<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ____ to ____
Commission file number 1-4881
AVON PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 13-0544597
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9 WEST 57TH STREET, NEW YORK, NEW YORK 10019-2683
(Address of principal executive offices)
(212) 546-6015
(telephone number)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X No ___
The number of shares of Common Stock (par value $.25) outstanding
at July 31, 1996 was 133,053,426 reflecting a two-for-one stock split
distributed in June 1996.
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Table of Contents
Part I. Financial Information
Page
Numbers
-------
Item 1. Financial Statements
Consolidated Statement of Income
Three Months Ended June 30, 1996 and
June 30, 1995.................................... 3
Six Months Ended June 30, 1996 and
June 30, 1995.................................... 4
Consolidated Balance Sheet
June 30, 1996 and December 31, 1995.............. 5
Consolidated Statement of Cash Flows
Six Months Ended June 30, 1996 and
June 30, 1995.................................... 6
Notes to Consolidated Financial Statements.......... 7-9
Item 2. Management's Discussion and Analysis of the
Results of Operations and Financial Condition....... 10-21
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K.................... 22
Signatures................................................... 23
2
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PART I. FINANCIAL INFORMATION
AVON PRODUCTS, INC.
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share data)
Three months ended
June 30
------------------
1996 1995
---- ----
(unaudited)
Net sales................................. $1,128.7 $1,064.0
Costs, expenses and other:
Cost of sales............................. 437.1 404.9
Marketing, distribution and
administrative expenses................. 546.0 523.1
Interest expense.......................... 10.4 10.3
Interest income........................... (3.7) (5.6)
Other (income)/expense, net............... .2 (2.4)
-------- --------
Total costs, expenses and other........... 990.0 930.3
-------- --------
Income before taxes and minority interest. 138.7 133.7
Income taxes.............................. 52.7 53.4
-------- --------
Income before minority interest........... 86.0 80.3
Minority interest......................... (.3) .1
-------- --------
Net income................................ $ 85.7 $ 80.4
======== ========
Income per share.......................... $ .64 $ .59*
======== ========
Average shares outstanding................ 133.91 136.92*
======== ========
*Restated to reflect a two-for-one stock split distributed in June
1996.
The accompanying notes are an integral part of these statements.
3
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AVON PRODUCTS, INC.
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share data)
Six months ended
June 30
------------------
1996 1995
---- ----
(unaudited)
Net sales................................. $2,144.8 $2,040.2
Costs, expenses and other:
Cost of sales............................. 838.7 792.2
Marketing, distribution and
administrative expenses................. 1,087.0 1,040.1
Interest expense.......................... 20.0 19.3
Interest income........................... (7.6) (9.7)
Other expense, net........................ 8.2 8.1
-------- --------
Total costs, expenses and other........... 1,946.3 1,850.0
-------- --------
Income before taxes and minority interest. 198.5 190.2
Income taxes.............................. 75.4 75.9
-------- --------
Income before minority interest........... 123.1 114.3
Minority interest......................... .3 .5
-------- --------
Net income................................ $ 123.4 $ 114.8
======== ========
Income per share.......................... $ .92 $ .84*
======== ========
Average shares outstanding................ 134.26 137.13*
======== ========
*Restated to reflect a two-for-one stock split distributed in June
1996.
The accompanying notes are an integral part of these statements.
4
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AVON PRODUCTS, INC.
CONSOLIDATED BALANCE SHEET
(In millions)
June 30 December 31
1996 1995
------- -----------
(unaudited)
ASSETS
Current assets:
Cash and equivalents..................... $ 72.9 $ 151.4
Accounts receivable...................... 409.9 402.0
Inventories.............................. 551.1 466.3
Prepaid expenses and other............... 213.6 195.3
-------- --------
Total current assets..................... 1,247.5 1,215.0
-------- --------
Property, plant and equipment, at cost... 1,168.6 1,169.5
Less accumulated depreciation............ 637.1 631.7
-------- --------
531.5 537.8
-------- --------
Other assets............................. 329.0 300.0
-------- --------
Total assets............................. $2,108.0 $2,052.8
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Debt maturing within one year............ $ 312.2 $ 47.3
Accounts payable......................... 298.7 419.7
Accrued compensation..................... 112.2 109.3
Other accrued liabilities................ 241.4 277.3
Sales and other taxes.................... 87.0 101.8
Income taxes............................. 290.4 289.9
-------- --------
Total current liabilities................ 1,341.9 1,245.3
-------- --------
Long-term debt........................... 105.8 114.2
Employee benefit plans................... 400.5 390.8
Deferred income taxes.................... 31.7 33.6
Other liabilities........................ 68.2 76.2
Shareholders' equity:
Common stock............................. 43.4 43.4
Additional paid-in capital............... 680.2 672.9
Retained earnings........................ 371.3 325.8
Translation adjustments.................. (208.6) (202.1)
Treasury stock, at cost.................. (726.4) (647.3)
-------- --------
Total shareholders' equity............... 159.9 192.7
-------- --------
Total liabilities and shareholders'
equity................................. $2,108.0 $2,052.8
======== ========
The accompanying notes are an integral part of these statements.
5
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AVON PRODUCTS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
Six months ended
June 30
------------------
1996 1995
---- ----
(unaudited)
Cash flows from operating activities:
Net income............................................ $123.4 $114.8
Adjustments to reconcile net income to net cash
used by operating activities:
Depreciation and amortization......................... 31.2 28.9
Provision for doubtful accounts....................... 34.5 35.7
Translation (gains)/losses............................ (.7) 2.1
Deferred income taxes................................. (9.4) (4.3)
Other................................................. 3.6 6.3
Changes in assets and liabilities:
Accounts receivable................................. (50.0) (52.1)
Inventories......................................... (86.6) (91.9)
Prepaid expenses and other.......................... (18.4) (30.0)
Accounts payable and accrued liabilities............ (104.9) (108.7)
Income and other taxes.............................. (11.0) (2.2)
Noncurrent assets and liabilities................... (7.6) 9.2
------ ------
Net cash used by continuing operations................ (95.9) (92.2)
Net cash used by discontinued operations.............. (36.8) (2.1)
------ ------
Net cash used by operating activities................. (132.7) (94.3)
------ ------
Cash flows from investing activities:
Capital expenditures.................................. (31.6) (26.3)
Disposal of assets.................................... 1.9 .5
Acquisition of Justine (Pty) Ltd...................... (6.3) --
------ ------
Net cash used by investing activities................. (36.0) (25.8)
------ ------
Cash flows from financing activities:
Cash dividends........................................ (80.7) (73.0)
Debt, net (maturities of three months or less)........ 257.1 150.9
Proceeds from short-term debt......................... 5.1 17.9
Retirement of short-term debt......................... (5.7) (19.6)
Retirement of long-term debt.......................... (.6) (16.8)
Repurchase of common stock............................ (79.9) (57.8)
Proceeds from exercise of stock options............... 4.8 .9
------ ------
Net cash provided by financing activities............. 100.1 2.5
------ ------
Effect of exchange rate changes on cash and
equivalents......................................... (9.9) 14.5
------ ------
Net decrease in cash and equivalents.................. (78.5) (103.1)
Cash and equivalents beginning of period.............. 151.4 214.8
------ ------
Cash and equivalents end of period.................... $ 72.9 $111.7
====== ======
The accompanying notes are an integral part of these statements.
6
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AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except share data)
1. ACCOUNTING POLICIES
The accompanying Consolidated Financial Statements should be read
in conjunction with the Consolidated Financial Statements and the
Notes thereto contained in Avon's 1995 Annual Report to Shareholders.
The interim statements are unaudited but include all adjustments,
which consisted of only normal recurring accruals, that management
considers necessary to fairly present the results for the interim
periods. Results for interim periods are not necessarily indicative
of results for a full year. The year end balance sheet data was
derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles.
To conform to the 1996 presentation, certain reclassifications
were made to the prior year's consolidated financial statements.
2. INFORMATION RELATING TO THE STATEMENT OF CASH FLOWS
"Net cash used by continuing operations" includes the following
cash payments for interest and income taxes:
Six months ended
June 30
----------------
1996 1995
---- ----
Interest..................................... $16.8 $16.2
Income taxes, net of refunds received........ 87.5 84.1
3. INCOME PER SHARE
Income per share of common stock is based on the weighted average
number of shares outstanding. The decrease in average shares
outstanding for the three and six months ended June 30, 1996 compared
to the respective periods of 1995 is primarily due to the shares
acquired under the stock repurchase program. During the first six
months of 1996, the Company purchased approximately 1.9 million shares
of common stock compared to approximately the same number of shares
purchased during the first six months of 1995. As of June 30, 1996,
the cumulative number of shares repurchased was approximately 11.6
million shares, as restated to reflect the two-for-one stock split
distributed in June 1996, for a total cost of approximately $375.1.
7
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AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except share data)
At the Annual Meeting on May 2, 1996, the shareholders
approved an amendment to the Company's Certificate of Incorporation
to increase the number of shares of common stock authorized from
200 million to 400 million and decrease the par value per share
from $.50 to $.25.
Also on May 2, 1996, the Company's Board of Directors authorized
a two-for-one stock split in the form of a 100 percent stock
distribution which was made on June 3, 1996 to shareholders of
record after the close of business on May 15, 1996.
All share and per share data included in this report, unless
indicated, have been restated to reflect the stock split.
4. INVENTORIES
June 30 December 31
1996 1995
------- -----------
Raw materials............. $145.5 $133.2
Finished goods............ 405.6 333.1
------ ------
$551.1 $466.3
====== ======
5. DIVIDENDS
Cash dividends paid per share of common stock were $.58 for the
three months ended June 30, 1996 and $.50 for the corresponding 1995
period on a pre-split basis. On May 2, 1996, the Board of Directors
declared a regular quarterly dividend of $.58 per share on the common
shares, paid on June 3, 1996, to shareholders of record on May 13,
1996. Future dividends will be paid on a post-split basis. The
dividend of $.58 per share is the equivalent of $.29 per share on a
post-split basis. The annual dividend rate for 1996, adjusted for the
two-for-one stock split, is $1.16 compared to an adjusted post-split
dividend rate for 1995 of $1.10.
8
<PAGE>9
AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except share data)
6. NEW ACCOUNTING STANDARDS
Effective January 1, 1996, the Company adopted Statement of
Financial Accounting Standards ("FAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of". This statement requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of assets may not be recoverable.
There was no impact on the Company's results of operations or
financial position upon adoption.
Also, effective January 1, 1996, the Company adopted FAS No. 123,
"Accounting for Stock-Based Compensation". This statement establishes
financial accounting and reporting standards for stock-based employee
compensation plans, such as stock purchase plans, stock options,
restricted stock and stock appreciation rights as well as non-employee
equity transactions. The Company has not changed the method of
accounting for its employee stock compensation plans, but as
permitted by this statement, will provide the fair value
disclosure requirements in the 1996 annual financial statements.
7. CONTINGENCIES
Various lawsuits and claims (asserted and unasserted) arising in
the ordinary course of business or related to businesses previously
sold are pending or threatened against Avon. The most significant of
these is described below.
In 1991, a class action suit was initiated against Avon on behalf
of certain classes of holders of Avon's Preferred Equity-Redemption
Cumulative Stock ("PERCS"). This lawsuit alleges various contract and
securities law claims relating to the PERCS (which were fully redeemed
that year). Avon has rejected the assertions in this case, believes
it has meritorious defenses to the claims and is vigorously contesting
this lawsuit.
In the opinion of Avon's management, based on its review of the
information available at this time, the difference, if any, between
the total cost of resolving such contingencies and reserves recorded
by Avon at June 30, 1996 should not have a material adverse impact
on Avon's consolidated financial position, results of operations or
cash flows.
9
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AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Dollars in millions, except share data)
ITEM 2. Management's Discussion and Analysis of the
Results of Operations and Financial Condition
All share and per share data included in this report have been
restated to reflect a two-for-one stock split distributed in June
1996.
Results of Operations--Three Months Ended June 30, 1996 and 1995.
