Pension and Defined Contribution Plans

Company-sponsored Pension Plans

The Company has several pension plans, both qualified and non-qualified, covering certain hourly and salaried employees. Benefits paid under these plans are based generally on employees’ years of service and/or compensation during the final years of employment. The Company makes annual contributions to the plans to the extent indicated by actuarial valuations and statutory requirements. Plan assets are invested primarily in equity and fixed income securities.

The following tables reflect the status of the Company’s domestic (U.S.-based) and international pension plans at August 31, 2017 and 2016 (in millions):



	Domestic Plans						International Plans
	August 31,						August 31,
	2017			2016			2017			2016
Change in benefit obligation:
Benefit obligation at beginning of year	$	223.0		$	192.2		$	57.3		$	49.8
Service cost	3.5			3.6			0.2			0.1
Interest cost	6.9			8.0			1.1			1.7
Actuarial (gain) loss	(10.2		)	27.5			(3.2		)	17.9
Benefits paid	(7.7		)	(8.3		)	(1.0		)	(3.6		)
Other	—			—			(0.9		)	(8.6		)
Benefit obligation at end of year	215.5			223.0			53.5			57.3
Change in plan assets:
Fair value of plan assets at beginning of year	$	128.8		$	123.9		$	30.3		$	32.6
Actual return on plan assets	12.1			7.9			4.1			5.2
Employer contributions	3.6			5.3			1.0			1.1
Benefits paid	(7.7		)	(8.3		)	(1.0		)	(3.6		)
Other	—			—			(0.3		)	(5.0		)
Fair value of plan assets at end of year	136.8			128.8			34.1			30.3
Funded status at the end of year	$	(78.7	)	$	(94.2	)	$	(19.4	)	$	(27.0	)
Amounts recognized in the consolidated balance sheets consist of:
Current liabilities	$	(1.2	)	$	(1.3	)	$	—		$	—
Non-current liabilities	(77.5		)	(92.9		)	(19.4		)	(27.0		)
Net amount recognized in Consolidated Balance Sheets	$	(78.7	)	$	(94.2	)	$	(19.4	)	$	(27.0	)
Accumulated benefit obligation	$	215.3		$	220.4		$	53.5		$	57.3
Pre-tax amounts in accumulated other comprehensive income:
Prior service cost	$	(7.7	)	$	(10.8	)	$	—		$	—
Net actuarial loss	(78.7		)	(96.9		)	(18.2		)	(28.2		)
Amounts in accumulated other comprehensive income	$	(86.4	)	$	(107.7	)	$	(18.2	)	$	(28.2	)
Estimated amounts that will be amortized from accumulated comprehensive income over the next fiscal year:
Prior service cost	$	3.1		$	3.1		$	—		$	—
Net actuarial loss	4.5			5.3			2.2			3.7

Components of net periodic pension cost for the fiscal years ended August 31, 2017, 2016, and 2015 included the following (in millions):



	Domestic Plans									International Plans
	2017			2016			2015			2017			2016			2015
Service cost	$	3.5		$	3.6		$	3.1		$	0.2		$	0.1		$	0.1
Interest cost	6.9			8.0			6.8			1.1			1.7			1.8
Expected return on plan assets	(9.4		)	(9.2		)	(9.2		)	(1.9		)	(1.9		)	(1.8		)
Amortization of prior service cost	3.1			3.1			1.4			—			—			—
Recognized actuarial loss	5.3			3.0			2.2			3.6			1.9			1.9
Net periodic pension cost	$	9.4		$	8.5		$	4.3		$	3.0		$	1.8		$	2.0

Weighted average assumptions used in computing the benefit obligation are as follows:



	Domestic Plans				International Plans
	2017		2016		2017		2016
Discount rate	3.5	%	3.2	%	2.5	%	2.1	%
Rate of compensation increase	5.5	%	5.5	%	3.2	%	2.8	%

Weighted average assumptions used in computing net periodic benefit cost are as follows:



	Domestic Plans						International Plans
	2017		2016		2015		2017		2016		2015
Discount rate	3.2	%	4.3	%	4.0	%	2.1	%	2.1	%	3.6	%
Expected return on plan assets	7.5	%	7.5	%	7.5	%	6.5	%	6.5	%	5.6	%
Rate of compensation increase	5.5	%	5.5	%	5.5	%	3.2	%	2.8	%	3.1	%

