Employee Benefit Plans

12 Months Ended

Jul. 31, 2020

Retirement Benefits, Description [Abstract]

Employee Benefit Plans

Employee Benefit Plans

Defined Benefit Pension Plans

The Company and certain of its international subsidiaries have defined benefit pension plans for many of their hourly and salaried employees. There are two types of U.S. plans. The first type of U.S. plan (Hourly Pension Plan) is a traditional defined benefit pension plan primarily for union production employees. The second plan (Salaried Pension Plan) is for some salaried and non-union production employees that provides defined benefits pursuant to a cash balance feature whereby a participant accumulates a benefit comprised of a percentage of current salary that varies with years of service, interest credits and transition credits. The Company no longer allows entrants into the U.S. Salaried Pension Plan and the participating employees no longer accrue Company contribution credits under the plan. Instead, eligible employees receive a 3% annual retirement contribution to their 401(k) in addition to the Company’s normal 401(k) match. The non-U.S. plans consist of plans in Belgium, Germany, Mexico, and the United Kingdom. These defined plans generally provide pension benefits based on years of service and compensation level. Components of net periodic benefit cost other than then service cost component are included in other income, net in the Consolidated Statements of Earnings.

Net periodic pension costs and amounts recognized in other comprehensive (loss) income for the Company’s pension plans include the following components (in millions):

	Year Ended July 31,
	2020		2019		2018
Net periodic benefit cost
Service cost	$	9.5	$	6.0	$	8.1
Interest cost	13.5		16.4		14.8
Expected return on assets	(26.1)		(26.5)		(26.2)
Prior service cost and transition amortization	0.7		0.6		0.3
Actuarial loss amortization	6.5		4.4		4.6
Settlement loss	3.1		2.9		3.5
Net periodic benefit costs	7.2		3.8		5.1
Other changes recognized in other comprehensive (loss) income:
Net actuarial (loss) gain	(25.2)		(29.0)		7.2
Amortization of asset obligations	0.2		0.2		0.2
Amortization of prior service cost	0.6		0.4		0.1
Amortization of net actuarial loss	9.5		7.3		8.1
Total recognized in other comprehensive (loss) income	(14.9)		(21.1)		15.6
Total recognized in net periodic benefit costs and other comprehensive (loss) income	$	(22.1)	$	(24.9)	$	10.5

The changes in projected benefit obligations, fair value of plan assets and funded status of the Company’s pension plans for the years ended July 31, 2020 and 2019 are summarized as follows (in millions):

	Year Ended July 31,
	2020		2019
Change in projected benefit obligation:
Projected benefit obligation, beginning of fiscal year	$	520.4	$	488.2
Service cost	9.5		6.0
Interest cost	13.5		16.4
Plan amendments	—		1.2
Participant contributions	0.8		0.8
Actuarial loss	55.2		42.5
Currency exchange rates	12.8		(11.2)
Settlement	(10.7)		(10.5)
Net transfers	—		1.2
Benefits paid	(15.9)		(14.2)
Projected benefit obligation, end of fiscal year	$	585.6	$	520.4
Change in fair value of plan assets:
Fair value of plan assets, beginning of fiscal year	$	502.2	$	486.3
Actual return on plan assets	59.1		39.4
Company contributions	3.0		10.4
Participant contributions	0.8		0.8
Currency exchange rates	12.1		(11.2)
Settlement	(10.7)		(10.5)
Net transfers	—		1.2
Benefits paid	(15.9)		(14.2)
Fair value of plan assets, end of fiscal year	$	550.6	$	502.2
Funded status:
Projected benefit obligation in excess of plan assets, end of fiscal year	$	(35.0)	$	(18.2)
Amounts recognized on the Consolidated Balance Sheets consist of:
Other long-term assets	$	6.2	$	6.8
Other current liabilities	(1.5)		(1.5)
Other long-term liabilities	(39.7)		(23.5)
Net recognized liability	$	(35.0)	$	(18.2)

The net underfunded status of $35.0 million and $18.2 million at July 31, 2020 and 2019, respectively, is recognized in the accompanying Consolidated Balance Sheets. The pension-related accumulated other comprehensive loss at July 31, 2020 and 2019 (prior to the consideration of income taxes) was $166.1 million and $152.0 million, respectively, and consisted primarily of unrecognized actuarial losses. The loss expected to be recognized in net periodic pension expense during the year ending July 31, 2021 is $8.8 million. The accumulated benefit obligation for all defined benefit pension plans was $561.9 million and $499.1 million at July 31, 2020 and 2019, respectively.

