XML 37 R21.htm IDEA: XBRL DOCUMENT v3.22.0.1
EMPLOYEE BENEFIT PLANS
 12 Months Ended
Jan. 01, 2022
Retirement Benefits [Abstract]  
EMPLOYEE BENEFIT PLANS EMPLOYEE BENEFIT PLANS
EMPLOYEE STOCK OWNERSHIP PLAN (“ESOP”) — Most U.S. employees may make contributions that do not exceed 25% of their eligible compensation to a tax-deferred 401(k) savings plan, subject to restrictions under tax laws. Employees generally direct the investment of their own contributions into various investment funds. An employer match benefit is provided under the plan equal to one-half of each employee’s tax-deferred contribution up to the first 7% of their compensation. Participants direct the entire employer match benefit such that no participant is required to hold the Company’s common stock in their 401(k) account. The employer match benefit totaled $28.0 million, $9.2 million and $24.6 million in 2021, 2020 and 2019, respectively. In 2020, the Match was suspended from the second quarter to the end of the year.
In addition, approximately 10,850 U.S. salaried and non-union hourly employees are eligible to receive a non-contributory benefit under the Core benefit plan. Core benefit allocations range from 2% to 6% of eligible employee compensation based on age. Allocations for benefits earned under the Core plan were $31.1 million, $5.4 million, and $28.4 million in 2021, 2020 and 2019, respectively. In 2020, the Core allocations were also suspended from the second quarter to the end of the year. Assets held in participant Core accounts are invested in target date retirement funds which have an age-based allocation of investments.
Prior to 2021, shares of the Company's common stock that were purchased with the proceeds of borrowings from the Company in 1991 ("1991 internal loan") were held by the ESOP. Shareowners' equity reflects a reduction equal to the cost basis of unallocated shares purchased with the internal borrowings. Unallocated shares were released from the trust based on current period debt principal and interest payments as a percentage of total future debt principal and interest payments. Dividends on both allocated and unallocated shares were used for debt service and to credit participant accounts for dividends earned on allocated shares. Dividends paid on the shares acquired with the 1991 internal loan were used solely to pay internal loan debt service in all periods. There are no unallocated shares remaining as of January 1, 2022, as all shares in the ESOP trust holding account were released as of the first quarter of 2020.

The Company’s net ESOP activity resulted in expense of $59.1 million and $4.4 million in 2021 and 2020, respectively, and income of $5.1 million in 2019. Net ESOP activity recognized for 2021 is comprised of the aforementioned Core and 401(k) match defined contribution benefits. Net ESOP activity for 2020 and 2019 is comprised of the cost basis of shares released, the cost of the aforementioned Core and 401(k) match defined contribution benefits, less the fair value of shares released and dividends on unallocated ESOP shares and was affected by the market value of the Company’s common stock on the monthly dates when shares were released. The weighted-average market value of shares released was $146.08 per share in 2020 and $138.67 per share in 2019.
The Company made cash contributions totaling $35.7 million in 2021, $9.2 million in 2020 and $2.2 million in 2019, excluding additional contributions of $7.2 million and $7.0 million in 2020 and 2019, which were used by the ESOP to make additional payments on the 1991 internal loan. These payments triggered the release of 226,212 and 207,049 shares of unallocated stock in 2020 and 2019, respectively. Dividends on ESOP shares, which were charged to shareowners’ equity as declared, were $1.3 million and $6.3 million in 2020 and 2019, respectively, net of the tax benefit which is recorded in earnings. Interest costs incurred by the ESOP on the 1991 internal loan, which have no earnings impact, were $0.1 million and $0.5 million for 2020 and 2019, respectively. Both allocated and unallocated ESOP shares were treated as outstanding for purposes of computing earnings per share. As of January 2, 2021, the cumulative number of ESOP shares allocated was 15,541,357, of which participants held 1,638,044 shares.

PENSION AND OTHER BENEFIT PLANS — The Company sponsors pension plans covering most domestic hourly and certain executive employees, and approximately 14,800 foreign employees. Benefits are generally based on salary and years of service, except for U.S. collective bargaining employees whose benefits are based on a stated amount for each year of service.

