Note 10 - Pension and Postretirement Benefits

12 Months Ended

Dec. 03, 2022

Notes to Financial Statements

Retirement Benefits [Text Block]

Note 10: Pension and Postretirement Benefits

Defined Contribution Plan

All U.S. employees have the option of contributing up to 75 percent of their pre-tax earnings to a 401(k) plan, subject to IRS limitations. We match up to the first 4 percent of each employee's pre-tax earnings, based on the employee’s contributions. All U.S. employees are eligible for a separate annual non-discretionary retirement contribution to the 401(k) plan of 1 percent of pay, that is invested based on the election of the individual participant. The 1 percent contribution is in addition to our 4 percent matching contribution described above and is in lieu of participation in our defined benefit pension plan. The total contribution to the 401(k) plan for 2022 was $12,113 which included the cost of the 4 percent company match of $9,082 and the additional 1 percent contribution of $3,031. The total contributions to the 401(k) plan were $12,488 and $10,764 in 2021 and 2020, respectively.

All U.S. employees are eligible to receive an annual discretionary non-elective contribution to the 401(k) plan of up to 3 percent based on achieving the company’s earnings per share target. This discretionary contribution is in addition to the contributions described above. A discretionary non-elective contribution of $950 and $5,205 was accrued for 2022 and 2021, respectively.

The defined contribution plan liability recorded in the Consolidated Balance Sheets was $12,263 and $10,494 in 2022 and 2021, respectively, for the U.S. Plan and several statutorily required non-U.S. Plans.

Defined Benefit Plans

Noncontributory defined benefit pension plans cover all U.S. employees employed prior to January 1, 2007. Benefits for these plans are based primarily on each employee’s years of service and average compensation. During 2011, we made significant changes to our U.S. pension plan. The changes included: benefits under the plan were locked-in using service and salary as of May 31, 2011, participants no longer earn benefits for future service and salary as they had in the past, affected participants receive a three percent increase to the locked-in benefit for every year they continue to work for us and we are making a retirement contribution of three percent of eligible compensation to the 401(k) Plan for those participants.  The funding policy is consistent with the funding requirements of federal law and regulations. Plan assets consist principally of listed equity securities and bonds. During 2020, we amended the U.S. pension plan to add a program for eligible employees to take a lump sum distribution. No amounts were paid under this program in 2022 and a total of $6,673 was paid during 2021 as distributions under this program. Other U.S. postretirement benefits are funded through a Voluntary Employees' Beneficiaries Association Trust.

Health care and life insurance benefits are provided for eligible retired employees and their eligible dependents. These benefits are provided through various insurance companies and health care providers. Costs are accrued during the years the employee renders the necessary service.

Certain non-U.S. subsidiaries provide pension benefits for their employees consistent with local practices and regulations. These plans are primarily defined benefit plans covering substantially all employees upon completion of a specified period of service. Benefits for these plans are generally based on years of service and annual compensation.

Following is a reconciliation of the beginning and ending balances of the benefit obligation and fair value of plan assets as of December 3, 2022 and November 27, 2021:

	Pension Benefits												Other Postretirement
	U.S. Plans						Non-U.S. Plans						Benefits
	2022			2021			2022			2021			2022			2021
Change in projected benefit obligation
Benefit obligation at beginning of year	$	361,212		$	388,530		$	238,400		$	250,561		$	31,262		$	39,075
Service cost		-			-			2,765			3,280			-			21
Interest cost		9,653			9,299			2,893			2,941			748			822
Participant contributions		-			-			-			-			296			365
Actuarial (gain)/loss1		(80,296	)		(9,177	)		(57,159	)		(3,630	)		(5,395	)		(6,115	)
Other		-			-			-			-			-			-
Curtailments		-			-			231			-			-			-
Settlement payments		(200	)		(6,673	)		(7,988	)		996			-			-
Benefits paid		(20,495	)		(20,767	)		(8,370	)		(8,578	)		(2,738	)		(2,906	)
Foreign currency translation effect		-			-			(15,922	)		(7,170	)		-			-
Benefit obligation at end of year		269,874			361,212			154,850			238,400			24,173			31,262
Change in plan assets
Fair value of plan assets at beginning of year		409,811			398,403			216,623			202,242			135,701			109,056
Actual return on plan assets		(63,562	)		37,466			(45,328	)		25,204			(12,613	)		28,716
Employer contributions		1,232			1,382			1,640			1,989			136			470
Participant contributions		-			-			-			-			296			365
Other		-			-			-			996			-			-
Settlement payments		(200	)		(6,673	)		-			-			-			-
Benefits paid2		(20,495	)		(20,767	)		(8,369	)		(8,578	)		(2,738	)		(2,906	)
Foreign currency translation effect		-			-			(22,658	)		(5,230	)		-			-
Fair value of plan assets at end of year		326,786			409,811			141,908			216,623			120,782			135,701
Plan assets in excess of (less than) benefit obligation as of year end	$	56,912		$	48,599		$	(12,942	)	$	(21,776	)	$	96,608		$	104,439

¹ Actuarial gain in 2022 and 2021 for the U.S. Plans is primarily due to assumption changes. Actuarial gain in 2022 and 2021 for the Non-U.S. Plans are due to both assumption changes and plan experience.

