(12) Pension Plan

The Company and certain subsidiaries have a noncontributory defined benefit retirement plan (the “Pension Plan”), covering approximately 20% of aggregate employees. Benefits are based on years of service and the employee’s average compensation for the highest five compensation years preceding retirement or termination. The Company’s funding policy is to contribute annually an amount in accordance with the requirements of the Employee Retirement Income Security Act of 1974 (“ERISA”).

The Company’s pension plan asset allocation, by asset category, is as follows for the fiscal years ended:


	2017			2016
Equity securities		56	%		55	%
Debt securities		38	%		38	%
Cash and cash equivalents		6	%		7	%

Total		100	%		100	%

The current asset allocation is being managed to meet the Company’s stated objective of asset growth and capital preservation. The factor is based upon the combined judgments of the Company’s Administrative Committee and its investment advisors to meet the Company’s investment needs, objectives, and risk tolerance. The Company’s target asset allocation percentage, by asset class, for the year ended February 28, 2017 is as follows:


Asset Class	Target Allocation Percentage
Cash		1 - 5	%
Fixed Income		35 - 55	%
Equity		45 - 60	%

The Company estimates the long-term rate of return on plan assets will be 7.5% based upon target asset allocation. Expected returns are developed based upon the information obtained from the Company’s investment advisors. The advisors provide ten-year historical and five-year expected returns on the fund in the target asset allocation. The return information is weighted based upon the asset allocation at the end of the fiscal year. The expected rate of return at the beginning of the fiscal year ended 2017 was 8.0%, the rate used in the calculation of the current year pension expense.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. The Company categorizes each of its fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are:


Level 1	-	Inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access.
Level 2	-	Inputs utilize data points that are observable such as quoted prices, interest rates and yield curves.
Level 3	-	Inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.

The following tables present the Plan’s fair value hierarchy for those assets measured at fair value as of February 28, 2017 and February 29, 2016 (in thousands):


	Assets Measured at Fair Value		Fair Value Measurements
Description	at 2/28/17		(Level 1)		(Level 2)		(Level 3)
Cash and cash equivalents	$	3,105	$	3,105	$	—	$	—
Government bonds		11,861		—		11,861		—
Corporate bonds		8,037		—		8,037		—
Domestic equities		24,777		24,777		—		—
Foreign equities		5,032		5,032		—		—

	$	52,812	$	32,914	$	19,898	$	—


	Assets Measured at Fair Value		Fair Value Measurements
Description	at 2/29/16		(Level 1)		(Level 2)		(Level 3)
Cash and cash equivalents	$	3,576	$	3,576	$	—	$	—
Government bonds		10,887		—		10,887		—
Corporate bonds		7,134		—		7,134		—
Domestic equities		20,226		20,226		—		—
Foreign equities		5,724		5,724		—		—

	$	47,547	$	29,526	$	18,021	$	—

Fair value estimates are made at a specific point in time, based on available market information and judgments about the financial asset, including estimates of timing, amount of expected future cash flows, and the credit standing of the issuer. In some cases, the fair value estimates cannot be substantiated by comparison to independent markets. The disclosed fair value may not be realized in the immediate settlement of the financial asset. In addition, the disclosed fair values do not reflect any premium or discount that could result from offering for sale at one time an entire holding of a particular financial asset. Potential taxes and other expenses that would be incurred in an actual sale or settlement are not reflected in amounts disclosed.

