Avon 2004 Annual Report Download - page 54

Global Beauty 75
Notes to Consolidated
Financial Statements
Cash Flows
Avon expects to contribute up to approximately $85.0
and $37.0 to its U.S. and non-U.S. pension plans, respec-
tively, in 2005.
Total benefit payments expected to be paid from the
plans are as follows:
Pension Benefits Post-
U.S. Non-U.S. retirement
Plans Plans Total Benefits
2005 $ 53.6 $ 38.4 $ 92.0 $14.9
2006 57.6 34.6 92.2 15.8
2007 61.2 37.1 98.3 16.4
2008 63.2 36.7 99.9 16.8
2009 64.2 40.0 104.2 17.0
2010–2014 319.0 208.4 527.4 80.9
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 obligations are paid to participants out
of the Company’s general assets, including assets held
in a grantor trust, described below, and corporate-
owned life insurance 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. Partici-
pants 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, 2004, 2003 and 2002, was $4.2, $5.5 and
$5.3, respectively. At December 31, 2004, the accrued
cost for the deferred compensation plan was $93.0
(2003 – $86.9) 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 benefits 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 2004
amounted to $12.2 (2003 – $10.8; 2002 – $9.7). The ben-
efit obligation under this program at December 31,
2004, was $52.1 (2003 – $45.4) and was included in
employee benefit plans.
Avon also maintains a Supplemental Life Insurance
Plan (“SLIP”) under which additional death benefits
ranging from $.4 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 irrevo-
cable 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, 2004, amounting to $81.8 (2003
– $85.7), consisted of a fixed-income portfolio, a man-
aged 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, 2004,
was $32.1 (2003 – $29.9). Refer to Note 5, Accumulated
Other Comprehensive Loss, for a summary of assets
maintained in the grantor trust.