The projected benefit obligation and fair value of plan assets for pension plans with projected benefit obligations in excess of plan assets were $220.4 million and $179.3 million, respectively, as of July 31, 2020, and $190.6 million and $165.6 million, respectively, as of July 31, 2019.

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were $158.0 million, $156.2 million and $133.1 million, respectively, as of July 31, 2020 and $135.0 million, $133.2 million and $122.5 million, respectively, as of July 31, 2019.

Assumptions

The weighted average discount rate and rates of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligation are as follows:

Projected Benefit Obligation	Year Ended July 31,
Weighted average actuarial assumptions	2020		2019
All U.S. plans:
Discount rate	2.37	%	3.54	%
Non-U.S. plans:
Discount rate	1.48	%	1.79	%
Rate of compensation increase	2.88	%	2.69	%

The weighted average discount rates, expected returns on plan assets and rates of increase in future compensation levels used to determine the net periodic benefit cost are as follows:

Net Periodic Benefit Cost	Year Ended July 31,
Weighted average actuarial assumptions	2020		2019		2018
All U.S. plans:
Discount rate	3.55	%	4.43	%	3.94	%
Expected return on plan assets	6.08	%	6.25	%	6.58	%
Rate of compensation increase	N/A		N/A		N/A
Non-U.S. plans:
Discount rate	1.85	%	2.43	%	2.40	%
Expected return on plan assets	3.78	%	4.08	%	4.19	%
Rate of compensation increase	2.72	%	2.69	%	2.70	%

Discount Rates The Company’s objective in selecting a discount rate is to select the best estimate of the rate at which the benefit obligations could be effectively settled on the measurement date, taking into account the nature and duration of the benefit obligations of the plan. In making this best estimate, the Company looks at rates of return on high-quality, fixed-income investments currently available, and expected to be available, during the period to maturity of the benefits. This process includes looking at the universe of bonds available on the measurement date with a quality rating of Aa or better. Similar appropriate benchmarks are used to determine the discount rate for the non-U.S. plans.

The Company utilizes a full yield curve approach to estimate service and interest costs by applying specific spot rates along the yield curve used to determine the benefit obligation of relevant projected cash outflows. This method provides a precise measurement of service and interest costs by aligning the timing of the plans’ liability cash flows to the corresponding spot rate on the yield curve.

Expected Long-Term Rate of Return To develop the expected long-term rate of return on assets assumption, the Company considers the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation for each plan. Based on portfolio performance, as of the measurement date of July 31, 2020, the Company’s long-term rate of return for the U.S. and non-U.S. pension plans is an asset-based weighted average of 6.08% and 3.78%, respectively. The expected long-term rate of return on assets shown in the pension benefit disclosure for U.S. and non-U.S. plans is an asset-based weighted average of all plans for each category.

Fair Value of Plan Assets

The estimated fair value of U.S. pension plan assets and their respective levels in the fair value hierarchy at July 31, 2020 and 2019 by asset category are as follows (in millions):

	U.S Pension Plans
Asset Category	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Measured Using NAV Per Share as Practical Expedient		Total
July 31, 2020
Cash and cash equivalents	$	6.7	$	3.3	$	—	$	—	$	10.0
Global equity securities	79.3		—		—		40.5		119.8
Fixed income securities	99.9		110.8		—		—		210.7
Private equity and other funds	—		—		—		26.8		26.8
Real asset funds	—		—		—		3.0		3.0
Total U.S. assets	$	185.9	$	114.1	$	—	$	70.3	$	370.3
July 31, 2019
Cash and cash equivalents	$	3.6	$	0.4	$	—	$	—	$	4.0
Global equity securities	76.3		—		—		35.8		112.1
Fixed income securities	95.2		96.7		—		—		191.9
Private equity and other funds	—		—		—		33.1		33.1
Real asset funds	—		—		—		3.4		3.4
Total U.S. assets	$	175.1	$	97.1	$	—	$	72.3	$	344.5

Certain investments held by the U.S. pension plans as of July 31, 2020, valued at net asset value (NAV), had the following unfunded commitments and/or redemption restrictions (in millions):

	U.S Pension Plans
Asset Category	Measured Using NAV Per Share as Practical Expedient		Unfunded Commitments		Redemption Frequency (If Currently Eligible)	Redemption Notice Period
July 31, 2020
Global equity securities	$	40.5	$	1.8	Monthly, Weekly	10 - 90 days
Private equity and other funds	26.8		—		Quarterly, Semi-Annually	60 - 90 days
Real asset funds	3.0		4.3		Not eligible	N/A
Total U.S. assets	$	70.3	$	6.1

Global equity securities consists primarily of publicly traded U.S. and non-U.S. equities, mutual funds and collective investment trusts. Publicly traded equities and index funds are valued at the closing price reported in the active market in which the individual securities are traded.

