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 post-retirement 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						Post-retirement benefits						Pension benefits
(In millions)	2014			2013			2014			2013			2014			2013
Change in benefit obligations:
Beginning balance	$	55.9		$	67.5		$	28.9		$	33.1		$	190.4		$	198.1
New Plan, beginning balance	—			—			—			—			—			3.6
Service cost	0.3			0.3			0.1			0.2			10.7			11.0
Interest cost	2.1			2.1			1.1			1.1			6.4			6.3
Actuarial loss (gain)	11.5			(9.3		)	(7.8		)	(3.2		)	25.1			(1.9		)
Benefits paid	(2.2		)	(0.8		)	(1.8		)	(2.2		)	(12.1		)	(9.6		)
Impact of exchange rates	—			—			(0.1		)	(0.1		)	(21.3		)	(3.7		)
Plan participant contributions	—			—			—			—			1.8			0.7
Settlements/Curtailments	—			(3.9		)	—			—			(3.3		)	(14.1		)
Ending balance	$	67.6		$	55.9		$	20.4		$	28.9		$	197.7		$	190.4
Change in plan assets at fair value:
Beginning balance	$	32.3		$	31.7		$	—		$	—		$	82.6		$	86.6
Actual return on plan assets	3.9			4.8			—			—			4.7			7.4
Company contributions	1.8			0.8			1.8			2.2			13.4			13.5
Plan participant contributions	—			—			—			—			1.8			1.3
Benefits and expenses paid	(2.5		)	(1.1		)	(1.8		)	(2.2		)	(12.0		)	(10.0		)
Impact of exchange rates	—			—			—			—			(7.6		)	(2.1		)
Settlements	—			(3.9		)	—			—			(3.6		)	(14.1		)
Ending balance	$	35.5		$	32.3		$	—		$	—		$	79.3		$	82.6
Funded status of plans	$	(32.1	)	$	(23.6	)	$	(20.4	)	$	(28.9	)	$	(118.4	)	$	(107.8	)

Amounts recognized in the balance sheet consisted of:



(In millions)	December 27, 2014			December 28, 2013
Accrued benefit liability	$	(170.9	)	$	(160.3	)
Accumulated other comprehensive loss (pretax)	66.2			49.3

Items not yet recognized as a component of pension expense as of December 27, 2014 and December 28, 2013 consisted of:



	2014					2013
(In millions)	Pension Benefits		Post-retirement Benefits			Pension Benefits		Post-retirement Benefits
Transition obligation	$	1.3	$	—		$	0.3	$	—
Prior service cost (benefit)	3.6		(10.6		)	3.9		(4.6		)
Net actuarial loss	69.0		2.9			45.6		4.1
Accumulated other comprehensive loss (pretax)	$	73.9	$	(7.7	)	$	49.8	$	(0.5	)

Components of other comprehensive loss (income) for the years ended December 27, 2014 and December 28, 2013 consisted of the following:



	2014						2013
(In millions)	Pension Benefits			Post-retirement Benefits			Pension Benefits			Post-retirement Benefits
Transition obligation	$	—		$	—		$	(0.1	)	$	—
Net prior service cost (benefit)	(0.3		)	(7.0		)	3.7			0.7
Net actuarial loss (gain)	30.2			(0.2		)	(26.1		)	(3.5		)
Impact of exchange rates	(5.8		)	—			(1.0		)	—
Other comprehensive loss (income)	$	24.1		$	(7.2	)	$	(23.5	)	$	(2.8	)

In 2015, the Company expects to recognize a prior service benefit of approximately $1.3 million and a net actuarial loss of $4.4 million as components of pension and post-retirement expense.