It is the Company’s policy to adjust, on an annual basis, the discount rate used to determine the projected benefit obligation to approximate rates on high-quality, long-term obligations based on the Company’s estimated benefit payments available as of the measurement date. The Company uses a publicly published yield curve to assist in the development of its discount rates. The Company estimates that each 100 basis point increase in the discount rate would result in reduced net periodic pension cost of approximately $1.2 million each for the domestic plans and international plans. The expected return on plan assets is derived from a periodic study of long-term historical rates of return on the various asset classes included in the Company’s targeted pension plan asset allocation. The Company estimates that each 100 basis point reduction in the expected return on plan assets would result in additional net periodic pension cost of $1.4 million and $0.3 million for domestic plans and international plans, respectively. The rate of compensation increase is also evaluated and adjusted by the Company, if necessary, annually.

The Company’s investment objective for domestic plan assets is to earn a rate of return sufficient to match or exceed the long-term growth of the plans’ liabilities without subjecting plan assets to undue risk. The plan assets are invested primarily in high quality equity and debt securities. The Company conducts a periodic strategic asset allocation study to form a basis for the allocation of pension assets between various asset categories. Specific allocation percentages are assigned to each asset category with minimum and maximum ranges established for each. The assets are then managed within these ranges. During fiscal 2017, the U.S. targeted asset allocation was 55% equity securities, 40% fixed income securities, and 5% real estate securities. The Company’s investment objective for the international plan assets is also to add value by matching or exceeding the long-term growth of the plans’ liabilities. During fiscal 2017, the international asset target allocation approximated 62% equity securities, 23% fixed income securities, 10% multi-strategy funds, and 5% real estate securities.

The Company’s pension plan asset allocation at August 31, 2017 and 2016 by asset category is as follows:



	% of Plan Assets
	Domestic Plans				International Plans
	2017		2016		2017		2016
Equity securities	58.1	%	55.4	%	63.9	%	61.1	%
Fixed income securities	37.2	%	39.1	%	23.2	%	25.0	%
Multi-strategy investments	—	%	—	%	8.2	%	8.9	%
Real estate	4.7	%	5.5	%	4.7	%	5.0	%
Total	100.0	%	100.0	%	100.0	%	100.0	%

The Company’s pension plan assets are stated at fair value from quoted market prices in an active market, quoted redemption values, or estimates based on reasonable assumptions as of the most recent measurement period. See the Fair Value Measurements footnote for a description of the fair value guidance.

No transfers between the levels of the fair value hierarchy occurred during the current fiscal period. In the event of a transfer in or out of a level within the fair value hierarchy, the transfers would be recognized on the date of occurrence.

The following tables present the fair value of the domestic pension plan assets by major category as of August 31, 2017 and 2016 (in millions):



			Fair Value Measurements
	Fair Value as of		Quoted Market Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	August 31, 2017		(Level 1)		(Level 2)		(Level 3)
Mutual funds:
Domestic large cap equity fund	$	43.4	$	43.4	$	—	$	—
Foreign equity fund	21.5		21.5		—		—
Real estate fund	6.4		—		—		6.4
Short-term fixed income investments	4.7		4.7		—		—
Fixed-income investments	46.2		—		46.2		—
Collective trust: domestic small cap equities	14.6		—		14.6		—
	$	136.8



			Fair Value Measurements
	Fair Value as of		Quoted Market Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	August 31, 2016		(Level 1)		(Level 2)		(Level 3)
Mutual funds:
Domestic large cap equity fund	$	46.5	$	46.5	$	—	$	—
Foreign equity fund	12.3		12.3		—		—
Real estate fund	7.1		—		—		7.1
Short-term fixed income investments	6.2		6.2		—		—
Fixed-income investments	44.2		—		44.2		—
Collective trust: Domestic small cap equities	12.5		—		12.5		—
	$	128.8

The following tables present the fair value of the international pension plan assets by major category as of August 31, 2017 and 2016 (in millions):



