bgg-20200329
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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________ 
FORM 10-Q
______________________________________________________________ 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 29, 2020
OR 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-1370
________________________________________________
https://cdn.kscope.io/a67d4e8dc12f1271bbcf2e033bbf75ba-bgg-20200329_g1.jpg
BRIGGS & STRATTON CORPORATION
(Exact name of registrant as specified in its charter)
____________________________________________________
Wisconsin 39-0182330
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
12301 West Wirth Street, Wauwatosa, Wisconsin 53222
(Address of Principal Executive Offices) (Zip Code)
(414) 259-5333
(Registrant’s telephone number, including area code)
___________________________________________________________ 

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock (par value $0.01 per share)BGGNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  x    No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act:
Large accelerated filerxAccelerated filer¨
Non-accelerated filer
¨  
Smaller reporting company¨
Emerging growth company¨
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  ¨    No x
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
ClassOutstanding at April 24, 2020
COMMON STOCK, par value $0.01 per share42,453,535 Shares



Table of Contents
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
INDEX
 
  Page No.
PART I – FINANCIAL INFORMATION
Item 1.
Item 2.
Item 3.
Item 4.
PART II – OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 6.

2

Table of Contents
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)


ASSETS
 
March 29,
2020
June 30,
2019
CURRENT ASSETS:
Cash and Cash Equivalents$44,413  $29,569  
Accounts Receivable, Net236,341  198,498  
Inventories -
Finished Products358,011  344,277  
Work in Process153,993  145,182  
Raw Materials14,510  12,547  
Total Inventories526,514  502,006  
Prepaid Expenses and Other Current Assets36,381  32,404  
Total Current Assets843,649  762,477  
OTHER ASSETS:
Goodwill100,360  169,682  
Investments30,554  49,641  
Other Intangible Assets, Net95,064  96,738  
Long-Term Deferred Income Tax Asset4,364  43,172  
Other Long-Term Assets, Net21,149  18,676  
Right of Use Asset103,924  —  
Total Other Assets355,415  377,909  
PLANT AND EQUIPMENT:
Cost1,238,822  1,220,339  
Less - Accumulated Depreciation848,488  809,294  
Total Plant and Equipment, Net390,334  411,045  
TOTAL ASSETS$1,589,398  $1,551,431  

3

Table of Contents

BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(In thousands, except per share data)
(Unaudited)
 

LIABILITIES & SHAREHOLDERS’ INVESTMENT
 
March 29,
2020
June 30,
2019
CURRENT LIABILITIES:
Accounts Payable$192,114  $287,620  
Short-Term Debt597,473  160,540  
Accrued Liabilities128,987  129,585  
Short-Term Lease Obligations11,710  —  
Total Current Liabilities930,284  577,745  
OTHER LIABILITIES:
Accrued Pension Cost209,318  221,033  
Accrued Employee Benefits21,110  21,311  
Accrued Postretirement Health Care Obligation22,035  25,929  
Accrued Warranty19,406  19,572  
Other Long-Term Liabilities57,838  44,152  
Long-Term Lease Obligations90,067  —  
Long-Term Debt  194,969  
Total Other Liabilities419,774  526,966  
SHAREHOLDERS’ INVESTMENT:
Common Stock - Authorized 120,000 shares, $.01 par value, issued 57,854 shares579  579  
Additional Paid-In Capital72,341  78,902  
Retained Earnings796,426  993,873  
Accumulated Other Comprehensive Loss(305,891) (292,550) 
Treasury Stock at cost, 15,399 and 15,796 shares, respectively(324,115) (334,084) 
Total Shareholders’ Investment239,340  446,720  
TOTAL LIABILITIES AND SHAREHOLDERS’ INVESTMENT$1,589,398  $1,551,431  

The accompanying notes are an integral part of these statements.
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
 Three Months EndedNine Months Ended
 March 29,
2020
March 31,
2019
March 29,
2020
March 31,
2019
NET SALES$473,535  $580,196  $1,225,195  $1,364,655  
COST OF GOODS SOLD410,071  483,209  1,050,460  1,131,422  
Gross Profit63,464  96,987  174,735  233,233  
ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
74,897  79,521  232,758  267,553  
GOODWILL IMPAIRMENT
67,480  —  67,480  —  
EQUITY IN EARNINGS (LOSS) OF UNCONSOLIDATED AFFILIATES(2,746) (205) (537) 5,786  
Income (Loss) from Operations(81,659) 17,261  (126,040) (28,534) 
INTEREST EXPENSE(9,521) (9,088) (25,390) (21,731) 
OTHER INCOME (EXPENSE), Net(1,773) 953  (2,904) 391  
Income (Loss) Before Income Taxes(92,953) 9,126  (154,334) (49,874) 
PROVISION (CREDIT) FOR INCOME TAXES51,653  1,121  39,253  (14,331) 
NET INCOME (LOSS)
$(144,606) $8,005  $(193,587) $(35,543) 
EARNINGS (LOSS) PER SHARE
Basic$(3.47) $0.19  $(4.65) $(0.86) 
Diluted(3.47) 0.19  (4.65) (0.86) 
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic41,726  41,527  41,685  41,691  
Diluted41,726  41,527  41,685  41,691  
DIVIDENDS PER SHARE$  $0.14  $0.10  $0.42  



