Avon 2004 Annual Report Download - page 49

Share Rights Plan
Avon has a Share Rights Plan under which one right
has been declared as a dividend for each outstand-
ing 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 beneficial ownership of 20% or more
of Avon’s voting stock. The description and terms of the
rights are set forth in a Rights Agreement between the
Company and Equiserve Trust Company, N.A., as succes-
sor Rights Agent.
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, 2004, the Company
had repurchased approximately 27.5 million shares at a
total cost of approximately $775.8 under this program
and through acquisitions of stock from employees in
connection with tax payments upon vesting of restricted
stock. See Note 19, Subsequent Events, for a discussion
of Avon’s new share repurchase program.
10 Employee Benefit Plans
Savings Plan
The Company offers a qualified defined contribution
plan for U.S.-based employees, the Avon Personal Sav-
ings Account Plan, which allows eligible participants
to contribute up to 25% of eligible compensation
through payroll deductions. Avon has matched
employee contributions dollar for dollar up to the first
3% of eligible compensation and fifty cents for each
dollar contributed from 4% to 6% of eligible compensa-
tion. In February 2005, Avon temporarily suspended the
matching contribution with the intention to resume
no later than 2006. In 2004, 2003 and 2002, matching
contributions approximating $14.6, $14.5 and $14.0,
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 retirement plans for substantially all
employees of those subsidiaries. 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 pay-based
credits related to age and service and interest credits
based on individual account balances and prevailing
interest rates. A 10-year transitional period was estab-
lished for all employees covered under the pre-existing
defined benefit retirement plan. For the period from
July 1, 1998, through June 30, 2008, benefits are calcu-
lated under both the former final average pay formula
and the cash balance formula. Eligible employees who
retire during this period receive whichever benefit yields
the higher amount. For those employees eligible for the
pre-existing plan, the benefit calculated under the for-
mer final average pay formula is frozen at June 30, 2008,
for periods thereafter.
Any pension plan participant who has retired 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 social security supplement payable until the
age of 65, and is eligible to receive retirement medical
coverage for retirements before April 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 for-
eign countries. The cost of such health care benefits is
shared by Avon and its retirees for employees hired on
or before January 1, 2005.