The Company contributes to a number of multi-employer plans for certain collective bargaining U.S. employees. The risks of participating in these multi-employer plans are different from single-employer plans in the following aspects:
a.    Assets contributed to the multi-employer plan by one employer may be used to provide benefit to employees of other participating employers.
b.    If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be inherited by the remaining participating employers.
c.    If the Company chooses to stop participating in some of its multi-employer plans, the Company may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

In addition, the Company also contributes to a number of multi-employer plans outside of the U.S. The foreign plans are insured, therefore, the Company’s obligation is limited to the payment of insurance premiums.

The Company has assessed and determined that none of the multi-employer plans to which it contributes are individually significant to the Company’s Consolidated Financial Statements. The Company does not expect to incur a withdrawal liability or expect to significantly increase its contributions over the remainder of the contract period.

In addition to the multi-employer plans, various other defined contribution plans are sponsored worldwide. As of January 1, 2022 and January 2, 2021 the Company had $135.8 million and $120.2 million, respectively, of liabilities pertaining to an unfunded supplemental defined contribution plan for certain U.S. employees.

The expense for defined contribution plans, aside from the earlier discussed ESOP plans, is as follows:
(Millions of Dollars)202120202019
Multi-employer plan expense$7.1 $7.8 $7.2 
Other defined contribution plan expense$28.6 $24.9 $31.3 

The components of net periodic pension expense (benefit) are as follows:
 U.S. PlansNon-U.S. Plans
(Millions of Dollars)202120202019202120202019
Service cost$6.5 $6.8 $12.3 $17.6 $16.1 $14.6 
Interest cost23.0 35.3 47.1 16.7 22.5 30.3 
Expected return on plan assets(54.9)(58.7)(61.7)(39.9)(41.2)(45.6)
Amortization of prior service cost (credit)1.1 1.0 1.0 (0.8)(0.7)(0.6)
Actuarial loss amortization9.2 8.5 8.0 12.2 11.7 8.6 
Special termination benefit— — — — 0.2 — 
Settlement / curtailment loss0.4 — — 0.7 0.6 1.0 
Net periodic pension (benefit) expense$(14.7)$(7.1)$6.7 $6.5 $9.2 $8.3 

The Company provides medical and dental benefits for certain retired employees in the United States, Brazil, and Canada. Approximately 16,160 participants are covered under these plans. Net periodic post-retirement benefit expense was comprised
of the following elements:
 Other Benefit Plans
(Millions of Dollars)202120202019
Service cost$0.4 $0.6 $0.3 
Interest cost0.9 1.5 1.6 
Amortization of prior service credit(0.7)(1.3)(1.4)
Actuarial loss amortization— 0.3 (0.3)
Special termination benefit— 16.1 — 
Net periodic post-retirement expense$0.6 $17.2 $0.2 

The components of net periodic benefit cost other than the service cost component are included in Other, net in the Consolidated Statements of Operations.

