Retirement Benefit Plans

Defined Benefit Plans

The Company and certain of its subsidiaries sponsor defined benefit pension plans covering most of its employees. The Company’s funding policy for its defined benefit pension plans is based on an actuarially determined cost method allowable under Internal Revenue Service regulations. One of the defined benefit pension plans covers substantially all non-union employees of the Company’s U.S. operations who were hired prior to March 1, 2003, and this plan was frozen in 2003, while another plan that covered union employees no longer has active participants due to the business closure. Consequently, although both plans continue, the non-union plan ceased the accrual of additional pension benefits for service subsequent to March 1, 2003, and the related union plan has had no participants accrue any additional benefits subsequent to December 31, 2013. The Company sponsors a defined pension plan for certain of its employees. The plan is a severance entitlement payable to the Italian employees who qualified prior to December 27, 2006. The plan is considered an unfunded defined benefit plan and is measured as the actuarial present value of the vested benefits to which the employees would be entitled if the employee separated at the consolidated balance sheet date.

The Company uses a September 30 measurement date for its U.S. defined benefit pension plans. Net pension expense, benefit obligations and plan assets for the Company-sponsored defined benefit pension plans consists of the following:



	Years Ended September 30,
	2016			2015
Service cost	$	280		$	148
Interest cost	1,017			978
Expected return on plan assets	(1,632		)	(1,671		)
Amortization of net loss	828			545
Settlement cost	223			—
Net pension expense for defined benefit plan	$	716		$	—

The status of all defined benefit pension plans at September 30 is as follows:



	2016			2015
Benefit obligations:
Benefit obligations at beginning of year	$	27,685		$	26,140
Transfer in	—			465
Service cost	280			148
Interest cost	1,017			978
Actuarial loss	2,405			1,328
Benefits paid	(1,659		)	(1,377		)
Currency translation	3			3
Benefit obligations at end of year	$	29,731		$	27,685
Plan assets:
Plan assets at beginning of year	$	20,896		$	22,110
Actual return on plan assets	2,061			117
Employer contributions	46			46
Benefits paid	(1,659		)	(1,377		)
Plan assets at end of year	$	21,344		$	20,896



	Plans in which Benefit Obligations Exceed Assets at September 30,
	2016			2015
Reconciliation of funded status:
Plan assets less than projected benefit obligations	$	(8,387	)	$	(6,789	)
Amounts recognized in accumulated other comprehensive loss:
Net loss	10,926			10,003
Net amount recognized in the consolidated balance sheets	$	2,539		$	3,214
Amounts recognized in the consolidated balance sheets are:
Accrued liabilities	(46		)	(46		)
Pension liability	(8,341		)	(6,743		)
Accumulated other comprehensive loss – pretax	10,926			10,003
Net amount recognized in the consolidated balance sheets	$	2,539		$	3,214

The amounts in accumulated other comprehensive loss that are expected to be recognized as components of net periodic benefit costs during fiscal 2017 are as follows:



	Plans in which Assets Exceed Benefit Obligations		Plans in which Benefit Obligations Exceed Assets
Net loss	$	—	$	887

Where applicable, the following weighted-average assumptions were used in developing the benefit obligation and the net pension expense for defined benefit pension plans:



	Years Ended September 30,
	2016		2015
Discount rate for liabilities	3.1	%	3.9	%
Discount rate for expenses	3.8	%	3.9	%
Expected return on assets	8.0	%	8.0	%

The Company holds investments in pooled separate accounts and common/collective trusts, in which the fair value of assets of the underlying funds are determined in the following ways:


•	U.S. equity securities are comprised of domestic equities that are priced using the closing price of the applicable nationally recognized stock exchange, as provided by industry standard vendors such as Interactive Data Corporation.


•	Non-U.S. equity securities are comprised of international equities. These securities are priced using the closing price from the applicable foreign stock exchange.


