Pension and Retirement Plans

We have defined benefit and defined contribution plans in the U.K., Germany and in the U.S. In the U.K. and Germany, the Company provides defined benefit pension plans for certain employees and former employees and defined contribution plans for the majority of the employees. The defined benefit plans in both the U.K. and Germany are closed to newly hired employees and have been for the two years ended September 30, 2017. In the U.S., the Company also provides defined contribution plans that cover most employees and supplementary retirement plans to certain employees and former employees who are now retired. These supplementary retirement plans are also closed to newly hired employees and have been for the two years ended September 30, 2017. These supplementary plans are funded through whole life insurance policies. The Company expects to recover all insurance premiums paid under these policies in the future, through the cash surrender value of the policies and any death benefits or portions thereof to be paid upon the death of the participant. These whole life insurance policies are carried on the balance sheet at their cash surrender values as they are owned by the Company and not assets of the defined benefit plans. In the U.S., the Company also provides for officer death benefits and post-retirement health insurance benefits through supplemental post-retirement plans to certain officers. The Company also funds these supplemental plans' obligations through whole life insurance policies on the officers.

Defined Benefit Plans

The Company funds its pension plans in amounts sufficient to meet the requirements set forth in applicable employee benefits laws and local tax laws. Liabilities for amounts in excess of these funding levels are accrued and reported in the consolidated balance sheet.

The German Plan does not have any assets and therefore all costs and benefits of the plan are funded annually with cash flow from operations.

The domestic supplemental retirement plans have life insurance policies which are not considered plan assets but were purchased by the Company as a vehicle to fund the costs of the plan. These insurance policies are included in the balance sheet at their cash surrender value, net of policy loans, aggregating $2.1 million and $1.9 million as of September 30, 2017 and 2016, respectively. The loans against the policies have been taken out by the Company to pay the premiums. The costs and benefit payments for these plans are paid through operating cash flows of the Company to the extent that they cannot be funded through the use of the cash values in the insurance policies. The Company expects that the recorded value of the insurance policies will be sufficient to fund all of the Company's obligations under these plans.

Assumptions:

The following table provides the weighted average actuarial assumptions used to determine the actuarial present value of projected benefit obligations at:



	Domestic				International
	September 30,				September 30,
	2017		2016		2017		2016
Discount rate:	3.75	%	3.50	%	2.34	%	1.77	%
Expected return on plan assets:					3.70	%	3.60	%
Rate of compensation increase:					1.00	%	1.00	%

The following table provides the weighted average actuarial assumptions used to determine net periodic benefit cost for years ended:



	Domestic				International
	September 30,				September 30,
	2017		2016		2017		2016
Discount rate:	3.50	%	4.25	%	1.77	%	3.10	%
Expected return on plan assets:					3.60	%	4.20	%
Rate of compensation increase:					1.00	%	1.00	%

For domestic plans, the discount rate was determined by comparison against the Citigroup Pension Discount Curve and Liability Index for AA rated corporate instruments. The Company monitors other indices to assure that the pension obligations are fairly reported on a consistent basis. The international discount rates were determined by comparison against country specific AA corporate indices, adjusted for duration of the obligation.

The periodic benefit cost and the actuarial present value of projected benefit obligations are based on actuarial assumptions that are reviewed on an annual basis. The Company revises these assumptions based on an annual evaluation of long-term trends, as well as market conditions that may have an impact on the cost of providing retirement benefits.

The components of net periodic benefit costs related to the U.S. and international plans are as follows:



	Years Ended September 30
	2017									2016
	Foreign			U.S.			Total			Foreign			U.S.			Total
	(amounts in thousands)
Pension:
Service cost	$	41		$	—		$	41		$	35		$	—		$	35
Interest cost	386			29			415			571			43			614
Expected return on plan assets	(268		)	—			(268		)	(357		)	—			(357		)
Amortization of net (gain)/loss	370			4			374			174			(5		)	169
Net periodic benefit cost	$	529		$	33		$	562		$	423		$	38		$	461

