. EMPLOYEE BENEFIT AND RETIREMENT PLANS

The Company has two defined benefit pension plans, one for U.S. employees and another for U.K. employees. The UK plan was closed to new entrants in fiscal 2009. The Company has a postretirement medical and life insurance benefit plan for U.S. employees. The Company also has defined contribution plans.

The Company amended its Postretirement Medical Plan effective December 31, 2013 whereby the Company terminated eligibility for employees ages 55-64. For retirees 65 and older, the Company’s contribution is fixed at $28.50 or $23.00 per month depending upon the plan the retiree has chosen.

The total cost of all such plans for fiscal 2016, 2015 and 2014 was $22.2 million, $4.6 million and $5.0 million, respectively. Included in these amounts are the Company’s contributions to the defined contribution plans amounting to $0.8 million, $0.8 million and $1.2 million in fiscal 2016, 2015 and 2014, respectively.

Under both U.S and U.K. defined benefit plans, benefits are based on years of service and final average earnings. Plan assets consist primarily of investment grade debt obligations, marketable equity securities and shares of the Company’s common stock. The asset allocation of the Company’s domestic pension plan is diversified, consisting primarily of investments in equity and debt securities. The Company seeks a long-term investment return that is reasonable given prevailing capital market expectations. Target allocations are 40% to 70% in equities (including 10% to 20% in Company stock), and 30% to 60% in cash and debt securities.

In fiscal 2017 the Company will use an expected long-term rate of return assumption of 5.0% for the U.S. domestic pension plan, and 3.6% for the U.K. plan. In determining these assumptions, the Company considers the historical returns and expectations for future returns for each asset class as well as the target asset allocation of the pension portfolio as a whole. In fiscal 2016 and 2015, the Company used a discount rate assumption of 3.77% and 4.49% for the U.S. plan and 3.00% and 3.90% for the U.K. plan, respectively. In determining these assumptions, the Company considers published third party data appropriate for the plans.

Other than the discount rate, pension valuation assumptions are generally long-term and not subject to short-term market fluctuations, although they may be adjusted as warranted by structural shifts in economic or demographic outlooks. Long-term assumptions are reviewed annually to ensure they do not produce results inconsistent with current market conditions. The discount rate is adjusted annually based on corporate investment grade (rated AA or better) bond yields, the maturities of which are correlated with the expected timing of future benefit payments, as of the measurement date.

Based upon the actuarial valuations performed on the Company’s defined benefit plans as of June 30, 2016, the U.S. plan will require a $4.1 million contribution in fiscal 2017 and the U.K. plan will require a $1.0 million contribution in fiscal 2017.

The table below sets forth the actual asset allocation for the assets within the Company’s plans.

	2016			2015
Asset category:
Cash equivalents		0	%		1	%
Fixed income		18	%		17	%
Equities		27	%		25	%
Mutual and pooled funds		55	%		57	%
		100	%		100	%

The Company determines its investments strategies based upon the composition of the beneficiaries in its defined benefit plans and the relative time horizons that those beneficiaries are projected to receive payouts from the plans. The Company engages an independent investment firm to manage the U.S. pension assets.

Cash equivalents are held in money market funds.

The Company’s fixed income portfolio includes mutual funds that hold a combination of short-term, investment-grade fixed income securities and a diversified selection of investment-grade, fixed income securities, including corporate securities and U.S. government securities.

The Company invests in equity securities, which are diversified across a spectrum of value and growth in large, medium and small capitalization as appropriate to achieve the objective of a balanced portfolio and optimize the expected returns and volatility in the various asset classes.

Other assets include pooled investment funds whose underlying assets consist primarily of property holdings as well as financial instruments designed to offset the long-term impact of inflation and interest rate fluctuations.

In accordance with “ASC 820 Fair Value Measurement”, the Company has categorized its financial assets (including its pension plan assets), based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy as set forth below. If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

Financial assets are categorized based on the inputs to the valuation techniques as follows:

o	Level 1 – Financial assets whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market which the Company has the ability to access at the measurement date.

o	Level 2 – Financial assets whose value are based on quoted market prices in markets where trading occurs infrequently or whose values are based on quoted prices of instruments with similar attributes in active markets.

Level 3 – Financial assets whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own view about the assumptions a market participant would use in pricing the asset.

The tables below show the portfolio by valuation category as of June 30, 2016 and June 30, 2015 (in thousands).