•	U.S. bond funds are comprised of domestic fixed income securities. Securities are priced by industry standards vendors, such as Interactive Data Corporation, using inputs such as benchmark yields, reported trades, broker/dealer quotes, or issuer spreads.

◦

Included as part of the U.S. bond funds, are private placement funds, for which fair market value is not always commercially available, the fair value of these investments is primarily determined using a discounted cash flow model, which utilizes a discount rate based upon the average of spread surveys collected from private-market intermediaries who are active in both primary and secondary transactions, and takes into account, among other factors, the credit quality and industry sector of the issuer and the reduced liquidity associated with private placements.


•	Non-U.S. bond funds are comprised of international fixed income securities. Securities are priced by Interactive Data Corporation, using inputs such as benchmark yields, reported trades, broker/dealer quotes, or issuer spreads.


•	Stable value fund is comprised of short-term securities and cash equivalent securities, which seek to provide high current income consistent with the preservation of principal and liquidity. As permitted under relevant securities laws, securities in this type of fund are valued initially at cost and thereafter adjusted for amortization of any discount or premium.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. However, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement result.

The following tables set forth the asset allocation of the Company’s defined benefit pension plan assets and summarize the fair values and levels within the fair value hierarchy for such plan assets as of September 30, 2016 and 2015:



September 30, 2016	Asset Amount		Level 1		Level 2		Level 3
U.S. equity securities:
Large value	$	492	$	—	$	492	$	—
Large blend	9,593		—		9,593		—
Large growth	503		—		503		—
Mid blend	57		—		57		—
Small blend	56		—		56		—
Non-U.S. equity securities:
Foreign large blend	1,565		—		1,565		—
Diversified emerging markets	18		—		18		—
U.S. debt securities:
Inflation protected bond	537		—		537		—
Intermediate term bond	7,747		—		5,562		2,185
High inflation bond	360		—		360		—
Non-U.S. debt securities:
Emerging markets bonds	66		—		66		—
Stable value:
Short-term bonds	350		—		350		—
Total plan assets at fair value	$	21,344	$	—	$	19,159	$	2,185



September 30, 2015	Asset Amount		Level 1		Level 2		Level 3
U.S. equity securities:
Large value	$	487	$	—	$	487	$	—
Large blend	9,268		—		9,268		—
Large growth	515		—		515		—
Mid blend	109		—		109		—
Small blend	102		—		102		—
Non-U.S. equity securities:
Foreign large blend	1,559		—		1,559		—
Diversified emerging markets	35		—		35		—
U.S. debt securities:
Inflation protected bond	489		—		489		—
Intermediate term bond	7,538		—		5,493		2,045
High inflation bond	340		—		340		—
Non-U.S. debt securities:
Emerging markets bonds	56		—		56		—
Stable value:
Short-term bonds	398		—		398		—
Total plan assets at fair value	$	20,896	$	—	$	18,851	$	2,045

Changes in the fair value of the Company’s Level 3 investments during the years ending September 30, 2016 and 2015 were as follows:



	2016		2015
Balance at beginning of year	$	2,045	$	2,102
Actual return on plan assets	126		76
Purchases and sales of plan assets, net	14		(133		)
Balance at end of year	$	2,185	$	2,045

Investment objectives relative to the assets of the Company’s defined benefit pension plans are to (i) optimize the long-term return on the plans’ assets while assuming an acceptable level of investment risk; (ii) maintain an appropriate diversification across asset categories and among investment managers; and (iii) maintain a careful monitoring of the risk level within each asset category. Asset allocation objectives are established to promote optimal expected returns and volatility characteristics given the long-term time horizon for fulfilling the obligations of the Company’s defined benefit pension plans. Selection of the appropriate asset allocation for the plans’ assets was based upon a review of the expected return and risk characteristics of each asset category in relation to the anticipated timing of future plan benefit payment obligations. The Company has a long-term objective for the allocation of plan assets. However, the Company realizes that actual allocations at any point in time will likely vary from this objective due principally to (i) the impact of market conditions on plan asset values and (ii) required cash contributions to and distribution from the plans. The “Asset Allocation Range” listed below anticipates these potential scenarios and provides flexibility for the Plan’s investments to vary around the objective without triggering a reallocation of the assets, as noted by the following:



