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Note 16 - Employee Benefit Plans
 12 Months Ended
Jun. 30, 2024
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. Obligations under the Company's defined benefit plan operated in Ireland have been transferred to the buyer of the Procon business as part of the divestiture in fiscal year 2023. Obligations under the unfunded defined benefit plan operated by the Sanyu business in Japan were transferred to the Company as of the date of acquisition in the third quarter of fiscal year 2024.

 

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,

 
  

2024

  

2023

  

2022

  

2024

  

2023

  

2022

 

Service Cost

 $-  $-  $5  $196  $176  $231 

Interest Cost

  9,891   9,586   7,320   1,190   1,039   768 

Expected return on plan assets

  (11,113)  (11,973)  (13,038)  (1,404)  (943)  (855)

Recognized net actuarial loss

  3,802   3,814   5,534   (607)  (57)  336 

Amortization of prior service cost (benefit)

  -   -   -   (3)  (4)  (4)

Net periodic benefit cost (benefit)

 $2,580  $1,427  $(179) $(628) $211  $476 

 

 

The following table sets forth the funded status and amounts recognized as of June 30, 2024 and 2023 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,

 
  

2024

  

2023

  

2024

  

2023

 

Change in benefit obligation

                

Benefit obligation at beginning of year

 $184,682  $199,825  $25,454  $30,868 

Service cost

  -   -   196   176 

Interest cost

  9,891   9,586   1,190   1,039 

Actuarial gain

  96   (8,625)  555   (4,052)

Benefits paid

  (16,230)  (16,104)  (1,779)  (1,391)

Foreign currency exchange rate & other changes

  -   -   1,378   (1,186)

Projected benefit obligation at end of year

 $178,439  $184,682  $26,994  $25,454 
                 

Change in plan assets

                

Fair value of plan assets at beginning of year

 $142,114  $157,851  $22,250  $30,986 

Actual return on plan assets

  6,447   167   1,317   (4,855)

Employer contribution

  9,981   200   257   251 

Benefits paid

  (16,230)  (16,104)  (1,497)  (1,391)

Foreign currency exchange rate & other changes

  -   -   (94)  (2,741)

Fair value of plan assets at end of year

 $142,312  $142,114  $22,233  $22,250 
                 

Funded Status

 $(36,127) $(42,568) $(4,761) $(3,204)
                 

Amounts recognized in the consolidated balance sheets consist of:

                

Prepaid benefit cost

 $-  $-  $2,570  $2,807 

Current liabilities

  (166)  (148)  (625)  (277)

Non-current liabilities

  (35,961)  (42,420)  (6,706)  (5,734)

Net amount recognized

 $(36,127) $(42,568) $(4,761) $(3,204)
                 

Unrecognized net actuarial loss

 $121,045  $120,087  $5,273  $4,032 

Unrecognized prior service cost

  -   -   (26)  (32)

Accumulated other comprehensive income, pre-tax

 $121,045  $120,087  $5,247  $4,000 

 

The accumulated benefit obligation for all defined benefit pension plans was $199.2 million and $206.6 million at June 30, 2024 and 2023, 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, 2024 and 2023 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, 2024

 
  

Total

  

Level 1

  

Level 2

  

Level 3

 

Cash and cash equivalents

 $2,792  $2,792  $-  $- 

Common and preferred stocks

  53,111   -   53,111   - 

Corporate bonds and other fixed income securities

  96,522   -   96,522   - 

Other

  12,120   -   12,120   - 
  $164,545  $2,792  $161,753   - 

 

  

June 30, 2023

 
  

Total

  

Level 1

  

Level 2

  

Level 3

 

Cash and cash equivalents

 $1,558  $1,558  $-  $- 

Common and preferred stocks

  54,308   -   54,308   - 

Corporate bonds and other fixed income securities

  97,215   -   97,215   - 

Other

  11,283   -   11,283   - 
  $164,364  $1,558  $162,806   - 

 

Asset allocation and target asset allocations are as follows:

 

  

U.S. Plans

  

Foreign Plans

 
  

Year Ended June 30,

  

Year Ended June 30,

 

Asset Category

 

2024

  

2023

  

2024

  

2023

 

Equity securities

 

35%

  

35%

  

0%

  

0%

 

Debt securities

 

42%

  

44%

  

69%

  

67%

 

Global balanced securities

 

11%

  

12%

  

1%

  

3%

 

Other

 

11%

  

9%

  

30%

  

30%

 

Total

 

99%

  

100%

  

100%

  

100%

 

 

  

2024

 

Asset Category – Target

 

U.S.

  

U.K.

 

Equity securities

 

33%

  

0%

 

Debt and market neutral securities

 

45%

  

67%

 

Global balanced securities

 

12%

  

1%

 

Other

 

10%

  

32%

 

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

2024

2023

2022

 

Plan assumptions - obligations

       

Discount rate

1.85% - 5.60%1.48% - 5.60%1.4% - 5.0% 

Rate of compensation increase

3.30%3.30%

3.25%

 
        

Plan assumption - cost

       

Discount rate

1.48% - 5.6%1.37% - 5.6%0.73% - 3.0% 

Expected return on assets

4.55% - 6.50%2.80% - 6.65%2.05% - 6.8% 

Rate of compensation increase

3.30%3.30%

3.25%

 

 

Included in the above are the following assumptions relating to the obligations for defined benefit pension plans in the United States at June 30, 2024; a discount rate of 5.6% and expected return on assets of 6.4%. 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 fiscal years are as follows:  2025, $17.9 million; 2026, $17.5 million; 2027, $17.4 million; 2028, $17.7 million; 2029, $17.0 million and years thereafter, $80.9 million. The Company expects to make $6.3 million of contributions to its pension plans in fiscal year 2025.

 

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, 2024, 2023, and 2022, 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 2024 and 2023 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

 

2024

2023

Status

 

2024

  

2023

  

2022

 

Imposed?

Agreement

New England Teamsters and Trucking Industry Pension Fund

 04-6372430-001 

Red

Red

Yes/ Implemented

 $816  $695  $579 

No

Mar-27

                      

IAM National Pension Fund, National Pension Plan

 51-6031295-002 

Red

Red

Yes/Implemented

 586  569  520 

Yes

May-25

         $1,402  $1,264  $1,099   

 

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 $2.8 million, $3.0 million, and $2.9 million for the years ended June 30, 2024, 2023, and 2022, respectively. At June 30, 2024, the salaried plan holds approximately 82,000 shares of Company common stock, representing approximately 4.4% of the holdings of the plan.