Avon 2015 Annual Report Download - page 67

“DPA”) and the consent to settlement (the “Consent”), prior professional and related fees associated with the FCPA investigations and
compliance reviews, the prior accrual for the settlements related to the FCPA investigations, and settlement charges associated with the U.S.
defined benefit pension plan. We allocate certain planned global expenses to our business segments primarily based on planned revenue.
The unallocated costs remain as Global and other expenses. We do not allocate to our segments costs of implementing restructuring
initiatives related to our global functions, costs in connection with the ongoing compliance with the DPA and the Consent, prior professional
and related fees associated with the FCPA investigations and compliance reviews, the prior accrual for the settlements related to the FCPA
investigations, and settlement charges associated with the U.S. defined benefit pension plan. Costs of implementing restructuring initiatives
related to a specific segment are recorded within that segment.
2015 2014 % Change 2014 2013 % Change
Total global expenses $ 487.9 $ 549.7 (11)% $ 549.7 $ 707.5 (22)%
CTI restructuring 33.4 27.4 27.4 22.8
FCPA accrual – 46.0 46.0 89.0
Pension settlement charge 7.3 9.5 9.5 –
Other items 3.1 – – –
Adjusted total global expenses $ 444.1 $ 466.8 (5)% $ 466.8 $ 595.7 (22)%
Allocated to segments (297.4) (382.4) (22)% (382.4) (374.1) 2%
Adjusted net global expenses $ 146.7 $ 84.4 74% $ 84.4 $ 221.6 (62)%
Net global expenses(1) $ 190.5 $ 167.3 14% $ 167.3 $ 333.4 (50)%
(1) Net global expenses represents total global expenses less amounts allocated to segments.
Amounts in the table above may not necessarily sum due to rounding.
As a result of its classification within discontinued operations, amounts allocated to segments have been reduced by amounts that were
previously allocated to North America for all periods presented, as these represent costs associated with functions of the Company’s
continuing operations.
2015 Compared to 2014
The comparability of total global expenses was impacted by the $46 accrual for the settlements related to the FCPA investigations which was
recorded in 2014 and lower settlement charges associated with the U.S. defined benefit pension plan in 2015, partially offset by higher CTI
restructuring and transaction-related costs associated with the separation of North America that were included in continuing operations. See
below for a further discussion of the settlement charges.
Adjusted total global expenses decreased compared to the prior-year period primarily as a result of cost savings initiatives, partially offset by
higher expenses associated with long-term employee incentive compensation plans as the prior-year period includes the benefit from the
reversal of such accruals that did not recur in the current-year period. Amounts allocated to segments decreased compared to the prior-year
period primarily due to lower planned corporate expenses, primarily as a result of our cost savings initiatives.
As a result of the lump-sum payments made to former employees who were vested and participated in the U.S. defined benefit pension
plan, in the third quarter of 2015, we recorded a settlement charge of approximately $24. These lump sum payments were made from our
plan assets and were not the result of a specific offer to participants of our U.S. defined benefit pension plan as described below. As the
settlement threshold was exceeded in the third quarter of 2015, a settlement charge of approximately $4 was also recorded in the fourth
quarter of 2015, as a result of additional payments from our U.S. defined benefit pension plan. These settlement charges were allocated
between Global Expenses and Discontinued Operations.
In an effort to reduce our pension benefit obligations, in March 2014, we offered former employees who were vested and participated in
the U.S. defined benefit pension plan a payment that would fully settle our pension plan obligation to those participants who elected to
receive such payment. The election period ended during the second quarter of 2014 and the payments were made in June 2014 from our
plan assets. As a result of the lump-sum payments made, in the second quarter of 2014, we recorded a settlement charge of approximately
$24. As the settlement threshold was exceeded in the second quarter of 2014, settlement charges of approximately $5 and approximately
$7 were also recorded in the third and fourth quarters of 2014, respectively, as a result of additional payments from our U.S. defined benefit
pension plan. These settlement charges were allocated between Global Expenses and Discontinued Operations.
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