Avon 2003 Annual Report Download - page 64

Cash Flows
Avon expects to contribute up to approximately $90.0 and $37.0, respectively, to its U.S. and Non-U.S. pension plans in 2004.
Avon expects to make the following benefit payments:
Pension Benefits
U.S. Non-U.S. Postretirement
Plans Plans Total Benefits
2004 $ 87.1 $ 35.1 $122.2 $16.1
2005 53.8 33.3 87.1 17.4
2006 59.7 34.2 93.9 17.4
2007 64.8 36.4 101.2 17.1
2008 69.1 37.2 106.3 16.8
2009-2013 374.3 214.7 589.0 81.0
Avon expects to contribute up to $90 million and $37 million,
respectively, to its U.S. and non-U.S. pension plans in 2004.
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Supplemental Retirement Programs
Avon offers a Deferred Compensation Plan (the “Plan”) for those employees
who are eligible to participate in the Company’s Long-Term Incentive Plan and
are on the U.S. payroll. The Plan is an unfunded, unsecured plan for which obli-
gations are paid to participants out of the Company’s general assets, including
assets held in a grantor trust, described below, and corporate-owned life insur-
ance policies. The Plan allows for the deferral of up to 50% of a participant’s
base salary, and all or part of incentive compensation bonuses and any excess
personal savings account contributions over specified annual limits up to 25%
of base salary. Participants may elect to have their deferred compensation
invested in one or more of three investment alternatives. Expense associated
with the Plan for the years ended December 31, 2003, 2002 and 2001, was
$5.5, $5.3 and $5.4, respectively. At December 31, 2003, the accrued cost for
deferred compensation plan was $86.9 (2002- $75.9) and was included in
Other liabilities.
Avon maintains a supplemental retirement program consisting of a Supplemental
Executive Retirement and Life Plan (“SERP”) and a Benefits Restoration Pension
Plan (“Restoration Plan”) under which non-qualified supplemental pension bene-
fits are paid to higher paid employees in addition to amounts received under
Avon’s qualified retirement plan which is subject to IRS limitations on covered
compensation. At retirement, a participant can elect to defer vested benefits into
the Deferred Compensation Plan. The annual cost of this program has been
included in the determination of the net periodic benefit cost shown above and in
2003 amounted to $10.8 (2002 – $9.7, 2001 – $10.5). The benefit obligation under
this program at December 31, 2003, was $45.4 (2002 – $40.6) and was primarily
included in Employee Benefit Plans.
Avon also maintains a Supplemental Life Insurance Plan (“SLIP”) under which
additional death benefits ranging from $.35 to $2.0 are provided to certain
active and retired officers.
Avon established a grantor trust to provide assets that may be used for the
benefits payable under the SERP, Restoration Plan and SLIP and for obligations
under Avon’s Deferred Compensation Plan. The trust is irrevocable and,
although subject to creditors’ claims, assets contributed to the trust can only
be used to pay such benefits with certain exceptions. The assets held in the
trust at December 31, 2003, amounting to $85.7 (2002 – $77.2), consisted of
a fixed-income portfolio, a managed portfolio of equity securities, corporate-
owned life insurance policies and cash and cash equivalents. These assets are
included in Other assets. The cash surrender value of the corporate-owned life
insurance policies included in the grantor trust at December 31, 2003, was
$29.9 (2002 – $27.6).