Avon 2003 Annual Report Download - page 59

9. Shareholders’ Equity (Deficit)
Share Rights Plan
Avon has a Share Rights Plan under which one right has been declared as a
dividend for each outstanding share of its common stock. Each right, which is
redeemable at $.005 at any time at Avon’s option, entitles the shareholder,
among other things, to purchase one share of Avon common stock at a price
equal to one-half of the then current market price, if certain events have
occurred. The right is exercisable if, among other events, one party obtains a
beneficial ownership of 20% or more of Avon’s voting stock.
Stock Repurchase Program
In September 2000, Avon’s Board approved a share repurchase program
under which the Company may buy up to $1,000.0 of its outstanding stock
over the next five years. As of December 31, 2003, the Company had repur-
chased approximately 10.9 million shares at a total cost of approximately
$551.7 under this program.
10. Employee Benefit Plans
Savings Plan
The Company offers a qualified defined contribution plan for U.S.-based
employees, the Avon Products, Inc. 401(k) Personal Savings Account, which
allows eligible participants to contribute 1% to 20% of qualified compensa-
tion through payroll deductions (effective January 1, 2003, 1% to 25% of
qualified compensation). Avon matches employee contributions dollar for dol-
lar up to the first 3% of eligible compensation and fifty cents for each dollar
contributed from 4% to 6% of eligible compensation. In 2003, 2002 and 2001,
matching contributions approximating $14.5, $14.0 and $13.3, respectively,
were made to this plan in cash, which was then used by the plan to purchase
Avon shares in the open market.
Retirement Plans
Avon and certain subsidiaries have contributory and noncontributory retire-
ment plans for substantially all employees. Benefits under these plans are
generally based on an employee’s years of service and average compensation
near retirement. Plans are funded based on legal requirements and cash flow.
Effective July 1998, the defined benefit retirement plan covering U.S.-based
employees was converted to a cash balance plan with benefits determined by
compensation credits related to age and service and interest credits based on
individual account balances and prevailing interest rates. This conversion also
included a 10-year transitional benefit arrangement for certain employees
covered under the pre-existing defined benefit retirement plan who retire dur-
ing that 10-year period, which provides them with the higher of the benefit
they would have received under the previous defined benefit retirement plan
and the current cash balance plan.
Effective April 1, 2002, any plan participant who retires on or after May 1,
2002 and chooses to receive 20% or more of their benefit as an annuity at
retirement is eligible to receive a new social security supplement payable until
age of 65 and retiree medical coverage, which beginning May 1, 2002, is
available only if the retiree chooses to receive at least 20% of their benefit as
an annuity, regardless of their age at retirement. In 2003, Avon eliminated the
social security supplement for retirements on or after January 1, 2005.
Postretirement Benefits
Avon provides health care and life insurance benefits for the majority of
employees who retire under Avon’s retirement plans in the United States and
certain foreign countries. The cost of such health care benefits is shared by
Avon and its retirees.
Reconciliation of Benefit Obligations, Plan Assets and Funded Status
Avon uses a December 31 measurement date for all of its plans.
Notes to Consolidated Financial Statements
notes to statements
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