² Amount excludes benefit payments made from sources other than plan assets.

Amounts in accumulated other comprehensive income (loss) that have not been recognized as components of net periodic benefit cost	Pension Benefits									Other Postretirement
	U.S. Plans					Non-U.S. Plans				Benefits
	2022		2021			2022		2021		2022			2021
Unrecognized actuarial loss	$	137,351	$	129,198		$	49,306	$	64,782	$	(8,530	)	$	(30,278	)
Unrecognized prior service (benefit) cost		-		(3	)		1,219		1,390		-			-
Ending balance	$	137,351	$	129,195		$	50,525	$	66,172	$	(8,530	)	$	(30,278	)

	Pension Benefits												Other Postretirement
	U.S. Plans						Non-U.S. Plans						Benefits
	2022			2021			2022			2021			2022			2021
Statement of financial position as of fiscal year-end
Non-current assets	$	69,826		$	66,157		$	16,790		$	24,772		$	98,848		$	107,323
Accrued benefit cost
Current liabilities		(1,248	)		(1,342	)		(1,727	)		(1,795	)		(218	)		(227	)
Non-current liabilities		(11,666	)		(16,216	)		(28,006	)		(44,753	)		(2,021	)		(2,657	)
Ending balance	$	56,912		$	48,599		$	(12,943	)	$	(21,776	)	$	96,609		$	104,439

The accumulated benefit obligation of the U.S. pension and other postretirement plans was $289,049 at  December 3, 2022 and $384,124 at November 27, 2021. The accumulated benefit obligation of the non-U.S. pension plans was $148,927 at  December 3, 2022 and $228,713 at November 27, 2021.

The following amounts relate to pension plans with accumulated benefit obligations in excess of plan assets as of December 3, 2022 and November 27, 2021:

	Pension Benefits and Other Postretirement Benefits
	U.S. Plans				Non-U.S. Plans
	2022		2021		2022		2021
Accumulated benefit obligation	$	12,914	$	17,558	$	36,820	$	48,912
Fair value of plan assets		-		-		9,617		11,350

The following amounts relate to pension plans with projected benefit obligations in excess of plan assets as of December 3, 2022 and November 27, 2021:

	Pension Benefits and Other Postretirement Benefits
	U.S. Plans				Non-U.S. Plans
	2022		2021		2022		2021
Projected benefit obligation	$	12,914	$	17,558	$	39,350	$	131,174
Fair value of plan assets		-		-	$	9,617		84,626

Information about the expected cash flows is as follows:

	Pension Benefits				Other
			Non-U.S.		Postretirement
	U.S. Plans		Plans		Benefits
Employer contributions
2023	$	-	$	6	$	-
Expected benefit payments
2023		21,081		8,055		2,832
2024		21,247		8,132		2,731
2025		21,280		8,276		2,617
2026		21,247		8,559		2,519
2027- 2032		123,707		53,015		12,305

The components of our net period defined benefit pension and postretirement benefit costs other than service cost are presented as non-operating expenses and service cost is presented in operating expenses.

Components of net periodic benefit cost and other supplemental information for the years ended  December 3, 2022, November 27, 2021, and November 28, 2020 are as follows:

	Pension Benefits																		Other
	U.S. Plans									Non-U.S. Plans									Postretirement Benefits
Net periodic cost (benefit)	2022			2021			2020			2022			2021			2020			2022			2021			2020
Service cost	$	-		$	-		$	-		$	2,765		$	3,280		$	2,950		$	-		$	21		$	73
Interest cost		9,653			9,299			11,738			2,893			2,941			3,158			748			822			1,135
Expected return on assets		(29,018	)		(31,123	)		(25,758	)		(6,465	)		(12,348	)		(11,312	)		(11,084	)		(8,945	)		(7,976	)
Amortization:
Prior service cost (benefit)		(3	)		(3	)		(3	)		63			69			64			-			-			-
Actuarial loss		4,132			3,198			7,195			2,411			4,053			3,829			(3,445	)		73			62
Curtailment loss		-			-			-			-			-			14			-			-			-
Settlement charge		-			-			-			3,329			-			67			-			-			-
Net periodic (benefit) cost	$	(15,237	)	$	(18,629	)	$	(6,828	)	$	4,996		$	(2,005	)	$	(1,230	)	$	(13,781	)	$	(8,029	)	$	(6,706	)