			Fair Value Measurements
	Fair Value as of		Quoted Market Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	August 31, 2017		(Level 1)		(Level 2)		(Level 3)
Equity securities	$	21.8	$	—	$	21.8	$	—
Short-term investments	0.2		0.2		—		—
Real estate fund	1.6		—		—		1.6
Multi-strategy investments	2.8		—		2.8		—
Fixed-income investments	7.7		—		7.7		—
	$	34.1



			Fair Value Measurements
	Fair Value as of		Quoted Market Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	August 31, 2016		(Level 1)		(Level 2)		(Level 3)
Equity securities	$	18.5	$	—	$	18.5	$	—
Short-term investments	0.5		0.5		—		—
Real estate fund	1.5		—		—		1.5
Multi-strategy investments	2.7		—		2.7		—
Fixed-income investments	7.1		—		7.1		—
	$	30.3

Publicly-traded securities are valued at the last reported sales price on the last business day of the period. Investments traded in the over-the-counter market and listed securities for which no sale was reported on the last day of the period are valued at the last reported bid price.

Investments in real estate are stated at estimated fair values based on the fund management’s valuations and upon appraisal reports prepared periodically by independent real estate appraisers. These investments are classified as Level 3 assets within the fair value hierarchy. The purpose of the appraisal is to estimate the fair value of the real estate as of a specific date based on the most probable price for which the appraised real estate will sell in a competitive market under all conditions requisite to a fair sale. Estimated fair value is based on (i) discounted cash flows using certain market assumptions, including holding period, discount rates, capitalization rates, rent and expense growth rates, future capital expenditures, and the ultimate sale of the property at the end of the holding period; (ii) the direct capitalization method; or (iii) the comparable sales method.

The tables below present a rollforward of the domestic and international pension plans’ Level 3 assets for the years ended August 31, 2017 and 2016 (in millions):



	Domestic Real Estate Fund
	Year Ended August 31,
	2017			2016
Balance, beginning of year	$	7.1		$	6.3
Net unrealized gain relating to instruments still held at the reporting date	0.2			0.5
Shares sold	(1.3		)	—
Shares purchased, including from dividend reinvestment	0.4			0.3
Balance, end of year	$	6.4		$	7.1



	International Real Estate Fund
	Year Ended August 31,
	2017		2016
Balance, beginning of year	$	1.5	$	1.6
Net unrealized loss relating to instruments still held at the reporting date	0.1		(0.1		)
Balance, end of year	$	1.6	$	1.5

The Company expects to contribute approximately $4.0 million and $1.1 million during fiscal 2018 to its domestic and international defined benefit plans, respectively. These amounts are based on the total contributions required during fiscal 2018 to satisfy current legal minimum funding requirements for qualified plans and estimated benefit payments for non-qualified plans.

Benefit payments are made primarily from funded benefit plan trusts. Benefit payments are expected to be paid as follows for the years ending August 31 (in millions):



	Domestic Plans		International Plans
2018	$	8.3	$	1.0
2019	8.4		1.0
2020	8.6		1.0
2021	12.3		1.1
2022	11.6		1.1
2023-2027	71.1		6.1

Multi-employer Pension Plans

The Company contributes to two multi-employer defined benefit pension plans under the terms of collective-bargaining agreements that cover certain of its union-represented employees. The risks of participating in these multi-employer plans are different from single-employer plans in the following aspects:


•	Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers.


•	If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be shared by the remaining participating employers.


•	If a participating employer chooses to stop participating in some of its multi-employer plans, the employer may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

The Company’s contributions to these plans were $0.5 million, $0.7 million, and $0.5 million for the years ended August 31, 2017, 2016, and 2015, respectively. During fiscal 2016, as a result of closing a facility, the Company withdrew from one of these multi-employer pension plans and incurred a withdrawal liability of $3.9 million. During fiscal 2017, the Company early settled this withdrawal liability.

Defined Contribution Plans

The Company also has defined contribution plans to which both employees and the Company make contributions. The cost to the Company for these plans was $8.0 million, $6.9 million, and $5.6 million for the years ended August 31, 2017, 2016, and 2015, respectively. Employer matching amounts are allocated in accordance with the participants’ investment elections for elective deferrals. At August 31, 2017, assets of the domestic defined contribution plans included shares of the Company’s common stock with a market value of approximately $12.2 million, which represented approximately 3.6% of the total fair market value of the assets in the Company’s domestic defined contribution plans.