June 30, 2016
Asset Category	Level 1		Level 2		Level 3		Total		%
Cash Equivalent	$	672	$	-	$	-	$	672		0	%
Fixed Income		-		20,342		-		20,342		18	%
Equities		28,639		2,435		-		31,074		27	%
Mutual & Pooled Funds		30,057		30,060		2,810		62,927		55	%
Total	$	59,368	$	52,837	$	2,810	$	115,015		100	%

June 30, 2015
Asset Category	Level 1		Level 2		Level 3		Total		%
Cash Equivalent	$	1,064	$	-	$	-	$	1,064		1	%
Fixed Income		-		21,058		-		21,058		17	%
Equities		27,960		3,210		-		31,170		25	%
Mutual & Pooled Funds		31,873		33,538		4,084		69,495		57	%
Total	$	60,897	$	57,806	$	4,084	$	122,787		100	%

Included in equity securities at June 30, 2016 and 2015 are shares of the Company’s common stock having a fair value of $9.7 million and $12.5 million, respectively.

A reconciliation of the beginning and ending balances of Level 3 assets is as follows (in thousands):

	Fair Value Measurement Using S ignificant Unobservable Inputs (Level 3)
	2016			2015

Beginning balance	$	4,084		$	3,895
Actual returns on assets		(718	)		507
Translation loss		(556	)		(318	)

Ending balance	$	2,810		$	4,084

The Level 3 assets consist of units of a pooled investment fund which invests in a mix of properties selected from across retail, office, industrial and other sectors predominantly located in the U.K. In addition to direct investments, the fund may also invest indirectly in property through investment vehicles such as quoted and unquoted property companies or collective investment trusts. Redemptions from the fund are not readily available given the illiquid nature of its assets.

U.S. and U.K. Plans Combined:

The status of these defined benefit plans is as follows (in thousands):

	2016			2015			2014
Change in benefit obligation
Benefit obligation at beginning of year	$	166,189		$	161,062		$	141,316
Service cost		2,757			2,663			2,709
Interest cost		7,032			6,818			6,922
Participant contributions		-			-			183
Exchange rate changes		(7,825	)		(4,167	)		5,359
Benefits paid		(6,590	)		(6,524	)		(5,956	)
Actuarial (gain) loss		13,670			6,337			10,529
Benefit obligation at end of year	$	175,233		$	166,189		$	161,062

Change in plan assets
Fair value of plan assets at beginning of year		122,787			122,924			109,326
Actual return on plan assets		226			3,466			14,105
Employer contributions		4,482			6,049			1,171
Participant contributions		-			-			183
Benefits paid		(6,590	)		(6,524	)		(5,956	)
Exchange rate changes		(5,890	)		(3,128	)		4,095
Fair value of plan assets at end of year		115,015			122,787			122,924
Funded status at end of year	$	(60,218	)	$	(43,402	)	$	(38,138	)
Amounts recognized in balance sheet
Current liability	$	(45	)	$	(37	)	$	(37	)
Noncurrent liability		(60,173	)		(43,365	)		(38,101	)
Net amount recognized in balance sheet	$	(60,218	)	$	(43,402	)	$	(38,138	)

Amounts not yet reflected in net periodic benefit costs and included in accumulated other comprehensive loss
Prior service cost	$	-		$	-		$	-
Accumulated loss		(17,849	)		(16,795	)		(8,686	)
Amounts not yet recognized as a component of net periodic benefit cost		(17,849	)		(16,795	)		(8,686	)
Accumulated net periodic benefit cost in excess of contributions		(42,369	)		(26,607	)		(29,452	)
Net amount recognized	$	(60,218	)	$	(43,402	)	$	(38,138	)

Components of net periodic benefit cost
Service cost	$	2,757		$	2,663		$	2,709
Interest cost		7,032			6,818			6,922
Expected return on plan assets		(6,268	)		(6,966	)		(6,332	)
Amortization of prior service cost		-			-			116
Recognized actuarial loss		17,878			1,309			398
Net periodic benefit cost	$	21,399		$	3,824		$	3,813

Estimated amounts that will be amortized from accumulated other comprehensive loss over the next year
Prior service cost	$	-		$	-		$	(30	)
Net loss		(114	)		(53	)		-

Information for pension plans with accumulated benefits in excess of plan assets
Projected benefit obligation	$	175,233		$	166,189		$	161,062
Accumulated benefit obligation		168,119			159,174			154,163
Fair value of assets		115,015			122,787			122,924

U.S. Plan:

The status of the U.S. defined benefit plan is as follows (in thousands):

	2016			2015			2014
Change in benefit obligation
Benefit obligation at beginning of year	$	116,398		$	110,054		$	99,788
Service cost		2,757			2,663			2,326
Interest cost		5,248			4,839			4,868
Benefits paid		(4,593	)		(4,372	)		(4,263	)
Actuarial loss		11,053			3,214			7,335
Benefit obligation at end of year	$	130,863		$	116,398		$	110,054

