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Pension Plans
12 Months Ended
May 31, 2022
Retirement Benefits [Abstract]  
Pension Plans

NOTE O — PENSION PLANS

We sponsor several pension plans for our associates, including our principal plan (the “Retirement Plan”), which is a non-contributory defined benefit pension plan covering substantially all domestic non-union associates. Pension benefits are provided for certain domestic union associates through separate plans. Associates of our foreign subsidiaries receive pension coverage, to the extent deemed appropriate, through plans that are governed by local statutory requirements.

The Retirement Plan provides benefits that are based upon years of service and average compensation with accrued benefits vesting after five years. Benefits for union associates are generally based upon years of service, or a combination of years of service and average compensation. Our pension funding policy considers contributions in an amount on an annual basis that can be deducted for federal income tax purposes, using a different actuarial cost method and different assumptions from those used for financial reporting. For the fiscal year ending May 31, 2023, we are required to contribute approximately $1.3 million to the retirement plans in the United States and approximately $4.9 million to our foreign plans. During the year, we will evaluate whether to make additional contributions. During fiscal 2022, we contributed $65.6 million to the pension plans in the United States which was in excess of the required contribution of $1.0 million but serves to improve the funded status of the plans.

Net periodic pension cost consisted of the following for the year ended May 31:

 

 

 

U.S. Plans

 

 

Non-U.S. Plans

 

(In thousands)

 

2022

 

2021

 

2020

 

 

2022

 

2021

 

2020

 

Service cost

 

$

47,655

 

$

44,520

 

$

39,425

 

 

$

5,023

 

$

6,355

 

$

5,400

 

Interest cost

 

 

15,366

 

 

15,223

 

 

20,415

 

 

 

4,948

 

 

5,308

 

 

4,842

 

Expected return on plan assets

 

 

(41,544

)

 

(33,115

)

 

(34,291

)

 

 

(7,691

)

 

(7,286

)

 

(7,118

)

Amortization of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prior service cost (credit)

 

 

5

 

 

8

 

 

9

 

 

 

(139

)

 

(150

)

 

(36

)

Net actuarial losses recognized

 

 

16,900

 

 

30,005

 

 

18,516

 

 

 

465

 

 

2,377

 

 

2,029

 

Curtailment/settlement losses

 

 

16

 

 

-

 

 

-

 

 

 

7

 

 

356

 

 

86

 

Net Pension Cost

 

$

38,398

 

$

56,641

 

$

44,074

 

 

$

2,613

 

$

6,960

 

$

5,203

 

 

The changes in benefit obligations and plan assets, as well as the funded status of our pension plans at May 31, 2022 and 2021, were as follows:

 

 

 

U.S. Plans

 

 

Non-U.S. Plans

 

(In thousands)

 

2022

 

2021

 

 

2022

 

2021

 

Benefit obligation at beginning of year

 

$

822,073

 

$

762,739

 

 

$

232,028

 

$

210,278

 

Service cost

 

 

47,655

 

 

44,520

 

 

 

5,023

 

 

6,355

 

Interest cost

 

 

15,366

 

 

15,223

 

 

 

4,948

 

 

5,308

 

Benefits paid

 

 

(59,795

)

 

(64,139

)

 

 

(7,657

)

 

(9,248

)

Participant contributions

 

 

-

 

 

-

 

 

 

1,138

 

 

1,140

 

Plan amendments

 

 

-

 

 

-

 

 

 

293

 

 

-

 

Plan settlements/curtailments

 

 

(190

)

 

-

 

 

 

(1,330

)

 

(2,342

)

Actuarial (gains)/losses

 

 

(121,374

)

 

63,730

 

 

 

(34,638

)

 

(7,774

)

Premiums paid

 

 

-

 

 

-

 

 

 

(107

)

 

(103

)

Currency exchange rate changes

 

 

-

 

 

-

 

 

 

(17,164

)

 

28,414

 

Benefit Obligation at End of Year

 

$

703,735

 

$

822,073

 

 

$

182,534

 

$

232,028

 

Fair value of plan assets at beginning of year

 

$

672,377

 

$

516,550

 

 

$

239,853

 

$

194,874

 

Actual (loss) return on plan assets

 

 

(61,036

)

 

157,702

 

 

 

(25,430

)

 

21,350

 

Employer contributions

 

 

65,604

 

 

62,264

 

 

 

4,626

 

 

7,119

 

Participant contributions

 

 

-

 

 

-

 

 

 

1,138

 

 

1,140

 

Benefits paid

 

 

(59,795

)

 

(64,139

)

 

 

(7,657

)

 

(9,248

)

