Avon 2004 Annual Report Download - page 59

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The third quarter 2002 special charges (net of adjustment to the 2001 charges) affected all business segments
as follows:
North Latin Asia Corporate
America* U.S. America Europe Pacific and Other Total
Supply chain $ 3.1 $ 3.2 $ .8 $ 5.9 $4.5 $ — $17.5
Workforce reduction
programs 1.6 1.2 3.3 1.6 — 3.9 11.6
Sales transformation
initiatives — 1.8 — 10.0 2.7 — 14.5
Total accrued charges 4.7(1) 6.2(2) 4.1(3) 17.5(4) 7.2(5) 3.9(6) 43.6
Adjustment to 2001
special charges (2.0) (4.4) — — — (.9) (7.3)
Net accrued charges $ 2.7 $ 1.8 $4.1 $17.5 $7.2 $3.0 $36.3
Number of employee
terminations 152 179 241 302 119 41 1,034
* Excludes amounts related to the U.S.
(1) The majority of the special charge within the North America segment related to the closure of a manufacturing facility in Canada and the
transition of production to existing facilities in the U.S.
(2) The special charge within the U.S. segment primarily related to workforce reduction programs within the sales and supply chain functions.
(3) The majority of the special charge within the Latin America segment included workforce reduction programs in Argentina, Central America
and in Venezuela (across numerous functional areas).
(4) The special charge within Europe primarily related to the restructuring of the sales force in certain Western European markets and the closure
of a distribution facility in Italy.
(5) The special charge within the Asia Pacific segment primarily related to supply chain initiatives in Japan, Australia and the Philippines.
In addition, the special charge included costs associated with the closure of stores and a procurement center in Hong Kong as well as contract
cancellation fees and other costs resulting from the shutdown of certain sales branches in Malaysia.
(6) The corporate and other special charge was the result of a workforce reduction program primarily within the information technology
department.
2002 special charges (net of adjustment to the 2001 charges) by category of expenditures were as follows:
Accrued
Severance Cost Contract
and Related of Sales Termination Other
Costs Charge Costs Costs Total
Supply chain $14.2 $1.4 $ .1 $ 1.8 $17.5
Workforce reduction programs 11.0 — — .6 11.6
Sales transformation initiatives 9.7 .6 2.3 1.9 14.5
Total accrued charges 34.9 2.0 2.4 4.3 43.6
Adjustment to 2001 special charges (5.7) — — (1.6) (7.3)
Net accrued charges $29.2 $2.0 $2.4 $ 2.7 $36.3
Accrued severance and related costs were expenses,
both domestic and international, associated with sup-
ply chain initiatives (primarily North America, Europe
and the Asia Pacific), workforce reduction programs
(all segments except the Asia Pacific) and sales transfor-
mation initiatives (primarily Europe, the Asia Pacific
and U.S.). Employee severance costs were accounted for
in accordance with the Company’s existing FAS No. 112,
“Employers’ Accounting for Post-employment Benefits,”
severance plans, or with other accounting literature.
Approximately 1,000 employees, or 2.0% of the total
workforce, received severance benefits.