Post Retirement:
Service cost	$	—		$	38		$	38		$	—		$	27		$	27
Interest cost	—			44			44			—			42			42
Amortization of net (gain)/loss	—			15			15			—			(79		)	(79		)
Net periodic benefit cost	$	—		$	97		$	97		$	—		$	(10	)	$	(10	)

Pension:
Increase (decrease) in minimum liability included in other comprehensive income (loss)	$	(1,831	)	$	(14	)	$	(1,845	)	$	3,105		$	25		$	3,130
Post Retirement:
Increase (decrease) in minimum liability included in other comprehensive income (loss)	—			(99		)	(99		)	—			283			283
Total:
Increase (decrease) in minimum liability included in comprehensive income (loss)	$	(1,831	)	$	(113	)	$	(1,944	)	$	3,105		$	308		$	3,413

The following table presents an analysis of the changes in 2017 and 2016 of the benefit obligation, the plan assets and the funded status of the plans:



	Years Ended September 30
	2017									2016
	Foreign			U.S.			Total			Foreign			U.S.			Total
	(Amounts in thousands)
Pension:
Change in projected benefit obligation (“PBO”)
Balance beginning of year	$	19,564		$	829		$	20,393		$	17,979		$	1,022		$	19,001
Service cost	42			—			42			35			—			35
Interest cost	386			29			415			571			43			614
Changes in actuarial assumptions	(1,582		)	(9		)	(1,591		)	3,948			20			3,968
Foreign exchange impact	651			—			651			(2,069		)	—			(2,069		)
Benefits paid	(402		)	(172		)	(574		)	(900		)	(256		)	(1,156		)
Projected benefit obligation at end of year	$	18,659		$	677		$	19,336		$	19,564		$	829		$	20,393
Changes in fair value of plan assets:
Fair value of plan assets at beginning of year	$	7,629		$	—		$	7,629		$	9,301		$	—		$	9,301
Actual gain on plan assets	368			—			368			111			—			111
Company contributions	376			172			548			406			256			662
Foreign exchange impact	268			—			268			(1,289		)	—			(1,289		)
Benefits paid	(402		)	(172		)	(574		)	(900		)	(256		)	(1,156		)
Fair value of plan assets at end of year	$	8,239		$	—		$	8,239		$	7,629		—			$	7,629
Funded status \ net amount recognized	$	(10,420	)	$	(677	)	$	(11,097	)	$	(11,935	)	$	(829	)	$	(12,764	)

Post Retirement:
Change in projected benefit obligation (“PBO”):
Balance beginning of year	$	—		$	1,257		$	1,257		$	—		$	985		$	985
Service cost	—			38			38			—			27			27
Interest cost	—			44			44			—			42			42
Changes in actuarial assumptions	—			(84		)	(84		)	—			203			203
Projected benefit obligation at end of year	$	—		$	1,255		$	1,255		$	—		$	1,257		$	1,257
Funded status \ net amount recognized	$	—		$	(1,255	)	$	(1,255	)	$	—		$	(1,257	)	$	(1,257	)

The amounts recognized in the consolidated balance sheet consist of:



	Years Ended September 30
	2017									2016
	Foreign			U.S.			Total			Foreign			U.S.			Total
	(Amounts in thousands)
Pension:
Accrued benefit liability	$	(10,420	)	$	(677	)	$	(11,097	)	$	(11,936	)	$	(829	)	$	(12,765	)
Deferred tax	(493		)	19			(474		)	(216		)	14			(202		)
Accumulated other comprehensive income	6,893			18			6,911			9,001			26			9,027
Net amount recognized	$	(4,020	)	$	(640	)	$	(4,660	)	$	(3,151	)	$	(789	)	$	(3,940	)
Post Retirement:
Accrued benefit liability	$	—		$	(1,255	)	$	(1,255	)	$	—		$	(1,257	)	$	(1,257	)
Deferred tax	—			91			91			—			52			52
Accumulated other comprehensive income (loss)	—			38			38			—			97			97
Net amount recognized	$	—		$	(1,126	)	$	(1,126	)	$	—		$	(1,108	)	$	(1,108	)
Total pension and post retirement:
Accrued benefit liability	$	(10,420	)	$	(1,932	)	$	(12,352	)	$	(11,936	)	$	(2,086	)	$	(14,022	)
Deferred tax	(493		)	110			(383		)	(216		)	66			(150		)
Accumulated other comprehensive income	6,893			56			6,949			9,001			123			9,124
Net amount recognized	$	(4,020	)	$	(1,766	)	$	(5,786	)	$	(3,151	)	$	(1,897	)	$	(5,048	)
Accumulated Benefit Obligation:
Pension	$	(18,514	)	$	(677	)	$	(19,191	)	$	(19,396	)	$	(829	)	$	(20,225	)
Post Retirement	—			(1,255		)	(1,255		)	—			(1,257		)	(1,257		)
Total accumulated benefit obligation	$	(18,514	)	$	(1,932	)	$	(20,446	)	$	(19,396	)	$	(2,086	)	$	(21,482	)

