Avon 2004 Annual Report Download - page 51

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The U.S. pension plans include funded qualified plans
and unfunded non-qualified plans. As of December 31,
2004 and 2003, the U.S. qualified pension plans had
benefit obligations of $714.6 and $611.5, and plan assets
of $624.4 and $547.7, respectively. Avon believes it has
adequate investments and cash flows to fund the liabil-
ities associated with the unfunded non-qualified plans.
The projected benefit obligation, accumulated benefit
obligation and fair value of plan assets for pension
plans with accumulated benefit obligations in excess
of plan assets as of December 31, 2004 and 2003, were
as follows:
U.S. Plans Non-U.S. Plans
2004 2003 2004 2003
Projected benefit
obligation $814.6 $705.5 $578.8 $485.1
Accumulated
benefit
obligation 736.0 629.0 544.2 452.8
Fair value
plan assets 624.4 547.7 278.5 220.2
Net Periodic Benefit Costs
Net periodic benefit costs for the years ended December 31 were determined as follows:
Pension Benefits
U.S. Plans Non-U.S. Plans Postretirement Benefits
2004 2003 2002 2004 2003 2002 2004 2003 2002
Service cost $25.5 $21.7 $19.0 $20.6 $20.7 $18.8 $ 2.5 $ 2.4 $ 2.2
Interest cost 48.1 47.2 43.6 32.7 30.3 25.4 11.5 12.1 12.5
Expected return on plan assets (51.5) (52.3) (53.2) (27.0) (22.9) (20.9) — — —
Amortization of prior service cost (.3) 1.9 1.5 1.4 3.5 1.4 (5.0) (5.0) (4.1)
Amortization of actuarial losses 30.5 18.9 1.4 6.3 6.0 2.8 1.7 1.8 .7
Settlements or curtailments — — — .8 (.1) 2.6 — (.1) —
Other — — — (1.2) .1 (.5) — — —
Net periodic benefit costs $52.3 $37.4 $12.3 $33.6 $37.6 $29.6 $10.7 $11.2 $11.3
In 2002 and 2001, the plan assets experienced weaker
investment returns, which was mostly due to unfavorable
returns on equity securities. These unfavorable invest-
ment returns increased pension costs in 2004 and 2003.
In addition, net periodic pension cost may significantly
increase in the future if settlement losses are required
to be recorded due to an increase in the aggregate
benefits paid as lump-sum distributions. Settlement
losses may result in the future if the number of eligible
participants deciding to receive lump-sum distributions
and the amount of their benefits increases.
Special termination benefits and settlements or cur-
tailments primarily represent the impact of employee
terminations on the Company’s benefits plans in the
U.S. and certain international locations (see Note 13,
Special Charges).