Retirement Benefit Plans

The Company has various defined benefit pension plans covering substantially all domestic employees, employed as of June 30, 2005, except those employed by BeautiControl, and certain employees in other countries. In addition to providing pension benefits, the Company provides certain postretirement healthcare and life insurance benefits for selected U.S. and Canadian employees. Employees may become eligible for these benefits if they reach normal retirement age while working for the Company or satisfy certain age and years of service requirements. The medical plans are contributory for most retirees with contributions adjusted annually, and contain other cost-sharing features, such as deductibles and coinsurance. The medical plans include an allowance for Medicare for post-65 age retirees. Most employees and retirees outside the United States are covered by government healthcare programs.

The Company uses its fiscal year end as the measurement date for its plans. The funded status of all of the Company's plans was as follows:



	U.S. plans												Foreign plans
	Pension benefits						Postretirement benefits						Pension benefits
(In millions)	2011			2010			2011			2010			2011			2010
Change in benefit obligations:
Beginning balance	$	59.2		$	54.1		$	36.6		$	38.4		$	172.6		$	164.6
Service cost	1.1			1.0			0.1			0.1			9.2			8.4
Interest cost	2.6			2.6			1.6			1.8			7.3			7.4
Actuarial (gain) loss	2.3			3.9			3.3			(0.9		)	8.6			8.7
Benefits paid	(1.4		)	(2.3		)	(3.3		)	(2.9		)	(16.4		)	(17.2		)
Impact of exchange rates	—			—			—			0.1			0.8			1.5
Plan participant contributions	—			—			—			—			1.5			4.8
Settlements	(0.2		)	(0.1		)	—			—			(7.6		)	(5.0		)
Curtailments/Amendments	—			—			—			—			—			(0.6		)
Ending balance	$	63.6		$	59.2		$	38.3		$	36.6		$	176.0		$	172.6
Change in plan assets at fair value:
Beginning balance	$	27.8		$	26.2		$	—		$	—		$	84.9		$	82.1
Actual return on plan assets	2.1			4.2			—			—			(0.2		)	4.3
Company contributions	1.8			0.1			3.3			2.9			14.8			12.4
Plan participant contributions	—			—			—			—			1.9			5.0
Benefits and expenses paid	(1.7		)	(2.7		)	(3.3		)	(2.9		)	(15.6		)	(15.7		)
Impact of exchange rates	—			—			—			—			2.1			2.2
Settlements	(0.2		)	—			—			—			(7.1		)	(5.4		)
Ending balance	$	29.8		$	27.8		$	—		$	—		$	80.8		$	84.9
Funded status of plans	$	(33.8	)	$	(31.4	)	$	(38.3	)	$	(36.6	)	$	(95.2	)	$	(87.7	)

Amounts recognized in the balance sheet consisted of:



(In millions)	December 31, 2011			December 25, 2010
Accrued benefit liability	$	(167.3	)	$	(155.7	)
Accumulated other comprehensive loss (pretax)	65.2			53.5

Items not yet recognized as a component of pension expense as of December 31, 2011 and December 25, 2010 consisted of:



	2011						2010
(In millions)	Pension Benefits			Postretirement Benefits			Pension Benefits			Postretirement Benefits
Transition obligation	$	0.5		$	—		$	—		$	—
Prior service (benefit)	(1.3		)	(6.0		)	(1.7		)	(6.7		)
Net actuarial loss	60.1			11.9			52.9			9.0
Accumulated other comprehensive loss (pretax)	$	59.3		$	5.9		$	51.2		$	2.3

Components of other comprehensive income (loss) for the years ended December 31, 2011 and December 25, 2010 consisted of the following:



	2011				2010
(In millions)	Pension Benefits		Postretirement Benefits		Pension Benefits			Postretirement Benefits
Transition obligation	$	0.5	$	—	$	—		$	—
Net prior service (cost) benefit	0.4		0.7		0.9			(0.8		)
Net actuarial gain (loss)	7.2		2.9		(7.2		)	0.9
Other comprehensive income (loss)	$	8.1	$	3.6	$	(6.3	)	$	0.1

In 2012, the Company expects to recognize approximately $0.9 million of the prior service benefit and $5.0 million of the net actuarial loss, as components of pension and postretirement expense.

