit Plan.

(2)Relates to the settlement of certain participant balances within the Gerstenslager Plan.

Weighted Average Rates

The following weighted-average assumptions were used to determine the unfunded benefit obligation and net periodic benefit cost:

	2022			2021			2020
Benefit obligation:
Discount rate		4.27	%		2.90	%		2.65	%
Net periodic pension cost:
Discount rate		2.74	%		2.65	%		3.57	%
Expected long-term rate of return		6.75	%		7.00	%		7.00	%

Actuarial developed yield curves are used to determine discount rates. The expected return on plan assets assumption is determined by reviewing the investment returns, as well as longer-term historical returns of an asset mix approximating our asset allocation targets, and periodically comparing these returns to the expectations of investment advisors and actuaries to determine whether long-term future returns are expected to differ significantly from the past.

Funded Status

The following tables provide a reconciliation of the changes in the projected benefit obligation and the fair value of plan assets and the funded status for our defined benefit plans:

	Pension Benefits						Other Benefits
(in thousands)	2022			2021(1)			2022			2021(1)
Change in benefit obligation
Benefit obligation, beginning of year	$	41,195		$	46,167		$	-		$	-
Service cost		-			-			15			-
Interest cost		2,621			1,205			70			-
Actuarial gain		(24,755	)		(4,814	)		(873	)		-
Benefits paid		(4,511	)		(1,345	)		(125	)		-
Settlements		(2,929	)		(18	)		-			-
Participant contributions		-			-			8			-
Benefit obligations acquired		101,946			-			4,982			-
Benefits obligation, end of year	$	113,567		$	41,195		$	4,077		$	-
Change in plan assets
Fair value, beginning of year	$	33,136		$	28,510		$	-		$	-
Return on plan assets		(11,379	)		4,289			-			-
Company contributions		2,308			1,700			117			-
Benefits paid		(4,511	)		(1,345	)		(125	)		-
Settlements		(2,929	)		(18	)		-			-
Participant contributions		-			-			8			-
Plan assets acquired		66,768			-			-			-
Fair value, end of year		83,393			33,136			-			-
Funded status	$	(30,174	)	$	(8,059	)	$	(4,077	)	$	-
Amounts recognized in the consolidated balance sheets consist of:
Other liabilities	$	(30,174	)	$	(8,059	)	$	(4,077	)	$	-
Accumulated other comprehensive loss		6,736			17,541			(873	)		-
Amounts recognized in accumulated other comprehensive loss consist of:
Net loss (income)		6,736			17,541			(873	)		-
Total	$	6,736		$	17,541		$	(873	)	$	-

(1)Activity presented for fiscal 2021 does not include the Tempel defined benefit domestic funded pension plan and other postretirement plans. These plans were assumed on December 1, 2021 in conjunction with the acquisition of Tempel. See “Note Q – Acquisitions" for additional information.

The following table shows other changes in plan assets and benefit obligations recognized in OCI during the fiscal years ended May 31:

	Pension Benefits						Other Benefits
(in thousands)	2022			2021 (1)			2022			2021 (1)
Net (gain) loss	$	(8,903	)	$	7,097		$	(873	)	$	-
Amortization of net (gain) loss		(546	)		775			-			-
Settlement cost		(1,357	)		-			-
Total recognized in other comprehensive (gain) loss	$	(10,806	)	$	7,872		$	(873	)	$	-
Total recognized in net periodic benefit cost and other comprehensive income	$	(10,704	)	$	(7,898	)	$	(787	)	$	-

(1)Activity presented for fiscal 2021 does not include the Tempel defined benefit domestic funded pension plan and other postretirement plans. These plans were assumed on December 1, 2021 in conjunction with the acquisition of Tempel. See “Note Q – Acquisitions" for additional information

Pension plan assets are required to be disclosed at fair value in our consolidated financial statements. Fair value is defined in “Note S – Fair Value Measurements.” The pension plan assets’ fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

Fair Value Hierarchy Categories

Valuations of Level 1 assets for all classes are based on quoted closing market prices from the principal exchanges where the individual securities are traded. Cash is valued at cost, which approximates fair value. Equity funds categorized as Level 2 assets are primarily non-exchange traded comingled or collective funds where the underlying securities have observable prices available from active markets. Valuation is based on the net asset value of fund units held as derived from the fair value of the underlying assets. Fixed-income funds categorized as Level 2 assets include corporate and government bonds and are generally valued based on independent broker/dealer bids or by comparison to other debt securities having similar durations, yields and credit ratings. Equity funds classified as Level 3 are fund investments in private companies. Valuation techniques and inputs for these assets include discounted cash flow analysis, earnings multiple approaches, recent transactions, transfer restrictions, prevailing discount rates, volatilities, credit ratings and other factors.