Fixed income securities consists primarily of investment and non-investment grade debt securities, debt securities issued by the U.S. Treasury, and exchange-traded funds. Government, corporate and other bonds and notes are valued at the closing price reported if traded on an active market or at yields currently available on comparable securities of issuers with similar credit ratings.

Private equity and other funds consists primarily of equity private placement funds, private equity investments and alternative fixed income-like investments. Private equity consists of interests in partnerships that invest in U.S. and non-U.S. equity and debt securities. This may include a diversified mix of partnership interests including buyouts, restructured/distressed debt, growth equity, mezzanine/subordinated debt, real estate, special situation partnerships and venture capital investments. Alternative fixed income-like investments consist primarily of private partnership interests in hedge funds of funds. Interests in these funds are valued at the NAV per share, which is a practical expedient for measuring fair value and thus not classified in the fair value hierarchy. The NAV is determined by the administrator custodian of the fund based on the fair value of the underlying assets owned by the fund less its liabilities, then divided by the number of units outstanding.

Real assets funds consists of funds and interests in partnerships that invest in private real estate, commodities and timber investments. Interests in partnerships are valued using the NAV from the most recent partnership statement, updated for any subsequent partnership interests’ cash flows.

The estimated fair values of non-U.S. pension plan assets and their respective levels in the fair value hierarchy at July 31, 2020 and 2019 by asset category are as follows (in millions):

	Non-U.S. Pension Plans
Asset Category	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
July 31, 2020
Cash and cash equivalents	$	0.1	$	—	$	—	$	0.1
Global equity securities	91.6		—		—		91.6
Fixed income securities	11.5		—		—		11.5
Investment funds	—		41.7		—		41.7
Insurance contracts	—		—		35.4		35.4
Total Non-U.S. assets	$	103.2	$	41.7	$	35.4	$	180.3
July 31, 2019
Cash and cash equivalents	$	0.4	$	—	$	—	$	0.4
Global equity securities	79.4		—		—		79.4
Fixed income securities	11.9		—		—		11.9
Investment funds	—		35.2		—		35.2
Insurance contracts	—		—		30.8		30.8
Total Non-U.S. assets	$	91.7	$	35.2	$	30.8	$	157.7

Global equity securities consists of publicly traded diversified growth funds invested across a broad range of traditional and alternative asset classes that may include, but are not limited to: equities, investment grade and high yield bonds, property, private equity, infrastructure, commodities and currencies. They may invest directly or hold up to 100% of the fund in other collective investment vehicles and may use exchange traded and over-the-counter financial derivatives, such as currency forwards or futures, for both investment as well as hedging purposes. Publicly traded equities and funds are valued at the closing price reported in the active market in which the individual securities are traded.

Fixed income securities consists primarily of investment grade debt securities and bond funds. Corporate bonds and notes are valued at either the yields currently available on comparable securities of issuers with similar credit ratings or valued under a discounted cash flows approach that maximizes observable inputs, such as current yields of similar instruments, but can include adjustments for certain risks that may not be observable such as credit and liquidity risks. The bond funds are traded on an active market and are valued at the closing price reported.

Investment funds consists of liability driven investment funds that may hold a range of low-risk hedging instruments including but not limited to government and corporate bonds, interest rate and inflation swaps, physical inflation-linked and nominal gilts, synthetic gilts, cash and money market instruments. The investment funds are valued at the closing price reported if traded on an active market or at yields currently available on comparable securities of issuers with similar credit ratings.

Insurance contracts are individual contracts whereby an insurance company offers a guaranteed minimum interest return. The Company does not have any influence on the investment decisions made by the insurer. European insurers, in general, are strictly regulated by an external control mechanism and have to invest for their guaranteed interest products within certain boundaries. Typically they have a strategic asset allocation with 80% to 90% fixed income products and 10% to 20% equity type products (including real estate).