The accumulated benefit obligation for all defined benefit pension plans at December 31, 2011 and December 25, 2010 was $208.1 million and $205.9 million, respectively. At December 31, 2011 and December 25, 2010, the accumulated benefit obligations of certain pension plans exceeded those plans' assets. For those plans, the accumulated benefit obligations were $170.0 million and $152.8 million, and the fair value of their assets was $69.3 million and $55.0 million as of December 31, 2011 and December 25, 2010, respectively. The accrued benefit cost for the pension plans is reported in accrued liabilities and other long-term liabilities.

The costs associated with all of the Company's plans were as follows:



	Pension benefits									Postretirement benefits
(In millions)	2011			2010			2009			2011			2010			2009
Components of net periodic benefit cost:
Service cost and expenses	$	10.3		$	9.4		$	7.5		$	0.1		$	0.1		$	0.1
Interest cost	9.9			10.0			9.7			1.7			1.8			2.5
Return on plan assets	(5.5		)	(6.5		)	(5.7		)	—			—			—
Settlement/Curtailment	2.8			2.2			—			—			—			—
Employee contributions	(0.3		)	—			—			—			—			—
Net deferral	3.9			3.2			4.0			(0.4		)	(0.4		)	(0.5		)
Net periodic benefit cost	$	21.1		$	18.3		$	15.5		$	1.4		$	1.5		$	2.1
Weighted average assumptions:
U.S. plans
Discount rate, net periodic benefit cost	4.7		%	5.1		%	5.8		%	5.0		%	5.3		%	5.8		%
Discount rate, benefit obligations	3.7			4.7			5.1			4.0			5.0			5.3
Return on plan assets	8.3			8.3			8.3			n/a			n/a			n/a
Salary growth rate, net periodic benefit cost	5.0			5.0			5.0			n/a			n/a			n/a
Salary growth rate, benefit obligations	3.0			5.0			5.0			n/a			n/a			n/a
Foreign plans
Discount rate	3.9		%	4.3		%	5.0		%	n/a			n/a			n/a
Return on plan assets	4.1			4.4			4.8			n/a			n/a			n/a
Salary growth rate	3.1			3.0			3.1			n/a			n/a			n/a

The Company has established strategic asset allocation percentage targets for significant asset classes with the aim of achieving an appropriate balance between risk and return. The Company periodically revises asset allocations, where appropriate, in an effort to improve return and manage risk. The estimated rate of return is based on long-term expectations given current investment objectives and historical results. The expected rate of return assumption used by the Company to determine the benefit obligation for its U.S. and foreign plans for 2011 was 8.3 percent and 4.1 percent, respectively, and 8.3 percent and 4.4 percent for 2010, respectively.

The Company determines the discount rate primarily by reference to rates of high-quality, long term corporate and government bonds that mature in a pattern similar to the expected payments to be made under the plans. The weighted average discount rates used to determine the benefit obligation for the U.S. and foreign plans for 2011 were 3.7 percent and 3.9 percent, respectively, and 4.7 percent and 4.3 percent, respectively, for 2010.

The assumed healthcare cost trend rate for 2011 was 7.3 percent for both post-65 age participants and pre-65 age participants, decreasing to 5.0 percent in 2019. The healthcare cost trend rate assumption could have a significant effect on the amounts reported. A one percentage point change in the assumed healthcare cost trend rates would have the following effects:



	One percentage point
(In millions)	Increase		Decrease
Effect on total of service and interest cost components	$	0.1	$	0.1
Effect on post-retirement benefit obligation	2.5		2.2

The Company sponsors a number of pension plans in the United States and in certain foreign countries. There are separate investment strategies in the United States and for each unit operating internationally that depend on the specific circumstances and objectives of the plans and/or to meet governmental requirements. The Company's overall strategic investment objectives are to preserve the desired funded status of its plans and to balance risk and return through a wide diversification of asset types, fund strategies and investment managers. The asset allocation depends on the specific strategic objectives for each plan and is rebalanced to obtain the target asset mix if the percentages fall outside of the range considered to be acceptable. The investment policies are reviewed from time to time to ensure consistency with long-term objectives. Options, derivatives, forward and futures contracts, short positions, or margined positions may be held in reasonable amounts as deemed prudent. For plans that are tax-exempt, any transactions that would jeopardize this status are not allowed. Lending of securities is permitted in some cases in which appropriate compensation can be realized. The Company's plans do not invest directly in its own stock; however, this does not mean investment in insurance company accounts or other commingled or mutual funds, or any index funds may not hold securities of the Company. The investment objectives of each unit are more specifically outlined below.