Consolidated
Avon's net income for the three months ended June 30, 1996 of
$85.7, or $.64 per share, increased 7 percent and 8 percent,
respectively, from net income of $80.4, or $.59 per share, in the
comparable period of 1995. The percent increase in income per share
exceeded the percent increase in net income due to the impact of
lower average shares outstanding in 1996 versus 1995 resulting
from the ongoing stock repurchase program. Pretax income of $138.7
increased 4 percent due to higher sales, an improved operating expense
ratio and lower corporate non-operating expenses in 1996. These
favorable results were partially offset by a decline in the gross
margin, lower interest income in 1996 and the favorable net effect of
one-time items in 1995, discussed below. Net income was favorably
impacted by a lower effective income tax rate in 1996 (38.0 percent
versus 39.9 percent in 1995) primarily attributable to the mix of
earnings and tax rates of international subsidiaries, including a
decrease in Brazil's statutory income tax rate. The 1995 results for
the second quarter included the following one-time pretax items: a
gain of $25.0, net of related costs, from a cash settlement of a lease
dispute and charges of $12.0 related to an early retirement program
implemented in Japan and $11.0 for severance costs, primarily in
Europe, as part of Avon's program to reduce fixed expenses in certain
markets. The lease dispute related to the overpayment of previous
years' rent for the Company's headquarters building. The $25.0 gain
represented a $14.0 recovery of disputed rent, which is included in
marketing, distribution and administrative expenses, and $11.0 of
interest, net of related costs, which is included in other
(income)/expense, net. The expenses in Japan and Europe are included
in marketing, distribution and administrative expenses. The net
effect of these one-time items was to increase net income in the
second quarter of 1995 by $3.0, or $.02 per share.
10
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AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued)
(Dollars in millions, except share data)
On a consolidated basis, Avon's worldwide net sales for the three
months ended June 30, 1996 of $1,128.7 increased $64.7, or 6 percent,
over the comparable period of the prior year. The increase in sales
was due to a 7 percent increase in international and a 4 percent
increase in U.S. The international sales increase resulted from
strong growth throughout most of the Americas region, Russia, Central
Europe, Italy and the Pacific Rim markets. These improvements were
partially offset by sales declines in Japan, and to a lesser extent,
Germany, Venezuela and France. Excluding the impact of foreign
currency exchange, net sales rose 14 percent over the comparable
period of the prior year.
Cost of sales as a percentage of sales was 38.7 percent in the
second quarter of 1996 compared to 38.1 percent in the second quarter
of 1995. The decline in the gross margin resulted from lower
margins in Venezuela due to the impact of two bolivar devaluations,
in Japan due to a shift to sales of lower-priced products, in Brazil
due to an investment to reduce excess inventory and in the U.S. due
to higher sales of the lower margin apparel line in 1996. These
declines were partially offset by margin improvements in Argentina and
Mexico.
Marketing, distribution and administrative expenses of $546.0
increased $22.9, or 4 percent, over the comparable period of 1995
but decreased as a percentage of sales to 48.4 percent from 49.2
percent in 1995. Excluding the effect of the 1995 one-time items
previously mentioned, operating expenses increased $32.3 and the
operating expense ratio increased slightly. The increase in operating
expenses was primarily in Brazil, the Pacific Rim, the U.S. and
Argentina. These increases were partially offset by lower expenses in
Japan, and to a lesser extent, Germany and Venezuela.
Interest income decreased $1.9 over the comparable period of
last year primarily due to lower levels of funds invested in Brazil
and in the U.S. in 1996.
Other (income)/expense, net, of $.2 was $2.6 unfavorable
to the comparable period last year primarily due to the interest
portion of the previously discussed favorable lease settlement in
1995, substantially offset by lower corporate non-operating expenses
in 1996.
11
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AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued)
(Dollars in millions, except share data)
U.S.
Net sales increased 4 percent in the second quarter of 1996
compared with the second quarter of 1995 reflecting a 2 percent
increase in both the number of Representative orders and average
order size. The sales improvement was driven by a significant
increase in apparel, and to a lesser extent, in color cosmetics,
gift and decorative, including home entertainment products, partially
offset by a decline in fashion jewelry and accessories and skin care
products. The increase in the average order size was the result of
the strong growth in apparel sales, particularly Casual Wear and
Accessories items, which includes the Diane Von Furstenberg line, as
well as Legwear.
Pretax income decreased 2 percent over the comparable period
of last year due to a decline in the gross margin and an unfavorable
operating expense ratio partially offset by higher sales. The gross
margin decline reflects increased sales of the lower margin apparel
line in the second quarter of 1996. The increase in the operating
expense ratio resulted from increased investments directed towards
consumer motivation and direct access strategies, including scented
strips and Olympic sweepstake inserts in the Avon brochure as well as
a new beauty and fashion catalog. These factors combined with higher
paper costs in 1996 resulted in the decline in pretax income.
International
Net sales increased 7 percent over the comparable period of 1995
and pretax income increased 40 percent. Excluding the 1995 one-time
pretax charges for Japan's early retirement program and European
severance costs, pretax income increased 14 percent. The sales
increase was driven primarily by strong unit growth throughout most
of the Americas, predominantly in Brazil, and to a lesser extent,
Mexico, Chile and Argentina. Brazil's improvement included double-
digit increases in unit volume and number of customers. The growth in
number of customers resulted from the revision of pricing strategies
aimed at increasing customer transactions in response to an
increasingly intense competitive environment in Brazil. The continued
impact of the peso devaluation in Mexico was more than offset by
increases in the number of orders as well as average order size. In
addition, the number of active Representatives in Mexico grew 10
percent over 1995 resulting from implementation of incentive programs
focused on retention and increasing the number of orders. The
international sales improvement was also due to improvements in the
12
<PAGE>13
AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued)
(Dollars in millions, except share data)
Pacific Rim, mainly in the Philippines and China, Russia and Central
Europe reflecting unit growth, and in Italy resulting from a favorable
exchange impact.
These favorable results were partially offset by continuing sales
declines in Japan caused by the unfavorable exchange impact of a
stronger U.S. dollar in 1996 as well as declines in units sold and
average order size. These shortfalls were caused, in part, by a new
commission structure implemented at the beginning of the year. In
addition to a change in Japan's management, new programs are being
implemented to address the field sales and marketing issues that have
been contributing to the operational shortfalls. Sales were also
lower in Germany and France due to operational declines and reduced
consumer spending resulting from weak economic conditions and rising
unemployment as well as a negative currency impact. Additionally, the
continued negative impact of the bolivar devaluation resulted in sales
declines in Venezuela. Excluding the impact of foreign currency
exchange, international sales rose 20 percent.
Excluding the one-time charges, previously discussed, the
higher pretax income reflected increases primarily in Mexico, the
Pacific Rim, Argentina, and most European markets. The increase
in Mexico was primarily due to the sales growth without a significant
increase in operating expenses. Higher pretax results in the
Pacific Rim and Argentina were attributed to operational improvements
driven by higher units sold. Improvements in Europe were most
significant in Russia and Italy due to higher sales, and in Germany
due to lower operating expenses resulting from a continued focus
on expense reduction. These favorable results were partially offset
by decreases in Japan, and to a lesser extent, in Venezuela. Japan
continues to face operational challenges. Japan's gross margin has
declined due to price discounting and extra commission offers and
the operating expense ratio has increased reflecting the sales
decline. Lower pretax results in Venezuela were mainly due to the
impact of two maxi-devaluations of the bolivar in the past seven
months.
Results of Operations - Six Months Ended June 30, 1996 and 1995.
Consolidated
Avon's net income for the six months ended June 30, 1996 of
$123.4, or $.92 per share, increased 7 percent and 10 percent,
respectively, compared to net income of $114.8, or $.84 per share, in
13
<PAGE>14
AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued)
(Dollars in millions, except share data)
the comparable period of 1995. The 10 percent increase in income per
share exceeded the 7 percent increase in net income due to the
impact of lower average shares outstanding in 1996 as a result of
the ongoing share repurchase program. Pretax income of $198.5
increased 4 percent due to higher sales partially offset by higher
operating expenses and cost of sales, higher net interest and the net
effect of the previously discussed 1995 one-time items. Net income
was also favorably impacted by a lower effective income tax rate in
1996 (38.0 percent versus 39.9 percent in 1995) resulting primarily
from the mix of earnings and tax rates of international subsidiaries,
including a decrease in Brazil's statutory income tax rate. The 1995
results include the previously discussed one-time items which had the
net effect of increasing net income by $3.0, or $.02 per share.
Consolidated net sales for the six months ended June 30, 1996
of $2,144.8 increased $104.6, or 5 percent, over the comparable
period of the prior year. This increase was primarily due to a 6
percent increase in international and a 4 percent increase in U.S.
sales. The international sales growth resulted from strong growth
in most markets in the Americas and the Pacific Rim, and to a lesser
extent, in Russia, Central Europe, Spain and Italy. These
improvements were partially offset by sales declines in Japan, and to
a lesser extent, Germany, Venezuela, and France. Excluding the impact
of foreign currency exchange, net sales rose 12 percent over the
comparable period of the prior year.
Cost of sales as a percentage of sales was 39.1 percent
compared to 38.8 percent in 1995. The higher cost ratio was
primarily due to gross margin declines in Venezuela due to the
impact of the bolivar devaluations, in Japan due to a shift to
sales of lower-priced products, and in the U.S. mainly due to
increased sales of the lower margin apparel line.
Marketing, distribution and administrative expenses of $1,087.0
increased $46.9, or 5 percent, over the comparable period of 1995
and decreased as a percentage of sales to 50.7 percent from 51.0
percent in 1995. Excluding the one-time charges in Japan and
Europe and the one-time lease settlement gain, previously mentioned,
the operating expenses increased $56.3 and the operating expense
14
<PAGE>15
AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued)
(Dollars in millions, except share data)
ratio increased to 50.7 percent from 50.5 percent in 1995. The
increase in operating expenses was primarily in Brazil, the
Pacific Rim and the U.S., partially offset by lower expenses in
Japan, and to a lesser extent, Germany and Venezuela. The increase
in the overall operating expense ratio was primarily due to
unfavorable expense ratios in Brazil reflecting increased
advertising and distribution expenses due to the recent expansion of
shipping facilities and in Japan due to the sales decline. These
declines were partially offset by improved expense ratios in most
European markets due to continued fixed expense reduction efforts, in
Venezuela due to the impact of the bolivar devaluations and in Mexico
due to higher sales.
Interest expense increased $.7 over the comparable period of
1995 as a result of higher domestic debt levels reflecting borrowings
for the ongoing stock repurchase program and for a litigation
settlement with Mallinckrodt Group Inc. ("Mallinckrodt"), partially
offset by reductions of debt in Japan and the Central European markets
in 1996.
Interest income decreased $2.1 from the comparable period of
1995 due to a lower level of funds invested in Brazil and the U.S.
Other expense, net, of $8.2 increased $.1 from the comparable
period of 1995 primarily due to the interest portion of the previously
discussed favorable lease settlement in 1995 substantially offset by
lower corporate expenses and lower foreign exchange losses in 1996.
U.S.
Net sales increased 4 percent reflecting a 2 percent increase
in the number of Representative orders and a 2 percent increase in
average order size. There were improvements in sales of apparel,
home entertainment, color cosmetics and personal care products.
These increases were partially offset by declines in sales of fashion
jewelry and accessories, skin care, fragrance and gift and decorative
products. The most significant growth was in the apparel category
reflecting the success of the Diane Von Furstenberg collections,
novelty and children's lines and the launch of Legwear in 1996.
Pretax income increased 1 percent in the first half of 1996
compared with the first half of 1995 due to the sales increase
partially offset by higher cost of sales. A gross margin decline was
15
<PAGE>16
AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued)
(Dollars in millions, except share data)
attributable to increased sales of the lower margin apparel
line, promotional pricing of certain products and the successful
sale of the lower-margin collectible Springtime Barbie doll, a gift
and decorative product. The operating expense ratio was level with
the prior year.