Fair Value of Plan Assets

The following table sets forth, by level within the fair value hierarchy, a summary of the defined benefit plans' assets measured at fair value on a recurring basis at May 31, 2022:

			Quoted		Significant
			Prices		Other		Significant
			in Active		Observable		Unobservable
			Markets		Inputs		Inputs
(in thousands)	Fair Value		(Level 1)		(Level 2)		(level 3)
Investment:
Cash and cash equivalents	$	1,238	$	1,238	$	-	$	-
Fixed-income funds		11,287		11,287		-		-
Equity funds		37,352		37,352		-		-
Administrative funds		2,946		2,946		-		-
Commingled fund investments
measured at net asset value1:
Fixed-income funds		21,056		-		-		-
Hedge funds		9,514		-		-		-
Total	$	83,393	$	52,823	$	-	$	-

1 Investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient have not been categorized in the fair value hierarchy.

The following table sets forth, by level within the fair value hierarchy, a summary of the defined benefit plans' assets measured at fair value on a recurring basis at May 31, 2021:

			Quoted		Significant
			Prices		Other		Significant
			in Active		Observable		Unobservable
			Markets		Inputs		Inputs
(in thousands)	Fair Value		(Level 1)		(Level 2)		(level 3)
Investment:
Money market funds	$	1,664	$	1,664	$	-	$	-
Fixed-income funds		12,629		12,629		-		-
Equity funds		16,022		16,022		-		-
Administrative funds		2,821		2,821		-		-
Total	$	33,136	$	33,136	$	-	$	-

Plan assets for the defined benefit plans consisted principally of the following as of the respective measurement dates:

	May 31,			May 31,
	2022			2021
Asset category:
Equity securities		45	%		48	%
Fixed-income funds		39	%		38	%
Hedge funds		11	%		0	%
Other		5	%		14	%
Total		100	%		100	%

Equity securities include no employer stock. The investment policy and strategy for the defined benefit plans is: (i) long-term in nature with liquidity requirements that are anticipated to be minimal due to the projected normal retirement date of the average employee and the current average age of participants; (ii) to earn nominal returns, net of investment fees, equal to or in excess of the defined benefit plans' respective liability growth rate; and (iii) to include a diversified asset allocation of domestic and international equities and fixed income investments. We are expected to contribute approximately $7,836,000 to the defined benefit and OPEB plans during fiscal 2023. However, we reserve the right to make additional contributions.

Estimated Future Benefits Payments

The following estimated future benefits, which reflect expected future service, as appropriate, are expected to be paid under the defined benefit and other postretirement plans during the fiscal years as follows:

(in thousands)	Pension Benefits		Other Benefits
2023	$	7,449	$	387
2024	$	7,086	$	368
2025	$	7,255	$	355
2026	$	7,463	$	336
2027	$	7,860	$	316
2028-2032	$	38,243	$	1,372

Commercial law requires us to pay severance and service benefits to employees at our Austrian Sustainable Energy Solutions location. Severance benefits must be paid to all employees hired before December 31, 2002. Employees hired after that date are covered under a governmental plan that requires us to pay benefits as a percentage of compensation (included in payroll tax withholdings). Service benefits are based on a percentage of compensation and years of service. The accrued liability for these unfunded plans was $6,249,000 and $7,062,000 at May 31, 2022 and 2021, respectively, and was included in other liabilities on our consolidated balance sheets. Net periodic pension cost for these plans was $51,000, $625,000, and $494,000, for fiscal 2022, fiscal 2021 and fiscal 2020, respectively. The assumed salary rate increase was 2.75% for each of fiscal 2022, fiscal 2021 and fiscal 2020. The discount rate at May 31, 2022, 2021 and 2020 was 1.90%, 1.10%, and 1.65%, respectively. Each discount rate was based on a published corporate bond rate with a term approximating the estimated benefit payment cash flows and is consistent with European and Austrian regulations.