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Note 16 - Employee Benefit Plans | 12 Months Ended
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Jun. 30, 2022
Notes to Financial Statements |
Retirement Benefits [Text Block] | 16. Employee Benefit Plans Retirement Plans The Company has defined benefit pension plans covering certain current and former employees both inside and outside of the U.S. The Company’s pension plan for U.S. employees is frozen for substantially all employees and participants in the plan have ceased accruing future benefits. Net periodic benefit cost for U.S. and non-U.S. plans included the following components (in thousands):
|  | U.S. Plans |  |  | Foreign Plans |
|  | Year Ended June 30, |  |  | Year Ended June 30, |
|  | 2022 |  |  | 2021 |  |  | 2020 |  |  | 2022 |  |  | 2021 |  |  | 2020 |
Service Cost |  | $ | 5 |  |  | $ | 4 |  |  | $ | 3 |  |  | $ | 231 |  |  | $ | 217 |  |  | $ | 236 |
Interest Cost |  |  | 7,320 |  |  |  | 7,439 |  |  |  | 9,083 |  |  |  | 768 |  |  |  | 725 |  |  |  | 846 |
Expected return on plan assets |  |  | (13,038 | ) |  |  | (13,012 | ) |  |  | (13,150 | ) |  |  | (855 | ) |  |  | (629 | ) |  |  | (868 | )
Recognized net actuarial loss |  |  | 5,534 |  |  |  | 5,933 |  |  |  | 5,101 |  |  |  | 336 |  |  |  | 757 |  |  |  | 651 |
Amortization of prior service cost (benefit) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (4 | ) |  |  | (5 | ) |  |  | (5 | )
Net periodic benefit cost (benefit) |  | $ | (179 | ) |  | $ | 364 |  |  | $ | 1,037 |  |  | $ | 476 |  |  | $ | 1,065 |  |  | $ | 860 |
The following table sets forth the funded status and amounts recognized as of June 30, 2022 and 2021 for our U.S. and foreign defined benefit pension plans (in thousands):
|  | U.S. Plans |  |  | Foreign Plans |
|  | Year Ended June 30, |  |  | Year Ended June 30, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Change in benefit obligation |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Benefit obligation at beginning of year |  | $ | 252,092 |  |  | $ | 264,619 |  |  | $ | 47,809 |  |  | $ | 45,190 |
Service cost |  |  | 5 |  |  |  | 4 |  |  |  | 231 |  |  |  | 217 |
Interest cost |  |  | 7,320 |  |  |  | 7,439 |  |  |  | 768 |  |  |  | 725 |
Actuarial loss (gain) |  |  | (42,844 | ) |  |  | (3,457 | ) |  |  | (11,353 | ) |  |  | (746 | )
Benefits paid |  |  | (16,748 | ) |  |  | (16,513 | ) |  |  | (1,636 | ) |  |  | (1,906 | )
Foreign currency exchange rate & other changes |  |  | - |  |  |  | - |  |  |  | (4,951 | ) |  |  | 4,329 |
Projected benefit obligation at end of year |  | $ | 199,825 |  |  | $ | 252,092 |  |  | $ | 30,868 |  |  | $ | 47,809 |
Change in plan assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fair value of plan assets at beginning of year |  | $ | 212,603 |  |  | $ | 194,824 |  |  | $ | 45,017 |  |  | $ | 41,973 |
Actual return on plan assets |  |  | (38,213 | ) |  |  | 26,277 |  |  |  | (8,161 | ) |  |  | 40 |
Employer contribution |  |  | 209 |  |  |  | 8,015 |  |  |  | 326 |  |  |  | 105 |
Benefits paid |  |  | (16,748 | ) |  |  | (16,513 | ) |  |  | (1,636 | ) |  |  | (1,906 | )
Foreign currency exchange rate |  |  | - |  |  |  | - |  |  |  | (4,560 | ) |  |  | 4,805 |
Fair value of plan assets at end of year |  | $ | 157,851 |  |  | $ | 212,603 |  |  | $ | 30,986 |  |  | $ | 45,017 |
Funded Status |  | $ | (41,974 | ) |  | $ | (39,489 | ) |  | $ | 118 |  |  | $ | (2,792 | )
Amounts recognized in the consolidated balance sheets consist of: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Prepaid benefit cost |  | $ | - |  |  | $ | - |  |  | $ | 6,295 |  |  | $ | 5,661 |
Current liabilities |  |  | (195 | ) |  |  | (208 | ) |  |  | (261 | ) |  |  | (309 | )
