Note K – Employee Pension 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 company matching contributions, annual or monthly employer contributions and discretionary contributions, based on individual plan provisions.

We also have one defined benefit plan, The Gerstenslager Company Bargaining Unit Employees’ Pension Plan (the “Gerstenslager Plan” or “defined benefit 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.

The following table summarizes the components of net periodic pension cost for the defined benefit plan and the defined contribution plans for the years ended May 31:


(in thousands)	2015			2014			2013
Defined benefit plan:
Interest cost	$	1,541		$	1,403		$	1,361
Actual return on plan assets		1,846			2,524			4,355
Net amortization and deferral		(3,641	)		(4,175	)		(5,522	)

Net periodic pension cost (benefit) on defined benefit plan		(254	)		(248	)		194
Defined contribution plans		13,270			12,586			9,955

Total retirement plan cost	$	13,016		$	12,338		$	10,149

The following actuarial assumptions were used for our defined benefit plan:


	2015			2014			2013
To determine benefit obligation:
Discount rate		4.07	%		4.38	%		4.44	%
To determine net periodic pension cost:
Discount rate		4.38	%		4.44	%		4.16	%
Expected long-term rate of return		7.00	%		8.00	%		8.00	%
Rate of compensation increase		n/a			n/a			n/a

To calculate the discount rate, we used the expected cash flows of the benefit payments and the Citigroup Pension Index. The Gerstenslager Plan’s expected long-term rate of return in fiscal 2015, fiscal 2014 and fiscal 2013 was based on the actual historical returns adjusted for a change in the frequency of lump-sum settlements upon retirement. In determining our benefit obligation, we use the actuarial present value of the vested benefits to which each eligible employee is currently entitled, based on the employee’s expected date of separation or retirement.

The following tables provide a reconciliation of the changes in the projected benefit obligation and fair value of plan assets and the funded status for the Gerstenslager Plan during fiscal 2015 and fiscal 2014 as of the respective measurement dates:


(in thousands)	May 31, 2015			May 31, 2014
Change in benefit obligation
Benefit obligation, beginning of year	$	35,539		$	31,930
Interest cost		1,541			1,403
Actuarial loss		3,924			3,002
Benefits paid		(777	)		(796	)

Benefit obligation, end of year	$	40,227		$	35,539

Change in plan assets
Fair value, beginning of year	$	26,470		$	24,442
Actual return on plan assets		1,846			2,524
Company contributions		620			300
Benefits paid		(777	)		(796	)

Fair value, end of year	$	28,159		$	26,470

Funded status	$	(12,068	)	$	(9,069	)

Amounts recognized in the consolidated balance sheets consist of:
Other liabilities	$	(12,067	)	$	(9,069	)
Accumulated other comprehensive loss		17,900			14,028
Amounts recognized in accumulated other comprehensive loss consist of:
Net loss		17,900			14,028

Total	$	17,900		$	14,028

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


(in thousands)	2015			2014
Net actuarial loss	$	(4,199	)	$	(2,419	)
Amortization of net loss		327			290

Total recognized in other comprehensive loss	$	(3,872	)	$	(2,129	)

Total recognized in net periodic benefit cost and other comprehensive loss	$	(3,618	)	$	(1,881	)

The estimated net loss for the defined benefit plan that will be amortized from AOCI into net periodic pension cost over the fiscal year ending May 31, 2016 is $433,654.

Pension plan assets are required to be disclosed at fair value in the consolidated financial statements. Fair value is defined in “Note Q – 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.

The following table sets forth, by level within the fair value hierarchy, a summary of the defined benefit plan’s assets measured at fair value on a recurring basis at May 31, 2015:


(in thousands)	Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Investment:
Money Market Funds	$	1,775	$	1,775	$	-	$	-
Bond Funds		11,524		11,524		-		-
Equity Funds		14,860		14,860		-		-

Totals	$	28,160	$	28,160	$	-	$	-

The following table sets forth by level within the fair value hierarchy a summary of the defined benefit plan’s assets measured at fair value on a recurring basis at May 31, 2014:


(in thousands)	Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Investment:
Money Market Funds	$	1,099	$	1,099	$	-	$	-
Bond Funds		11,570		11,570		-		-
Equity Funds		13,801		13,801		-		-

Totals	$	26,470	$	26,470	$	-	$	-

Fair values of the money market, bond and equity funds held by the defined benefit plan were determined by quoted market prices.

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


	May 31, 2015			May 31, 2014
Asset category
Equity securities		53	%		52	%
Debt securities		41	%		44	%
Other		6	%		4	%

Total		100	%		100	%

Equity securities include no employer stock. The investment policy and strategy for the defined benefit plan 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 actuarial assumptions of the plan; and (iii) to include a strategic asset allocation of 60-80% equities, including international, and 20%-40% fixed income investments. No employer contributions are expected to be made to the defined benefit plan during fiscal 2016.

The following estimated future benefits, which reflect expected future service, as appropriate, are expected to be paid during the fiscal years noted:


(in thousands)
2016	$	799
2017	$	872
2018	$	958
2019	$	1,080
2020	$	1,183
2021-2025	$	7,896

Commercial law requires us to pay severance and service benefits to employees at our Austrian Pressure Cylinders 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 $5,564,000 and $6,440,000 at May 31, 2015 and 2014, respectively, and was included in other liabilities on the consolidated balance sheets. Net periodic pension cost for these plans was $718,000, $677,000, and $689,000, for fiscal 2015, fiscal 2014 and fiscal 2013, respectively. The assumed salary rate increase was 3.0%, for each of fiscal 2015, fiscal 2014 and fiscal 2013. The discount rate at May 31, 2015, 2014 and 2013 was 1.60%, 3.25%, and 4.50%, 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.