Changes in plan assets and benefit obligations recognized in Accumulated other comprehensive loss in 2021 are as follows:
(Millions of Dollars)2021
Current year actuarial gain$(133.4)
Amortization of actuarial loss(21.0)
Prior service cost from plan amendments0.9 
Settlement / curtailment loss(1.1)
Currency / other(7.8)
Total gain recognized in Accumulated other comprehensive loss (pre-tax)$(162.4)
The changes in the pension and other post-retirement benefit obligations, fair value of plan assets, as well as amounts recognized in the Consolidated Balance Sheets, are shown below.
 U.S. PlansNon-U.S. PlansOther Benefits
(Millions of Dollars)202120202021202020212020
Change in benefit obligation
Benefit obligation at end of prior year$1,404.3 $1,325.4 $1,622.3 $1,449.9 $61.2 $52.2 
Service cost6.5 6.8 17.6 16.1 0.4 0.6 
Interest cost23.0 35.3 16.7 22.5 0.9 1.5 
Special termination benefit— — — 0.2 — 16.1 
Settlements/curtailments(0.8)— (15.3)(5.5)— — 
Actuarial (gain) loss(47.2)123.3 (92.4)112.0 (6.6)(2.9)
Plan amendments0.8 0.1 0.1 0.1 — — 
Foreign currency exchange rate changes— — (37.7)84.9 (0.2)(1.8)
Participant contributions— — 0.2 0.3 — — 
Acquisitions, divestitures, and other152.4 (4.0)28.9 (6.5)— — 
Benefits paid(80.8)(82.6)(50.0)(51.7)(5.4)(4.5)
Benefit obligation at end of year$1,458.2 $1,404.3 $1,490.4 $1,622.3 $50.3 $61.2 
Change in plan assets
Fair value of plan assets at end of prior year$1,191.5 $1,103.5 $1,229.6 $1,093.5 $— $— 
Actual return on plan assets63.4 160.9 17.9 119.3 — — 
Participant contributions— — 0.2 0.3 — — 
Employer contributions13.8 13.7 20.8 22.0 5.4 4.5 
Settlements(0.8)— (13.7)(5.2)— — 
Foreign currency exchange rate changes— — (15.6)55.6 — — 
Acquisitions, divestitures, and other153.0 (4.0)37.4 (4.2)— — 
Benefits paid(80.8)(82.6)(50.0)(51.7)(5.4)(4.5)
Fair value of plan assets at end of plan year$1,340.1 $1,191.5 $1,226.6 $1,229.6 $— $— 
Funded status — assets less than benefit obligation$(118.1)$(212.8)$(263.8)$(392.7)$(50.3)$(61.2)
Unrecognized prior service cost (credit)3.5 3.8 (16.4)(17.4)0.1 (0.6)
Unrecognized net actuarial loss (gain)213.4 278.7 268.3 360.3 (9.7)(3.2)
Net amount recognized$98.8 $69.7 $(11.9)$(49.8)$(59.9)$(65.0)
 U.S. PlansNon-U.S. PlansOther Benefits
(Millions of Dollars)202120202021202020212020
Amounts recognized in the Consolidated Balance Sheets
Prepaid benefit cost (non-current)$0.6 $— $62.4 $0.2 $— $— 
Current benefit liability(6.0)(7.3)(10.3)(10.2)(7.5)(6.8)
Non-current benefit liability(112.7)(205.5)(315.9)(382.7)(42.8)(54.4)
Net liability recognized$(118.1)$(212.8)$(263.8)$(392.7)$(50.3)$(61.2)
Accumulated other comprehensive loss (pre-tax):
Prior service cost (credit)$3.5 $3.8 $(16.4)$(17.4)$0.1 $(0.6)
Actuarial loss (gain)213.4 278.7 268.3 360.3 (9.7)(3.2)
216.9 282.5 251.9 342.9 (9.6)(3.8)
Net amount recognized$98.8 $69.7 $(11.9)$(49.8)$(59.9)$(65.0)
Actuarial losses and gains reflected in the table above are driven by changes in demographic experience, changes in assumptions, and differences in actual returns on investments compared to estimated returns. For the year ended January 1, 2022, the decrease in the benefit obligation is primarily driven by the improvement in the single equivalent discount rate used to measure these obligations. The actual return on plan assets during the year also varied in comparison to what was assumed, which also impacted the funded position. These impacts were partially offset by an updated mortality improvement scale which increased the projected obligations.
The accumulated benefit obligation for all defined benefit pension plans was $2.943 billion at January 1, 2022 and $3.022 billion at January 2, 2021. Information regarding pension plans in which accumulated benefit obligations exceed plan assets follows: 
 U.S. PlansNon-U.S. Plans
(Millions of Dollars)2021202020212020
Accumulated benefit obligation$1,299.8 $1,401.5 $326.1 $1,531.8 
Fair value of plan assets$1,184.6 $1,191.5 $50.3 $1,201.3 
Information regarding pension plans in which projected benefit obligations (inclusive of anticipated future compensation increases) exceed plan assets as follows:
 U.S. PlansNon-U.S. Plans
(Millions of Dollars)2021202020212020
Projected benefit obligation$1,303.3 $1,404.3 $399.1 $1,619.9 
Fair value of plan assets$1,184.6 $1,191.5 $72.9 $1,227.0 
The major assumptions used in valuing pension and post-retirement plan obligations and net costs were as follows:
 Pension Benefits
 U.S. PlansNon-U.S. PlansOther Benefits
 202120202019202120202019202120202019
Weighted-average assumptions used to determine benefit obligations at year end:
Discount rate2.80 %2.39 %3.20 %1.78 %1.31 %1.80 %2.84 %2.19 %3.64 %
Rate of compensation increase3.00 %3.56 %3.50 %3.56 %3.29 %3.30 %— 3.50 %3.50 %
Weighted-average assumptions used to determine net periodic benefit cost:
Discount rate - service cost2.95 %3.58 %4.43 %1.41 %1.57 %2.37 %4.42 %5.62 %5.22 %
Discount rate - interest cost1.68 %2.75 %3.86 %1.06 %1.61 %2.37 %1.60 %3.36 %4.04 %
Rate of compensation increase3.00 %3.00 %3.00 %3.27 %3.30 %3.44 %— 3.50 %3.50 %
Expected return on plan assets4.75 %5.25 %6.25 %3.25 %3.90 %4.73 %— — — 
The expected rate of return on plan assets is determined considering the returns projected for the various asset classes and the relative weighting for each asset class. The Company will use a 4.07% weighted-average expected rate of return assumption to determine the 2022 net periodic benefit cost.
PENSION PLAN ASSETS — Plan assets are invested in equity securities, government and corporate bonds and other fixed income securities, money market instruments and insurance contracts. The Company’s worldwide asset allocations at January 1, 2022 and January 2, 2021 by asset category and the level of the valuation inputs within the fair value hierarchy established by ASC 820, Fair Value Measurement, are as follows:
Asset Category (Millions of Dollars)
2021Level 1Level 2
Cash and cash equivalents$74.2 $55.7 $18.5 
Equity securities
U.S. equity securities323.3 92.5 230.8 
Foreign equity securities205.9 44.8 161.1 
Fixed income securities
Government securities871.1 340.7 530.4 
Corporate securities996.3 — 996.3 
Insurance contracts49.6 — 49.6 
Other46.3 — 46.3 
Total$2,566.7 $533.7 $2,033.0 
 
