Annual report pursuant to Section 13 and 15(d)

Employee Benefit Plans

v3.19.2
Employee Benefit Plans
 12 Months Ended
Jun. 30, 2019
Postemployment Benefits [Abstract]  
EMPLOYEE BENEFIT PLANS
NOTE 12 — EMPLOYEE BENEFIT PLANS
We have a profit sharing program for eligible employees, which distributes, on a quarterly basis, a percentage of our pre-tax profits. In addition, we have an employee savings plan that qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. Since April 1, 2011, the employer match amount was 50% of the first $8,000 of an eligible employee’s contribution (i.e., a maximum of $4,000) during each fiscal year.
The total expenses under the profit sharing and 401(k) programs aggregated $18.6 million, $16.0 million, and $15.3 million in the fiscal years ended June 30, 2019, 2018 and 2017, respectively. We have no defined benefit plans in the United States. In addition to the profit sharing plan and the United States 401(k), several of our foreign subsidiaries have retirement plans for their full-time employees, several of which are defined benefit plans. Consistent with the requirements of local law, our deposits funds for certain of these plans with insurance companies, with third-party trustees or into government-managed accounts and/or accrues for the unfunded portion of the obligation. The assumptions used in calculating the obligation for the foreign plans depend on the local economic environment.
We apply authoritative guidance that requires an employer to recognize the funded status of each of its defined pension and post-retirement benefit plans as a net asset or liability on its balance sheets. Additionally, the authoritative guidance requires an employer to measure the funded status of each of its plans as of the date of its year-end statement of financial position. The benefit obligations and related assets under our plans have been measured as of June 30, 2019 and 2018.
Summary data relating to our foreign defined benefit pension plans, including key weighted-average assumptions used, is provided in the following tables:
 
Year ended June 30,
(In thousands)
2019
 
2018
Change in projected benefit obligation:
 
 
 
Projected benefit obligation as of the beginning of the fiscal year
$
96,682

 
$
97,265

Service cost
4,220

 
4,127

Interest cost
1,132

 
1,302

Contributions by plan participants
69

 
78

Actuarial (gain) loss
4,187

 
(8,228
)
Benefit payments
(1,755
)
 
(1,190
)
Assumed benefit obligation from acquisition
11,095

 
—

Transfer in
—

 
2,806

Foreign currency exchange rate changes and others, net
(140
)
 
522

Projected benefit obligation as of the end of the fiscal year
$
115,490

 
$
96,682

 
 
 
 
 
Year ended June 30,
(In thousands)
2019
 
2018
Change in fair value of plan assets:
 
 
 
Fair value of plan assets as of the beginning of the fiscal year
$
27,932

 
$
21,780

Actual return on plan assets
854

 
850

Employer contributions
3,587

 
3,662

Benefit and expense payments
(1,752
)
 
(1,190
)
Assumed plan assets from acquisition
3,424

 
—

Transfer in
—

 
2,806

Foreign currency exchange rate changes and others, net
(490
)
 
24

Fair value of plan assets as of the end of the fiscal year
$
33,555

 
$
27,932

 
 
As of June 30,
(In thousands)
2019
 
2018
Underfunded status
$
81,935

 
$
68,750

 
 
 
 
 
As of June 30,
(In thousands)
2019
 
2018
Plans with accumulated benefit obligations in excess of plan assets:
 
 
 
Accumulated benefit obligation
$
72,508

 
$
60,047

Projected benefit obligation
$
115,490

 
$
96,682

Plan assets at fair value
$
33,555

 
$
27,932


 
 
Year ended June 30,
 
2019

2018

2017
Weighted-average assumptions(1):
 
 
 
 
 
