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, 2018 and 2017 (in millions):



	Domestic Plans						International Plans
	August 31,						August 31,
	2018			2017			2018			2017
Change in benefit obligation:
Benefit obligation at beginning of year	$	215.5		$	223.0		$	53.5		$	57.3
Service cost	2.7			3.5			0.2			0.2
Interest cost	7.3			6.9			1.3			1.1
Actuarial gain	(14.3		)	(10.2		)	(4.5		)	(3.2		)
Benefits paid	(8.0		)	(7.7		)	(5.5		)	(1.0		)
Other	—			—			0.5			(0.9		)
Benefit obligation at end of year	203.2			215.5			45.5			53.5
Change in plan assets:
Fair value of plan assets at beginning of year	$	136.8		$	128.8		$	34.1		$	30.3
Actual return on plan assets	11.3			12.1			0.9			4.1
Employer contributions	9.3			3.6			1.2			1.0
Benefits paid	(8.0		)	(7.7		)	(5.5		)	(1.0		)
Other	—			—			0.2			(0.3		)
Fair value of plan assets at end of year	149.4			136.8			30.9			34.1
Funded status at the end of year	$	(53.8	)	$	(78.7	)	$	(14.6	)	$	(19.4	)
Amounts recognized in the consolidated balance sheets consist of:
Non-current assets	$	1.6		$	—		$	—		$	—
Current liabilities	(5.3		)	(1.2		)	(0.1		)	—
Non-current liabilities	(50.1		)	(77.5		)	(14.5		)	(19.4		)
Net amount recognized in Consolidated Balance Sheets	$	(53.8	)	$	(78.7	)	$	(14.6	)	$	(19.4	)
Accumulated benefit obligation	$	202.7		$	215.3		$	45.5		$	53.5
Pre-tax amounts in accumulated other comprehensive income:
Prior service cost	$	(4.6	)	$	(7.7	)	$	—		$	—
Net actuarial loss	(58.8		)	(78.7		)	(12.9		)	(18.2		)
Amounts in accumulated other comprehensive income	$	(63.4	)	$	(86.4	)	$	(12.9	)	$	(18.2	)
Pensions plans in which benefit obligation exceeds plan assets:
Projected benefit obligation	$	119.2		$	215.5		$	45.5		$	53.5
Accumulated benefit obligation	118.7			215.3			45.5			53.5
Plan assets	63.8			136.8			30.9			34.1
Pensions plans in which plan assets exceed benefit obligation:
Projected benefit obligation	$	84.0		$	—		$	—		$	—
Accumulated benefit obligation	84.0			—			—			—
Plan assets	85.6			—			—			—
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	$	2.9		$	4.5		$	1.5		$	2.2

Net periodic pension cost is allocated between Cost of products sold and Selling, distribution, and administrative expenses in the Consolidated Statements of Comprehensive Income based on the nature of the employee's other services. Components of net periodic pension cost for the fiscal years ended August 31, 2018, 2017, and 2016 included the following (in millions):



	Domestic Plans									International Plans
	2018			2017			2016			2018			2017			2016
Service cost	$	2.7		$	3.5		$	3.6		$	0.2		$	0.2		$	0.1
Interest cost	7.3			6.9			8.0			1.3			1.1			1.7
Expected return on plan assets	(10.2		)	(9.4		)	(9.2		)	(2.2		)	(1.9		)	(1.9		)
Amortization of prior service cost	3.1			3.1			3.1			—			—			—
Recognized actuarial loss	4.5			5.3			3.0			2.3			3.6			1.9
Net periodic pension cost	$	7.4		$	9.4		$	8.5		$	1.6		$	3.0		$	1.8

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



	Domestic Plans				International Plans
	2018		2017		2018		2017
Discount rate	3.9	%	3.5	%	2.9	%	2.5	%
Rate of compensation increase	5.5	%	5.5	%	3.1	%	3.2	%

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



	Domestic Plans						International Plans
	2018		2017		2016		2018		2017		2016
Discount rate	3.5	%	3.2	%	4.3	%	2.5	%	2.1	%	2.1	%
Expected return on plan assets	7.5	%	7.5	%	7.5	%	6.5	%	6.5	%	6.5	%
Rate of compensation increase	5.5	%	5.5	%	5.5	%	3.1	%	3.2	%	2.8	%

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 reduce net periodic pension cost approximately $1.4 million and approximately $0.6 million for the domestic plans and international plans, respectively. 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 $1.5 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 2018, 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 2018, the international asset target allocation approximated 62% equity securities, 23% fixed income securities, and 15% multi-strategy funds.

The Company’s pension plan asset allocation at August 31, 2018 and 2017 by asset category is as follows:



	% of Plan Assets
	Domestic Plans				International Plans
	2018		2017		2018		2017
Equity securities	57.5	%	58.1	%	61.9	%	63.9	%
Fixed income securities	37.8	%	37.2	%	25.5	%	23.2	%
Multi-strategy investments	—	%	—	%	12.6	%	8.2	%
Real estate	4.7	%	4.7	%	—	%	4.7	%
Total	100.0	%	100.0	%	100.0	%	100.0	%

The Company’s pension plan assets are stated at fair value based on 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. Certain pension assets valued at net asset value (“NAV”) per share as a practical expedient are excluded from the fair value hierarchy. Investments in pension plan assets are described in further detail below.

Short-term Fixed Income Investments: Short-term investments consist of money market funds, which are valued at the daily closing price as reported by the relevant fund (Level 1).