The accompanying notes are an integral part of these statements.
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)


 
 Three Months EndedNine Months Ended
March 29,
2020
March 31,
2019
March 29,
2020
March 31,
2019
Net Income (Loss)$(144,606) $8,005  $(193,587) $(35,543) 
Other Comprehensive Income (Loss):
Cumulative Translation Adjustments(12,332) 1,196  (14,589) (2,230) 
Unrealized Loss on Derivative Instruments, Net of Tax(8,183) (4,157) (9,571) (8,635) 
Unrecognized Pension & Postretirement Obligation, Net of Tax3,607  2,708  10,819  8,116  
Other Comprehensive Loss
(16,908) (253) (13,341) (2,749) 
Total Comprehensive Income (Loss)$(161,514) $7,752  $(206,928) $(38,292) 


The accompanying notes are an integral part of these statements.
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
(In thousands)
(Unaudited)
FOR THE THREE MONTHS ENDED MARCH 29, 2020Common StockAdditional Paid in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury StockTotal Shareholders' Investment
BALANCES, DECEMBER 29, 2019$579  $70,901  $940,616  $(288,983) $(323,583) 399,530  
Net Loss—  —  (144,606) —  —  (144,606) 
Total Other Comprehensive Loss, Net of Tax—  —  —  (16,908) —  (16,908) 
Stock Option Activity, Net of Tax—  345  —  —  —  345  
Restricted Stock—  474  —  —  (532) (58) 
Amortization of Unearned Compensation—  599  —  —  —  599  
Deferred Stock - Directors—  22  416  —  —  438  
BALANCES, MARCH 29, 2020
$579  $72,341  $796,426  $(305,891) $(324,115) $239,340  

FOR THE THREE MONTHS ENDED MARCH 31, 2019Common StockAdditional Paid in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury StockTotal Shareholders' Investment
BALANCES, DECEMBER 30, 2018
$579  $77,310  $1,016,205  $(254,768) $(333,907) 505,419  
Net Income—  —  8,005  —  —  8,005  
Total Other Comprehensive Loss, Net of Tax—  —  —  (253) —  (253) 
Cash Dividends Declared ($0.14 per share)
—  —  (5,895) —  —  (5,895) 
Restricted Stock—  —  —  —  (241) (241) 
Amortization of Unearned Compensation—  490  —  —  —  490  
Deferred Stock - Directors—  (277) (50) —  853  526  
Treasury Stock Purchases—  —  —  —  (508) (508) 
BALANCES, MARCH 31, 2019
$579  $77,523  $1,018,265  $(255,021) $(333,803) $507,543  



The accompanying notes are an integral part of these statements.
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
(In thousands)
(Unaudited)
FOR THE NINE MONTHS ENDED MARCH 29, 2020Common StockAdditional Paid in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury StockTotal Shareholders' Investment
BALANCES, JUNE 30, 2019$579  $78,902  $993,873  $(292,550) $(334,084) 446,720  
Net Loss    (193,587)     (193,587) 
Total Other Comprehensive Loss, Net of Tax      (13,341)   (13,341) 
Cash Dividends Declared ($0.10 per share)
    (4,248)     (4,248) 
Stock Option Activity, Net of Tax  1,103        1,103  
Restricted Stock  (9,561)     9,079  (482) 
Amortization of Unearned Compensation  1,880        1,880  
Deferred Stock  (597)     542  (55) 
Deferred Stock - Directors  614  388    348  1,350  
BALANCES, MARCH 29, 2020
$579  $72,341  $796,426  $(305,891) $(324,115) $239,340  