Plans with projected benefit obligations in excess of plan assets are attributable to unfunded domestic supplemental retirement plans, our German plans which are legally not required to be funded and our U.K. retirement plan.

Accrued benefit liability reported as:



	September 30,
	2017		2016
	(Amounts in thousands)
Current accrued benefit liability	$	534	$	581
Non-current accrued benefit liability	11,818		13,441
Total accrued benefit liability	$	12,352	$	14,022

As of September 30, 2017 and 2016, the amounts included in accumulated other comprehensive income, consisted of deferred net losses totaling approximately $6.9 million and $9.1 million, respectively.

The amount of net deferred gain expected to be recognized as a component of net periodic benefit cost for the year ending September 30, 2018, is approximately $186 thousand.

Contributions

The Company expects to contribute $0.5 million to its pension plans for fiscal 2018.

Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid (amounts in thousands):



Fiscal year ending September 30:	(Amounts in thousands)
2018	$	606
2019	651
2020	667
2021	691
2022	724
Thereafter	4,225

Plan Assets

At September 30, 2017, our pension plan in the U.K. was the only plan with assets, holding investments of approximately $8.2 million. Pension plan assets are managed by a fiduciary committee. The Company's investment strategy for pension plan assets is to maximize the long-term rate of return on plan assets within an acceptable level of risk while maintaining adequate funding levels. Local regulations, local funding rules, and local financial and tax considerations are part of the funding and investment process. In deciding on the investments to be held, the trustees take into account the risk of possible fluctuations in income from, and market values of, the assets as well as the risk of departing from an asset profile which broadly matches the liability profile. The committee has invested the plan assets in a single pooled fund with an authorized investment company (the “Fund”). The Fund selected by the trustees is consistent with the plan's overall investment principles and strategy described herein. There are no specific targets as to asset allocation other than those contained within the Fund that is managed by the authorized investment company.

The fair value of the assets held by the U.K. pension plan by asset category are as follows:



	Fair Values as of
	September 30, 2017								September 30, 2016
	Fair Value Measurements Using Inputs Considered as								Fair Value Measurements Using Inputs Considered as
Asset Category	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
	(Thousands)
Cash on deposit	$	62	$	62	$	—	$	—	$	86	$	86	$	—	$	—
Pooled funds	8,177		8,177		—		—		7,543		7,543		—		—
Total plan assets	$	8,239	$	8,239	$	—	$	—	$	7,629	$	7,629	$	—	$	—

The expected long-term rates of return on plan assets are equal to the yields to maturity of appropriate indices for government and corporate bonds and by adding a premium to the government bond return for equities. The expected rate of return on cash is the Bank of England base rate in force at the effective date.

Level 1 investments represent mutual funds for which a quoted market price is available on an active market. These investments primarily hold stocks or bonds, or a combination of stocks and bonds.

Defined Contribution Plans

The Company has defined contribution plans in domestic and international locations under which the Company matches a portion of the employee's contributions and may make discretionary contributions to the plans. The Company's contributions were $152 thousand and $129 thousand for the years ended September 30, 2017 and 2016, respectively.