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EMPLOYEES' RETIREMENT PLANS | 12 Months Ended
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Aug. 31, 2022
Retirement Benefits [Abstract] |
EMPLOYEES' RETIREMENT PLANS | NOTE 15. EMPLOYEES' RETIREMENT PLANS Substantially all employees in the U.S. are covered by a defined contribution 401(k) retirement plan. The tax qualified defined contribution plan is maintained, and contributions are made, in accordance with the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The Company also provides certain eligible executives benefits pursuant to its Benefit Restoration Plan ("BRP") equal to amounts that would have been available under the tax qualified ERISA plan, but were subject to the limitations of ERISA, tax laws and regulations. Company expenses for these plans, a portion of which are discretionary, totaled $34.0 million, $47.0 million and $37.3 million for 2022, 2021 and 2020, respectively, of which $7.2 million, $25.5 million and $15.9 million were recorded in selling, general and administrative expenses during 2022, 2021 and 2020, respectively, and the remainder was recorded in cost of goods sold in the Company's consolidated statements of earnings. The deferred compensation liability under the BRP was $43.1 million and $51.2 million at August 31, 2022 and 2021, respectively, of which $40.0 million and $45.4 million, respectively, was included in other noncurrent liabilities, and $3.1 million and $5.8 million, respectively, was included in accrued expenses and other payables on the Company's consolidated balance sheets. Though under no obligation to fund the BRP, the Company has segregated assets in a trust with a value of $57.9 million and $69.4 million at August 31, 2022 and 2021, respectively, and such assets were included in other noncurrent assets on the Company's consolidated balance sheets. The net holding loss on these segregated assets was $7.1 million in 2022, compared to a net holding gain of $10.1 million and $6.0 million in 2021 and 2020, respectively, and was included in net sales in the Company's consolidated statements of earnings. U.K. Pension Plan Following the acquisition of Tensar, the Company assumed the TGL Pension Plan in the United Kingdom (the "U.K.") ("U.K. Pension Plan"), a defined benefit pension plan. The U.K. Pension Plan provides retirement benefit payments for participating retired employees and their spouses, and was closed to new participants prior to the acquisition. Upon acquisition, the excess of projected U.K. Pension Plan assets over the U.K. Pension Plan benefit obligation was recognized as an asset on the Company's consolidated balance sheet and previously existing deferred actuarial gains and losses and unrecognized service costs or benefits were eliminated. The Company’s funding policy for the U.K. Pension Plan is to contribute annually the amount necessary to provide for benefits based on accrued service and meet at least the minimum contributions required by applicable regulations. U.S. Pension Plan In 2019, the Company acquired a partially funded defined benefit pension plan (the "U.S. Pension Plan"), which was closed to new participants prior to the acquisition. Pension benefits associated with the U.S. Pension Plan are generally based on each participant’s years of service, compensation and age at retirement or termination. The Company’s funding policy for the U.S. Pension Plan is to contribute annually the amount necessary to provide for benefits based on accrued service and meet at least the minimum contributions required by applicable regulations. As a result of the closure of the Rancho Cucamonga facility, the Company recorded pension curtailment loss and special termination benefits of $3.2 million in 2020. For further details, refer to Note 3, Changes in Business. The following tables include a reconciliation of the beginning and ending balances of pension benefit obligation and the fair value of plan assets resulting from the U.K. Pension Plan and the U.S. Pension Plan and the related amounts recognized in the Company’s consolidated balance sheets as of August 31, 2022 and 2021:
|  | U.K. Pension Plan | U.S. Pension Plan
(in thousands) |  | 2022 |  |  | 2022 |  | 2021
Benefit obligation at beginning of year |  | $ | — |  |  |  | $ | 33,687 |  |  | $ | 36,130 |
Acquisition |  | 68,966 |  |  |  | — |  |  | — |
Interest cost |  | 635 |  |  |  | 709 |  |  | 724 |
Actuarial gain |  | (11,107) |  |  |  | (6,010) |  |  | (1,557) |
Benefits paid |  | (942) |  |  |  | (1,818) |  |  | (1,610) |
Foreign currency translation |  | (5,510) |  |  |  | — |  |  | — |
Benefit obligation at end of year |  | $ | 52,042 |  |  |  | $ | 26,568 |  |  | $ | 33,687 |
Fair value of plan assets at beginning of year |  | $ | — |  |  |  | $ | 34,126 |  |  | $ | 29,201 |
Acquisition |  | 83,586 |  |  |  | — |  |  | — |
Actual return on plan assets |  | (15,718) |  |  |  | (7,407) |  |  | 4,042 |
Administrative expenses |  | — |  |  |  | (461) |  |  | (52) |
Employer contributions |  | 73 |  |  |  | — |  |  | 2,545 |
Benefits paid |  | (942) |  |  |  | (1,818) |  |  | (1,610) |
Foreign currency translation |  | (6,545) |  |  |  | — |  |  | — |
Fair value of plan assets at end of year |  | $ | 60,454 |  |  |  | $ | 24,440 |  |  | $ | 34,126 |