	Percent of Plan Assets at September 30,				Asset Allocation Range
	2016		2015		Asset Allocation Range
U.S. equities	50	%	50	%	30% to 70%
Non-U.S. equities	7	%	8	%	0% to 20%
U.S. debt securities	41	%	40	%	20% to 70%
Non-U.S. debt securities	—	%	—	%	0% to 10%
Other securities	2	%	2	%	0% to 60%
Total	100	%	100	%

External consultants assist the Company with monitoring the appropriateness of the above investment strategy and the related asset mix and performance. To develop the expected long-term rate of return assumptions on plan assets, generally the Company uses long-term historical information for the target asset mix selected. Adjustments are made to the expected long-term rate of return assumptions when deemed necessary based upon revised expectations of future investment performance of the overall investments markets.

The Company does not anticipate making any contributions to its defined benefit pension plans during fiscal 2017. The Company has carryover balances from previous periods that may be available for use as a credit to reduce the amount of contributions that the Company is required to make to certain of its defined benefit pension plans in fiscal 2017. The Company’s ability to elect to use such carryover balances will be determined based on the actual funded status of each defined benefit pension plan relative to the plan’s minimum regulatory funding requirements. The following defined benefit payment amounts are expected to be made in the future:



Years Ending September 30,	Projected Benefit Payments
2017	$	2,414
2018	1,850
2019	1,576
2020	1,808
2021	1,849
2022-2026	8,648

Multi-Employer Plans

The Company contributes to one (1) U.S. multi-employer retirement plan for certain union employees, as follow:

Pension

Fund

Pension Protection Act Zone Status

FIP/RP Status

Pending/

Implemented

Contributions by the Company

Surcharge

Imposed

Expiration of

Collective

Bargaining

Agreement

2016

2015

2016

2015

Fund ¹

Green

5/31/2020

¹ The fund is the IAM National Pension Fund – EIN 51-6031295 / Plan number 2. The IAM National Pension Fund utilized the special 30-year amortization provided by Public law 111-192, section 211 to amortize its losses from 2008.

The plan's year-end to which the zone status relates is December 31, 2015 and 2014.

The risks of participating in the multi-employer retirement plan are different from a single-employer plan in that (i) assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers; (ii) if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers; and (iii) if the Company chooses to stop participating in the multi-employer retirement plan, the Company may be required to pay the plan an amount based on the unfunded status of the plan, referred to as a withdrawal liability.

Defined Contribution Plans

Substantially all non-union U.S. employees of the Company and its U.S. subsidiaries are eligible to participate in the Company’s U.S. defined contribution plan. The Company makes non-discretionary, regular matching contributions to this plan equal to an amount that represents one hundred percent (100%) of a participant’s deferral contribution up to one percent (1%) of eligible compensation plus eighty percent (80%) of a participant’s deferral contribution between one percent (1%) and six percent (6%)of eligible compensation. The Company’s regular matching contribution expense for its U.S. defined contribution plan in fiscal 2016 and 2015 was $647 and $694, respectively. This defined contribution plan provides that the Company may also make an additional discretionary matching contribution during those periods in which the Company achieves certain performance levels. The Company did not provide additional discretionary matching contributions in either fiscal 2016 and 2015. The Company sponsors a separate defined contribution plan for certain of its U.S. union employees. The Company's contribution to this plan is based on a specified amount per hour based on the provisions of the applicable collective bargaining agreement.

The Company sponsors a defined contribution plan for certain of its employees Maniago union employees. The plan is a severance entitlement payable plan to Italian employees based on local government laws, which qualifies as a defined contribution plan.