	Pension Benefits																		Other
	U.S. Plans									Non-U.S. Plans									Postretirement Benefits
Weighted-average assumptions used to determine benefit obligations	2022			2021			2020			2022			2021			2020			2022			2021			2020
Discount rate		5.36	%		2.75	%		2.50	%		3.70	%		1.27	%		1.16	%		5.29	%		2.51	%		2.19	%
Rate of compensation increase1		0.00	%		0.00	%		4.50	%		1.83	%		1.48	%		1.74	%		N/A			N/A			N/A

Weighted-average assumptions used to determine net costs for years ended	2022			2021			2020			2022			2021			2020			2022			2021			2020
Discount rate		2.75	%		2.50	%		3.17	%		1.29	%		1.19	%		1.34	%		2.51	%		2.19	%		3.00	%
Expected return on plan assets		7.00	%		7.24	%		7.49	%		3.49	%		6.15	%		6.23	%		8.25	%		8.25	%		8.50	%
Rate of compensation increase1		0.00	%		0.00	%		4.50	%		1.68	%		1.67	%		1.74	%		0.00	%		0.00	%		N/A

¹ Under the U.S. pension plan, the compensation amount was locked-in as of May 31, 2011 and thus the benefit no longer includes compensation increases. The 4.50 percent rate for 2020 is for the supplemental executive retirement plan only; for and since 2021, there has been no compensation increase as subsequent to November 27, 2021, there were no active employees in the supplemental executive retirement plan.

The discount rate assumption is determined using an actuarial yield curve approach, which results in a discount rate that reflects the characteristics of the plan. The approach identifies a broad population of corporate bonds that meet the quality and size criteria for the particular plan. We use this approach rather than a specific index that has a certain set of bonds that may or may not be representative of the characteristics of our particular plan. A higher discount rate reduces the present value of the pension obligations. The discount rate for the U.S. pension plan was 5.36 percent at December 3, 2022, 2.76 percent at  November 27, 2021 and 2.53 percent at November 28, 2020. Net periodic pension cost for a given fiscal year is based on assumptions developed at the end of the previous fiscal year. A discount rate change of 0.5 percentage points at  December 3, 2022 would impact U.S. pension and other postretirement plan (income) expense by approximately ($11) (pre-tax) in fiscal 2023. Discount rates for non-U.S. plans are determined in a manner consistent with the U.S. plans.

For the U.S. pension plan, we adopted the Adjusted Pri-2012 base mortality table projected generationally using scale MP-2021.

The expected long-term rate of return on plan assets assumption for the U.S. pension plan was 7.00 percent in 2022, 7.25 percent in 2021 and 7.50 in 2020. Our expected long-term rate of return on U.S. plan assets was based on our target asset allocation assumption of 55 percent equities and 45 percent fixed-income. Management, in conjunction with our external financial advisors, determines the expected long-term rate of return on plan assets by considering the expected future returns and volatility levels for each asset class that are based on historical returns and forward-looking observations. For 2022, the expected long-term rate of return on the target equities allocation was 8.50 percent and the expected long-term rate of return on the target fixed-income allocation was 5.60 percent. The total plan rate of return assumption included an estimate of the effect of diversification and the plan expense. A change of 0.5 percentage points for the expected return on assets assumption would impact U.S. net pension and other postretirement plan expense by approximately $2,238 (pre-tax).

Management, in conjunction with our external financial advisors, uses the actual historical rates of return of the asset categories to assess the reasonableness of the expected long-term rate of return on plan assets.

The expected long-term rate of return on plan assets assumption for non-U.S. pension plans was a weighted-average of 3.49 percent in 2022 compared to 6.15 percent in 2021 and 6.23 percent in 2020. The expected long-term rate of return on plan assets assumption used in each non-U.S. plan is determined on a plan-by-plan basis for each local jurisdiction and is based on expected future returns for the investment mix of assets currently in the portfolio for that plan. Management, in conjunction with our external financial advisors, develops expected rates of return for each plan, considers expected long-term returns for each asset category in the plan, reviews expectations for inflation for each local jurisdiction, and estimates the effect of active management of the plan’s assets. Our largest non-U.S. pension plans are in the United Kingdom and Germany. The expected long-term rate of return on plan assets for the United Kingdom was 2.50 percent and the expected long-term rate of return on plan assets for Germany was 4.50 percent. Management, in conjunction with our external financial advisors, uses actual historical returns of the asset portfolio to assess the reasonableness of the expected rate of return for each plan.