FOR THE NINE MONTHS ENDED MARCH 31, 2019Common StockAdditional Paid in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury StockTotal Shareholders' Investment
BALANCES, JULY 1, 2018$579  $76,408  $1,071,480  $(252,272) $(325,771) 570,424  
Net Loss    (35,543)     (35,543) 
Total Other Comprehensive Loss, Net of Tax      (2,749)   (2,749) 
Cash Dividends Declared ($0.28 per share)
    (17,492)     (17,492) 
Stock Option Activity, Net of Tax  (43)     1,862  1,819  
Restricted Stock  (72)     670  598  
Amortization of Unearned Compensation  1,886        1,886  
Deferred Stock  (879)     520  (359) 
Deferred Stock - Directors  223  (180)   853  896  
Treasury Stock Purchases        (11,937) (11,937) 
BALANCES, MARCH 31, 2019$579  $77,523  $1,018,265  $(255,021) $(333,803) $507,543  

The accompanying notes are an integral part of these statements.
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 Nine Months Ended
March 29,
2020
March 31,
2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss$(193,587) $(35,543) 
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
Depreciation and Amortization54,819  47,385  
Stock Compensation Expense4,468  5,496  
Goodwill Impairment67,480  —  
Loss on Disposition of Plant and Equipment1,412  66  
Provision (Credit) for Deferred Income Taxes36,294  (19,247) 
Equity in Earnings of Unconsolidated Affiliates(3,302) (8,403) 
Dividends Received from Unconsolidated Affiliates 10,376  10,510  
Loss on Disposition of Unconsolidated Affiliates1,000  —  
Change in Operating Assets and Liabilities:
Accounts Receivable(41,447) (70,876) 
Inventories(26,843) (113,407) 
Other Current Assets(3,301) (856) 
Accounts Payable, Accrued Liabilities and Income Taxes(75,314) 77,905  
Other, Net(1,633) 2,079  
Net Cash Used in Operating Activities(169,578) (104,891) 
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures (3)(43,066) (46,379) 
Proceeds Received on Disposition of Plant and Equipment2,680  31  
Cash Paid for Acquisition, Net of Cash Acquired  (8,865) 
Net Cash Used in Investing Activities(40,386) (55,213) 
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Borrowings on Credit Facilities241,684  163,509  
Repayments on Long-Term Debt  (5,424) 
Debt Issuance Costs(6,161)   
Treasury Stock Purchases  (11,937) 
Stock Option Exercise Proceeds and Tax Benefits  1,823  
Cash Dividends Paid(10,136) (11,891) 
Payments Related to Shares Withheld for Taxes for Stock Compensation(55) (257) 
Net Cash Provided by Financing Activities225,332  135,823  
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
(570) (239) 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS14,798  (24,520) 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, Beginning (1)
30,342  49,218  
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, Ending (2)$45,140  $24,698  
(1) Included within Beginning Cash, Cash Equivalents, and Restricted Cash is approximately $0.8 million and $4.3 of restricted cash as of June 30, 2019 and July 1, 2018, respectively.
(2) Included within Ending Cash, Cash Equivalents, and Restricted Cash is approximately $0.7 million and $0.8 million of restricted cash as of March 29, 2020 and March 31, 2019, respectively.
The accompanying notes are an integral part of these statements.
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(3) Non-cash investing activity: The change in the balance of unpaid purchases of property, plant, and equipment included in accounts payable is $5.8 million for the nine months ended March 29, 2020 and is $11.4 million for the nine months ended March 31, 2019.
The accompanying notes are an integral part of these statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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1. Description of Business and General Information
Briggs & Stratton Corporation (the “Company”) is focused on providing power to get work done and make people's lives better. The Company is a U.S. based producer of gasoline engines and outdoor power equipment. The Company’s Engines segment sells engines worldwide, primarily to original equipment manufacturers ("OEMs") of lawn and garden equipment and other gasoline engine powered equipment. The Company also sells related service parts and accessories for its engines. The Company’s Products segment designs, manufactures and markets a wide range of outdoor power equipment, job site products, and related accessories.

The majority of lawn and garden equipment is sold during the spring and summer months when most lawn care and gardening activities are performed. Engine sales in the Company’s third fiscal quarter have historically been the highest, while engine sales in the first fiscal quarter have historically been the lowest. Sales of pressure washers and lawn and garden powered equipment are typically higher during the third and fourth fiscal quarters than at other times of the year. Sales of portable generators and snowthrowers are typically higher during the first and second fiscal quarters.