The Company's weighted-average asset allocations at December 31, 2011 and December 25, 2010, by asset category, were as follows:



	2011				2010
Asset Category	U.S. plans		Foreign plans		U.S. plans		Foreign plans
Equity securities	62	%	25	%	64	%	30	%
Fixed income securities	38		16		36		13
Real estate	—		5		—		1
Cash and money market investments	—		41		—		9
Guaranteed contracts	—		13		—		47
Total	100	%	100	%	100	%	100	%

The fair value of the Company's pension plan assets at December 31, 2011 by asset category is as follows:



Description of Assets (in millions)		December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Domestic plans:
	Common/collective trust (a)	$	29.8	$	—	$	29.8	$	—
Foreign plans:
Australia	Investment fund (b)	5.0		—		5.0		—
Switzerland	Guaranteed insurance contract (c)	33.9		—		—		33.9
Germany	Guaranteed insurance contract (c)	5.6		—		—		5.6
Belgium	Mutual fund (d)	16.1		16.1		—		—
Austria	Euro bond fund (e)	1.0		1.0		—		—
	Guaranteed insurance contract (c)	0.5		—		—		0.5
Korea	Guaranteed insurance contract (c)	2.8		—		—		2.8
Japan	Common/collective trust (f)	7.4		—		7.4		—
	Money market fund (f)	4.6		4.6		—		—
Philippines	Fixed income securities (g)	3.1		3.1		—		—
	Money market fund (g)	0.7		0.7		—		—
Total		$	110.5	$	25.5	$	42.2	$	42.8

The fair value of the Company's pension plan assets at December 25, 2010 by asset category is as follows:



Description of Assets (in millions)		December 25, 2010		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Domestic plans:
	Common/collective trust (a)	$	27.8	$	—	$	27.8	$	—
Foreign plans:
Australia	Investment fund (b)	6.4		—		6.4		—
Switzerland	Guaranteed insurance contract (c)	30.5		—		—		30.5
Germany	Guaranteed insurance contract (c)	5.4		—		—		5.4
Belgium	Mutual fund (d)	19.2		—		19.2		—
Austria	Euro bond fund (e)	1.1		—		1.1		—
Korea	Guaranteed insurance contract (c)	4.3		—		—		4.3
Japan	Common/collective trust (f)	8.4		—		8.4		—
	Money market fund (f)	6.0		6.0		—		—
Philippines	Fixed income securities (g)	3.6		3.6		—		—
Total		$	112.7	$	9.6	$	62.9	$	40.2

____________________

(a)

The investment strategy of the U.S. pension plan for each period presented is to seek to achieve each year a return greater than or equal to the return that would have been earned by a portfolio invested approximately 60 percent in equity securities and 40 percent in fixed income securities for both periods. As of December 31, 2011 and December 25, 2010, the common trusts held 62 and 64 percent of its assets in equity securities and 38 and 36 percent in fixed income securities, respectively. Of the amounts held in equity securities at the end of 2011 and 2010, the percentage of invested funds included: 32 and 33 percent in large U.S. stocks, 20 and 21 percent small U.S. stocks, respectively, and 10 percent in international stocks in each year. The common trusts are comprised of shares or units in commingled funds that are not publicly traded. The underlying assets in these funds (equity securities and fixed income securities) are valued using quoted market prices.

(b)

For each period presented, the strategy of this fund is to achieve a long-term net return of at least 4 percent above inflation based on the Australian consumer price index over a rolling 5 year period. The investment strategy is to invest mainly in equities and property, which are expected to earn higher returns over the long term. The fair value of the fund is determined using the net asset value per share using quoted market prices or other observable inputs in active markets. As of December 31, 2011 and December 25, 2010, the percentage of funds held in investments included: Australian equities of 35 and 37 percent, other equities of listed companies outside of Australia of 38 and 27 percent, and real estate of 10 and 19 percent, government and corporate bonds of 10 and 11 percent and cash of 7 and 6 percent, respectively.