Non-current liabilities |  |  | (41,779 | ) |  |  | (39,281 | ) |  |  | (5,916 | ) |  |  | (8,144 | )
Net amount recognized |  | $ | (41,974 | ) |  | $ | (39,489 | ) |  | $ | 118 |  |  | $ | (2,792 | )
Unrecognized net actuarial loss |  | $ | 120,719 |  |  | $ | 117,847 |  |  | $ | 1,479 |  |  | $ | 4,618 |
Unrecognized prior service cost |  |  | - |  |  |  | - |  |  |  | (38 | ) |  |  | (51 | )
Accumulated other comprehensive income, pre-tax |  | $ | 120,719 |  |  | $ | 117,847 |  |  | $ | 1,441 |  |  | $ | 4,567 |
The accumulated benefit obligation for all defined benefit pension plans was $226.8 million and $299.8 million at June 30, 2022 and 2021, respectively. The estimated actuarial net loss for the defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is $4.2 million. Plan Assets and Assumptions The fair values of the Company’s pension plan assets at June 30, 2022 and 2021 by asset category, as classified in the three levels of inputs described in Note 1 under the caption Fair Value of Financial Instruments, are as follows (in thousands):
|  | June 30, 2022 |
|  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Cash and cash equivalents |  | $ | 1,254 |  |  | $ | 1,123 |  |  | $ | 131 |  |  | $ | - |
Common and preferred stocks |  |  | 64,343 |  |  |  | 1,786 |  |  |  | 62,557 |  |  |  | - |
Corporate bonds and other fixed income securities |  |  | 112,593 |  |  |  | 1,535 |  |  |  | 111,058 |  |  |  | - |
Other |  |  | 10,648 |  |  |  | - |  |  |  | 10,648 |  |  |  | - |
|  | $ | 188,838 |  |  | $ | 4,444 |  |  | $ | 184,394 |  |  |  | - |
|  | June 30, 2021 |
|  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Cash and cash equivalents |  | $ | 3,209 |  |  | $ | 3,148 |  |  | $ | 61 |  |  | $ | - |
Common and preferred stocks |  |  | 86,499 |  |  |  | 2,425 |  |  |  | 84,074 |  |  |  | - |
Corporate bonds and other fixed income securities |  |  | 146,742 |  |  |  | 1,850 |  |  |  | 144,892 |  |  |  | - |
Other |  |  | 21,170 |  |  |  | - |  |  |  | 21,170 |  |  |  | - |
|  | $ | 257,620 |  |  | $ | 7,423 |  |  | $ | 250,197 |  |  |  | - |
Asset allocation and target asset allocations are as follows:
|  | U.S. Plans |  |  | Foreign Plans |
|  | Year Ended June 30, |  |  | Year Ended June 30, |
Asset Category |  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Equity securities |  | 33% |  |  | 36% |  |  | 6% |  |  | 5% |
Debt securities |  | 48% |  |  | 43% |  |  | 78% |  |  | 70% |
Global balanced securities |  | 11% |  |  | 12% |  |  | 15% |  |  | 24% |
Other |  | 8% |  |  | 9% |  |  | 1% |  |  | 1% |
Total |  | 100% |  |  | 100% |  |  | 100% |  |  | 100% |
|  | 2022 |
Asset Category – Target |  | U.S. |  |  | U.K. |
Equity securities |  | 33% |  |  | 0% |
Debt and market neutral securities |  | 49% |  |  | 70% |
Global balanced securities |  | 12% |  |  | 1% |
Other |  | 6% |  |  | 29% |
Total |  | 100% |  |  | 100% |
Our investment policy for the U.S. pension plans targets a range of exposure to the various asset classes. Standex rebalances the portfolio periodically when the allocation is not within the desired range of exposure. The plan seeks to provide returns in excess of the various benchmarks. The benchmarks include the following indices: S&P 500; Citigroup PMI EPAC; Citigroup World Government Bond and Barclays Aggregate Bond. A third-party investment consultant tracks the plan’s portfolio relative to the benchmarks and provides quarterly investment reviews which consist of a performance and risk assessment on all investment managers and on the portfolio. Certain managers within the plan use, or have authorization to use, derivative financial instruments for hedging purposes, the creation of market exposures and management of country and asset allocation exposure. Currency speculation derivatives are strictly prohibited.