Inventory levels generally increase during the first and second fiscal quarters in anticipation of customer demand. Inventory levels begin to decrease as sales increase in the third fiscal quarter. This seasonal pattern results in high inventories and low cash flow for the Company in the first, second and the beginning of the third fiscal quarters. The pattern generally results in higher cash flow in the latter portion of the third fiscal quarter and in the fourth fiscal quarter as inventories are liquidated and receivables are collected.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission and therefore do not include all information and notes necessary for a fair statement of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but also does not include all disclosures required by accounting principles generally accepted in the United States. However, in the opinion of the Company, adequate disclosures have been presented to prevent the information from being misleading, and all adjustments necessary to fairly present the Company's results of operations and financial position have been included. All of these adjustments are of a normal recurring nature, except as otherwise noted.

The consolidated financial statements have been prepared assuming the Company will continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. See note 16 for additional information.

Interim results are not necessarily indicative of results for a full year. The information included in these condensed consolidated financial statements should be read in conjunction with the financial statements and the notes thereto that were included in the Company's latest Annual Report on Form 10-K.

2. New Accounting Pronouncements

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting and Hedging Activities. ASU No. 2017-12 better aligns a Company's risk management activities and financial reporting for hedging relationships, in addition to simplifying certain aspects of ASC Topic 815. The guidance was effective beginning fiscal year 2020, with early adoption permitted. The Company adopted this ASU prospectively effective July 1, 2019 and this standard did not have a material impact on the Company's Condensed Consolidated Financial Statements.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under the amendments in ASU 2017-04, an entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The updated guidance requires a prospective adoption. The guidance is effective beginning fiscal year 2021. Early adoption is permitted. The Company adopted this ASU prospectively effective July 1, 2019.
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In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Certain qualitative and quantitative disclosures are required, as well as a modified retrospective recognition and measurement of impacted leases. The Company adopted the guidance beginning fiscal year 2020. The Company's project plan involved identifying and implementing appropriate changes to its business processes, systems and controls as well as compiling and evaluating lease arrangements to support lease accounting and disclosures under Topic 842. Upon adoption, the Company recorded $93.0 million of right of use assets and lease obligation liabilities on the consolidated balance sheet. The Company elected the practical expedient package which allows the Company to maintain historical lease classification and not reassess initial direct costs. There was no impact on existing financial debt covenants. See note 15 for additional information on lease accounting.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU No. 2016-01 enhances the existing financial instruments reporting model by modifying fair value measurement tools, simplifying impairment assessments for certain equity instruments, and modifying overall presentation and disclosure requirements. The guidance was effective beginning fiscal year 2019, with early adoption permitted. The Company adopted this standard effective July 1, 2018 and it did not have a material impact on the Company’s results of operations, financial position, and cash flows.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), which requires the measurement of expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable forecasts. The objective of ASU No. 2016-01 is to provide financial statement users with additional information about expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. ASU No. 2016-13 was effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently assessing the impact of this ASU.

3. Accumulated Other Comprehensive Income (Loss)
The following tables set forth the changes in accumulated other comprehensive income (loss) (in thousands):
 Three Months Ended March 29, 2020
 Cumulative Translation AdjustmentsDerivative Financial InstrumentsPension and Postretirement Benefit PlansTotal
Beginning Balance$(34,024) $(8,454) $(246,505) $(288,983) 
Other Comprehensive Income (Loss) Before Reclassification
(12,332) (10,600) (12) (22,944) 
Income Tax Expense (Benefit)  2,544  3  2,547  
Net Other Comprehensive Income (Loss) Before Reclassifications
(12,332) (8,056) (9) (20,397) 
Reclassifications:
Realized (Gains) Losses - Foreign Currency Contracts (1)
  (446)   (446) 
Realized (Gains) Losses - Commodity Contracts (1)
  175    175  
Realized (Gains) Losses - Interest Rate Swaps (1)
  104    104  
Amortization of Prior Service Costs (Credits) (2)
    19  19  
Amortization of Actuarial Losses (2)    4,739  4,739  
Total Reclassifications Before Tax  (167) 4,758  4,591  
Income Tax Expense (Benefit)  40  (1,142) (1,102) 
Net Reclassifications  (127) 3,616  3,489  
Other Comprehensive Income (Loss)(12,332) (8,183) 3,607  (16,908) 
Ending Balance$(46,356) $(16,637) $(242,898) $(305,891) 
(1) Amounts reclassified to net income (loss) are included in net sales or cost of goods sold. See Note 9 for information related to derivative financial instruments.
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(2) Amounts reclassified to net income (loss) are included in the computation of net periodic expense, which is presented in cost of goods sold or engineering, selling, general and administrative expenses. See Note 7 for information related to pension and postretirement benefit plans.