Discount rate
0.3%-1.7%
 
0.5%-2.3%
 
0.8%-1.9%
Expected rate of return on assets
1.0%-2.9%
 
1.3%-2.9%
 
1.5%-2.9%
Rate of compensation increases
1.8%-4.5%
 
3.0%-4.5%
 
3.0%-5.8%

__________________
(1)
Represents the weighted-average assumptions used to determine the benefit obligation.
The assumptions for expected rate of return on assets were developed by considering the historical returns and expectations of future returns relevant to the country in which each plan is in effect and the investments applicable to the corresponding plan. The discount rate for each plan was derived by reference to appropriate benchmark yields on high quality corporate bonds, allowing for the approximate duration of both plan obligations and the relevant benchmark index.
The following table presents losses recognized in accumulated other comprehensive income (loss) before tax related to our foreign defined benefit pension plans: 
 
As of June 30,
(In thousands)
2019
 
2018
Unrecognized transition obligation
$
242

 
$
251

Unrecognized prior service cost
4

 
28

Unrealized net loss
25,721

 
23,208

Amount of losses recognized
$
25,967

 
$
23,487


Losses in accumulated other comprehensive income (loss) related to our foreign defined benefit pension plans expected to be recognized as components of net periodic benefit cost over the fiscal year ending June 30, 2020 are as follows: 
(In thousands)
 
Unrecognized prior service cost
$
3

Unrealized net loss
906

Amount of losses expected to be recognized
$
909

 
The components of our net periodic cost relating to its foreign subsidiaries’ defined pension plans are as follows: 
 
Year ended June 30,
(In thousands)
2019
 
2018
 
2017
Components of net periodic pension cost:
 
 
 
 
 
Service cost(1)
$
4,220

 
$
4,127

 
$
4,015

Interest cost
1,132

 
1,302

 
1,117

Return on plan assets
(476
)
 
(428
)
 
(393
)
Amortization of transitional obligation
—

 
—

 
251

Amortization of prior service cost
21

 
26

 
46

Amortization of net loss
1,047

 
1,731

 
1,617

Net periodic pension cost
$
5,944

 
$
6,758

 
$
6,653


__________________
(1)
Service cost is reported in cost of revenues, research and development and selling, general and administrative expenses. All other components of net periodic pension cost are reported in other expense (income), net in the Consolidated Statements of Operations.
Fair Value of Plan Assets
Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three levels of inputs used to measure fair value of plan assets are described in Note 3, “Fair Value Measurements.”
The foreign plans’ investments are managed by third-party trustees consistent with the regulations or market practice of the country where the assets are invested. We are not actively involved in the investment strategy, nor does it have control over the target allocation of these investments. These investments made up 100% of total foreign plan assets in the fiscal years ended June 30, 2019 and 2018.
The expected aggregate employer contribution for the foreign plans during the fiscal year ending June 30, 2020 is $3.1 million.
The total benefits to be paid from the foreign pension plans are not expected to exceed $5.3 million in any year through the fiscal year ending June 30, 2029.
Foreign plan assets measured at fair value on a recurring basis consisted of the following investment categories as of June 30, 2019 and 2018, respectively:
As of June 30, 2019 (In thousands)
Total
 
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
 
Significant Other
Observable Inputs
(Level 2)
Cash and cash equivalents
$
18,571

 
$
18,571

 
$
—

Bonds, equity securities and other investments
14,984

 
—

 
14,984

Total assets measured at fair value
$
33,555

 
$
18,571

 
$
14,984

 
 
 
 
 
 
As of June 30, 2018 (In thousands)
Total
 
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
 
Significant Other
Observable Inputs
(Level 2)
Cash and cash equivalents
$
15,737

 
$
15,737

 
$
—

Bonds, equity securities and other investments
12,195

 
—

 
12,195

Total assets measured at fair value
$
27,932

 
$
15,737

 
$
12,195


 Concentration of Risk
We manage a variety of risks, including market, credit and liquidity risks, across our plan assets through our investment managers. We define a concentration of risk as an undiversified exposure to one of the above-mentioned risks that increases the exposure of the loss of plan assets unnecessarily. We monitor exposure to such risks in the foreign plans by monitoring the magnitude of the risk in each plan and diversifying our exposure to such risks across a variety of instruments, markets and counterparties. As of June 30, 2019, we did not have concentrations of plan asset investment risk in any single entity, manager, counterparty, sector, industry or country.