(c)

The strategy of the Company's plans in Austria, Germany, Korea and Switzerland is to seek to ensure the future benefit payments of their participants and manage market risk. This is achieved by funding the pension obligations through guaranteed insurance contracts. The plan assets operate similar to investment contracts whereby the interest rate, as well as the surrender value, is guaranteed. The fair value is determined as the contract value, using a guaranteed rate of return which will increase if the market performance exceeds that return.

(d)

The strategy of the Belgian plan in each period presented is to seek to achieve each year a return greater than or equal to the return that would have been earned by a portfolio invested approximately 60 percent in equity securities and 40 percent in fixed income securities. The fair value of the fund is calculated using the net asset value per share as determined by the quoted market prices of the underlying investments. As of December 31, 2011 and December 25, 2010, the percentage of funds held in investments included: large-cap equities of European companies of 28 and 33 percent, small-cap equities of European companies of 20 and 22 percent, equities outside of Europe, mainly in the U.S. and emerging markets 14 and 12 percent, and the remaining amount in bonds, primarily from European and U.S. governments 38 and 33 percent, respectively.


(e)	This fund invests in highly-rated euro government bonds. The fair value of the bond fund is determined using quoted market prices of the underlying assets included in the fund.

(f)

The Company's strategy for each period presented is to invest approximately 60 percent of assets to benefit from the higher expected returns from long-term investments in equities and to invest 40 percent of assets in short-term low investment risk instruments to fund near term benefits payments. The target allocation for plan assets to implement this strategy is 50 percent equities in Japanese listed securities, 7 percent in equities outside of Japan and 43 percent in cash and other short-term investments. The equity investment has been achieved through a collective trust that held 62 and 59 percent in total funded assets as of December 31, 2011 and December 25, 2010, respectively. Of the amount held in the collective trust as of the end of 2011 and 2010, 88 and 87 percent was invested in Japanese equities, while 12 and 13 percent was invested in equities of companies based outside of Japan, respectively. The fair value of the collective trust is determined by the market value of the underlying shares, which are traded in active markets. At year end 2011 and 2010, 38 and 41 percent of the plan assets were held in a money market fund. The money market fund is a highly liquid investment and is valued using quoted market prices in active markets.

(g)

The investment strategy in the Philippines is to invest in low risk domestic fixed-income earnings securities. Assets include, but are not limited to, Philippine peso denominated treasury bills, treasury bonds, treasury notes and other government securities fully guaranteed by the Philippine government. The amounts held at year end were valued using quoted bid prices on similarly termed government securities. The money market fund is a highly liquid investment and is valued using quoted market prices in active markets.

The following table presents a reconciliation of the beginning and ending balances of the fair value measurements using significant unobservable inputs (Level 3):



	Level 3
Beginning balance at December 25, 2010	$	40.2
Realized gains	1.1
Purchases, sales and settlements, net	0.6
Impact of exchange rates	0.9
Ending balance at December 31, 2011	$	42.8

The Company expects to contribute $16.4 million to its U.S. and foreign pension plans and $3.1 million to its other U.S. postretirement benefit plan in 2012.

The Company also has several savings, thrift and profit-sharing plans. Its contributions to these plans are in part based upon various levels of employee participation. The total cost of these plans was $8.7 million, $8.9 million and $7.8 million for 2011, 2010 and 2009, respectively.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid for the Company's U.S. and foreign plans:



Years	Pension benefits		Postretirement benefits		Subsidy receipts		Total
2012		$12.5		$3.5		$0.4		$15.6
2013	13.2		3.5		0.4		16.3
2014	20.0		3.6		0.5		23.1
2015	11.9		3.6		0.5		15.0
2016	14.1		3.5		0.5		17.1
2017-2021	96.8		15.8		2.4		110.2

Included in the postretirement benefits in the table above are expected payments for prescription drug benefits. As a result of the Medicare Prescription Drug, Improvement and Modernization Act of 2003, the Company expects subsidies of $4.7 million from 2012 through 2021 related to these prescription drug benefits.