International
Net sales increased 6 percent and pretax income increased
31 percent over the comparable period of 1995. Excluding the
1995 one-time charges for Japan's early retirement program and
European severance costs, pretax income increased 11 percent. The
sales increase was primarily due to growth in most markets in the
Americas, most significantly in Brazil due to double-digit increases
in unit volume and customers, and in Mexico due to price increases
and unit growth partially offset by the continued impact of the peso
devaluation. Sales were also higher in Chile, Central America
and Argentina due to unit growth. In addition, the international
sales improvement was driven by unit growth in almost all Pacific Rim
markets, most significantly in the Philippines and China, and in
Russia, Central Europe and Spain. These favorable results were
partially offset by a significant sales decline in Japan resulting
from the unfavorable exchange impact of a stronger U.S. dollar in
1996 and a shift in pricing strategy to sales of lower-priced
products due to a continued decline in consumer spending. Strategies
are being put in place in Japan that focus on improving the field
sales and marketing areas. Sales also declined in Germany and France
due to weakening economic conditions and increasing unemployment, and
in Venezuela primarily due to the negative impact of the bolivar
devaluations. Excluding the impact of foreign currency exchange,
international sales were up 17 percent over the comparable period
of 1995.
Excluding the one-time charges previously discussed, the
increase in pretax income reflected increases in Europe, most markets
in the Americas, the Philippines and Malaysia. The increase in Europe
reflected sales increases and operational improvements including
improved gross margins in Italy, Germany, Spain and Russia
and favorable operating expense ratios in most markets in the region
due to the continued effect of fixed expense reduction efforts.
16
<PAGE>17
AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued)
(Dollars in millions, except share data)
Increases in Mexico, Argentina, Central America and Chile were due to
sales growth. The improvements in the Philippines and Malaysia
reflected higher sales and improved expense ratios. These favorable
results were partially offset by decreases in Japan, and to a lesser
extent in Venezuela. The decline in Japan was due to the decrease in
sales and continuing operational difficulties including a decline in
the gross margin due to a continued focus on lower-priced impulse
items in an attempt to increase consumer appeal, as well as an
unfavorable expense ratio. Lower pretax results in Venezuela were
caused by the bolivar devaluations.
Liquidity and Capital Resources
Cash Flows
Excluding changes in debt, there was a net decrease in cash of
$334.4 in the first half of 1996 compared with $235.5 in the
comparable period of 1995. The $98.9 variance primarily reflects
the final payment of the Mallinckrodt settlement in January 1996, an
unfavorable exchange rate impact on cash, higher cash used for the
repurchase of common stock and higher dividends. Cash usage was also
affected by investing activities including the purchase of Justine
(Pty) Ltd., a direct selling business in South Africa, and higher
capital spending in the Pacific Rim, mainly in China, in 1996.
For the first half of 1996, under the stock repurchase program,
the Company purchased approximately 1.9 million shares of common stock
for $79.9 compared with $57.8 spent for the repurchase of approxi-
mately the same number of shares during the comparable period
in 1995. As of June 30, 1996, the cumulative number of shares
repurchased was approximately 11.6 million shares.
Capital Resources
Total debt increased $256.5 to $418.0 at June 30, 1996 from
$161.5 at December 31, 1995, principally due to normal seasonal
working capital requirements during the first six months of 1996
and a payment made relating to the Mallinckrodt settlement. Total
debt at June 30, 1996 of $418.0 was $102.7 higher than total
17
<PAGE>18
AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued)
(Dollars in millions, except share data)
debt of $315.3 at June 30, 1995 primarily due to the Mallinckrodt
settlement, the ongoing share buyback program and higher borrowings
in the United Kingdom, France and China. These increases were
partially offset by the repayment of a yen note obligation of Avon's
Japanese subsidiary in the second half of 1995 and lower debt
levels in Central Europe.
At June 30, 1996, there were no borrowings under the $600
revolving credit and competitive advance facility agreement ("Credit
Agreement"). This agreement is also used to support the Company's
commercial paper borrowings of which $250.8 was outstanding at June
30, 1996.
At June 30, 1996, there were no borrowings under the Company's
bankers' acceptance facilities.
Management currently believes that cash from operations and
available financing alternatives are adequate to meet anticipated
requirements for working capital, dividends, capital expenditures,
the stock repurchase program and other cash needs.
Working Capital
As of June 30, 1996 and December 31, 1995, current liabilities
exceeded current assets by $94.4 and $30.3, respectively. The
increase of current liabilities over current assets of $64.1 was
mainly due to an increase in debt, partially offset by a decrease in
accounts payable, and a decrease in cash and equivalents. These
changes resulted from higher inventory levels, which reflects the
seasonal pattern of Avon's operations as well as higher U.S. apparel
inventory to support increased sales, and the final Mallinckrodt
settlement payment.
Although current liabilities exceeded current assets at June 30,
1996, management believes this highlights the effectiveness of
its working capital management and does not adversely affect
liquidity. Avon's liquidity results from its ability to generate
significant cash flows from operations and its ample unused borrowing
capacity. Actions that would eliminate the working capital deficit
are not anticipated at this time. Avon's credit agreements do not
contain any provisions or requirements with respect to working
capital.
18
<PAGE>19
AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued)
(Dollars in millions, except share data)
Financial Instruments and Risk Management Strategies
The Company operates globally, with manufacturing and
distribution facilities in various locations around the world. The
Company may reduce its exposure to fluctuations in interest rates and
foreign exchange rates by creating offsetting positions through the
use of derivative financial instruments. The Company currently does
not use derivative financial instruments for trading or speculative
purposes, nor is the Company a party to leveraged derivatives.
The Company periodically uses interest rate swaps to hedge
portions of interest payable on its debt. In addition, the Company
may periodically employ interest rate caps to reduce exposure, if any,
to increases in variable interest rates.
At June 30, 1996, the Company had three interest rate
swap agreements on its 170 million 6-1/8 percent Deutsche Mark Notes
("Notes"), due May 1998. Each agreement has a notional principal
amount of $100.0. In July 1995, the Company entered into an
interest rate swap agreement, which effectively converted the interest
payable on the Notes from a floating to a fixed interest rate basis of
approximately 7.2 percent through maturity. The fixed interest rate
on this swap agreement is slightly below 5.8 percent. As a result of
this swap, the interest rate is established at 1.4 percentage points
above the 5.8 percent interest rate on this swap.
The Company has two interest rate cap contracts, each with a
notional principal amount of $100.0, used to economically hedge the
Company's short-term variable interest rate working capital debt.
One of the cap contracts expires in early 1997 and the other expires
in May 1998. These cap contracts have been marked-to-market yielding
an insignificant income statement adjustment.
The Company may periodically hedge foreign currency royalties, net
investments in foreign subsidiaries, firm purchase commitments and
contractual foreign currency cash flows or obligations, including
third-party or intercompany foreign currency transactions. The
Company regularly monitors its foreign currency exposures and ensures
that hedge contract amounts do not exceed the amounts of the
underlying exposures.
19
<PAGE>20
AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued)
(Dollars in millions, except share data)
At June 30, 1996, the Company held foreign currency forward
contracts with notional amounts totaling $168.5 and option
contracts with notional amounts totaling $87.9 to hedge
foreign currency items. These contracts have maturities in early
1997 or prior. The Company also entered into certain foreign currency
forward contracts with notional amounts totaling $84.0 and
option contracts with notional amounts of $25.8 to economically
hedge certain foreign currency exposures, which do not qualify as
hedging transactions under the current accounting definitions and,
accordingly, have been marked-to-market. The mark-to-market
adjustment on these contracts at June 30, 1996 was insignificant
The Company's risk of loss on the options in the future is limited
to premiums paid, which are insignificant.
The Company attempts to minimize its credit exposure to
counterparties by entering into interest rate swap and cap contracts
only with major international financial institutions with "A" or
higher credit ratings as issued by Standard & Poor's Corporation. The
Company's foreign currency and interest rate derivatives are comprised
of over-the-counter forward contracts or options with major
international financial institutions. Although the Company's
theoretical credit risk is the replacement cost at the then estimated
fair value of these instruments, management believes that the risk of
incurring losses is remote and that such losses, if any, would not be
material.
New Accounting Standards
Effective January 1, 1996, the Company adopted Statement of
Financial Accounting Standards ("FAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of". This statement requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of assets may not be recoverable.
There was no impact on the Company's results of operations or
financial position upon adoption.
2
<PAGE>21
AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued)
(Dollars in millions, except share data)
Also, effective January 1, 1996, the Company adopted FAS No. 123,
"Accounting for Stock-Based Compensation". This statement establishes
financial accounting and reporting standards for stock-based employee
compensation plans, such as stock purchase plans, stock options,
restricted stock and stock appreciation rights as well as non-employee
equity transactions. The Company has not changed the method of
accounting for its employee stock compensation plans but, as
permitted by this statement, will provide the fair value
disclosure requirements in the 1996 annual financial statements.
21
<PAGE>22
AVON PRODUCTS, INC.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
------- -----------
3.1 --Restated Certificate of Incorporation of Avon
filed May 13, 1996.
3.2 --By-Laws of Avon, as restated, effective June 6,
1996.
11.1 --Statement re computation of primary income per
share.
11.2 --Statement re computation of fully diluted income
per share.
27 --Financial Data Schedule.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the second
quarter of 1996.
22
<PAGE>23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
AVON PRODUCTS, INC.
(Registrant)
Date: August 13, 1996 By /s/ MICHAEL R. MATHIESON
-------------------------------
Michael R. Mathieson
Vice President & Controller
Principal Accounting Officer
Signed both on behalf of the
registrant and as principal
accounting officer.
23
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For Quarter Ended June 30, 1996 Commission file number 1-4881
-----------------------
AVON PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
-----------------------
EXHIBITS
<PAGE>
AVON PRODUCTS, INC.
INDEX TO EXHIBITS
Exhibit
Number Description
- ------- -----------
3.1 --Restated Certificate of Incorporation of Avon
filed May 13, 1996.
3.2 --By-Laws of Avon, as restated, effective June 6,
1996.
11.1 --Statement re computation of primary income
per share.
11.2 --Statement re computation of fully diluted
income per share.
27 --Financial Data Schedule.
EXHIBIT 3.1
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
AVON PRODUCTS, INC.
Under Section 807 of the Business Corporation Law
We, JAMES E. PRESTON and WARD M. MILLER, JR., being
respectively Chairman of the Board and Secretary of AVON PRODUCTS,
INC. (the "Corporation"), do hereby certify as follows:
1. The name of the Corporation is AVON PRODUCTS, INC.
and the name under which the Corporation was formed is California
Perfume Company, Inc.
2. The Certificate of Incorporation of the Corporation was
filed by the Department of State of the State of New York on January 27,
1916.
3. The Certificate of Incorporation of the Corporation as
heretofore amended is hereby further amended to reflect an amendment
of the first paragraph of Article III authorized by a majority vote of
the Corporation's Board of Directors followed by authorization by vote
of the holders of a majority of all the outstanding shares of stock of
the Corporation entitled to vote thereon at the Corporation's Annual
Meeting of Shareholders held on May 2, 1996. Such amendment changed the
number of shares of Common Stock which the Corporation has authority
to issue from 200,000,000 shares, $.50 par value, of which 86,750,705
shares are presently issued and outstanding, and 113,249,295 shares
which are currently unissued at a rate of change of two to one, to
400,000,000 shares, $.25 par value, of which 173,501,410 shares are
presently issued and outstanding and 226,498,590 shares which are
currently unissued at a rate of change of two to one.
4. Article IIIB, which established a series of the Corpora-
tion's authorized shares of Preferred Stock designated the "$2.00
<PAGE 2>
Preferred Equity-Redemption Cumulative Stock", has been deleted in
its entirety to reflect the complete redemption and cancellation by the
Corporation of all such Preferred Stock.
5. The text of the Certificate of Incorporation of the Corpo-
ration as heretofore amended is hereby restated to read as herein set
forth in full:
ARTICLE I: The corporate name is
AVON PRODUCTS, INC.