Funded status at end of year (net asset (liability) recognized in the consolidated balance sheets as of August 31,) |  | $ | 8,412 |  |  |  | $ | (2,128) |  |  | $ | 439 |
Amounts recognized in accumulated other comprehensive income as of August 31, |  |  |  |  |  |  |
Net actuarial (gain) loss |  | $ | 5,666 |  |  |  | $ | 2,278 |  |  | $ | (1,110) |
Weighted average assumptions used to determine benefit obligations are detailed below:
|  | U.K. Pension Plan |  | U.S. Pension Plan
|  | 2022 |  | 2022 |  | 2021
Effective discount rate for benefit obligations |  | 4.3 | % |  | 4.7 | % |  | 2.9 | %
Expected long-term rate of return on plan assets |  | 4.0 | % |  | 4.7 | % |  | 4.8 | %
The pension accumulated benefit obligation represents the actuarial present value of benefits based on employee service and compensation as of the measurement date and does not include an assumption about future compensation levels. The service cost component of net periodic benefit cost is recorded in cost of goods sold within the consolidated statements of earnings and other components of net periodic benefit costs are recorded in selling, general and administrative expenses within the consolidated statements of earnings. Components of net periodic benefit cost and other supplemental information are detailed below:
|  | U.K. Pension Plan |  | U.S. Pension Plan
|  | Year Ended August 31,
(in thousands) |  | 2022 |  | 2022 |  | 2021 |  | 2020
Service cost |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 335 |
Expected administrative expenses |  | — |  |  | 50 |  |  | 290 |  |  | 450 |
Interest cost |  | 635 |  |  | 709 |  |  | 724 |  |  | 892 |
Expected return on plan assets |  | (1,067) |  |  | (1,579) |  |  | (1,493) |  |  | (1,334) |
Special termination benefits |  | — |  |  | — |  |  | — |  |  | 1,918 |
Settlements, curtailments and other |  | — |  |  | — |  |  | — |  |  | 1,314 |
Total net periodic benefit (gain) cost |  | $ | (432) |  |  | $ | (820) |  |  | $ | (479) |  |  | $ | 3,575 |
Other changes in plan assets and benefit obligations recognized in other comprehensive income |  |  |  |  |  |  |  |
Net actuarial (gain) loss arising during measurement period |  | $ | 5,666 |  |  | $ | 3,388 |  |  | $ | (4,344) |  |  | $ | 3,642 |
Amortization of net actuarial gain |  | — |  |  | — |  |  | — |  |  | (3,232) |
Total (gain) loss recognized in other comprehensive income |  | $ | 5,666 |  |  | $ | 3,388 |  |  | $ | (4,344) |  |  | $ | 410 |
Weighted average assumptions used to determine net periodic benefit cost for 2022, 2021 and 2020 are detailed below:
|  | U.K Pension Plan |  | U.S. Pension Plan
|  | 2022 |  | 2022 |  | 2021 |  | 2020(1)
Effective rate for interest on benefit obligations |  | 2.9 | % |  | 2.2 | % |  | 2.1 | % |  | 2.8 | %
Effective rate for service cost |  | N/A |  | N/A |  | N/A |  | 3.3 | %
Expected long-term rate of return |  | 4.0 | % |  | 5.0 | % |  | 5.0 | % |  | 6.0 | %
__________________________________ (1) Certain weighted average assumptions used to determine net periodic benefit cost for 2020 were remeasured at an interim date. This remeasurement resulted in an effective rate for interest on benefit obligations of 2.9% and an effective rate for service cost of 3.5%. The Company determines the discount rates used to measure liabilities as of the August 31 measurement date, which is also the date used for the related annual measurement assumptions. The discount rates reflect the current rate at which the associated liabilities could be effectively settled at the end of the year. For the U.K. Pension Plan, the Company sets its discount rate by reference to a corporate bond yield curve derived from AA rated U.K. corporate bonds. The single equivalent discount rate is derived as equivalent to applying the full yield curve approach to each future year's projected benefit cash flow. For the U.S. Pension Plan, the Company uses the full yield curve approach and sets its rates to reflect the yield of a portfolio of high-quality corporate bonds that would produce cash flows sufficient in timing and amount to settle projected future benefits. The expected return assumptions are based on the strategic asset allocation of each plan and long-term capital market return expectations. For the U.K. Pension Plan, the interest cost calculation is determined by applying the single equivalent discount rate to the discounted value of the year-by-year projected benefit payments. For the U.S. Pension Plan, the Company measures interest cost using the full yield curve approach. The interest cost calculation is determined by applying duration-specific spot rates to the year-by-year projected benefit payments. Neither the single equivalent discount rate nor the full yield curve approach affect the measurement of the total benefit obligations. The Company plans to make immaterial contributions to the U.K. Pension Plan and does not expect to make any contributions to the U.S. Pension Plan in 2023. Future contributions will depend on market conditions, interest rates and other factors. Plan Assets Plan assets consist primarily of public equity, corporate and government bonds. The principal investment objectives are to achieve, over the long term, a return on the plan assets which is consistent with the assumptions made by the