Premiums paid

 

 

-

 

 

-

 

 

 

(107

)

 

(103

)

Plan settlements/curtailments

 

 

(190

)

 

-

 

 

 

(1,330

)

 

(2,327

)

Currency exchange rate changes

 

 

-

 

 

-

 

 

 

(17,718

)

 

27,048

 

Fair Value of Plan Assets at End of Year

 

$

616,960

 

$

672,377

 

 

$

193,375

 

$

239,853

 

(Deficit)/Surplus of plan assets versus benefit obligations at end of year

 

$

(86,775

)

$

(149,696

)

 

$

10,841

 

$

7,825

 

Net Amount Recognized

 

$

(86,775

)

$

(149,696

)

 

$

10,841

 

$

7,825

 

Accumulated Benefit Obligation

 

$

610,433

 

$

702,315

 

 

$

172,141

 

$

217,012

 

 

The fair value of the assets held by our pension plans has decreased at May 31, 2022 since our previous measurement date at May 31, 2021, due to market returns. Total plan liabilities have decreased due to an increase in the discount rate used to value the liability. We have decreased our recorded liability for the net underfunded status of our pension plans. We expect pension expense in fiscal 2023 to be higher when compared to our fiscal 2022 expense level due to a reduction in expected return on plan assets and higher interest costs which will only be partially offset by a reduction in service cost due to higher discount rates. Any future declines in the value of our pension plan assets or increases in our plan liabilities could require us to increase our recorded liability for the net underfunded status of our pension plans and could also require accelerated and higher cash contributions to our pension plans.

Amounts recognized in the Consolidated Balance Sheets for the years ended May 31, 2022 and 2021 are as follows:

 

 

 

U.S. Plans

 

 

Non-U.S. Plans

 

(In thousands)

 

2022

 

2021

 

 

2022

 

2021

 

Noncurrent assets

 

$

77

 

$

-

 

 

$

22,399

 

$

22,698

 

Current liabilities

 

 

(8

)

 

(8

)

 

 

(443

)

 

(471

)

Noncurrent liabilities

 

 

(86,844

)

 

(149,688

)

 

 

(11,115

)

 

(14,402

)

Net Amount Recognized

 

$

(86,775

)

$

(149,696

)

 

$

10,841

 

$

7,825

 

 

The following table summarizes the relationship between our plans' benefit obligations and assets:

 

 

 

U.S. Plans

 

 

 

2022

 

 

2021

 

(In thousands)

 

Benefit
Obligation

 

Plan Assets

 

 

Benefit
Obligation

 

Plan Assets

 

Plans with projected benefit obligations in excess of plan assets

 

$

702,511

 

$

615,659

 

 

$

822,073

 

$

672,377

 

Plans with accumulated benefit obligations in excess of plan assets

 

 

10,542

 

 

10,024

 

 

 

702,315

 

 

672,377

 

Plans with assets in excess of projected benefit obligations

 

 

1,224

 

 

1,301

 

 

 

-

 

 

-

 

Plans with assets in excess of accumulated benefit obligations

 

 

599,891

 

 

606,936

 

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-U.S. Plans

 

 

 

2022

 

 

2021

 

(In thousands)

 

Benefit
Obligation

 

Plan Assets

 

 

Benefit
Obligation

 

Plan Assets

 

Plans with projected benefit obligations in excess of plan assets

 

$

36,607

 

$

25,049

 

 

$

45,294

 

$

30,421

 

Plans with accumulated benefit obligations in excess of plan assets

 

 

32,808

 

 

22,844

 

 

 

43,522

 

 

30,421

 

Plans with assets in excess of projected benefit obligations

 

 

145,927

 

 

168,326

 

 

 

186,734

 

 

209,432

 

Plans with assets in excess of accumulated benefit obligations

 

 

139,333

 

 

170,531

 

 

 

173,490

 

 

209,432

 

 

The following table presents the pretax net actuarial loss and prior service (cost) recognized in accumulated other comprehensive income (loss) not affecting retained earnings:

 

 

 

U.S. Plans

 

 

Non-U.S. Plans

 

(In thousands)

 

2022

 

2021

 

 

2022

 

2021

 

Net actuarial loss

 

$

(214,607

)

$

(250,317

)

 

$

(25,984

)

$

(30,045

)

Prior service (costs) credits

 

 

(7

)

 

(12

)

 

 

518

 

 

1,023

 

Total recognized in accumulated other comprehensive
   income not affecting retained earnings

 

$

(214,614

)

$

(250,329

)

 

$

(25,466

)

$

(29,022

)

 