Mutual Funds: Mutual funds held by the domestic plans are open-end mutual funds that are registered with the Securities and Exchange Commission and seek to either replicate or outperform a related index. These funds are required to publish their daily net asset value and to transact at that price. The mutual funds held by the domestic plans are deemed to be actively traded (Level 1).

Collective Trust: The collective trust seeks to outperform the overall small-cap stock market and is comprised of small cap equity securities with quoted prices in active markets for identical investments. The value of this fund is calculated on each business day by dividing the total value of assets, less liabilities, by the number of units of each class outstanding but is not published (Level 2).

Fixed Income Investments: The fixed interest fund seeks to maximize total return by investing primarily in a diversified portfolio of intermediate and long-term debt securities and is valued using the NAV of units of a management investment company’s trust. The NAV, as provided by the fund's trustee, is used as a practical expedient to estimate fair value. As such, these funds are excluded from the fair value hierarchy. The NAV is based on the fair value of the underlying investments held by the fund less the fund's liabilities.

Real Estate Fund: The real estate fund invests primarily in commercial real estate and includes mortgage loans that are backed by the associated property's investment objective. The fund seeks real estate returns, risk, and liquidity appropriate to a core fund. The fund also seeks to provide current income with the potential for long-term capital appreciation. This investment is valued based on the NAV per share, without further adjustment. The NAV, as provided by the fund's trustee, is used as a practical expedient to estimate fair value and is therefore excluded from the fair value hierarchy. NAV is based on the fair value of the underlying investments. Investors may request to redeem all or any portion of their shares on a quarterly basis. Each investor must provide a written redemption request at least sixty days prior to the end of the quarter for which the request is to be effective. If insufficient funds are available to honor all redemption requests at any point in time, available funds will be allocated pro-rata based on the total number of shares held by each investor. All decisions regarding whether to honor redemption requests are made by the fund’s board of directors.

International Plan Investments: The international plans' assets consist primarily of funds invested in equity securities, multi-strategy investments, and fixed income investments. These securities are calculated using the values of the underlying holdings (i.e. significant observable inputs) but do not have actively quoted market prices (Level 2). The short-term fixed income investments represents cash and cash equivalents held by the funds at fiscal year end (Level 1). The international plans divested from the real estate fund during the current fiscal year, which was previously valued using NAV as a practical expedient and was excluded from the fair value hierarchy.

The following tables present the fair value of the domestic pension plan assets by major category as of August 31, 2018 and 2017 (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, 2018		(Level 1)		(Level 2)		(Level 3)
Assets included in the fair value hierarchy:
Mutual funds:
Domestic large cap equity fund	$	48.3	$	48.3	$	—	$	—
Foreign equity fund	20.8		20.8		—		—
Collective trust: Domestic small cap equities	16.8		—		16.8		—
Short-term fixed income investments	7.6		7.6		—		—
Total assets in the fair value hierarchy	93.5
Assets calculated at net asset value:
Fixed-income investments	48.9
Real estate fund	7.0
Total assets at net asset value	55.9
Total assets at fair value	$	149.4



			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)
Assets included in the fair value hierarchy:
Mutual funds:
Domestic large cap equity fund	$	43.4	$	43.4	$	—	$	—
Foreign equity fund	21.5		21.5		—		—
Collective trust: Domestic small cap equities	14.6		—		14.6		—
Short-term fixed income investments	4.7		4.7		—		—
Total assets in the fair value hierarchy	84.2
Assets calculated at net asset value:
Fixed-income investments	46.2
Real estate fund	6.4
Total assets at net asset value	52.6
Total assets at fair value	$	136.8

The following tables present the fair value of the international pension plan assets by major category as of August 31, 2018 and 2017 (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, 2018		(Level 1)		(Level 2)		(Level 3)
Assets included in the fair value hierarchy:
Equity securities	$	19.1	$	—	$	19.1	$	—
Short-term fixed income investments	0.3		0.3		—		—
Multi-strategy investments	3.9		—		3.9		—
Fixed-income investments	7.6		—		7.6		—
Total assets at fair value	$	30.9



			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)
Assets included in the fair value hierarchy:
Equity securities	$	21.8	$	—	$	21.8	$	—
Short-term fixed income investments	0.2		0.2		—		—
Multi-strategy investments	2.8		—		2.8		—
Fixed-income investments	7.7		—		7.7		—
Total assets in the fair value hierarchy	32.5
Assets calculated at net asset value:
Real estate fund	1.6
Total assets at net asset value	1.6
Total fair value of assets	$	34.1

The Company expects to contribute approximately $5.3 million and $1.1 million during fiscal 2019 to its domestic and international defined benefit plans, respectively. These amounts are based on the total contributions required during fiscal 2019 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
2019	$	12.6	$	0.8
2020	9.1		0.9
2021	9.8		0.9
2022	10.3		1.0
2023	17.3		1.0
2024-2028	70.8		5.6

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, $0.5 million, and $0.7 million for the years ended August 31, 2018, 2017, and 2016, 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, $8.0 million, and $6.9 million for the years ended August 31, 2018, 2017, and 2016, respectively. Employer matching amounts are allocated in accordance with the participants’ investment elections for elective deferrals. At August 31, 2018, assets of the domestic defined contribution plans included shares of the Company’s common stock with a market value of approximately $9.9 million, which represented approximately 2.6% of the total fair market value of the assets in the Company’s domestic defined contribution plans.