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 additional benefits subsequent to December 31, 2013. The Company sponsors another defined benefit 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 its liability is measured as the actuarial present value of the vested benefits to which the employees would be entitled if they 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,
	2019			2018
Service cost	$	299		$	262
Interest cost	1,055			963
Expected return on plan assets	(1,573		)	(1,608		)
Amortization of net loss	429			641
Settlement cost	246			—
Net pension expense for defined benefit plans	$	456		$	258

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



	2019			2018
Benefit obligations:
Benefit obligations at beginning of year	$	27,437		$	27,921
Service cost	299			262
Interest cost	1,055			963
Actuarial loss (gain)	3,691			178
Benefits paid	(1,914		)	(1,880		)
Currency translation	(20		)	(7		)
Benefit obligations at end of year	$	30,548		$	27,437
Plan assets:
Plan assets at beginning of year	$	22,052		$	21,691
Actual return on plan assets	622			2,118
Employer contributions	210			123
Benefits paid	(1,914		)	(1,880		)
Plan assets at end of year	$	20,970		$	22,052



	Plans in which Benefit Obligations Exceed Assets at September 30,
	2019			2018
Reconciliation of funded status:
Plan assets less than projected benefit obligations	$	(9,574	)	$	(5,385	)
Amounts recognized in accumulated other comprehensive loss:
Net loss	11,404			7,432
Net amount recognized in the consolidated balance sheets	$	1,830		$	2,047
Amounts recognized in the consolidated balance sheets are:
Accrued liabilities	(46		)	(46		)
Pension liability	(9,528		)	(5,339		)
Accumulated other comprehensive loss – pretax	11,404			7,432
Net amount recognized in the consolidated balance sheets	$	1,830		$	2,047

The amounts in accumulated other comprehensive loss that are expected to be recognized as components of net periodic benefit costs during fiscal 2019 are as follows:



	Plans in which Assets Exceed Benefit Obligations		Plans in which Benefit Obligations Exceed Assets
Net loss	$	—	$	755

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,
	2019		2018
Discount rate for liabilities	2.9	%	4.1	%
Discount rate for expenses	4.2	%	3.6	%
Expected return on assets	7.5	%	7.7	%

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, 2019 and 2018:



September 30, 2019	Asset Amount		Level 2		Level 3
U.S. equity securities:
Large value	$	435	$	435	$	—
Large blend	9,368		9,368		—
Large growth	625		625		—
Mid blend	163		163		—
Small blend	159		159		—
Non-U.S. equity securities:
Foreign large blend	1,607		1,607		—
Diversified emerging markets	17		17		—
U.S. debt securities:
Inflation protected bond	1,100		1,100		—
Intermediate term bond	6,974		4,969		2,005
High inflation bond	173		173		—
Non-U.S. debt securities:
Emerging markets bonds	106		106		—
Stable value:
Short-term bonds	243		243		—
Total plan assets at fair value	$	20,970	$	18,965	$	2,005



September 30, 2018	Asset Amount		Level 2		Level 3
U.S. equity securities:
Large value	$	446	$	446	$	—
Large blend	9,910		9,910		—
Large growth	825		825		—
Mid blend	228		228		—
Small blend	229		229		—
Non-U.S. equity securities:
Foreign large blend	1,714		1,714		—
Diversified emerging markets	18		18		—
U.S. debt securities:
Inflation protected bond	1,184		1,184		—
Intermediate term bond	6,811		4,996		1,815
High inflation bond	182		182		—
Non-U.S. debt securities:
Emerging markets bonds	38		38		—
Stable value:
Short-term bonds	467		467		—
Total plan assets at fair value	$	22,052	$	20,237	$	1,815

Changes in the fair value of the Company’s Level 3 investments during the years ending September 30, 2019 and 2018 were as follows:



	2019		2018
Balance at beginning of year	$	1,815	$	2,175
Actual return on plan assets	190		1
Purchases and sales of plan assets, net	—		(361		)
Balance at end of year	$	2,005	$	1,815

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
	2019		2018		Asset Allocation Range
U.S. equities	51	%	53	%	30% to 70%
Non-U.S. equities	8	%	8	%	0% to 20%
U.S. debt securities	39	%	37	%	20% to 70%
Non-U.S. debt securities	1	%	—	%	0% to 10%
Other securities	1	%	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 anticipates making approximately $403 in contributions to its defined benefit pension plans during fiscal 2020. 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 2020. 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
2020	$	2,348
2021	2,020
2022	1,846
2023	1,931
2024	1,950
2025-2029	8,950

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

2019

2018

2019

2018

Fund ¹

Red

Green

Implemented

Yes

5/31/2020

¹ The fund is the IAM National Pension Fund – EIN 51-6031295 / Plan number 2. The IAM National Pension Fund ("IAM plan") 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, 2018 and 2017.

Under the Pension Protection Act of 2006 and extended by the Multi-employer Pension Reform Act of 2014, certain safeguards were implemented to inform participants about the financial health of pension plan. The Company received the zone status notice from the IAM plan. The notice mentions the plan is well funded at 89%; however, the IAM Plan's Board of Trustees voluntarily elected to place the plan in the Red Zone, which deems it to be in critical status for 2019 due to decline of the IAM Plan's credit balance and challenging investment environment. As such, all participating employers are required by regulation to begin contributing 5% Pension Protection Act ("PPA") contribution surcharges effective with hours worked on or after June 1, 2019. Absent adoption of the Rehabilitation Plan and schedules, the PPA contribution surcharges increase to 10% effective for the hours worked on or after January 1, 2020 and apply continuously until such adoption. The Company began contributing the surcharges during fiscal 2019.

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 2019 and 2018 was $470 and $475, 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 2019 and 2018.

The Company sponsors a defined contribution plan for certain of its 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.