ARTICLE II: The purposes for which the Corporation is
formed are:
To develop, manufacture, produce, provide, operate, distribute
and deal in and with services, property and goods of all kinds
including without limitation engaging in the manufacture and
distribution of cosmetics and toiletries.
To engage in any lawful act or activity for which corporations may
be organized under the Business Corporation Law of the State of New
York.
ARTICLE III: The total number of shares of all classes of capital
stock which the Corporation shall have authority to issue is 425,000,000
shares, divided into two classes consisting of 400,000,000 shares of
Common Stock, par value $.25 per share (the "Common Stock"), and
25,000,000 shares of Preferred Stock, par value $1.00 per share (the
"Preferred Stock").
The shares of authorized Common Stock of the Corporation shall be
identical in all respects and shall have equal rights and privileges.
The Board of Directors shall have authority by resolution to issue
the shares of Preferred Stock from time to time on such terms as it may
determine and to divide the Preferred Stock into one or more
<PAGE 3>
classes or series and, in connection with the creation of any such class
or series, to determine and fix by the resolution or resolutions
providing for the issuance of shares thereof the designation, powers
and relative participating, optional, or other special rights of such
class or series, and the qualifications, limitations or restrictions
thereof, to the full extent now or hereafter permitted by law.
The holders of capital stock of the Corporation shall not have any
preemptive rights.
ARTICLE lllA. Series A Junior Participating Preferred
Stock:
1. Designation and Amount. An aggregate of 800,000 shares of
Preferred Stock, par value $l.00, of the Corporation are hereby
constituted as a series designated as "Series A Junior Participating
Preferred Stock" (the "Series A Preferred Stock"). Such number
of shares may be increased or decreased by resolution of the Board of
Directors; provided, that no decrease shall reduce the number of
shares of Series A Preferred Stock to a number less than the number of
shares then outstanding plus the number of shares reserved for issu-
ance upon the exercise of outstanding options, rights or warrants or
upon the conversion of any outstanding securities issued by the Corpo-
ration convertible into Series A Preferred Stock.
2. Dividends and Distributions.
(a) Subject to the rights of the holders of any shares of
any series of Preferred Stock (or any similar stock) ranking prior and
superior to the Series A Preferred Stock with respect to dividends, the
holders of shares of Series A Preferred Stock, in preference to the
holders of Common Stock, par value $0.25 per share (the "Common
Stock"), of the Corporation, and of any other junior stock, shall be
entitled to receive, when, as and if declared by the Board of Directors
out of funds legally available for the purpose, quarterly dividends pay-
able in cash on the first day of March, June, September and December
in each year (each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend
<PAGE 4>
Payment Date after the first issuance of a share or fraction of a share
of Series A Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $10 or (b) subject to the pro-
vision for adjustment hereinafter set forth, 100 times the aggregate per
share amount of all cash dividends, and 100 times the aggregate per
share amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect
to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Series A Preferred Stock. In the
event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares
of Common Stock (by reclassification or otherwise than by payment of
a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the amount to
which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding sen-
tence shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock out-
standing immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding imme-
diately prior to such event.
(b) The Corporation shall declare a dividend or distribution
on the Series A Preferred Stock as provided in paragraph (a) of this
Section immediately after it declares a dividend or distribution on the
Common Stock (other than a dividend payable in shares of Common Stock);
provided that, in the event no dividend or distribution shall have been
declared on the Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend Payment
Date, a dividend of $l0 per share on the Series A Preferred Stock shall
nevertheless be payable on such subsequent Quarterly Dividend Payment
Date.
<PAGE 5>
(c) Dividends shall begin to accrue and be cumulative
on outstanding shares of Series A Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such
shares, unless the date of issue of such shares is prior to the record
date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue
of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the shares
of Series A Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Series A Preferred Stock en-
titled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the
date fixed for the payment thereof.
3. Voting Rights. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(a) Subject to the provision for adjustment, hereinafter
set forth, each share of Series A Preferred Stock shall entitle the
holder thereof to 100 votes on all matters submitted to a vote of the
shareholders of the Corporation. In the event the Corporation shall at
any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassi-
fication or otherwise than by payment of a dividend in shares of Com-
mon Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the number of votes per share to which
holders of shares of Series A Preferred Stock were entitled immediately
prior to such event shall be adjusted by multiplying such number by a
fraction, the numerator of which is the number of shares of Common
<PAGE 6>
Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(b) Except as otherwise provided herein, in any Certificate
of Amendment creating a series of Preferred Stock or any similar
stock, or by law, the holders of shares of Series A Preferred Stock and
the holders of shares of Common Stock and any other capital stock of
the Corporation having general voting rights shall vote together as one
class on all matters submitted to a vote of shareholders of the Corpo-
ration.
(c) Except as set forth herein, or as otherwise provided
by law, holders of Series A Preferred Stock shall have no voting
rights.
4. Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock are in arrears,
thereafter and until all accrued and unpaid dividends and distributions,
whether or not declared, on shares of Series A Preferred Stock out-
standing shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either as to divi-
dends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, except dividends paid ratably on the Series A
Preferred Stock and all such parity stock on which dividends are payable
or in arrears in proportion to the total amounts to which the holders of
all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock, provided that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any such junior stock
in exchange for shares of any stock of the Corporation ranking junior
(either as to dividends or upon dissolution, liquidation, or winding up)
to the Series A Preferred Stock; or
<PAGE 7>
(iv) redeem or purchase or otherwise acquire for
consideration shares of Series A Preferred Stock, or any shares of stock
ranking on a parity with the Series A Preferred Stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares
upon such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and prefer-
ences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective
series or classes.
(b) The Corporation shall not permit any subsidiary of
the Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
this Section 4, purchase or otherwise acquire such shares at such time
and in such manner.
5. Reacquired Shares. Any shares of Series A Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition
thereof. All such shares shall upon their cancellation become
authorized but on issued shares of Preferred Stock and may be
reissued as part of a new series of Preferred Stock subject to the
conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, in any other Certificate of Amendment
creating a series of Preferred Stock or any similar stock or as
otherwise required by law.
6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be
made (i) to the holders of shares of stock ranking junior (either
<PAGE 8>
as to dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock unless, prior thereto, the holders of shares of
Series A Preferred Stock shall have received $100 per share, plus an
amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment, provided
that the holders of shares of Series A Preferred Stock shall be
entitled to receive an aggregate amount per share, subject to the pro-
vision for adjustment hereinafter set forth, equal to 100 times the
aggregate amount to be distributed per share to holders of shares of
Common Stock, or (ii) to the holders of shares of stock ranking on a
parity (either as to dividends or upon liquidation , dissolution or
winding up) with the Series A Preferred Stock, except distributions
made ratably on the Series A Preferred Stock and all such parity stock
in proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding up.
In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by payment
of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the aggregate
amount to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under the proviso in clause (i)
of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares
of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
7. Consolidation, Merger, etc. In case the Corporation
shall enter into any consolidation, merger, combination or other trans-
action in which the shares of Common Stock are exchanged for or
changed into other stock or securities, cash and/or any other property,
then in any such case each share of Series A Preferred Stock shall at
the same time be similarly exchanged or changed into an amount per
share, subject to the provision for adjustment hereinafter set forth,
equal to 100 times the aggregate amount of stock, securities, cash
and/or any other property (payable in kind), as the case may be, into
<PAGE 9>
which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time declare or
pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise
than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect
to the exchange or change of shares of Series A Preferred Stock shall
be adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immedi-
ately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to
such event.
8. Redemption. The shares of Series A Preferred Stock
shall not be redeemable.
9. Rank. The Series A Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of assets,
junior to all series of any other class of the Corporation's Preferred
Stock.
10. Amendment. The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially
alter or change the powers, preferences or special rights of the
Series A Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least two-thirds of the
outstanding shares of Series A Preferred Stock, voting together as a
single series.
ARTICLE IV: The office of the Corporation is to be located
in the City and County of New York, State of New York.
ARTICLE V: The number of directors of the Corporation shall be not
less than ten (10) nor more than twenty (20). The number of directors
to be chosen within said maximum and minimum limits shall be determined
in the manner prescribed by the By-Laws.
<PAGE 10>
The Board of Directors shall be divided into three classes as
nearly equal in number as possible, with each class having at least
three members, with the term of office of one class expiring each year.
At the annual meeting of shareholders in 1986, directors of the first
class shall be elected to hold office for a term expiring at the next
succeeding annual meeting, directors of the second class shall be
elected to hold office for a term expiring at the second succeeding
annual meeting and directors of the third class shall be elected to hold
office for a term expiring at the third succeeding annual meeting.
At each annual meeting of shareholders after 1986, successors to
the directors whose terms shall then expire shall be elected to hold
office for terms expiring at the third succeeding annual meeting.
Any vacancies in the Board of Directors, by reason of an increase in the
number of directors or otherwise, shall be filled solely by the Board of
Directors, by majority vote of the directors then in office, though less
than a quorum, but any such director so elected shall hold office only
until the next succeeding annual meeting of shareholders. At such
annual meeting, such director shall be elected and qualified in the
class in which such director is assigned to hold office for the term or
remainder of the term of such class. Directors shall continue in office
until others are chosen and qualified in their stead. When the number
of directors is changed, any newly created directorships or any decrease
in directorships shall be so assigned among the classes by a majority
of the directors then in office, though less than a quorum, so as to
make all classes as nearly equal in number as possible. To the extent
of any inequality within the limits of the foregoing, the class or
classes caused to have the greatest or greater number of directorships
shall be the class or classes then having the last date or the later
dates for the expiration of its or their terms. No decrease in the
number of directors shall shorten the term of any incumbent director.
Any director may be removed from office as a director but
only for cause by the affirmative vote of the holders of eighty percent
(80%) of the combined voting power of the then outstanding shares of
stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class.
<PAGE 11>
Notwithstanding anything contained in this Restated Certificate of
Incorporation to the contrary, the affirmative vote of the holders
of at least eighty percent (80%) of the combined voting power of the
then outstanding shares of the stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single
class, shall be required to alter, amend or adopt any provisions
inconsistent with or repeal this Article V.
The directors need not be shareholders of the Corporation.
ARTICLE VI: At all elections of directors of the Corporation each
shareholder shall be entitled to as many votes as shall equal the number
of votes which (except for the provisions of this Article) he would be
entitled to cast for the election of directors with respect to his
shares of stock multiplied by the number of directors to be elected, and
he may cast all of such votes for a single director or may distribute
them among the number to be voted for, or any two or more of them,
as he may see fit.
ARTICLE VII:
(A) In addition to any affirmative vote required by law or
this Restated Certificate of Incorporation:
1. any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with (a) an Interested
Shareholder (as hereinafter defined) or (b) any other corporation
(whether or not itself an Interested Shareholder) which is, or
after such merger or consolidation would be, an Affiliate (as
hereinafter defined) of an Interested Shareholder, or
2. any sale, lease, exchange, mortgage, pledge, grant of a
security interest, transfer or other disposition (in one
transaction or a series of transactions) to or with (a) an
Interested Shareholder or (b) an Affiliate of an Interested
Shareholder of assets of the Corporation or any Subsidiary having
an aggregate Fair Market Value (as hereinafter defined) of
$25,000,000 or more, or
<PAGE 12>
3. the issuance or transfer by the Corporation or any Subsidiary
(in one transaction or a series of transactions) of any securities
of the Corporation or any Subsidiary, having an aggregate Fair
Market Value of $25,000,000 or more to an Interested Shareholder or
any Affiliate of an Interested Shareholder in exchange for cash,
securities or other property (or combination thereof), or
4. the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation proposed by or on behalf
of an Interested Shareholder or any Affiliate of an Interested
Shareholder, or
5. any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or
any other transaction (whether or not with or into or otherwise
involving an Interested Shareholder) which has the effect, directly
or indirectly, of increasing the proportionate share of the
outstanding shares of any class of equity or convertible securities
of the Corporation or any Subsidiary directly or indirectly
beneficially owned by (a) an Interested Shareholder or (b) an
Affiliate of an Interested Shareholder
shall require either:
(a) the approval of a majority of the Disinterested Directors
(as hereinafter defined) or (b) the affirmative vote of the
holders of that amount of the voting power of the Voting
Stock (as hereinafter defined) equal to the sum of (1) the
voting power of the shares of Voting Stock of which their
Interested Shareholder is the beneficial owner and (2) a
majority of the voting power of the remaining outstanding
shares of Voting Stock, voting together as a single class;
provided, however, that no such vote shall be required for
the purchase by the Corporation of shares of Voting Stock
from an Interested Shareholder unless such vote is required
by Paragraph (B) of this Article VII.
