Pensions and Other Benefit Plans

The Company provides retirement plans, including defined benefit and defined contribution plans, and other postretirement benefit plans to certain employees. The Company applies ASC Topic 715 “Compensation – Retirement Benefits,” which required the recognition in pension and other postretirement benefits obligations and accumulated other comprehensive income of actuarial gains or losses, prior service costs or credits and transition assets or obligations that had previously been deferred. This statement also requires an entity to measure a defined benefit postretirement plan’s assets and obligations that determine its funded status as of the end of the fiscal year.

Pension Plans

The Company provides defined benefit pension plans to certain employees. The Company uses March 31 as the measurement date. The following provides a reconciliation of benefit obligation, plan assets, and funded status of the plans:



	March 31,
	2017			2016
Change in benefit obligation:
Benefit obligation at beginning of year	$	421,147		$	261,540
Benefit obligation assumed in Magnetek acquisition	—			168,855
Benefit obligation assumed in STAHL acquisition	72,638			—
Service cost	1,779			2,187
Interest cost	16,648			13,926
Actuarial (gain) loss	(4,475		)	(6,979		)
Benefits paid	(31,757		)	(19,196		)
Settlement	(883		)	—
Foreign exchange rate changes	(3,226		)	814
Benefit obligation at end of year	$	471,871		$	421,147

Change in plan assets:
Fair value of plan assets at beginning of year	$	317,868		$	204,201
Plan assets acquired in Magnetek acquisition	—			127,726
Actual gain (loss) on plan assets	30,164			(691		)
Employer contribution	6,140			5,936
Benefits paid	(31,757		)	(19,196		)
Settlement	(883		)	—
Foreign exchange rate changes	(92		)	(108		)
Fair value of plan assets at end of year	$	321,440		$	317,868

Funded status	$	(150,431	)	$	(103,279	)
Unrecognized actuarial loss	83,030			98,630
Unrecognized prior service cost	8			15
Net amount recognized	$	(67,393	)	$	(4,634	)

Amounts recognized in the consolidated balance sheets are as follows:



	March 31,
	2017			2016
Accrued liabilities	$	(3,310	)	$	(812	)
Other non-current liabilities	(147,121		)	(102,467		)
Deferred tax effect of accumulated other comprehensive loss	21,102			27,256
Accumulated other comprehensive loss	61,936			71,389
Net amount recognized	$	(67,393	)	$	(4,634	)

In fiscal 2018, an estimated net loss of $3,227,000 and prior service cost of $6,000 for the defined benefit pension plans will be amortized from accumulated other comprehensive loss to net periodic benefit cost.

Net periodic pension cost included the following components:



	2017			2016			2015
Service costs—benefits earned during the period	$	1,779		$	2,187		$	2,153
Interest cost on projected benefit obligation	16,648			13,926			9,850
Expected return on plan assets	(22,428		)	(19,783		)	(14,241		)
Net amortization	3,190			10			3,517
Settlement	247			—			—
Other	(57		)	2,452			82
Net periodic pension cost (benefit)	$	(621	)	$	(1,208	)	$	1,361

During the first quarter of fiscal 2017, certain terminated employees in the Company's foreign pension plans accepted an offer to settle their pension obligation with a lump sum payment. The settlement was required to be offered under the employment law of the foreign jurisdiction. The settlement resulted in a loss of $247,000 included within net periodic pension (benefit) cost.

As part of the acquisition of STAHL, the Company became the sponsor of STAHL's pension plan ("STAHL's Plan"), a single-employer defined benefit plan. STAHL's Plan provides benefits to certain current and former employees of STAHL and has been closed to new members since 1997. As of the date of acquisition, the benefit obligation was actuarially determined to be $72,638,000.

Information for pension plans with a projected benefit obligation in excess of plan assets is as follows:



	March 31,
	2017		2016
Projected benefit obligation	$	471,871	$	421,147
Fair value of plan assets	321,440		317,868

Information for pension plans with an accumulated benefit obligation in excess of plan assets is as follows:



	March 31,
	2017		2016
Accumulated benefit obligation	$	463,412	$	415,772
Fair value of plan assets	321,440		317,868

Unrecognized gains and losses are amortized through March 31, 2017 on a straight-line basis over the average remaining service period of active participants. Starting in fiscal 2016, the Company changed the amortization period of its largest plan to the average remaining lifetime of inactive participants, as a significant portion of the plan population is now inactive. This change increases the amortization period of the unrecognized gains and losses.

