Pension and Postretirement Benefits

9 Months Ended

Sep. 30, 2019

General Discussion Of Pension And Other Postretirement Benefits [Abstract]

Pension And Other Postretirement Benefits Disclosure [Text Block]

Note 9 – Pension and Other Postretirement Benefits

The components of net periodic benefit cost for the three and nine months ended September 30, 2019 and 2018 are as follows:

	Three Months Ended September 30,								Nine Months Ended September 30,
					Other								Other
					Postretirement								Postretirement
	Pension Benefits				Benefits				Pension Benefits				Benefits
		2019		2018		2019		2018		2019		2018		2019		2018
Service cost	$	993	$	938	$	2	$	—	$	2,956	$	2,886	$	5	$	5
Interest cost		1,852		1,015		36		31		4,068		3,096		107		97
Expected return on plan assets		(2,140)		(1,229)		—		—		(4,102)		(3,793)		—		—
Actuarial loss amortization		799		782		—		2		2,348		2,375		—		31
Prior service cost amortization		(34)		(28)		—		—		(117)		(88)		—		—
Net periodic benefit cost	$	1,470	$	1,478	$	38	$	33	$	5,153	$	4,476	$	112	$	133

The Company previously disclosed in its Annual Report filed on Form 10-K, as amended by Form 10-K/A, for the year ended December 31, 2018 that the Company began the process of terminating Quaker’s primary non-contributory U.S. pension plan (the “U.S. Pension Plan”) during the fourth quarter of 2018. As part of this process, and considering the fully funded status of the U.S. Pension Plan, the asset allocation of the U.S. Pension Plan was adjusted modeling a glide path that is more heavily allocated to fixed income securities with lengthened durations to match the projected liabilities. As a result, the expected return on plan assets declined during the three and nine months ended September 30, 2019 compared to the three and nine months ended September 30, 2018. In order to terminate the U.S. Pension Plan in accordance with Internal Revenue Service (“I.R.S.”) and Pension Benefit Guaranty Corporation requirements, the Company will be required to fully fund the U.S. Pension Plan on a termination basis and will commit to contribute additional assets if necessary, to do so. The amount necessary to do so is not yet known but is currently estimated to be between $0 and $10 million. In addition, the Company expects to record a non-cash pension settlement charge at plan termination. This settlement charge will include the immediate recognition into expense of the related unrecognized losses within AOCI on the balance sheet as of the plan termination date. The Company does not have a current estimate for this future settlement charge, however, the gross AOCI related to the U.S. Pension Plan was approximately $18.5 million as of September 30, 2019. During the third quarter of 2019, the Company received a favorable termination determination letter from the I.R.S. and has amended the Plan to comply with final regulations of the Internal Revenue Code. The Company currently estimates that the U.S. Pension Plan termination will be completed during 2020.

Employer Contributions

The Company previously disclosed in its Annual Report filed on Form 10-K, as amended by Form 10-K/A, for the year ended December 31, 2018 that it expected to make minimum cash contributions of approximately $6 million to its legacy Quaker pension and other postretirement benefit plans in 2019. As of September 30, 2019, approximately $4 million of contributions have been made to the Company’s legacy Quaker pension and other postretirement benefit plans.

Houghton Pension Plans

In connection with the Combination, the Company assumed all of Houghton’s defined benefit pension plans. The pension plans cover certain U.S. salaried and hourly employees (“Houghton U.S. Plans”) as well as certain employees in the U.K., France and Germany (“Non-U.S. Plans”). The Houghton U.S. Plans provide benefits based on an employee’s years of service and compensation received for the highest five consecutive years of earnings. Houghton management made the decision to freeze benefits for non-union employees as of March 31, 2009 for the Houghton U.S. Plans. The Non-U.S. Plans provide benefits based on a formula of years of service and a percentage of compensation which varies among the Non-U.S. Plans. Houghton management made the decision to freeze its U.K. Non-U.S. plan benefits as of May 1, 2013. Subsequent to closing the Combination, during the nine months ended September 30, 2019, the Company made approximately $1 million of contributions to the Houghton U.S. and Non-U.S. Plans, and expects to contribute an additional approximately $1 million to these plans over the remainder of 2019. As of September 30, 2019, the acquired pension balance for these plans was $24.1 million, which is recorded within other current and other non-current liabilities on the Company’s Condensed Consolidated Balance Sheet.

In connection with the Combination, the Company now contributes to a multiemployer defined benefit pension plan under terms of a collective bargaining union contract (the Cleveland Bakers and Teamsters Pension Fund). The expiration date of the collective bargaining contract is May 1, 2022. As of January 1, 2018, the last valuation date available for the multiemployer plan, total plan liabilities were approximately $592 million. As of December 31, 2018, the multiemployer pension plan had total plan assets of approximately $315 million. The Company’s contribution rate to the multiemployer pension plan is specified in the collective

bargaining union contract and contributions are made to the plan based on its union employee payroll. The Company contributed less than $0.1 million during the three and nine months ended September 30, 2019. While the Company may also have additional liabilities imposed by law as a result of its participation in the multiemployer defined benefit pension plan, there is no liability as of September 30, 2019. The Employee Retirement Income Security Act of 1974, as amended by the Multi-Employer Pension Plan Amendments Act of 1980, imposes certain contingent liabilities upon an employer who is a contributor to a multiemployer pension plan if the employer withdraws from the plan or the plan is terminated or experiences a mass withdrawal.

The Pension Protection Act of 2006 (the “PPA”) also added special funding and operational rules generally applicable to plan years beginning after 2007 for multiemployer plans with certain classifications based on a multitude of factors (including, for example, the plan’s funded percentage, cash flow position and whether the plan is projected to experience a minimum funding deficiency). The plan to which the Company contributes is in “critical” status. Plans in the “critical” status classification must adopt measures to improve their funded status through a funding improvement or rehabilitation plan which may require additional contributions from employers (which may take the form of a surcharge on benefit contributions) and/or modifications to retiree benefits. The amount of additional funds that the Company may be obligated to contribute to the plan in the future cannot be estimated as such amounts will be likely based on future levels of work that require the specific use of those union employees covered by the plan, and the amount of that future work and the number of affected employees that may be needed is not reasonably estimable.