The following table summarizes the changes in the fair values of the non-U.S. pension plans’ Level 3 assets for the years ended July 31, 2020, 2019 and 2018 (in millions):

	Non-U.S. Pension Plans
Ending balance at July 31, 2017	$	34.3
Unrealized losses	(4.0)
Foreign currency exchange	0.2
Purchases	0.5
Sales	(2.4)
Ending balance at July 31, 2018	28.6
Unrealized gains	3.5
Foreign currency exchange	(1.5)
Purchases	0.5
Sales	(0.3)
Ending balance at July 31, 2019	30.8
Unrealized gains	4.1
Foreign currency exchange	2.1
Purchases	0.5
Sales	(2.1)
Ending balance at July 31, 2020	$	35.4

Investment Policies and Strategies

For U.S. pension plans, the Company uses a total return investment approach to achieve a long-term return on plan assets, with what the Company believes to be a prudent level of risk for the purpose of meeting its retirement income commitments to employees. The plans’ investments are diversified to assist in managing risk. During the year ended July 31, 2020, the Company’s asset allocation guidelines targeted an allocation as follows:

	Salaried Pension Plan		Hourly Pension Plan
Global equities	33	%	37	%
Fixed income	65		60
Real assets	1		2
Cash and cash equivalents	1		1
Total	100	%	100	%

The targeted percentages are inclusive of private equity and other fund vehicles. These target allocation guidelines are determined in consultation with the Company’s investment consultant and through the use of modeling the risk/return trade-offs among asset classes utilizing assumptions about expected annual return, expected volatility/standard deviation of returns and expected correlations with other asset classes.

For non-U.S. plans, the general investment objectives are to maintain a suitably diversified portfolio of secure assets of appropriate liquidity that will generate income and capital growth to meet, together with any new contributions from members and the Company, the cost of current and future benefits. Investment policy and performance is measured and monitored on an ongoing basis by the Company’s Investment Committee through its use of an investment consultant and through quarterly investment portfolio reviews.

Estimated Contributions and Future Payments

The Company’s general funding policy is to make at least the minimum required contributions as required by applicable regulations, plus any additional amounts that it determines to be appropriate. The Company made required contributions of $4.0 million to its qualified U.S. pension plans and $1.5 million to its non-qualified U.S. pension plans during the year ended July 31, 2020. In August 2020, the Company contributed an additional $0.9 million to the qualified U.S. pension plans. The Company estimates that it will contribute approximately $1.5 million to its non-qualified U.S. pension plans for the year ended July 31, 2021. The estimated minimum funding requirement for the Company’s qualified U.S. pension plans for the year ending July 31, 2021 is $4.0 million. In accordance with the Pension Protection Act of 2006, this contribution obligation may be met with existing credit balances that resulted from payments above the minimum obligation in prior fiscal years. The Company had sufficient credit balances to meet the minimum obligation for the plan year ended July 31, 2020 of its qualified U.S. pension plans. The Company made contributions of $1.0 million to its non-U.S. pension plans during the year ended July 31, 2020 and estimates that it will contribute approximately $1.6 million in the year ended July 31, 2021 based upon the local government prescribed funding requirements. Future estimates of the Company’s pension plan contributions may change significantly depending on the actual rate of return on plan assets, discount rates and regulatory requirements.

The estimated future benefit payments for the Company’s U.S. and non-U.S. plans are as follows (in millions):

Year Ending July 31,	Estimated Future Benefit Payments
2021	$	30.0
2022	27.3
2023	27.5
2024	25.9
2025	29.7
2025-2029	147.3

Retirement Savings and Employee Stock Ownership Plan

The Company provides a contributory employee savings plan to U.S. employees that permits participants to make contributions by salary reduction pursuant to section 401(k) of the Internal Revenue Code. For eligible employees, employee contributions of up to 50% of compensation are matched at a rate equaling 100% of the first 3% contributed and 50% of the next 2% contributed. In addition, the Company contributes 3% of compensation annually for eligible employees. Total contribution expense for these plans was $22.0 million, $23.5 million, and $22.1 million for the years ended July 31, 2020, 2019 and 2018, respectively. This plan also includes shares from an Employee Stock Ownership Plan (ESOP). As of July 31, 2020, all shares of the ESOP have been allocated to participants. Total ESOP shares are considered to be shares outstanding for diluted earnings per share calculations.

Deferred Compensation and Other Benefit Plans

The Company provides various deferred compensation and other benefit plans to certain executives. The deferred compensation plan allows these employees to defer the receipt of all of their bonus and other stock-related compensation and up to 75% of their salary to future periods. Other benefit plans are provided to supplement the benefits for a select group of highly compensated individuals that are reduced because of compensation limitations set by the Internal Revenue Code. The Company has recorded a liability of $4.1 million and $5.0 million as of July 31, 2020 and 2019, respectively, related primarily to its deferred compensation plans.