Assumed health care trend rates	2022			2021			2020
Health care cost trend rate assumed for next year		6.50	%		6.50	%		6.75	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)		5.75	%		5.00	%		5.00	%
Fiscal year that the rate reaches the ultimate trend rate	2026			2028			2028

The asset allocation for the company’s U.S. and non-U.S. pension plans at the end of 2022 and 2021 follows.

	U.S. Pension Plans									Non-U.S. Pension Plans									Other Postretirement Plans
				Percentage of									Percentage of									Percentage of
				Plan Assets at									Plan Assets at									Plan Assets at
	Target			Year-End						Target			Year-End						Target			Year-End
Asset Category	2022			2022			2021			2022			2022			2021			2022			2022			2021
Equities		55.0	%		53.1	%		57.7	%		24.8	%		25.5	%		21.3	%		0.0	%		0.0	%		0.0	%
Fixed income		45.0	%		45.8	%		40.1	%		75.2	%		70.0	%		67.0	%		0.0	%		0.0	%		0.0	%
Insurance		0.0	%		0.1	%		0.0	%		0.0	%		0.0	%		0.0	%		100.0	%		98.9	%		99.8	%
Cash1		0.0	%		1.0	%		2.2	%		0.0	%		4.5	%		11.7	%		0.0	%		1.1	%		0.2	%
Total		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%

Plan Asset Management

Plan assets are held in trust and invested in mutual funds, separately managed accounts and other commingled investment vehicles holding U.S. and non-U.S. equity securities, fixed income securities and other investment classes. We employ a total return approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for a prudent level of risk. Futures and options may also be used to enhance risk-adjusted long-term returns while improving portfolio diversification and duration. Risk management is accomplished through diversification across asset classes, utilization of multiple investment managers and general plan-specific investment policies. Risk tolerance is established through careful consideration of the plan liabilities, plan funded status and our assessment of our overall liquidity position. This asset allocation policy mix is reviewed annually and actual versus target allocations are monitored regularly and rebalanced on an as-needed basis. Plan assets are invested using a combination of active and passive investment strategies. Passive, or “indexed” strategies, attempt to mimic rather than exceed the investment performance of a market benchmark. The plans’ active investment strategies employ multiple investment management firms which in aggregate cover a range of investment styles and approaches. Performance is monitored and compared to relevant benchmarks on a regular basis.

The U.S. pension plans consist of two plans: a pension plan and a supplemental executive retirement plan (“SERP”). There were no assets in the SERP in 2022 and 2021. Consequently, all of the data disclosed in the asset allocation table for the U.S. pension plans pertain to our U.S. pension plan.

During 2022, we maintained our assets within the allowed ranges of the target asset allocation mix of 55 percent equities and 45 percent fixed income plus or minus 5 percent and continued our focus to reduce volatility of plan assets in future periods and to more closely match the duration of the assets with the duration of the liabilities of the plan.

The non-U.S. pension plans consist of all the pension plans administered by us outside the U.S., principally consisting of plans in Germany, the United Kingdom, France and Canada. During 2022, we maintained our assets for the non-U.S. pension plans at the specific target asset allocation mix determined for each plan plus or minus the allowed rate and continued our focus to reduce volatility of plan assets in future periods and to more closely match the duration of the assets with the duration of the liabilities of the individual plans. We plan to maintain the portfolios at their respective target asset allocations in 2023.

Other postretirement benefits plans consist of two U.S. plans: a retiree medical health care plan and a group term life insurance plan. There were no assets in the group term life insurance plan for 2022 and 2021. Consequently, all of the data disclosed in the asset allocation table for other postretirement plans pertain to our retiree medical health care plan. Our investment strategy for other postretirement benefit plans is to own insurance policies that maintain an asset allocation nearly completely in equities. These equities are invested in a passive portfolio indexed to the S&P 500.

Fair Value of Plan Assets

The following table presents plan assets categorized within a three-level fair value hierarchy as described in Note 13.