The weighted-average assumptions in the following table represent the rates used to develop the actuarial present value of the projected benefit obligation for the year listed and also net periodic pension cost for the following year:



	2017		2016		2015
Discount rate	3.65	%	4.03	%	3.83	%
Expected long-term rate of return on plan assets	7.23	%	7.22	%	7.50	%
Rate of compensation increase	0.39	%	0.44	%	2.30	%

The expected rates of return on plan asset assumptions are determined considering long-term historical averages and real returns on each asset class.

The Company’s retirement plan target and actual asset allocations are as follows:



	Target	Actual
	2018	2017	2016
Equity securities	65%	69%	67%
Fixed income	35%	31%	33%
Total plan assets	100%	100%	100%

The Company has an investment objective for domestic pension plans to adequately provide for both the growth and liquidity needed to support all current and future benefit payment obligations. The investment strategy is to invest in a diversified portfolio of assets which are expected to satisfy the aforementioned objective and produce both absolute and risk adjusted returns competitive with a benchmark that is a blend of major U.S. and international equity indexes and an aggregate bond fund. The Company's policy is to de-risk the portfolio by increasing liability-hedging investments as the pension liability funded status increases.

The Company’s funding policy with respect to the defined benefit pension plans is to contribute annually at least the minimum amount required by the Employee Retirement Income Security Act of 1974 (ERISA). Additional contributions may be made to minimize PBGC premiums. The Company expects to contribute approximately $8,416,000 to its pension plans in fiscal 2018.

Information about the expected benefit payments for the Company’s defined benefit plans is as follows:



2018	$	26,868
2019	27,053
2020	27,632
2021	27,977
2022	28,087
2023-2027	143,004

Postretirement Benefit Plans

The Company sponsors a defined benefit other postretirement health care plan that provide medical and life insurance coverage to certain U.S. retirees and their dependents of one of its subsidiaries. Prior to the acquisition of this subsidiary, the Company did not sponsor any postretirement benefit plans. The Company pays the majority of the medical costs for certain retirees and their spouses who are under age 65. For retirees and dependents of retirees who retired prior to January 1, 1989, and are age 65 or over, the Company contributes 100% toward the American Association of Retired Persons (“AARP”) premium frozen at the 1992 level. For retirees and dependents of retirees who retired after January 1, 1989, the Company contributes $35 per month toward the AARP premium. The life insurance plan is noncontributory.

The Company’s postretirement health benefit plans are not funded. The following sets forth a reconciliation of benefit obligation and the funded status of the plan:



	March 31,
	2017			2016
Change in benefit obligation:
Benefit obligation at beginning of year	$	5,144		$	6,234
Interest cost	152			189
Actuarial gain	(841		)	(887		)
Benefits paid	(344		)	(392		)
Benefit obligation at end of year	$	4,111		$	5,144

Funded status	$	(4,111	)	$	(5,144	)
Unrecognized actuarial loss	(23		)	818
Net amount recognized	$	(4,134	)	$	(4,326	)

Amounts recognized in the consolidated balance sheets are as follows:



	March 31,
	2017			2016
Accrued liabilities	$	(519	)	$	(604	)
Other non-current liabilities	(3,592		)	(4,540		)
Deferred tax effect of accumulated other comprehensive loss	865			1,182
Accumulated other comprehensive loss	(888		)	(364		)
Net amount recognized	$	(4,134	)	$	(4,326	)

In fiscal 2018, there is no estimated loss for the defined benefit postretirement health care plans that will be amortized from accumulated other comprehensive loss to net periodic benefit cost. In fiscal 2017, net periodic postretirement benefit cost included the following:



	Year Ended March 31,
	2017		2016		2015
Interest cost	$	152	$	189	$	209
Net amortization	—		89		60
Net periodic postretirement benefit cost	$	152	$	278	$	269

For measurement purposes, healthcare costs are assumed to increase 6.50% in fiscal 2018, grading down over time to 5.0% in five years. The discount rate used in determining the accumulated postretirement benefit obligation was 3.60% and 3.45% as of March 31, 2017 and 2016, respectively.

Information about the expected benefit payments for the Company’s postretirement health benefit plans is as follows:



2018	$	519
2019	501
2020	464
2021	417
2022	381
2023-2027	1,496

Assumed medical claims cost trend rates have an effect on the amounts reported for the health care plans. A one-percentage point change in assumed health care cost trend rates would have the following effects



	One Percentage Point Increase		One Percentage Point Decrease
Effect on total of service and interest cost components	$	8	$	(7	)
Effect on postretirement obligation	219		(199		)

The Company has collateralized split-dollar life insurance arrangements with two of its former officers. Under these arrangements, the Company pays certain premium costs on life insurance policies for the former officers. Upon the later of the death of the former officer or their spouse, the Company will receive all of the premiums paid to-date. The net periodic pension cost for fiscal 2017 was $231,000 and the liability at March 31, 2017 is $4,508,000 with $4,368,000 included in other non-current liabilities and $140,000 included in accrued liabilities in the consolidated balance sheet. The cash surrender value of the policies is $2,917,000 and $2,754,000 at March 31, 2017 and 2016, respectively. The balance is included in other assets in the consolidated balance sheet.