Pension expense is composed of the following components included in cost of goods sold and selling, general and administrative expenses in the Company’s consolidated statements of earnings for fiscal years ended (in thousands):


	2017			2016			2015
Components of net periodic benefit cost
Service cost	$	1,166		$	1,301		$	1,122
Interest cost		2,372			2,369			2,447
Expected return on plan assets		(3,665	)		(3,928	)		(3,856	)
Amortization of:
Prior service cost		—			(86	)		(145	)
Unrecognized net loss		2,683			2,551			1,524

Net periodic benefit cost		2,556			2,207			1,092

Other changes in Plan Assets and Projected Benefit Obligation Recognized in Other comprehensive Income
Net actuarial loss (gain)		(723	)		2,102			11,224
Amortization of net actuarial loss		(2,683	)		(2,551	)		(1,524	)
Amortization of prior service credit		—			86			145

		(3,406	)		(363	)		9,845

Total recognized in net periodic pension cost and other comprehensive income	($	850	)	$	1,844		$	10,937

The following table represents the assumptions used to determine benefit obligations and net periodic pension cost for fiscal years ended:


	2017			2016			2015
Weighted average discount rate (net periodic pension cost)		4.30	%		4.00	%		4.90	%
Earnings progression (net periodic pension cost)		3.00	%		3.00	%		3.00	%
Expected long-term rate of return on plan assets (net periodic pension cost)		7.50	%		8.00	%		8.00	%
Weighted average discount rate (benefit obligations)		4.10	%		4.30	%		4.00	%
Earnings progression (benefit obligations)		3.00	%		3.00	%		3.00	%

During the current fiscal year, the Company adopted the new MP-2016 improvement scale to determine their benefit obligations under the plan. The accumulated benefit obligation (“ABO”), change in projected benefit obligation (“PBO”), change in plan assets, funded status, and reconciliation to amounts recognized in the consolidated balance sheets are as follows (in thousands):


	2017			2016
Projected benefit obligation at beginning of year	$	56,243		$	60,845
Service cost		1,166			1,301
Interest cost		2,372			2,369
Actuarial (gain)/loss		2,479			(2,661	)
Other assumption change		(730	)		(1,603	)
Benefits paid		(3,872	)		(4,008	)

Projected benefit obligation at end of year	$	57,658		$	56,243

Change in plan assets:
Fair value of plan assets at beginning of year	$	47,547		$	50,993
Company contributions		3,000			3,000
Gain (loss) on plan assets		6,137			(2,438	)
Benefits paid		(3,872	)		(4,008	)

Fair value of plan assets at end of year	$	52,812		$	47,547

Unfunded status	($	4,846	)	($	8,696	)

Accumulated benefit obligation at end of year	$	53,590		$	51,948

The measurement dates used to determine pension and other postretirement benefits is the Company’s fiscal year end. The Company contributed $3.0 million during fiscal year 2017 and would expect to contribute a similar amount during fiscal year 2018.

Estimated future benefit payments which reflect expected future service, as appropriate, are expected to be paid in the fiscal years ended (in thousands):


	Projected
Year	Payments
2018	$	4,100
2019		4,100
2020		4,200
2021		4,300
2022		4,300
2023 - 2027		18,700

Effective February 1, 1994, the Company adopted a Defined Contribution 401(k) Plan (the “401(k) Plan”) for its United States employees. The 401(k) Plan covers substantially all full-time employees who have completed sixty days of service and attained the age of eighteen. United States employees can contribute up to 100 percent of their annual compensation, but are limited to the maximum annual dollar amount allowable under the Internal Revenue Code. The 401(k) Plan provides for employer matching contributions or discretionary employer contributions for certain employees not enrolled in the Pension Plan for employees of the Company. Eligibility for employer contributions, matching percentage, and limitations depends on the participant’s employment location and whether the employees are covered by the Company’s pension plan, etc. The Company’s matching contributions are immediately vested. The Company made matching 401(k) contributions in the amount of $1.2 million, $1.2 million and $1.1 million in fiscal years ended 2017, 2016 and 2015, respectively.

In addition, the Northstar Computer Forms, Inc. 401(k) Profit Sharing Plan was merged into the 401(k) Plan on February 1, 2001. The Company declared profit sharing contributions on behalf of the former employees of Northstar Computer Forms, Inc. in accordance with its original plan in the amounts of $228,000, $229,000, and $227,000, in fiscal years ended 2017, 2016 and 2015, respectively.