	December 3, 2022
U.S. Pension Plans	Level 1		Level 2		Level 3		Total Assets
Equities	$	-	$	152,084	$	21,525	$	173,609
Fixed income		-		126,114		23,547		149,661
Insurance		-		-		179		179
Cash		3,337		-		-		3,337
Total categorized in the fair value hierarchy		3,337		278,198		45,251		326,786

Non-U.S. Pension Plans	Level 1		Level 2		Level 3		Total Assets
Equities	$	28,422	$	-	$	-	$	28,422
Fixed income		41,515		-		703		42,218
Cash		491		-		-		491
Total categorized in the fair value hierarchy		70,428		-		703		71,131
Other investments measured at NAV1								70,777
Total	$	70,428	$	-	$	703	$	141,908

Other Postretirement Benefits	Level 1		Level 2		Level 3		Total Assets
Insurance	$	-	$	-	$	119,446	$	119,446
Cash		1,336		-		-		1,336
Total	$	1,336	$	-	$	119,446	$	120,782

	November 27, 2021
U.S. Pension Plans	Level 1		Level 2		Level 3		Total Assets
Equities	$	-	$	236,557	$	-	$	236,557
Fixed income		-		164,133		186		164,319
Cash		8,935		-		-		8,935
Total categorized in the fair value hierarchy		8,935		400,690		186		409,811

Non-U.S. Pension Plans	Level 1		Level 2		Level 3		Total Assets
Equities	$	35,117	$	-	$	-	$	35,117
Fixed income		48,243		5,285		749		54,277
Cash		4,399		-		-		4,399
Total categorized in the fair value hierarchy		87,759		5,285		749		93,793
Other investments measured at NAV1								122,830
Total	$	87,759	$	5,285	$	749	$	216,623

Other Postretirement Benefits	Level 1		Level 2		Level 3		Total Assets
Insurance	$	-	$	-	$	135,484	$	135,484
Cash		217		-		-		217
Total	$	217	$	-	$	135,484	$	135,701

¹ In accordance with ASC Topic 820-10, Fair Value Measurement, certain investments that are measured at NAV (Net Asset Value per share) (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts represented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position.

² Negative cash for 2021 represents unsettled pending trades within an investment that are classified in cash and cash equivalents until settled.

The definitions of fair values of our pension and other postretirement benefit plan assets at  December 3, 2022 and November 27, 2021 by asset category are as follows:

Equities—Primarily publicly traded common stock for purposes of total return and to maintain equity exposure consistent with policy allocations. Investments include: (i) U.S. and non-U.S. equity securities and mutual funds valued at closing prices from national exchanges; and (ii) commingled funds valued at unit values or net asset values provided by the investment managers, which are based on the fair value of the underlying investments. Funds valued at net asset value have various investment strategies including seeking maximum total returns consistent with prudent investment management, seeking current income consistent with preservation of capital and daily liquidity and seeking to approximate the risk and return characterized by a specific index fund. There are no restrictions for redeeming holdings out of these funds and the funds have no unfunded commitments.

Fixed income—Primarily corporate and government debt securities for purposes of total return and managing fixed income exposure to policy allocations. Investments include (i) mutual funds valued at closing prices from national exchanges, (ii) corporate and government debt securities valued at closing prices from national exchanges, (iii) commingled funds valued at unit values or net asset value provided by the investment managers, which are based on the fair value of the underlying investments, and (iv) an annuity contract, the value of which is determined by the provider and represents the amount the plan would receive if the contract were cashed out at year-end.

Insurance—Insurance contracts for purposes of funding postretirement medical benefits. Fair values are the cash surrender values as determined by the providers which are the amounts the plans would receive if the contracts were cashed out at year end.

Cash–Cash balances on hand, accrued income and pending settlements of transactions for purposes of handling plan payments. Fair values are the cash balances as reported by the Trustees of the plans.

The following is a roll forward of the Level 3 investments of our pension and postretirement benefit plan assets during the years ended December 3, 2022 and November 27, 2021:

	Fixed Income
U.S. Pension Plans	2022		2021
Level 3 balance at beginning of year	$	186	$	205
Net transfers into / (out of) level 3		16,564		-
Purchases, sales, issuances and settlements, net		28,501		(19	)
Level 3 balance at end of year	$	45,251	$	186

	Fixed Income
Non-U.S. Pension Plans	2022			2021
Level 3 balance at beginning of year	$	749		$	770
Net transfers into / (out of) level 3		7			64
Net (losses)/gains		(1	)		(43	)
Currency change effect		(52	)		(42	)
Level 3 balance at end of year	$	703		$	749

	Insurance
Other Postretirement Benefits	2022			2021
Level 3 balance at beginning of year	$	135,484		$	108,406
Net transfers into / (out of) level 3		(1,992	)		(1,658	)
Purchases, sales, issuances and settlements, net		(1,122	)		(1,093	)
Net (losses)/gains		(12,924	)		29,829
Level 3 balance at end of year	$	119,446		$	135,484