<PAGE 13>
(B) Any purchase by the Corporation of shares of Voting
Stock from an Interested Shareholder, other than pursuant to an offer
to the holders of all of the outstanding shares of the same class of
Voting Stock as those so purchased, at a per share price in excess of
the Market Price (as hereinafter defined), at the time of such purchase,
of the shares so purchased, shall require the affirmative vote of the
holders of that amount of the voting power of the Voting Stock equal to
the sum of (i) the voting power of the shares of Voting Stock of which
the Interested Shareholder is the beneficial owner (as hereinafter
defined) and (ii) a majority of the voting power of the remaining out-
standing shares of Voting Stock, voting together as a single class.
(C) It shall be the duty of any Interested Shareholder:
(i) to give or cause to be given written notice to the
Corporation, immediately upon becoming an Interested
Shareholder, of such person's status as an Interested
Shareholder and of such other information as the Corporation
may reasonably require with respect to identifying all owners
and amount of ownership of the outstanding Voting Stock of
which such Interested Shareholder is the beneficial owner,
and
(ii) to notify the Corporation promptly in writing of any
change in the information provided in subparagraph (i) of
this Paragraph (C), provided, however, that the failure of an
Interested Shareholder to comply with the provisions of this
Paragraph (C) shall not in any way be construed to prevent
the Corporation from enforcing the provisions of Paragraphs
(A) and (B) of this Article VII.
(D) For the purposes of this Article VII:
<PAGE 14>
1. "Voting Stock" shall mean the outstanding shares of
capital stock of the Corporation entitled to vote
generally in the election of directors.
2. "Person" shall mean any individual, firm, corporation or
other entity.
3. "Interested Shareholder" shall mean any person (other
than the Corporation or any Subsidiary) who which:
(a) is the beneficial owner, directly or indirectly, of
5% or more of the voting power of the outstanding Voting
Stock; or
(b) is an Affiliate of the Corporation and at any time
within the two-year period immediately prior to the date
in question was the beneficial owner, directly or
indirectly, of 5% or more of the voting power of the
then outstanding Voting Stock; or
(c) is an assignee of or has otherwise succeeded to the
beneficial ownership of any shares of Voting Stock which
were at any time within the two-year period immediately
prior to the date in question beneficially owned by an
Interested Shareholder, if such assignment or succession
shall have occurred in the course of a transaction or
series of transactions not involving a public offering
within the meaning of the Securities Act of 1933.
For the purposes of determining whether a person is an
Interested Shareholder, the number of shares of Voting Stock
deemed to be outstanding shall include shares deemed owned
through application of subparagraph 4 below but shall not
include any other shares of Voting Stock which may be
issuable pursuant to any agreement, arrangement or
understanding, or upon conversion rights, warrants or
options, or otherwise.
<PAGE 15>
4. A person shall be a "beneficial owner" of any Voting
Stock:
(a) which such person or any of its Affiliates or
Associates beneficially owns, directly or indirectly;
or
(b) which such person or any of its Affiliates or
Associates has (i) the right to acquire (whether
such right is exercisable immediately or only after
the passage of time) pursuant to any agreement,
arrangement or understanding or upon the
exercise of conversion rights, exchange rights,
warrants or options, or otherwise or (ii) the right to
vote or to direct the voting thereof pursuant to any
agreement, arrangement or understanding; or
(c) which is beneficially owned, directly or indirectly,
by any other person with which such person
or its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any
shares of Voting Stock.
5. "Affiliate" or "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the Securities and Exchange Act
of 1934, as in effect on January 1, 1986.
6. "Subsidiary" shall mean any corporation of which a
majority of any class of equity security is owned, directly
or indirectly, by the Corporation; provided, however, that,
for purposes of the definition of Interested Shareholder set
forth in subparagraph 3, the term "Subsidiary" shall mean
only a corporation of a majority of the voting power of the
capital stock entitled to vote generally in the election of
directors is owned, directly or indirectly, by the
Corporation.
<PAGE 16>
7. "Disinterested Director" shall mean any member of the
Board of Directors of the Corporation who is unaffiliated
with an Interested Shareholder and was a member of the Board
prior to the time that such Interested Shareholder became an
Interested Shareholder, and any successor of a Disinterested
Director who is unaffiliated with an Interested Shareholder
and is recommended to succeed a Disinterested Director by a
majority of Disinterested Directors then on the Board.
8. "Market Price" means the last closing sale price
immediately preceding the time in question of a share
of the stock in question on the Composite Tape for New
York Stock Exchange-Listed Stocks.
9. "Fair Market Value" means: (i) in the case of stock, the
Market Price, and (ii) in the case of property other than
cash or stock, the Fair Market Value of such property on the
date in question as determined by the Board in good faith.
(E) A majority of the Disinterested Directors shall have the
power to determine for the purpose of this Article VII on the basis of
information known to them after reasonable inquiry (1) whether a per-
son is an Interested Shareholder, (2) the number of shares of Voting
Stock beneficially owned by any person, (3) whether a person is an
Affiliate or Associate of another and (4) whether a transaction or
series of transactions constitutes one of the transactions specified in
Paragraph (A) hereof. The good faith determination of a majority of the
Disinterested Directors shall be conclusive and binding for all purposes
of this Article VII.
<PAGE 17>
(F) Notwithstanding any other provision of this Restated
Certificate of Incorporation or the By-Laws of the Corporation or the
fact that a lesser percentage may be specified by law, this Restated
Certificate of Incorporation or the By-Laws of the Corporation, the
affirmative vote of the holders of at least eighty percent (80%) of the
combined voting power of the then outstanding Voting Stock, voting
together as a single class, shall be required to amend, alter, repeal or
adopt any provision inconsistent with this Article VII.
The Secretary of State is designed as the agent of the Corporation
upon whom process in any action or proceeding against it may be served;
and the address to which the Secretary of State shall a copy of any
process against the Corporation which may be served upon him pursuant to
law is :
9 West 57th Street
New York, New York 10019
ARTICLE VIII: No person who is or was a director of the
Corporation shall have personal liability to the Corporation or its
shareholders for damages for any breach of duty in such capacity,
provided that the foregoing shall not limit the liability of any such
person (i) if a judgment or other final adjudication adverse to him
establishes that his acts or omissions were in bad faith or involved
intentional misconduct a knowing violation of law or that he personally
gained, in fact, a financial profit or other advantage to which he was
not legally entitled or that his acts violated Section 719 of the
Business Corporation Law of New York or, (ii) for any act or omission
occurring prior to the adoption of this Article VIII. No Amendment to
or repeal of this Article VIII shall apply to or have any effect on the
liability or alleged liability of any such person to the Corporation for
or with respect to any acts or omissions of such person occurring
to such amendment or repeal. If the Business Corporation Law of New
York is amended hereafter to expand or limit the liability of a
director, then the liability of a person who is or was a director of the
Corporation shall be deemed to be expanded to the extent required or
limited to the extent permitted by the Business Corporation Law of New
York, as so amended.
<PAGE 18>
6. This restatement of the Certificate of Incorporation was
authorized by the Board of Directors of the Corporation and the holders
of a majority of all the outstanding shares of stock of the Corporation.
IN WITNESS WHEREOF, we have subscribed this certificate as of
the 7th day of May, 1996, and we affirm the statements contained herein
as true under the penalties of perjury.
/s/ James E. Preston
James E. Preston
Chairman of the Board
/s/ Ward M. Miller, Jr.
Ward M. Miller, Jr.
Secretary
EXHIBIT 3.2
<PAGE>
BY-LAWS
OF
AVON PRODUCTS, INC.
ARTICLE I
OFFICES
Section 1. Location. The principal office of the corporation
shall be located in the City of New York, County of New York. Prior to
April 16, 1997, the post office address to which the Secretary of State
shall mail a copy of any process against the corporation served upon him
is 9 West 57th Street, New York, New York 10019. After that date, such
address shall be that for which the Secretary of the corporation has
provided written notice.
The corporation may also have other offices at such places either
within or without the State of New York as the board of directors may
from time to time designate or the business of the corporation may
require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders
of the corporation, for the election of directors and the transaction of
such other business as may properly come before said meeting, shall be
held annually at such place within or without the State of New York as
may from time to time be designated by the directors and set forth in
the notice of the meeting. The meeting shall be held on the first
Thursday in May or on such other date during the months of April or May
in each year as may from time to time be designated by the directors and
set forth in the notice of the meeting. The chairman of the board of
directors, or another member of the board of directors appointed by the
chairman, shall be the presiding officer at every meeting of the
shareholders of the corporation.
<PAGE 2>
Section 2. Special Meetings. Special meetings of shareholders,
unless otherwise prescribed by law, may be called for any purpose or
purposes at any time by the chairman of the board or the president or by
the order of the board of directors, and special meetings of
shareholder sprescribed by law for the election of directors shall be
called by the board or by the secretary or an assistant secretary upon
demand as prescribed by law. Such meetings shall, except as otherwise
prescribed by law, be held at such time and place within or without the
State of New York as shall be designated by the person, or in the order
of the board of directors, calling such meeting.
Section 3. Notice of Meetings. A copy of the notice of every
annual and special meeting of shareholders, other than any meeting the
giving of notice of which is otherwise prescribed by law, stating the
place, date and hour thereof, and, in the case of any special meeting,
indicating that it is being issued by or at the direction of the person
or persons calling the meeting and setting forth the purposes for which
the meeting is called, shall be given personally or mailed, at least ten
but not more than fifty days before such meeting, to each shareholder of
record entitled to vote thereat. If mailed, such copy shall be
deposited in the United States mail with postage thereon prepaid,
directed to each such shareholder at his address as the same appears on
the record of shareholders of the corporation or, if he shall have filed
with the secretary of the corporation a written request that notices to
him be mailed to some other address, then directed to him at such other
address. If at any meeting, annual or special, action is proposed to be
taken which would, if taken, entitle shareholders fulfilling the
requirements of law to receive payment for their shares, the notice of
the meeting shall include a statement of that purpose and to that
effect.
Section 4. Quorum. At all meetings of shareholders, except as
otherwise expressly provided by law, there shall be present either in
person or by proxy shareholders of record holding at least a majority of
the shares entitled to vote at such meetings in order to constitute a
quorum, but less than a quorum shall have the power to adjourn any
meeting until a quorum shall be present. The presiding officer at any
meeting of shareholders may adjourn such meeting at any time for the
purpose of determining whether a quorum is present or for any other
reason. When a quorum is once present to organize a meeting, it is not
broken by the subsequent withdrawal of any shareholders.
Section 5. Voting. At every meeting of shareholders every shareholder
of record shall be entitled to one vote for every share standing
<PAGE 3>
in his name on the record of shareholders on any matter to be voted upon
at such meeting, unless otherwise provided in the certificate of
incorporation, and may exercise such voting right either in person or by
proxy, except that no proxy shall be voted on after eleven months from
its date unless otherwise provided in the proxy. The vote for directors
shall be by written ballot. As provided in the certificate of
incorporation, at all elections of directors each shareholder shall be
entitled to as many votes as shall equal the number of votes which
(except for such provision) he would be entitled to cast for the
election of directors with respect to his shares, multiplied by the
number of directors to be elected, and he may cast all of such votes for
a single director or may distribute them among the number to be voted
for, or any two or more of them, as he may see fit. No share of
stock shall be voted at any meeting by any person other than (i) the
owner thereof registered as such on the corporation's books on the
record date fixed by the directors, or (ii) the duly appointed proxy of
such registered owner.