The accumulated benefit obligation for all defined benefit pension plans at December 27, 2014 and December 28, 2013 was $218.5 million and $213.0 million, respectively. At December 27, 2014 and December 28, 2013, the accumulated benefit obligations of certain pension plans exceeded those respective plans' assets. For those plans, the accumulated benefit obligations were $191.8 million and $156.3 million, and the fair value of their assets was $74.3 million and $54.3 million as of December 27, 2014 and December 28, 2013, respectively. At December 27, 2014 and December 28, 2013, the benefit obligations of the Company's significant pension plans exceeded those respective plans' assets. 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									Post-retirement benefits
(Dollars in millions)	2014			2013			2012			2014			2013			2012
Components of net periodic benefit cost:
Service cost and expenses	$	10.8		$	11.5		$	9.9		$	0.1		$	0.2		$	0.1
Interest cost	8.6			8.4			8.9			1.1			1.1			1.2
Return on plan assets	(5.8		)	(5.7		)	(5.6		)	—			—			—
Settlement/Curtailment	1.8			4.0			1.7			—			—			—
Employee contributions	(0.3		)	(0.3		)	(0.3		)	—			—			—
Net deferral	2.7			5.0			4.3			(0.6		)	(0.4		)	(0.4		)
Net periodic benefit cost	$	17.8		$	22.9		$	18.9		$	0.6		$	0.9		$	0.9
Weighted average assumptions:
U.S. plans
Discount rate, net periodic benefit cost	3.9		%	3.3		%	3.7		%	4.5		%	3.5		%	4.0		%
Discount rate, benefit obligations	3.5			4.0			3.3			3.8			4.5			3.5
Return on plan assets	8.3			8.3			8.3			n/a			n/a			n/a
Salary growth rate, net periodic benefit cost	3.0			3.0			3.0			n/a			n/a			n/a
Salary growth rate, benefit obligations	3.0			3.0			3.0			n/a			n/a			n/a
Foreign plans
Discount rate	2.6		%	3.5		%	3.3		%	n/a			n/a			n/a
Return on plan assets	3.8			4.4			4.1			n/a			n/a			n/a
Salary growth rate	3.2			3.3			3.1			n/a			n/a			n/a

____________________

na Not applicable

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/or manage risk. The expected return on plan assets is determined based on the expected long-term rate of return on plan assets and the market-related value of plan assets. The market-related value of plan assets 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 2014 was 8.3 percent and 3.8 percent, respectively, and 8.3 percent and 4.4 percent for 2013, respectively.

The Company determines the discount rate primarily by reference to rates on high-quality, long term corporate and government bonds that mature in a pattern similar to the expected payments to be made under the various plans. The weighted average discount rates used to determine the benefit obligation for its U.S. and foreign plans for 2014 was 3.5 percent and 2.6 percent, respectively, and 4.0 percent and 3.5 percent for 2013, respectively.

During 2014, the Company made changes to certain post-retirement healthcare benefits. Effective January 1, 2015, Medicare eligible participants were moved from the self-insured employer plan to a private Medicare exchange, receiving a fixed subsidy from the Company. The Company re-measured the post-retirement benefits obligation as of the date of the plan change, resulting in a decrease to the obligation of $7.0 million. The Company no longer uses the assumed healthcare cost trends to value its post-retirement benefits obligation.

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 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. While the Company's plans do not invest directly in its own stock, it is possible that the various plans' investments in mutual, commingled or indexed funds or insurance contracts (GIC's) may hold ownership of Company securities. The investment objectives of each unit are more specifically outlined below.

The Company's weighted-average asset allocations at December 27, 2014 and December 28, 2013, by asset category, were as follows:



	2014				2013
Asset category	U.S. plans		Foreign plans		U.S. plans		Foreign plans
Equity securities	64	%	29	%	64	%	37	%
Fixed income securities	36		17		36		15
Cash and money market investments	—		7		—		3
Guaranteed contracts	—		46		—		44
Other	—		1		—		1
Total	100	%	100	%	100	%	100	%

The fair value of the Company's pension plan assets at December 27, 2014 by asset category was as follows:



Description of assets (in millions)		December 27, 2014		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)	$	35.5	$	—	$	35.5	$	—
Foreign plans:
Australia	Investment fund (b)	2.9		—		2.9		—
Switzerland	Guaranteed insurance contract (c)	27.6		—		—		27.6
Germany	Guaranteed insurance contract (c)	5.5		—		—		5.5
Belgium	Mutual fund (d)	22.8		22.8		—		—
Austria	Guaranteed insurance contract (c)	0.5		—		—		0.5
Korea	Guaranteed insurance contract (c)	3.1		—		—		3.1
Japan	Common/collective trust (e)	11.9		—		11.9		—
Philippines	Fixed income securities (f)	1.6		1.6		—		—
	Equity fund (f)	3.4		3.4		—		—
Total		$	114.8	$	27.8	$	50.3	$	36.7

The fair value of the Company's pension plan assets at December 28, 2013 by asset category was as follows:



