Avon 2007 Annual Report Download - page 72

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The total fair value of restricted stock and restricted stock units
that vested during 2007 was $14.3, based upon market prices
on the vesting dates. As of December 31, 2007, there was
approximately $43.9 of unrecognized compensation cost related
to restricted stock and restricted stock unit compensation
arrangements. That cost is expected to be recognized over a
weighted-average period of 2.0 years.
2005-2007 Performance Cash Plan
In 2005, we established a three-year performance cash plan for
the period 2005-2007 (the “Plan”). Awards were set with the
objective of payouts ranging from 30% of target for the
achievement of threshold financial objectives aligned with our
long-term business plan to 200% of target if maximum
performance objectives are achieved. The Compensation Com-
mittee of the Board of Directors had designated total revenues
and operating margin as the key performance measures under
the Plan. As of December 31, 2007, the objectives were not
achieved; therefore, no expense was recognized during 2007.
During 2006 and 2005, management determined that the like-
lihood of achieving the objectives was remote; therefore, no
expense was recognized during 2006 or 2005, respectively.
NOTE 9. Shareholders’ Equity
Share Rights Plan
We have a Share Rights Plan under which one right has been
declared as a dividend for each outstanding share of its common
stock. Each right, which is redeemable at $.005 at any time at
our 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 Avon and Computer Share
Limited.
Stock Repurchase Program
In September 2000, our Board approved a five-year, $1,000.0
share repurchase program which was completed during August
2005. In August 2005, our Board of Directors authorized us to
repurchase an additional $500.0 of our common stock. The
$500.0 program was completed during December 2005. In
February 2005, our Board approved a new five-year, $1,000.0
share repurchase program to begin upon completion of our pre-
vious share repurchase program. This $1,000.0 program was
completed during December 2007. In October 2007, our Board
of Directors approved a five-year $2,000.0 share repurchase
program (“$2.0 billion program”) to begin upon completion of
our previous $1,000.0 share repurchase program. We
repurchased approximately 322,000 shares for $12.9 under the
$2.0 billion program in December 2007.
NOTE 10. Employee Benefit Plans
Savings Plan
We offer a qualified defined contribution plan for U.S.-based
employees, the Avon Personal Savings Account Plan, which
allows eligible participants to contribute up to 25% of eligible
compensation through payroll deductions. Prior to February
2005, we 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 compensation. In
February 2005, Avon temporarily suspended the matching con-
tribution. The matching contributions were resumed in 2006 at
the pre-February 2005 levels. In 2007, 2006, and 2005, match-
ing contributions approximating $12.8, $12.7 and $1.8,
respectively, were made to this plan in cash, which were then
used by the plan to purchase Avon shares in the open market.
Defined Benefit Pension and
Postretirement Plans
Avon and certain subsidiaries have contributory and non-
contributory 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.
We provide health care and life insurance benefits for the
majority of employees who retire under our retirement plans in
the U.S. and certain foreign countries. In the U.S., the cost of
such health care benefits is shared by us and our retirees for
employees hired on or before January 1, 2005. Employees hired
after January 1, 2005, will pay the full cost of the health care
benefits upon retirement.
In September 2006, the FASB issued SFAS No. 158, Employers’
Accounting for Defined Benefit Pension and Other Postretire-
ment Plans – an amendment of FASB Statements No. 87, 88,
106 and 132R (“SFAS 158”). SFAS 158 requires, among other
things, the recognition of the funded status of pension and
other postretirement benefit plans on the balance sheet. Each
overfunded plan is recognized as an asset and each underfunded
plan is recognized as a liability. The initial impact of the stan-
dard, due to unrecognized prior service costs or credits and net
actuarial gains or losses, as well as subsequent changes in the
funded status, are recognized as components of accumulated
comprehensive loss in shareholders’ equity. Additional minimum
pension liabilities and related intangible assets were also
derecognized upon adoption of the new standard.