Other Benefit Plans

The Company also sponsors defined contribution plans covering substantially all domestic employees. Participants may elect to contribute basic contributions. These plans provide for employer contributions based on employee eligibility and participation. The Company recorded a charge for such contributions of approximately $3,543,000, $3,485,000, and $2,998,000 for the years ended March 31, 2017, 2016, and 2015, respectively. The Company expects its contributions for the defined contribution plans in future years to remain comparable to its fiscal 2016 contributions.

Fair Values of Plan Assets

The Company classified its investments within the categories of equity securities, fixed income securities, and cash equivalents, as the Company’s management bases its investment objectives and decisions from these three categories. The Company’s investment policy as it relates to its pension assets is to invest in broad-based mutual funds, with an investment objective of being diversified. Further the Company’s investment objective of its equity securities is long-term growth, its objective of the fixed income securities is long-term growth, consistency of income and preservation of capital, and its objective of cash equivalents is preservation of capital. It is the Company’s position that its investment policy and investment objectives as defined above reduce the risk of concentrations within its investments.

The fair values of the Company’s defined benefit plans’ consolidated assets by asset category as of March 31 were as follows:



	March 31,
	2017		2016
Asset categories:
Equity securities	$	220,497	$	212,301
Fixed income securities	99,700		104,622
Cash equivalents	1,243		945
Total	$	321,440	$	317,868

The fair values of our defined benefit plans’ consolidated assets were determined using the fair value hierarchy of inputs described in Note 4. The fair values by category of inputs as of March 31, 2017 and March 31, 2016 were as follows:



	Quoted Prices in Active Markets for Identical Assets		Significant other observable Inputs		Significant unobservable Inputs
As of March 31, 2017:	(Level 1)		(Level 2)		(Level 3)		Total
Asset categories:
Equity securities	$	149,435	$	71,062	$	—	$	220,497
Fixed income securities	32,010		49,524		18,166		99,700
Cash equivalents	1,243		—		—		1,243
Total	$	182,688	$	120,586	$	18,166	$	321,440



	Quoted Prices in Active Markets for Identical Assets		Significant other observable Inputs		Significant unobservable Inputs
As of March 31, 2016:	(Level 1)		(Level 2)		(Level 3)		Total
Asset categories:
Equity securities	$	142,947	$	69,354	$	—	$	212,301
Fixed income securities	34,326		52,438		17,858		104,622
Cash equivalents	945		—		—		945
Total	$	178,218	$	121,792	$	17,858	$	317,868

Level 1 fixed income securities consist of fixed income mutual funds with quoted market prices.

The Level 2 securities are investments in common collective trust funds and certain debt securities. The fair values of the common collective trust fund securities are determined based on the net asset value of these funds. Each of these investment funds has a stated performance objective to approximate as closely as practicable, before expenses, the performance of the stated benchmark to which the funds are indexed, over the long term. Redemptions of the units held in these funds may be made on the last business day of each month and on at least one other business day during the month, based on the net asset value per unit of the funds. We are not aware of any significant restrictions on the issuances or redemptions of units of participation in these funds. Fixed income securities categorized as level 2 are investments in a combination of funds whose underlying investments are in a variety of fixed income securities including foreign and domestic corporate bonds, securities issued by the US government, US and foreign government obligations, and other similar fixed income investments. The fair values of the underlying investments in these funds are generally based on independent broker dealer bids, or by comparison to other debt securities having similar durations, yields, and credit ratings. The fair values of these funds are determined based on their net asset values. We are not aware of any significant restrictions on the issuances or redemption of shares of these funds

Fair value of Level 3 fixed income securities at the beginning of the year was $17,858,000. During fiscal 2017 fixed income securities earned investment return of $678,000 and had disbursements of $370,000 resulting in an ending balance of $18,166,000. These fixed income securities consist primarily of insurance contracts which are carried at their liquidation value based on actuarial calculations and the terms of the contracts. Significant inputs in determining the fair value for these contracts include company contributions, contract disbursements, and stated interest rates. Gains and losses on these contracts are recognized as part of net periodic pension cost and recorded as part of cost of sales, selling, or general and administrative expense.