The following table includes the changes recognized in other comprehensive income:

 

 

 

 

 

U.S. Plans

 

 

Non-U.S. Plans

 

(In thousands)

 

2022

 

2021

 

 

2022

 

2021

 

Changes in plan assets and benefit obligations recognized in other
   comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

Prior service cost

 

$

-

 

$

-

 

 

$

294

 

$

-

 

 

 

Net (gain) arising during the year

 

 

(18,794

)

 

(60,857

)

 

 

(1,517

)

 

(21,838

)

 

 

Effect of exchange rates on amounts included in AOCI

 

 

-

 

 

-

 

 

 

(1,999

)

 

6,465

 

Amounts recognized as a component of net periodic benefit cost:

 

 

 

 

 

 

 

 

 

 

 

 

Amortization or curtailment recognition of prior service (cost) benefit

 

 

(5

)

 

(8

)

 

 

139

 

 

150

 

 

 

Amortization or settlement recognition of net (loss)

 

 

(16,916

)

 

(30,005

)

 

 

(473

)

 

(2,748

)

 

 

Total recognized in other comprehensive (income)

 

$

(35,715

)

$

(90,870

)

 

$

(3,556

)

$

(17,971

)

 

In measuring the projected benefit obligation and net periodic pension cost for our plans, we utilize actuarial valuations. These valuations include specific information pertaining to individual plan participants, such as salary, age and years of service, along with certain assumptions. The most significant assumptions applied include discount rates, expected return on plan assets and rate of compensation increases. We evaluate these assumptions, at a minimum, on an annual basis, and make required changes, as applicable. In developing our expected long-term rate of return on pension plan assets, we consider the current and expected target asset allocations of the pension portfolio, as well as historical returns and future expectations for returns on various categories of plan assets. Expected return on assets is determined by using the weighted-average return on asset classes based on expected return for the target asset allocations of the principal asset categories held by each plan. In determining expected return, we consider both historical performance and an estimate of future long-term rates of return. Actual experience is used to develop the assumption for compensation increases.

The following weighted-average assumptions were used to determine our year-end benefit obligations and net periodic pension cost under the plans:

 

 

 

U.S. Plans

 

Non-U.S. Plans

 

 

Year-End Benefit Obligations

 

2022

 

2021

 

2022

 

2021

Discount rate

 

 

4.43

%

 

 

 

2.75

%

 

 

 

4.02

%

 

 

 

2.72

%

 

Rate of compensation increase

 

 

3.21

%

 

 

 

3.19

%

 

 

 

2.94

%

 

 

 

2.91

%

 

 

 

 

U.S. Plans

 

 

 

Non-U.S. Plans

 

 

Net Periodic Pension Cost

 

2022

 

2021

 

2020

 

2022

 

2021

 

2020

Discount rate

 

 

2.76

%

 

 

 

2.78

%

 

 

 

3.65

%

 

 

 

2.72

%

 

 

 

2.49

%

 

 

 

2.61

%

 

Expected return on plan assets

 

 

6.50

%

 

 

 

7.00

%

 

 

 

7.40

%

 

 

 

3.46

%

 

 

 

3.30

%

 

 

 

3.91

%

 

Rate of compensation increase

 

 

3.19

%

 

 

 

3.19

%

 

 

 

3.80

%

 

 

 

2.91

%

 

 

 

2.86

%

 

 

 

2.86

%

 

 

The following tables illustrate the weighted-average actual and target allocation of plan assets:

 

 

 

U.S. Plans

 

 

 

Target Allocation

 

Actual Asset Allocation

 

(Dollars in millions)

 

as of May 31, 2022

 

2022

 

 

2021

 

Equity securities

 

 

55

%

 

 

$

326.2

 

 

$

387.1

 

Fixed income securities

 

 

20

%

 

 

 

117.0

 

 

 

112.0

 

Multi-class

 

 

20

%

 

 

 

136.6

 

 

 

150.8

 

Cash

 

 

5

%

 

 

 

37.0

 

 

 

22.3

 

Other

 

 

 

 

 

 

 

0.2

 

 

 

0.2

 

Total assets

 

 

100

%

 

 

$

617.0

 

 

$

672.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-U.S. Plans

 

 

 

Target Allocation

 

Actual Asset Allocation

 

(Dollars in millions)

 

as of May 31, 2022

 

2022

 

 

2021

 

Equity securities

 

 

37

%

 

 

$

69.2

 

 

$

103.4

 

Fixed income securities

 

 

52

%

 

 

 

101.1

 

 

 

108.2

 

Cash

 

 

 

 

 

 

 

0.1

 

 

 

0.1

 