Section 6. Inspectors of Voting. The board of directors, in
advance of any shareholders' meeting, may appoint one or more inspectors
to act at the meeting or any adjournment thereof. If inspectors are
not so appointed, the person presiding at a shareholders' meeting may,
and on the request of any shareholder entitled to vote thereat shall,
appoint one or more inspectors. In case any person appointed fails to
appear or act, the vacancy may be filled by appointment made by the
board of directors in advance of the meeting or at the meeting by the
person presiding thereat. Inspectors, none of whom shall be an officer,
director or a candidate for the office of director, shall determine the
number of shares outstanding and the voting power of each, the shares
represented at the meeting, the existence of a quorum, the validity and
effect of proxies, and shall determine and report to the meeting as to
the results of all voting (by ballot or otherwise) on all matters
submitted to a vote at the meeting. Each inspector, before entering
upon the discharge of his duties, shall take and sign an oath faithfully
to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability.
Section 7. Voting List of Shareholders. A list of shareholders as
of the record date, certified by the corporate officer responsible for
its preparation or by a transfer agent, shall be produced at any meeting
of shareholders upon the request thereat or prior thereto of any
shareholder. If the right to vote at any meeting is challenged, the
inspectors of election, or person presiding thereat, shall require such
list of shareholders to be produced as evidence of the right of the
persons challenged to vote at such meeting, and all persons who appear
from such list to be shareholders entitled to vote thereat may vote at
such meeting.
<PAGE 4>
Section 8. Conduct of Meetings of Shareholders. Subject to the
following and any other provisions of the corporation's certificate of
incorporation or by-laws, meetings of shareholders generally shall
follow accepted rules of parliamentary procedure, as determined by the
presiding officer at such meeting.
(a) The presiding officer of the meeting shall have absolute
authority over matters of procedure, and there shall be no appeal from
the ruling of the presiding officer. If the presiding officer, in his
absolute discretion, deems it advisable to dispense with the rules of
parliamentary procedure as to any meeting or any part thereof, the
presiding officer shall so state and shall also state the rules under
which the meeting or any part thereof shall be conducted.
(b) In order to prevent disruption or disorder which could
interfere with the conduct of the business of the meeting or for any
other reason deemed necessary or advisable, the presiding officer at any
meeting may, in his sole discretion, quit the chair and announce the
adjournment of the meeting; and upon his so doing, the meeting is
thereupon adjourned.
(c) Any other motion for adjournment, if otherwise properly made
other than a motion to adjourn at the close of business of the meeting
or a motion to adjourn for the purpose of tabulating votes or proxies,
shall be disposed of by a per share vote.
(d) The presiding officer of the meeting may require that any
person not a bona fide shareholder of record or the proxy of a bona fide
shareholder of record leave the meeting.
(e) A resolution or motion shall be considered for a vote at a
meeting only if (i) proposed by a bona fide shareholder of record or a
duly authorized proxy of such a shareholder of record, (ii) seconded by
a bona fide shareholder of record or a duly authorized proxy of such a
shareholder of record (other than the individual proposing the
resolution or motion) and (iii) such resolution or motion is ruled in
order by the presiding officer of the meeting in his sole discretion,
which order shall not be appealable.
(f) At any meeting called for the election of directors, the polls
shall be opened and closed at the times and in the manner directed by
the presiding officer of such meeting. Once the presiding officer has
announced the closing of the polls, no further voting shall be
permitted.
<PAGE 5>
Section 9 Notice of Proposed Shareholder Business. (a) A proposal
of business to be considered by the shareholders at an annual meeting of
shareholders ("annual meeting") may be made (i) pursuant to the
corporation's notice of meeting, (ii) by or at the direction of the
board of directors or (iii) by any shareholder of the corporation who
was a shareholder of record at the time of giving notice provided for in
this Section 9, who is entitled to vote at the meeting and who complies
with the notice procedures set forth in this Section 9.
(b) For an item of business to be properly brought before an
annual meeting by a shareholder pursuant to clause (iii) of paragraph
(a) of this Section 9, the shareholder must have given timely notice
thereof in writing to the secretary of the corporation and such item of
business must otherwise be a proper matter for shareholder action. To
be timely, a shareholder's notice shall be delivered to the secretary at
the principal office of the corporation not later than the close of
business on the 90th day nor earlier than the close of business on the
120th day prior to the first anniversary of the preceding year's annual
meeting. In the event that the date of the annual meeting is more than
30 days before or more than 60 days after such anniversary date, notice
by the shareholder to be timely must be so delivered not earlier than
the close of business on the 120th day prior to such annual meeting and
not later than the close of business on the later of the 90th day prior
to such annual meeting or the 10th day following the day on which public
announcement of the date of such meeting is first made by the
corporation. In no event shall the public announcement of an
adjournment of an annual meeting commence a new time period for the
giving of a shareholder's notice as described above. Such shareholder's
notice shall set forth (i) a brief description of the business desired
to be brought before the meeting, the reasons for considering such
business at the meeting and any material interest in such business of
such shareholder and the beneficial owner, if any, on whose behalf the
proposal is made and (ii) as to the shareholder giving the notice and
the beneficial owner, if any, on whose behalf the proposal is made, (A)
the name and address of such shareholder, as they appear on the
corporation's books, and of such beneficial owner, and (B) the class and
number of shares of the corporation which are owned beneficially and of
record by such shareholder and such beneficial owner.
(c) Only such business shall be conducted at an annual meeting as
shall have been brought before the meeting in accordance with the
procedures set forth in this Section 9. Except as otherwise provided by
law, the presiding officer of the meeting shall have the power and duty
to determine whether any business proposed to be brought before the
meeting was made or proposed, as the case may be, in accordance with the
notice procedures set forth in this Section 9 and, if any proposed
business is not in compliance with this Section 9, to declare that such
proposal shall be disregarded.
<PAGE 6>
(d) For purposes of this Section 9, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News
Service, Associated Press or comparable national news service or in a
document publicly filed by the corporation with the Securities and
Exchange Commission pursuant to Section 13, 14 or 15(d) of the
Securities and Exchange Act of 1934, as amended ("the "Exchange Act").
(e) Notwithstanding the foregoing provisions of this Section 9, a
shareholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to
the matters set forth in this Section 9. Nothing in this Section 9
shall be deemed to adversely affect any rights of shareholders to
request inclusion of proposals in the corporation's proxy statement
pursuant to Rule 14a-8 under the Exchange Act.
ARTICLE III
DIRECTORS
Section 1. Number, Election and Terms. The number of the
directors constituting the entire board of directors shall be not less
than ten (10) nor more than twenty (20). Subject to such limitation the
number shall be fixed by the board of directors. The directors shall be
classified, with respect to the time for which they shall severally hold
office, into three classes, as nearly equal in number as possible, as
determined by the board of directors of the corporation, one class
originally elected for a term expiring at the annual meeting of
shareholders held in 1987, another class originally elected for a term
expiring at the annual meeting of shareholders held in 1988, and another
class originally elected for a term expiring at the annual meeting of
shareholders held in 1989, with each director to hold office until
his or her successor is duly elected and qualified. At each annual
meeting of shareholders of the corporation, the successors of the class
of directors whose term expires at that meeting shall be elected to hold
office for a term expiring at the annual meeting of shareholders held in
the third year following the year of their election.
Except as otherwise provided by law, by the certificate of
incorporation, or by the by-laws of this corporation, the directors in
each class shall be elected by ballot at the applicable annual meeting
of shareholders by a plurality of the votes of the shareholders cast in
person or by proxy at such election. In voting for the election of
directors, shareholders shall be entitled to cumulative voting. Each
director shall be elected to serve until the expiration of his or her
term or until his or her successor shall have been elected and qualified
except in the event of the death, resignation or removal or the earlier
termination of the term of office of any such director. Each director
shall be at least 21 years of age. It is not necessary for a director
to be a shareholder of the corporation.
Section 2. Newly Created Directorships and Vacancies. Newly
created directorships resulting from any increase in the number of
directors and any vacancies on the board of directors resulting from
death, resignation, disqualification, removal or other cause shall be
filled only by the affirmative vote of a majority of the remaining
<PAGE 7>
directors then in office, even though less than a quorum of the board of
directors. Any director elected in accordance with the preceding
sentence shall hold office until the next meeting of shareholders at
which the election of directors is in the regular order of business, and
until such director's successor shall have been duly elected and
qualified. No decrease in the number of directors constituting the
board of directors shall shorten the term of any incumbent director.
Section 3. Removal. Any director, or the entire board of
directors, may be removed from office at any time only for cause and
only by the affirmative vote of the holders of at least eighty percent
of the voting power of all shares of the corporation entitled to vote
generally in the election of directors, voting together as a single
class.
Section 4. Powers and Duties of the Board of Directors. Except as
otherwise provided by law or by the certificate of incorporation, the
business of the corporation shall be managed by the board of directors,
which may adopt such rules and regulations for that purpose and for the
conduct of its meetings as it may deem proper. The board of directors
may have one or more offices and keep the books, records and minutes of
the corporation, except such records as are required to be kept in the
State of New York, at such places as it may from time to time determine.
Any of such records may be in written form or in any other form capable
of being converted into written form within a reasonable time. In
addition to the powers and authority expressly conferred upon it by
these by-laws, the board of directors may exercise all such powers of
the corporation and do all such lawful acts and things as are allowed by
the certificate of incorporation or by law.
Section 5. First Meeting of the Board of Directors. The first
meeting of the board of directors to be held after an annual meeting of
shareholders for the election of directors shall be called and held for
the purposes of organization, the election or appointment of officers
and the transaction of such other business as may be stated in the
notice thereof. The first meeting shall be held at such time and place
as shall be fixed in written notice mailed to each newly elected
director at his last known post office address at least two days prior
to such meeting.
Section 6. Regular Meetings. Regular meetings of the board of
directors shall be held at such time and place within or without the
State of New York as may be determined by resolution of the board, and
no notice shall be required for any regular meeting. Except as
otherwise provided by law, any business may be transacted at any regular
meeting.
Section 7. Special Meetings. Special meetings of the board of
directors may, unless otherwise prescribed by law, be called from time
to time by the chairman of the board or the president. Upon the written
request directed to the chairman of the board, president or the
secretary of a majority of the directors stating the time, place and
purposes of such special meeting, the chairman of the board, president
or the secretary shall call a special meeting of the board of directors.
Special meetings of the board of directors shall be held at the place
where regular meetings of the board are held unless otherwise fixed by
the board.
<PAGE 8>
Section 8. Notice of Special Meetings. Notice of the time, place
and purpose of each special meeting of the board of directors, other
than any meeting the giving of notice of which is otherwise prescribed
by law, shall be given to each director at least two hours prior to such
meeting. For the purpose of this Section, notice will be deemed to be
duly given to a director if given to him orally (including by telephone)
or if such notice be delivered to such director in person or be mailed,
sent by facsimile transmission, or cabled to his address as it appears
upon the books of the corporation or to the address last made known in
writing to the secretary of the corporation by such director as the
address to which such notices are to be given.
Section 9. Quorum. At each meeting of the board of directors,
one-half (1/2) of the entire board shall constitute a quorum for the
transaction of business, except as provided in Section 2 of this Article
III, but less than a quorum may, without notice other than announcement
at the meeting, adjourn a meeting until a quorum shall be present.
Every act of a majority of the directors present at any meeting or
adjourned session of a meeting at which there is a quorum shall be the
act of the board of directors.
Section 10. Compensation of Directors and Members of Committees.
The board of directors may from time to time, in its discretion, fix the
amount which shall be payable to members of the board of directors and
to members of any committee for attendance at the meetings of the board
or of such committee and for services rendered to the corporation. A
director or member of the committee may serve the corporation in any
other capacity and receive compensation therefor.
Section 11. Meetings By Communication Equipment. The board of
directors or any committee of the board may hold a meeting by means of
conference telephone or similar communications equipment allowing all
persons participating in the meeting to hear each other at the same
time. Participation by such means shall constitute presence in person at
the meeting.