Asset Category (Millions of Dollars)
2020Level 1Level 2
Cash and cash equivalents$83.2 $69.0 $14.2 
Equity securities
U.S. equity securities329.4 91.2 238.2 
Foreign equity securities234.1 65.7 168.4 
Fixed income securities
Government securities821.6 285.8 535.8 
Corporate securities867.6 — 867.6 
Insurance contracts41.7 — 41.7 
Other43.5 — 43.5 
Total$2,421.1 $511.7 $1,909.4 
U.S. and foreign equity securities primarily consist of companies with large market capitalizations and to a lesser extent mid and small capitalization securities. Government securities primarily consist of U.S. Treasury securities and foreign government securities with de minimus default risk. Corporate fixed income securities include publicly traded U.S. and foreign investment grade and to a small extent high yield securities. Assets held in insurance contracts are invested in the general asset pools of the various insurers, mainly debt and equity securities with guaranteed returns. Other investments include diversified private equity holdings. The level 2 investments are primarily comprised of institutional mutual funds that are not publicly traded; the investments held in these mutual funds are generally level 1 publicly traded securities.

The Company's investment strategy for pension assets focuses on a liability-matching approach with gradual de-risking taking place over a period of many years.  The Company utilizes the current funded status to transition the portfolio toward investments that better match the duration and cash flow attributes of the underlying liabilities. Assets approximating 50% of the Company's current pension liabilities have been invested in fixed income securities, using a liability / asset matching duration strategy, with the primary goal of mitigating exposure to interest rate movements and preserving the overall funded status of the underlying plans. Plan assets are broadly diversified and are invested to ensure adequate liquidity for immediate and medium term benefit payments. The Company’s target asset allocations include approximately 20%-40% in equity securities, approximately 50%-70% in fixed income securities and approximately 10% in other securities. The funded status percentage (total plan assets divided by total projected benefit obligation) of all global pension plans was 87% in 2021, 80% in 2020 and 79% in 2019. The increase in 2021 compared to 2020 and 2019 primarily relates to the pension plan assumed in the MTD acquisition.

CONTRIBUTIONS —  The Company’s funding policy for its defined benefit plans is to contribute amounts determined annually on an actuarial basis to provide for current and future benefits in accordance with federal law and other regulations. The Company expects to contribute approximately $41 million to its pension and other post-retirement benefit plans in 2022.
EXPECTED FUTURE BENEFIT PAYMENTS —  Benefit payments, inclusive of amounts attributable to estimated future employee service, are expected to be paid as follows over the next 10 years:
(Millions of Dollars)TotalYear 1Year 2Year 3Year 4Year 5Years 6-10
Future payments$1,505.3 $151.9 $153.8 $151.5 $150.3 $150.6 $747.2 
These benefit payments will be funded through a combination of existing plan assets, the returns on those assets, and amounts to be contributed in the future by the Company.

HEALTH CARE COST TRENDS — The weighted-average annual assumed rate of increase in the per-capita cost of covered benefits (i.e., health care cost trend rate) is assumed to be 6.3% for 2022, reducing gradually to 4.6% by 2031 and remaining at that level thereafter.