Property and other

 

 

11

%

 

 

 

23.0

 

 

 

28.2

 

Total assets

 

 

100

%

 

 

$

193.4

 

 

$

239.9

 

 

The following tables present our pension plan assets as categorized using the fair value hierarchy at May 31, 2022 and 2021:

 

U.S. Plans

 

(In thousands)

 

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

 

 

Significant
Other
Observable
Inputs (Level 2)

 

 

Significant
Unobservable
Inputs (Level 3)

 

 

Fair Value at
May 31, 2022

 

U.S. Treasury and other government

 

$

-

 

 

$

34,902

 

 

$

-

 

 

$

34,902

 

State and municipal bonds

 

 

-

 

 

 

576

 

 

 

-

 

 

 

576

 

Foreign bonds

 

 

-

 

 

 

1,150

 

 

 

-

 

 

 

1,150

 

Mortgage-backed securities

 

 

-

 

 

 

10,254

 

 

 

-

 

 

 

10,254

 

Corporate bonds

 

 

-

 

 

 

23,883

 

 

 

-

 

 

 

23,883

 

Stocks - large cap

 

 

30,295

 

 

 

-

 

 

 

-

 

 

 

30,295

 

Mutual funds - equity

 

 

-

 

 

 

295,905

 

 

 

-

 

 

 

295,905

 

Mutual funds - multi-class

 

 

-

 

 

 

136,583

 

 

 

-

 

 

 

136,583

 

Mutual funds - fixed

 

 

-

 

 

 

16,368

 

 

 

-

 

 

 

16,368

 

Cash and cash equivalents

 

 

37,004

 

 

 

-

 

 

 

-

 

 

 

37,004

 

Limited partnerships

 

 

-

 

 

 

-

 

 

 

166

 

 

 

166

 

Investments measured at NAV (1)

 

 

 

 

 

 

 

 

 

 

 

29,874

 

Total

 

$

67,299

 

 

$

519,621

 

 

$

166

 

 

$

616,960

 

 

(1)
In accordance with Subtopic 820-10, Fair Value Measurements and Disclosures, certain investments that are measured at fair value using the net asset value ("NAV") per share practical expedient have not been classified in the fair value hierarchy. The investments that are measured at fair value using NAV per share included in the table above are intended to permit reconciliation of the fair value hierarchy to the fair value of the plan assets at the end of each period.

 

Non-U.S. Plans

 

(In thousands)

 

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

 

 

Significant
Other
Observable
Inputs (Level 2)

 

 

Significant
Unobservable
Inputs (Level 3)

 

 

Fair Value at
May 31, 2022

 

Pooled equities

 

$

-

 

 

$

68,067

 

 

$

-

 

 

$

68,067

 

Pooled fixed income

 

 

-

 

 

 

100,151

 

 

 

-

 

 

 

100,151

 

Foreign bonds

 

 

-

 

 

 

920

 

 

 

-

 

 

 

920

 

Insurance contracts

 

 

-

 

 

 

-

 

 

 

23,013

 

 

 

23,013

 

Mutual funds

 

 

-

 

 

 

1,115

 

 

 

-

 

 

 

1,115

 

Cash and cash equivalents

 

 

109

 

 

 

-

 

 

 

-

 

 

 

109

 

Total

 

$

109

 

 

$

170,253

 

 

$

23,013

 

 

$

193,375

 

 

U.S. Plans

 

(In thousands)

 

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

 

 

Significant
Other
Observable
Inputs (Level 2)

 

 

Significant
Unobservable
Inputs (Level 3)

 

 

Fair Value at
May 31, 2021

 

U.S. Treasury and other government

 

$

-

 

 

$

20,752

 

 

$

-

 

 

$

20,752

 

State and municipal bonds

 

 

-

 

 

 

767

 

 

 

-

 

 

 

767

 

Foreign bonds

 

 

-

 

 

 

1,068

 

 

 

-

 

 

 

1,068

 

Mortgage-backed securities

 

 

-

 

 

 

17,628

 

 

 

-

 

 

 

17,628

 

Corporate bonds

 

 

-

 

 

 

42,370

 

 

 

-

 

 

 

42,370

 

Stocks - large cap

 

 

40,332

 

 

 

-

 

 

 

-

 

 

 

40,332

 

Mutual funds - equity

 

 

-

 

 

 

346,790

 

 

 

-

 

 

 

346,790

 

Mutual funds - multi-class

 

 

-

 

 

 

150,838

 

 

 

-

 

 

 

150,838

 

Mutual funds - fixed

 

 

-

 

 

 

29,440

 

 

 