Section 12. Nomination of Director Candidates. Nominations for
the election of directors may be made by the board of directors or a
proxy committee appointed by the board of directors or by any
shareholder entitled to vote in the election of directors generally.
However, any shareholder entitled to vote in the election of directors
generally may nominate one or more persons for election as directors at
a meeting only if written notice of such shareholder's intent to make
such nomination is given to the secretary of the corporation not later
than (i) with respect to an election to be held at an annual meeting of
shareholders, 60 days in advance of such meeting, and (ii) with respect
to an election to be held at a special meeting of shareholders for the
election of directors, the close of business on the seventh day
following the date on which notice of such meeting is first given to
shareholders. Each such notice shall set forth: (a) the name and
address of the shareholder who intends to make the nomination and of the
person or persons to be nominated; (b) a representation that the
shareholder is a holder of record of common stock of the corporation
entitled to vote at such meeting and intends to appear in person or by
<PAGE 9>
proxy at the meeting to nominate the person or persons specified in the
notice; (c) a description of all arrangements or understandings between
the shareholder and each nominee and any other person or persons (naming
such person or persons) pursuant to which the nomination or nominations
are to be made by the shareholder; (d) such other information regarding
each nominee proposed by such shareholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission, had the nominee been nominated, or
intended to be nominated, by the board of directors; and (e) the consent
of each nominee to serve as a director of the corporation if so
elected. The chairman of the meeting may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing
procedure.
ARTICLE IV
COMMITTEES OF THE BOARD OF DIRECTORS
Section 1. Committees. The board of directors, by resolution or
resolutions passed by a majority of the entire board, may designate from
among its members various committees, each consisting of three or more
of the directors, and each of which, to the extent provided in said
resolution or resolutions, shall have and may exercise such powers and
authority as may be specified by the board of directors, except that no
such committee shall have authority as to (1) the submission to
shareholders of any action that needs shareholders' authorization under
law, (2) the filling of vacancies in the board or in any committee,
(3) the fixing of compensation of the directors for serving on the board
or on any committee, (4) the amendment or repeal of the by-laws, or the
adoption of new by-laws, or (5) the amendment or repeal of any
resolution of the board which by its terms shall not be so amendable or
repealable. The board of directors may designate one or more directors
as alternate members of any such committee. Each such committee and the
members thereof shall serve at the pleasure of the board of directors.
Section 2. Standing Committees. There shall at all times be at
least three standing committees of the board of directors, namely an
audit committee, a compensation committee, and a nominating committee,
each of which shall consist of three or more directors, none of whom may
be a current or former officer or employee of the corporation. The
compensation committee shall, in addition to such other duties as the
board of directors may specify, administer the corporation's 1993 Stock
Incentive Plan and be responsible for reviewing and approving all stock
option awards or other forms of stock incentive awards, whether or not
granted pursuant to that plan.
Section 3. General Rules. At each meeting of a committee, one-
third of the entire committee, but not less than two (2) members, shall
constitute a quorum for the transaction of business. Notice of the time
and place of each committee meeting shall be subject to the same notice
rules as are applicable to special meetings of the board of directors,
except that no notice of the purpose of a committee meeting need be
stated. Any action required or permitted to be taken at any meeting of
<PAGE 10>
a committee of the board of directors may be taken without a meeting if
all members of such committee consent to such action in writing and such
writing or writings are filed with the minutes of proceedings of the
committee. Except as otherwise provided in this Article IV, each
committee of the board of directors may adopt its own rules of
procedure, may meet at stated times or on such notice as the committee
may determine and shall keep regular minutes of its proceedings and
report the same to the board of directors when required.
ARTICLE V
OFFICERS
Section 1. Number and Designation. The officers of the
corporation will consist of a chairman of the board, a president, one or
more vice presidents, a treasurer and a secretary and such other
officers as the board of directors may elect, including, but not limited
to, one or more "executive" vice presidents, "senior" vice presidents or
"group" vice presidents. Any two offices may be held by one person,
except that the chairman of the board or president may not also be the
secretary, and except that, where the by-laws or resolutions of the
board of directors provide for signatures of the incumbents of two
offices of the corporation upon certificates for shares, notes, checks
or other instruments or documents issued by the corporation, such
offices must be held by two separate persons.
Section 2. Election. The board of directors shall, at their first
meeting after their election, elect a chairman of the board and a
president from their number and shall also elect one or more vice-
presidents, a secretary and a treasurer who need not be members of the
board of directors, but in the event of the failure of the board so to
elect any officer, such officer may be elected at any subsequent meeting
of the board. Each officer so elected shall hold office until the first
meeting of the board of directors following the next annual meeting of
shareholders for the election of directors and until his successor is
elected, except in the event of his death, resignation or removal or the
earlier termination of his term of office, and except that the terms of
office of all vice-presidents shall terminate with each annual election
of officers at which any vice-president is elected. Any vacancy in an
office may be filled for the unexpired portion of the term of such
office by the board of directors at any regular or special meeting. The
board of directors may also elect other officers, including a
controller, who need not be members of the board of directors, and may
prescribe, and from time to time change, their respective powers and
duties, except as the powers and duties of the controller are prescribed
by these by-laws. Each officer so elected shall hold office at the
pleasure of the board of directors.
Section 3. Chairman of the Board. The chairman of the board shall
preside at all meetings of the shareholders and of the board of
directors. He shall perform such other duties as may be required in the
management of the business.
<PAGE 11>
Section 4. The President. The president shall have the general
powers and duties of supervision and management of the corporation. In
the absence or incapacity of the chairman of the board, he shall also
preside at all meetings of the shareholders and of the board of
directors.
Section 4A. The function of chief executive officer, and chief
operating officer of the corporation, shall be discharged by such
officer or officers as the board of directors may from time to time
designate.
Section 5. Vice Presidents. Each vice-president, including any
executive vice presidents, senior vice presidents and/or group vice
presidents, shall have such powers and shall perform such duties as may
be assigned to him by the board, the chairman of the board or the
president.
Section 6. The Treasurer. The treasurer shall have the care and
custody of all the funds and securities of the corporation and shall
deposit the same in the name of the corporation in such bank or banks,
trust company or trust companies and in such safe deposit company or
companies as the board of directors may designate. He shall be
responsible for the disbursement of funds of the corporation and shall
perform the duties and exercise all the powers usually incident to the
office of the treasurer and such other duties as from time to time may
be assigned to him by the board, the chairman of the board or the
president.
Section 7. The Secretary. The secretary shall keep the minutes
and act as secretary of all meetings of the board of directors and of
the shareholders. He shall attend to the giving and serving of all
notices of the corporation. He shall be the custodian of the records
and of the corporate seal of the corporation. He shall attend to such
correspondence as may be assigned to him and perform all the duties
incidental to his office. He shall be empowered to affix the corporate
seal to all documents, execution of which, on behalf of the corporation,
under its seal, is duly authorized and when so affixed may attest the
same; and, in general, he shall perform the duties and exercise all the
powers usually incident to the office of a secretary of a corporation
and such other duties as, from time to time, may be assigned to him by
the board, the chairman of the board or the president.
Section 8. The Controller. The controller shall maintain and
supervise proper books and records of all assets, liabilities,
disbursements and transactions of the corporation. He shall prepare
such financial statements and reports as shall be required, and shall
perform such other duties as from time to time may be assigned to him by
the board, the chairman of the board or the president.
Section 9. Appointed Officers. The chief executive officer of the
corporation may from time to time appoint one or more officers with the
title of vice president with such powers and duties as the chief
executive officer may specify. The chief executive officer may from
time to time also appoint (a) one or more assistant treasurers who may
<PAGE 12>
perform some or all of the duties and powers usually incident to the
treasurer, (b) one or more assistant secretaries who may perform some or
all of the duties and powers usually incident to the secretary and (c)
one or more assistant controllers who may perform some or all of the
duties assigned to the controller. Any of said appointed officers may
be removed at any time by the chief executive officer. The chief
executive officer or the president also may appoint one or more officers
of operating business units or divisions of the corporation, who shall
not be officers of the corporation, but shall have such powers and
duties as the chief executive officer, president or the head of the
operating business unit or division shall specify. Any appointed
officers of operating business units or divisions may be removed at any
time by the chief executive officer, the president, or the head of the
business unit or division to whom such appointed officer reports.
Section 10. Stockholder Consents and Proxies. The chief executive
officer, president, treasurer and secretary of the corporation or any
one of them or their designees, shall have the power and authority on
behalf of the corporation to execute any consents or proxies,
authorizing any person to attend and act and vote in person or by proxy
at any meetings of the stockholders or members of any corporation or
other entity in which the corporation owns stock or otherwise has an
ownership interest, or to attend such meetings themselves, and at any
such meetings they or their designees or proxies, as the case may be,
shall possess and may exercise any and all the rights and powers
incident to such ownership as the corporation as the owner thereof might
have possessed and executed if present.
Section 11. Delegation of Duties of Officers. The board of
directors may delegate the duties and powers of any officer, agent or
employee of the corporation to any other officer, agent or employee or
director for a specified time during the absence of any such person or
for any other reason that the board may deem sufficient.
Section 12. Removal. Any officer of the corporation elected or
appointed by the board of directors may be removed by the board with or
without cause.
Section 13. Bond. The board of directors shall have power, to the
extent permitted by law, to require any officer, agent or employee of
the corporation to give bond for the faithful discharge of his duties in
such form and with such surety or sureties as the board may deem
advisable.
ARTICLE VI
CAPITAL SHARES
Section 1. Form. The certificates for shares shall be in such
forms as may be prescribed by law and as shall be approved by the board
of directors.
<PAGE 13>
Section 2. Issuance. All certificates for shares shall be signed by
the chairman of the board or the president or a vice-president and the
secretary or an assistant secretary or the treasurer or an assistant
treasurer and shall have the seal of the corporation affixed thereto.
Such seal may be a facsimile, engraved or printed. Where any such
certificate is countersigned by a transfer agent or registered by a
registrar, other than the corporation itself or its employee, the
signatures of any such officers or assistant officers upon such
certificate may be facsimiles, engraved or printed.
Section 3. Transfer. The board of directors shall have the power
and authority to make such rules and regulations as it may deem
expedient concerning the issue, registration and transfer of
certificates for shares, and may appoint transfer agents or clerks and
registrars thereof.
Section 4. Fixing of Record Date. The board of directors may at
any time fix a record date not more than fifty nor less than ten days
prior to (a) the date of any meeting of shareholders or (b) the last day
on which the shareholders are entitled to express consent or dissent
from any proposal without a meeting, as the date as of which
shareholders entitled to notice of or to vote at such a meeting, or
whose consent or dissent is required or may be expressed, for any
purpose, as the case may be, shall be determined, and, except as
otherwise provided by law, all persons who were the holders
of record of voting shares at such date and no others shall be entitled
to notice of and to vote at such meeting or to express their consent or
dissent, as the case may be. The board of directors may at any time fix
a record date not exceeding fifty days prior to the date fixed for the
payment of any dividend or the making of any distribution or for the
delivery or allotment of evidences of rights or evidences of interest
arising out of any change, conversion, or exchange of capital shares, as
the date for the determination of the shareholders entitled to receive
any such dividend, distribution, rights or interest, and in any such
case only shareholders of record at the date so fixed shall be entitled
to receive such dividend, distribution, rights or interest.
ARTICLE VII
NEGOTIABLE INSTRUMENTS, CONTRACTS, ETC.
Section 1. Signatures on Checks, etc. All checks, drafts, bills
of exchange, notes or other obligations or orders for the payment of
money shall be signed in the name of the corporation by such officer or
officers, person or persons, as the board of directors may from time to
time designate by resolution.