plan actuaries in determining the funding of the plans, to ensure that sufficient liquid assets are available to meet benefit payments as they fall due and to consider the interest of the Company in relation to the size and volatility of the Company's contribution requirements. Each asset class has broadly diversified characteristics. Asset and benefit obligation forecasting studies are conducted periodically, generally every two to three years, or when significant changes have occurred in market conditions, benefits, participant demographics or funded status. The U.K. Pension Plan's weighted average target allocation ranges and actual allocations as a percentage of plan assets, including the notional exposure of future contracts by asset categories, are detailed below:
|  | Pension Assets
|  | Target Percent |  | 2022
Fixed income securities |  | 70.0% | to | 75.0% |  | 71.4%
Equity securities |  | 10.0 | to | 15.0 |  | 12.4
Cash and other |  | 15.0 | to | 20.0 |  | 16.2
Total |  |  |  |  |  | 100%
The U.S. Pension Plan's weighted average target and actual allocations as a percentage of plan assets, including the notional exposure of future contracts by asset categories, are detailed below:
|  | Pension Assets
|  | Target Percent |  |  |  | 2022 |  | 2021
Fixed income securities |  | 95.0% | to | 100.0% |  |  |  | 98.0% |  | 64.1%
Equity securities |  | — | to | — |  |  |  | — |  | 34.1
Cash and other |  | — | to | 5.0 |  |  |  | 2.0 |  | 1.8
Total |  |  |  |  |  |  |  | 100.0% |  | 100.0%
Investment Valuation Investments are stated at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability at the measurement date. Investments in equity securities traded on a national securities exchange are valued at the last reported sales price on the final business day of the year. Fixed income securities are valued at the yields currently available on comparable securities of issues with similar credit ratings. Purchases and sales of securities are recorded as of the trade date. Realized gains and losses on sales of securities are determined based on average cost. Interest income is recognized on the accrual basis. Dividend income is recognized on the ex-dividend date. Non-interest bearing cash is valued at cost, which approximates fair value. Fair Value Measurements The following table sets forth the plan assets by asset class for the U.K. Pension Plan as of August 31, 2022. Level 1 assets consist of cash and cash equivalents. Level 2 assets include funds invested in bonds and fixed income securities. Level 3 assets consist primarily of Secured Finance and Multistrategy Funds that invest in debt, loan and structured financial instruments in both public and private secured finance markets. The changes in Level 3 assets related to actual return on plan assets, purchases, sales, settlements and transfers were immaterial from the Acquisition Date to August 31, 2022.
|  |  |  | Fair Value at Measurement Date Using |  |  |  |  |  |
(in thousands) |  | August 31, 2022 |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  |  |  |  |  |
Fixed income securities |  | $ | 43,160 |  |  | $ | — |  |  | $ | 35,849 |  |  | $ | 7,311 |  |  |  |  |  |  |
Equity securities |  | 7,514 |  |  | — |  |  | 7,514 |  |  | — |  |  |  |  |  |  |
Cash and other |  | 9,780 |  |  | 530 |  |  | 7,676 |  |  | 1,574 |  |  |  |  |  |  |
Fair value of U.K. Pension Plan assets |  | $ | 60,454 |  |  |  |  |  |  |  |  |  |  |  |  |
The following table sets forth the plan assets by asset class for the U.S. Pension Plan as of August 31, 2022 and 2021. All securities are traded on a national securities exchange and therefore are Level 1 assets in the fair value hierarchy.
|  | Fair Value at Measurement Date
(in thousands) |  | August 31, 2022 |  | August 31, 2021
Fixed income securities |  | $ | 23,958 |  |  | $ | 21,890 |
Equity securities |  | — |  |  | 11,641 |
Cash and other |  | 482 |  |  | 595 |
Fair value of U.S. Pension Plan assets |  | $ | 24,440 |  |  | $ | 34,126 |
Future Pension Benefit Payments The following table provides the estimated aggregate pension benefit payments that are payable from the U.K Pension Plan and the U.S. Pension Plan to participants in future years:
(in thousands) |  | U.K. Pension Plan |  | U.S. Pension Plan
2023 |  | $ | 2,601 |  |  | $ | 1,820 |
2024 |  | 2,670 |  |  | 1,796 |
2025 |  | 2,738 |  |  | 1,771 |
2026 |  | 2,809 |  |  | 1,744 |
2027 |  | 2,882 |  |  | 1,731 |
2028 through 2032 |  | 15,576 |  |  | 8,512 |

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- Definition The entire disclosure for an entity's employee compensation and benefit plans, including, but not limited to, postemployment and postretirement benefit plans, defined benefit pension plans, defined contribution plans, non-qualified and supplemental benefit plans, deferred compensation, share-based compensation, life insurance, severance, health care, unemployment and other benefit plans. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 712 -URI http://asc.fasb.org/topic&trid=2197446 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 710 -URI http://asc.fasb.org/topic&trid=2127225 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 715 -URI http://asc.fasb.org/topic&trid=2235017 + Details
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