Weighted average assumptions – benefit obligation
Discount rate		3.77	%		4.49	%		4.29	%
Rate of compensation increase		Varies			Varies			Varies

Change in plan assets
Fair value of plan assets at beginning of year	$	84,853		$	84,629		$	77,208
Actual return on plan assets		(1,730	)		(274	)		11,661
Employer contributions		3,380			4,870			23
Benefits paid		(4,593	)		(4,372	)		(4,263	)
Fair value of plan assets at end of year		81,910			84,853			84,629
Funded status at end of year	$	(48,953	)	$	(31,545	)	$	(25,425	)

Amounts recognized in balance sheet
Current liability	$	(45	)	$	(37	)	$	(37	)
Noncurrent liability		(48,908	)		(31,508	)		(25,388	)
Net amount recognized in balance sheet	$	(48,953	)	$	(31,545	)	$	(25,425	)

Weighted average assumptions – net periodic benefit cost
Discount rate		4.49	%		4.29	%		4.96	%
Rate of compensation increase		Varies			Varies			Varies
Return on plan assets		5.50	%		6.00	%		6.00	%

Amounts not yet reflected in net periodic benefit cost and included in accumulated other comprehensive loss
Prior service cost	$	-		$	-		$	-
Accumulated loss		(13,412	)		(11,817	)		(3,585	)
Amounts not yet recognized as a component of net periodic benefit cost		(13,412	)		(11,817	)		(3,585	)
Accumulated contributions less than net periodic benefit cost		(35,541	)		(19,728	)		(21,840	)
Net amount recognized	$	(48,953	)	$	(31,545	)	$	(25,425	)

Components of net periodic benefit cost
Service cost	$	2,757		$	2,663		$	2,326
Interest cost		5,248			4,839			4,868
Expected return on plan assets		(4,589	)		(5,063	)		(4,484	)
Amortization of prior service cost		-			-			116
Recognized actuarial loss		15,779			319			12
Net periodic benefit cost	$	19,195		$	2,758		$	2,838

Estimated amounts that will be amortized from accumulated other comprehensive loss over the next year
Prior service cost	$	-		$	-		$	(30	)
Net loss		(114	)		(53	)		-

Information for plan with accumulated benefits in excess of plan assets
Projected benefit obligation	$	130,863		$	116,398		$	110,054
Accumulated benefit obligation		123,749			109,383			103,155
Fair value of assets		81,910			84,853			84,629

U.K. Plan:

The status of the U.K. defined benefit plan is as follows (in thousands):

		2016			2015			2014
Change in benefit obligation
Benefit obligation at beginning of year	$	49,791		$	51,008		$	41,528
Service cost		0			0			383
Interest cost		1,784			1,979			2,054
Participant contributions		-			-			183
Exchange rate changes		(7,825	)		(4,167	)		5,359
Benefits paid		(1,997	)		(2,152	)		(1,693	)
Actuarial loss		2,617			3,123			3,194
Benefit obligation at end of year	$	44,370		$	49,791		$	51,008

Weighted average assumptions - benefit obligation
Discount rate		3.00	%		3.90	%		4.30	%
Rate of compensation increase		n/a			n/a			n/a	%

Change in plan assets
Fair value of plan assets at beginning of year	$	37,934		$	38,295		$	32,118
Actual return on plan assets		1,956			3,740			2,444
Employer contributions		1,102			1,179			1,148
Participant contributions		-			-			183
Benefits paid		(1,997	)		(2,152	)		(1,693	)
Exchange rate changes		(5,890	)		(3,128	)		4,095
Fair value of plan assets at end of year		33,105			37,934			38,295
Funded status at end of year	$	(11,265	)	$	(11,857	)		(12,713	)
Amounts recognized in balance sheet
Current liability	$	—		$	—		$	—
Noncurrent liability		(11,265	)		(11,857	)		(12,713	)
Net amount recognized in balance sheet	$	(11,265	)	$	(11,857	)	$	(12,713	)

Weighted average assumptions – net periodic benefit cost

Discount rate		3.90	%		4.30	%		4.70	%
Rate of compensation increase		n/a			n/a			3.10	%
Return on plan assets		4.77	%		5.45	%		5.40	%