Description of assets (in millions)		December 28, 2013		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)	$	32.3	$	—	$	32.3	$	—
Foreign plans:
Australia	Investment fund (b)	5.7		—		5.7		—
Switzerland	Guaranteed insurance contract (c)	27.0		—		—		27.0
Germany	Guaranteed insurance contract (c)	6.0		—		—		6.0
Belgium	Mutual funds (d)	23.6		23.6		—		—
Austria	Guaranteed insurance contract (c)	0.5		—		—		0.5
Korea	Guaranteed insurance contract (c)	2.9		—		—		2.9
Japan	Common/collective trust (e)	12.5		—		12.5		—
Philippines	Fixed income securities (f)	2.3		2.3		—		—
	Equity fund (f)	2.1		2.1		—		—
Total		$	114.9	$	28.0	$	50.5	$	36.4

____________________

(a)

The investment strategy of the U.S. pension plan for each period presented was to achieve 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. As of each of the years ended December 27, 2014 and December 28, 2013, the common trusts held 64 percent of its assets in equity securities and 36 percent in fixed income securities in both years. The percentage of funds invested in equity securities at the end of 2014 and 2013, included: 33 percent in large U.S. stocks, 21 percent small U.S. stocks, and 10 percent in international stocks. 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 five-year period. The investment strategy is to invest mainly in equities and property, which are expected to earn relatively 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 27, 2014 and December 28, 2013, the percentage of funds held in investments included: Australian equities of 30 percent and 31 percent, government and corporate bonds of 12 percent and 11 percent, cash of 6 percent and 9 percent, other equities of listed companies outside of Australia of 43 percent and 40 percent, respectively, and real estate of 9 percent in each year.

(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 a return greater than or equal to the return that would have been earned by a portfolio invested approximately 62 percent in equity securities and 38 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 27, 2014 and December 28, 2013, the percentage of funds held in various asset classes included: large-cap equities of European companies of 26 percent and 30 percent, small-cap equities of European companies of 17 percent and 19 percent, equities outside of Europe, mainly in the U.S. and emerging markets, of 8 percent and 10 percent, and bonds, primarily from European and U.S. governments, of 30 percent and 41 percent, respectively. The remaining amount in 2014 included 19 percent in a money market fund.

(e)

The Company's strategy for each period presented is to invest approximately 57 percent of assets to benefit from the higher expected returns from long-term investments in equities and to invest 43 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, 3 percent in cash and other short-term investments and 40 percent in domestic Japanese bonds. This strategy has been achieved through a collective trust that held 100 percent of total funded assets as of December 27, 2014 and December 28, 2013. As of the end of 2014 and 2013, the allocation of funds within the common collective trust included: 51 percent and 52 percent in Japanese equities, 7 percent and 8 percent in equities of companies based outside of Japan, and 4 percent and 40 percent in cash and other short term investments, respectively. In 2014, the remaining 38 percent of funds were invested in Japanese bonds. The fair value of the collective trust is determined by the market value of the underlying shares, which are traded in active markets.

(f)

In both years, the investment strategy in the Philippines was to achieve an appropriate balance between risk and return, from a diversified portfolio of Philippine peso denominated bonds and equities. The target asset class allocations is 57 percent in equity securities, 38 percent fixed income securities and 5 percent in cash and deposits. The fixed income securities at year end included assets valued using a weighted average of completed deals on similarly termed government securities, as well as balances invested in short term deposit accounts. The equity index fund was valued at the closing price of the active market in which it was traded.

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



	Year Ending
(In millions)	December 27, 2014			December 28, 2013
Beginning balance	$	36.4		$	44.4
Realized gains	0.7			1.2
Purchases, sales and settlements, net	2.6			(9.9		)
Impact of exchange rates	(3.0		)	0.7
Ending balance	$	36.7		$	36.4

The Company expects to contribute $12.8 million to its U.S. and foreign pension plans and $2.1 million to its other U.S. post-retirement benefit plan in 2015.

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, $10.5 million and $10.9 million for 2014, 2013 and 2012, respectively.

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



Years	Pension benefits		Post-retirement benefits		Total
2015		$17.9		$2.1		$20.0
2016	12.4		2.0		14.4
2017	30.4		1.9		32.3
2018	12.8		1.8		14.6
2019	16.8		1.7		18.5
2020-2024	71.9		6.9		78.8