-

 

 

 

29,440

 

Cash and cash equivalents

 

 

22,224

 

 

 

-

 

 

 

-

 

 

 

22,224

 

Limited partnerships

 

 

-

 

 

 

-

 

 

 

168

 

 

 

168

 

Total

 

$

62,556

 

 

$

609,653

 

 

$

168

 

 

$

672,377

 

 

 

Non-U.S. Plans

 

(In thousands)

 

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

 

 

Significant
Other
Observable
Inputs (Level 2)

 

 

Significant
Unobservable
Inputs (Level 3)

 

 

Fair Value at
May 31, 2021

 

Pooled equities

 

$

-

 

 

$

101,975

 

 

$

-

 

 

$

101,975

 

Pooled fixed income

 

 

-

 

 

 

107,457

 

 

 

-

 

 

 

107,457

 

Foreign bonds

 

 

-

 

 

 

717

 

 

 

-

 

 

 

717

 

Insurance contracts

 

 

-

 

 

 

-

 

 

 

28,230

 

 

 

28,230

 

Mutual funds

 

 

-

 

 

 

1,397

 

 

 

-

 

 

 

1,397

 

Cash and cash equivalents

 

 

77

 

 

 

-

 

 

 

-

 

 

 

77

 

Total

 

$

77

 

 

$

211,546

 

 

$

28,230

 

 

$

239,853

 

 

The following table includes the activity that occurred during the years ended May 31, 2022 and 2021 for our Level 3 assets:

 

 

 

 

 

 

Actual Return on Plan Assets For:

 

 

 

 

 

 

 

 

 

Balance at

 

 

Assets Still Held

 

 

Assets Sold

 

 

Purchases, Sales and

 

 

Balance at

 

(In thousands)

 

Beginning of Period

 

 

at Reporting Date

 

 

During Year

 

 

Settlements, net (1)

 

 

End of Period

 

Year ended May 31, 2022

 

$

28,398

 

 

 

(1,009

)

 

 

-

 

 

 

(4,210

)

 

$

23,179

 

Year ended May 31, 2021

 

 

27,437

 

 

 

455

 

 

 

-

 

 

 

506

 

 

 

28,398

 

 

(1)
Includes the impact of exchange rate changes during the year.

The primary objective for the investments of the Retirement Plan is to provide for long-term growth of capital without undue exposure to risk. This objective is accomplished by utilizing a strategy of equities, fixed-income securities and cash equivalents in a mix that is conducive to participation in a rising market, while allowing for adequate protection in a falling market. Our Investment Committee oversees the investment allocation process, which includes the selection and evaluation of investment managers, the determination of investment objectives and risk guidelines, and the monitoring of actual investment performance. In order to manage investment risk properly, Plan policy prohibits short selling, securities lending, financial futures, options and other specialized investments, except for certain alternative investments specifically approved by the Investment Committee. The Investment Committee reviews, on a quarterly basis, reports of actual Plan investment performance provided by independent third parties, in addition to its review of the Plan investment policy on an annual basis. The investment objectives are similar for our plans outside of the United States, subject to local regulations.

The goals of the investment strategy for pension assets include: the total return of the funds shall, over an extended period of time, surpass an index composed of the MSCI World Stock Index (equity), the Barclays Long-Term Government/Credit Index (fixed income), and 30-day Treasury Bills (cash), weighted appropriately to match the asset allocation of the plans. The equity portion of the funds shall surpass the MSCI World Stock Index over a full market cycle, while the fixed-income portion shall surpass Barclays Long-Term Government/Credit Index over a full market cycle. The purpose of the fixed-income fund is to reduce the overall volatility of the plan liabilities and provide a hedge against interest rate fluctuations. Therefore, the primary objective of the fixed-income portion is to match the Barclays Long-Term Government/Credit Index.

We expect to pay the following estimated pension benefit payments in the next five years (in millions): $65.5 in 2023, $68.8 in 2024, $70.9 in 2025, $73.9 in 2026 and $76.3 in 2027. In the five years thereafter (2028-2032), we expect to pay $379.8 million.

In addition to the defined benefit pension plans discussed above, we also sponsor associate savings plans under Section 401(k) of the Internal Revenue Code, which cover most of our associates in the United States. We record expense for defined contribution plans for any employer-matching contributions made in conjunction with services rendered by associates. The majority of our plans provide for matching contributions made in conjunction with services rendered by associates. Matching contributions are invested in the same manner that the participants invest their own contributions. Matching contributions charged to income were $24.7 million, $21.7 million and $21.1 million for the years ending May 31, 2022, 2021 and 2020, respectively.