Amounts not yet reflected in net periodic benefit costs and included in accumulated other comprehensive loss
Prior service cost	$	—		$	—		$	—
Accumulated loss		(4,437	)		(4,978	)		(5,101	)
Amounts not yet recognized as a component of net periodic benefit cost		(4,437	)		(4,978	)		(5,101	)
Accumulated net periodic benefit cost in excess of contributions		(6,828	)		(6,879	)		(7,612	)
Net amount recognized	$	(11,265	)	$	(11,857	)	$	(12,713	)

Components of net periodic benefit cost
Service cost	$	—		$	—		$	383
Interest cost		1,784			1,979			2,054
Expected return on plan assets		(1,679	)		(1,903	)		(1,848	)
Amortization of net loss		2,099			990			386
Net periodic benefit cost	$	2,204		$	1,066		$	975

Estimated amounts that will be amortized from accumulated other comprehensive loss over the next year	$	—		$	—		$	—

Information for plan with accumulated benefits in excess of plan assets
Projected benefit obligation	$	44,370		$	49,791		$	51,008
Accumulated benefit obligation		44,370			49,791			51,008
Fair value of assets		33,104			37,934			38,295

Postretirement Medical and Life Insurance Benefits:

The status of the U.S. postretirement medical and life insurance benefit plan is as follows (in thousands):

	2016			2015			2014
Change in benefit obligation:
Benefit obligation at beginning of year	$	6,611		$	5,867		$	10,964
Service cost		105			113			225
Interest cost		287			244			396
Plan amendments		—			—			(5,730	)
Benefits paid		(772	)		(647	)		(429	)
Actuarial (gain) loss		1,150			1,034			441
Benefit obligation at end of year	$	7,381		$	6,611		$	5,867

Weighted average assumptions: benefit obligations
Discount rate		3.77	%		4.49	%		4.29	%
Rate of compensation increase		2.64	%		2.64	%		2.64	%

Change in plan assets
Fair value of plan assets at beginning of year	$	—		$	—		$	—
Employer contributions		772			647			429
Benefits paid, net of employee contributions		(772	)		(647	)		(429	)
Fair value of plan assets at end of year		—			—			—

Amounts recognized in balance sheet
Current postretirement benefit obligation	$	(396	)	$	(441	)	$	(379	)
Non-current postretirement benefit obligation		(6,985	)		(6,170	)		(5,488	)
Net amount recognized in balance sheet	$	(7,381	)	$	(6,611	)	$	(5,867	)

Weighted average assumptions – net periodic benefit cost
Discount rate		4.49	%		4.29	%		4.96	%
Rate of compensation increase		2.64	%		2.64	%		2.64	%

Amounts not yet reflected in net periodic benefit cost and included in accumulated other comprehensive loss
Prior service credit	$	4,523		$	5,305		$	6,104
Accumulated gain (loss)		(1,983	)		(850	)		185
Amounts not yet recognized as a component of net periodic benefit cost		2,540			4,455			6,289
Net periodic benefit cost in excess of accumulated contributions		(9,921	)		(11,066	)		(12,156	)
Net amount recognized	$	(7,381	)	$	(6,611	)	$	(5,867	)

Components of net periodic benefit cost
Service cost	$	105		$	113		$	225
Interest cost		287			244			396
Amortization of prior service credit		(781	)		(799	)		(771	)
Amortization of accumulated loss		15			—			(1	)
Net periodic benefit cost	$	(374	)	$	(442	)	$	(151


Estimated amounts that will be amortized from accumulated other comprehensive loss over the next year
Prior service credit	$	673		$	781		$	799
Net loss		(120	)		(15	)		—
	$	553		$	766		$	799


Healthcare cost trend rate assumed for next year		6.90	%		8.00	%		8.30	%
Rate to which the cost trend rate gradually declines		4.50	%		4.50	%		4.50	%
Year that the rate reaches the rate at which it is assumed to remain		2027			2027			2026

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one percentage point change in assumed health care cost trend rates would have the following effects (in thousands):

	1% Increase
	2016		2015		2014
Effect on total of service and interest cost	$	-	$	-	$	35
Effect on postretirement benefit obligation		2		4		7

	1% Decrease
	2016			2015			2014
Effect on total of service and interest cost	$	-		$	-		$	(30	)
Effect on postretirement benefit obligation		(2	)		(4	)		(7	)

For fiscal 2017, the Company expects to make a $4.0 million contribution to the qualified domestic pension plan, $45,000 to the nonqualified domestic pension plan, $1.0 million to the U.K. pension plan, and $396,000 to the postretirement medical and life insurance plan.

Future pension and other benefit payments are as follows (in thousands):

Fiscal Year	Pension		Other Benefits
2017	$	6,700	$	396
2018		6,997		363
2019		7,326		358
2020		7,656		364
2021		7,966		370
2022-2026		45,924		1,926