Year Ended June 30 | 2022 | 2021 | 2020 |
Plan assumptions - obligations |  |  |  |  |  |  |
Discount rate | 1.4%-5.0% | 0.73 - 3.00% | 0.99 - 2.90% |
Rate of compensation increase | 3.25% | 3.25% | 2.90% |
Plan assumption - cost |  |  |  |  |  |  |
Discount rate | 0.73%-3.0% | 0.99 - 2.90% | 0.31 - 3.70% |
Expected return on assets | 2.05%-6.8% | 1.40 - 6.90% | 2.30 - 7.00% |
Rate of compensation increase | 3.25% | 2.90% | 3.20% |
Included in the above are the following assumptions relating to the obligations for defined benefit pension plans in the United States at June 30, 2022; a discount rate of 5.0% and expected return on assets of 6.7%. The U.S. defined benefit pension plans represent the majority of our pension obligations. The expected return on plan assets assumption is based on our expectation of the long-term average rate of return on assets in the pension funds and is reflective of the current and projected asset mix of the funds. The discount rate reflects the current rate at which pension liabilities could be effectively settled at the end of the year. The discount rate is determined by matching our expected benefit payments from a stream of AA- or higher bonds available in the marketplace, adjusted to eliminate the effects of call provisions. Expected benefit payments for all plans during the next five years are as follows: 2023, $17.6 million; 2024, $17.5 million; 2025, $17.5 million; 2026, $17.3 million; 2027, $17.2 million and five years thereafter, $83.2 million. The Company expects to make $0.5 million of contributions to its pension plans in 2023. The Company operates defined benefit plans in Germany and Japan which are unfunded. Multi-Employer Pension Plans We contribute to two multiemployer defined benefit plans under the terms of collective bargaining agreements that cover our union-represented employees. These plans generally provide for retirement, death and/or termination benefits for eligible employees within the applicable collective bargaining units, based on specific eligibility/participation requirements, vesting periods and benefit formulas. The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects:
| ● | Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers.
| ● | If a participating employer stops contributing to the multiemployer plan, the unfunded obligations of the plan may be borne by the remaining participating employers.
| ● | If we choose to stop participating in some of our multiemployer plans, we may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability. However, cessation of participation in a multiemployer plan and subsequent payment of any withdrawal liability is subject to the collective bargaining process.
The following table outlines the Company’s participation in multiemployer pension plans for the periods ended June 30, 2022, 2021, and 2020, and sets forth the yearly contributions into each plan. The “EIN/Pension Plan Number” column provides the Employer Identification Number (“EIN”) and the three-digit plan number. The most recent Pension Protection Act zone status available in 2022 and 2021 relates to the plans’ two most recent fiscal year-ends. The zone status is based on information that we received from the plans’ administrators and is certified by each plan’s actuary. Among other factors, plans certified in the red zone are generally less than 65% funded, plans certified in the orange zone are both less than 80% funded and have an accumulated funding deficiency or are expected to have a deficiency in any of the next six plan years, plans certified in the yellow zone are less than 80% funded, and plans certified in the green zone are at least 80% funded. The “FIP/RP Status Pending/Implemented” column indicates whether a financial improvement plan (“FIP”) for yellow/orange zone plans, or a rehabilitation plan (“RP”) for red zone plans, is either pending or has been implemented. For all plans, the Company’s contributions do not exceed 5% of the total contributions to the plan in the most recent year.
|  |  |  |  | Pension Protection Act |  |  |  |  |  |  |  |  |  |  |  |  |  | Expiration
|  |  |  |  | Zone Status |  | Contributions |  |  | Date of
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Collective
|  | EIN/Plan |  |  |  | FIP/RP |  |  |  |  |  |  |  |  |  |  |  |  | Surcharge | Bargaining
Pension Fund |  | Number |  | 2022 | 2021 | Status |  | 2022 |  |  | 2021 |  |  | 2020 |  | Imposed? | Agreement
New England Teamsters and Trucking Industry Pension Fund |  |  | 04-6372430-001 |  | Red | Red | Yes/ Implemented |  | $ | 520 |  |  | $ | 631 |  |  | $ | 531 |  | No | May-25
IAM National Pension Fund, National Pension Plan |  |  | 51-6031295-002 |  | Red | Red | Yes/Implemented |  |  | 579 |  |  |  | 513 |  |  |  | 595 |  | Yes | Oct-22 - May-25
|  |  |  |  |  |  |  |  | $ | 1,099 |  |  | $ | 1,144 |  |  | $ | 1,126 |  |  |
Retirement Savings Plans The Company has two primary employee savings plans, one for salaried employees and one for hourly employees. Substantially all of our full-time domestic employees are covered by these savings plans. Under the provisions of the plans, employees may contribute a portion of their compensation within certain limitations. The Company, at the discretion of the Board of Directors, may make contributions on behalf of our employees under the plans. Company contributions were $2.9 million, $2.9 million, and $3.7 million for the years ended June 30, 2022, 2021, and 2020, respectively. At June 30, 2022, the salaried plan holds approximately 121,000 shares of Company common stock, representing approximately 4.4% of the holdings of the plan.

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