Section 2. Execution of Contracts, Deeds. etc. The board of
directors or any committee given specific authority in the premises, or
given authority to exercise generally the powers of the board during the
interval between meetings of the board to the extent permitted by law,
may authorize any officer or officers, agent or agents, in the name of
and on behalf of the corporation, to enter into or execute and deliver
<PAGE 14>
any and all deeds, bonds, mortgages, contracts and other obligations or
instruments and to vote on behalf of the corporation shares of stock of
other domestic or in the name of the corporation, and such authority may
be general or confined to specific instances.
ARTICLE VIll
CORPORATE SEAL
Section 1. Description. The seal of the corporation shall be
circularin form with the name of the corporation in the circumference
and the words and figures "Corporate Seal--l916--N.Y." in the center.
ARTICLE IX
FISCAL YEAR
Section 1. Definition. The fiscal year of this corporation shall
be from the first day of January to the thirty-first day of December,
inclusive, in each year or such other twelve consecutive months as the
board of directors may by resolution designate.
ARTICLE X
WAIVER OF NOTICE
Section 1. Meetings Held on Waiver. Whenever any notice is
required to be given under the provisions of these by-laws, or of the
certificate of incorporation, or of any of the laws of the State of New
York, a waiver thereof, in writing, signed by the person or persons
entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent thereto. The attendance of any
shareholder at a meeting, in person or by proxy, without protesting
prior to the conclusion of the meeting the lack of notice of such
meeting, shall constitute a waiver of notice by him.
ARTICLE XI
AMENDMENTS
Section 1. By the Shareholders. Except as otherwise provided by
law, these by-laws may be amended or repealed or new by-laws may be
adopted at any meeting of the shareholders of the corporation by the
affirmative vote of shareholders holding of record a majority of the
issued and outstanding shares entitled to vote, represented either in
person or by proxy, provided notice of the proposed amendment be
contained in the notice or waiver of notice of such meeting.
Section 2. By the Board of Directors. Except as otherwise
provided by law, these by-laws may be amended at any meeting of the
board of directors of the corporation at which a quorum is present by
<PAGE 15>
the affirmative vote of a majority of the directors present at such
meeting, provided notice of the proposed amendment is contained in the
notice or waiver of notice of such meeting, provided, however, that the
board of directors shall have no power to amend or repeal the by-laws,
or adopt any new by-laws, with respect to cumulative voting.
Section 3. All By-Law Amendments. Notwithstanding anything
contained in these by-laws to the contrary, the affirmative vote of the
holders of at least eighty percent of the voting power of all shares of
the corporation entitled to vote generally in the election of directors,
voting together as a single class, shall be required to alter, amend or
repeal Sections 1, 2, 3 or 12 of Article III, or this Section 3 of this
Article XI.
ARTICLE XII
INDEMNIFICATION
Section 1. Indemnification--Third Party and Derivative Actions.
(a) The corporation shall indemnify any person made, or threatened to be
made, a party to an action or proceeding, whether civil or criminal
(other than one by or in the right of the corporation to procure a
judgment in its favor), including an action by or in the right of any
Mother corporation of any type or kind, domestic or foreign, or any
partnership, joint venture, trust, employee benefit plan or other
enterprise, which any director, officer or employee of the corporation
served in any capacity at the request of the corporation, by reason of
the fact that he is or was a director or officer of the corporation, or
is or was serving such other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise in any capacity,
against judgments, fines, including excise taxes, amounts paid in
settlement and expenses, including attorney's fees, incurred in
connection with any such action or proceeding, or any appeal therein,
provided that no indemnification may be made to or on behalf of such
person if a judgment or other final adjudication adverse to such person
establishes that (i) his acts were committed in bad faith or were the
result of his active or deliberate dishonesty and were material to such
action or proceeding or (ii) he personally gained in fact a financial
profit or other advantage to which he was not legally entitled.
(b) The corporation shall indemnify any person made, or threatened
to be made, a party to an action by or in the right of the corporation
to procure a judgment in its favor by reason of the fact that he is or
was a director or officer of the corporation, or is or was serving at
the request of the corporation as a director or officer of any other
corporation of any type or kind, domestic or foreign, or of any
partnership, joint venture, trust, employee benefit plan or other
enterprise, against amounts paid in settlement and expenses, including
attorneys' fees, incurred in connection with such action, or any appeal
therein, provided that no indemnification may be made to or on behalf of
such person if (i) his acts were committed in bad faith or were the
result of his active and deliberate dishonesty and were material to such
action or (ii) he personally gained in fact a financial profit or
other advantage to which he was not legally entitled.
<PAGE 16>
(c) The termination of any civil or criminal action or proceeding
by judgment, settlement, conviction or upon a plea of nolo contendere,
or its equivalent, shall not in itself create a presumption that any
such person has not met the standard of conduct set forth in this
Section 1.
Section 2. Payment of Indemnification; Repayment. (a) A person
who has been successful, on the merits or otherwise, in the defense of a
civil or criminal action or proceeding of the character described in
Section 1 of this Article shall be entitled to indemnification as
authorized in such Section.
(b) Any indemnification under Section 1 of this Article, unless
ordered by a court, shall be made by the corporation in such manner as
provided by law.
(c) Expenses incurred by a person referred to in Section 1 of this
Article in defending a civil or criminal action or proceeding shall be
paid by the corporation in advance of the final disposition of such
action or proceeding upon receipt of an undertaking by or on behalf of
such person to repay such amount in case he is ultimately found, in
accordance with this Article, not to be entitled to indemnification or,
where indemnity is granted, to the extent the expenses so paid exceed
the indemnification to which he is entitled.
(d) Any indemnification of a person under Section 1 of this
Article, or advancement of expenses under Section 2(c) of this Article,
shall be made promptly, and in any event within 60 days, upon the
written request of such person.
Section 3. Enforcement; Defenses. The right to indemnification or
advancement of expenses granted by this Article shall be enforceable by
the person in question in any court of competent jurisdiction if the
corporation denies such request, in whole or in part, or if no
disposition thereof is made within 60 days. Such person's expenses
incurred in connection with successfully establishing his right to
indemnification, in whole or in part, in any such action shall also be
indemnified by the corporation. It shall be a defense to any such
action (other than an action brought to enforce a claim for the
advancement of expenses under Section 2(c) of this Article where
the required undertaking has been received by the corporation) that the
claimant has not met the standard of conduct set forth in Section 1 of
this Article, but the burden of proving such defense shall be on the
corporation. Neither the failure of the corporation to have made a
determination that indemnification of the claimant is proper, nor the
fact that there has been an actual determination by the corporation that
indemnification of the claimant is not proper, shall be a defense to the
action or create a presumption that the claimant is not entitled to
indemnification.
Section 4. Survival; Savings Clause; Preservation of Other Rights.
(a) The foregoing indemnification provisions shall be deemed to be a
contract between the corporation and each person who serves in such
capacity at any time while these provisions as well as the relevant
<PAGE17>
provisions of the New York Business Corporation Law are in effect and
any repeal or modification thereof shall not affect any right or
obligation then existing with respect to any state of facts then or
previously existing or any action or proceeding previously or thereafter
brought or threatened based in whole or in part upon any such state of
facts. Such a contract right may not be modified retroactively without
the consent of such person.
(b) If this Article or any portion hereof shall be invalidated on
any ground by any court of competent jurisdiction, then the corporation
shall nevertheless indemnify each such person against judgments, fines,
amounts paid in settlement and expenses, including attorneys' fees,
incurred in connection with any actual or threatened action by or in the
right of the corporation, or any appeal therein, to the full extent
permitted by any applicable portion of this Article that shall not have
been invalidated and to the full extent permitted by applicable law.
(c) The indemnification provided by this Article shall not be
deemed exclusive of any other rights to which those indemnified may be
entitled under any by-law, agreement, vote of shareholders or directors
or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue
as to a person who has ceased to be a director, officer or employee of
the corporation and shall inure to the benefit of the heirs, executors
and administrators of such a person. The corporation is hereby
authorized to provide further indemnification if it deems it advisable
by resolution of shareholders or directors, by amendment of these by-
laws or by agreement.
EXHIBIT 11.1
<PAGE>
EXHIBIT 11.1
AVON PRODUCTS, INC.
COMPUTATION OF PRIMARY INCOME PER SHARE
(In millions, except per share data)
Three months ended
June 30
------------------
1996 1995
---- ----
Weighted average shares of common stock:
Weighted average shares outstanding during
the period.............................. 133.914 136.917**
Common stock equivalents*................. -- --
------- -------
Weighted average shares for primary income
per share computation................... 133.914 136.917**
======= =======
Net income................................ $ 85.7 $ 80.4
======= =======
Primary income per share.................. $ .64 $ .59**
======= =======
- ----------
*Common stock equivalents are not reported because they result in
less than three percent dilution.
**Restated to reflect a two-for-one stock split distributed in June
1996.
<PAGE>
EXHIBIT 11.1
AVON PRODUCTS, INC.
COMPUTATION OF PRIMARY INCOME PER SHARE
(In millions, except per share data)
Six months ended
June 30
----------------
1996 1995
---- ----
Weighted average shares of common stock:
Weighted average shares outstanding during
the period.............................. 134.256 137.133**
Common stock equivalents*................. -- --
------- -------
Weighted average shares for primary income
per share computation................... 134.256 137.133**
======= =======
Net income................................ $ 123.4 $ 114.8
======= =======
Primary income per share.................. $ .92 $ .84**
======= =======
- ----------
*Common stock equivalents are not reported because they result in
less than three percent dilution.
**Restated to reflect a two-for-one stock split distributed in June
1996.
EXHIBIT 11.
<PAGE>
EXHIBIT 11.2
AVON PRODUCTS, INC.
COMPUTATION OF FULLY DILUTED INCOME PER SHARE
(In millions, except per share data)
Three months ended
June 30
------------------
1996 1995
---- ----
Weighted average shares of common stock:
Weighted average shares outstanding during
the period................................. 133.914 136.917*
Common stock equivalents. ................... .944 .412*
------- -------
Weighted average shares for fully diluted
income per share computation............... 134.858 137.329*
======= =======
Net income................................... $ 85.7 $ 80.4
======= =======
Fully diluted income per share............... $ .64 $ .59*
======= =======
*Restated to reflect a two-for-one stock split distributed in June
1996.
<PAGE>
EXHIBIT 11.2
AVON PRODUCTS, INC.
COMPUTATION OF FULLY DILUTED INCOME PER SHARE
(In millions, except per share data)
Six months ended
June 30
----------------
1996 1995
---- ----
Weighted average shares of common stock:
Weighted average shares outstanding during
the period................................. 134.256 137.133*
Common stock equivalents. ................... .956 .416*
------- -------
Weighted average shares for fully diluted
income per share computation............... 135.212 137.549*
======= =======
Net income................................... $ 123.4 $ 114.8
======= =======
Fully diluted income per share............... $ .91 $ .83*
======= =======
*Restated to reflect a two-for-one stock split distributed in June
1996.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27
Avon Products, Inc.
Financial Data Schedule
This schedule contains summary financial information
extracted from the Avon Products, Inc. financial statements
as of June 30, 1996 and for the six months then ended
included in the Form 10-Q as of June 30, 1996 and is
qualified in its entirety by reference to such financial
statements.
<MULTIPLIER> 1000000
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<PERIOD-TYPE> 6-MOS
<S> <C>
<CASH> 73
<SECURITIES> 0
<RECEIVABLES> 438
<ALLOWANCES> (28)
<INVENTORY> 551
<CURRENT-ASSETS> 1,248
<PP&E> 1,169
<DEPRECIATION> (637)
<TOTAL-ASSETS> 2,108
<CURRENT-LIABILITIES> 1,342
<BONDS> 106
0
0
<COMMON> 43
<OTHER-SE> 117
<TOTAL-LIABILITY-AND-EQUITY> 2,108
<SALES> 2,145
<TOTAL-REVENUES> 2,145
<CGS> 839
<TOTAL-COSTS> 1,053
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 34
<INTEREST-EXPENSE> 20
<INCOME-PRETAX> 199
<INCOME-TAX> 75
<INCOME-CONTINUING> 123
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 123
<EPS-PRIMARY> .92
<EPS-DILUTED> .92
</TABLE>
