<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 March 31, 1997
OR
[ ] 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.)
1345 Avenue of the Americas, New York, N.Y. 10105-0196
-------------------------------------------------------
(Address of principal executive offices)
(212) 282-5000
--------------
(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 April 30, 1997 was 132,087,551.
<PAGE>2
Table of Contents
Part I. Financial Information
Page
Numbers
-------
Item 1. Financial Statements
Consolidated Statement of Income
Three Months Ended March 31, 1997 and
March 31, 1996........................................ 3
Consolidated Balance Sheet
March 31, 1997 and December 31, 1996.................... 4
Consolidated Statement of Cash Flows
Three Months Ended March 31, 1997 and
March 31, 1996........................................ 5
Notes to Consolidated Financial Statements................ 6-8
Item 2. Management's Discussion and Analysis of the
Results of Operations and Financial Condition............. 9-15
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders....... 16
Item 6. Exhibits and Reports on Form 8-K.......................... 17
Signatures......................................................... 18
2
<PAGE>3
PART I. FINANCIAL INFORMATION
AVON PRODUCTS, INC.
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share data)
Three months ended
March 31
------------------
1997 1996
---- ----
(unaudited)
Net sales........................................... $1,087.6 $1,016.1
Costs, expenses and other:
Cost of sales....................................... 441.6 401.6
Marketing, distribution and
administrative expenses........................... 572.9 541.0
Interest expense.................................... 9.6 9.6
Interest income..................................... (2.3) (3.9)
Other expense, net.................................. 2.8 8.0
-------- --------
Total costs, expenses and other..................... 1,024.6 956.3
-------- --------
Income before taxes and minority interest........... 63.0 59.8
Income taxes........................................ 23.3 22.7
-------- --------
Income before minority interest..................... 39.7 37.1
Minority interest................................... 1.6 .6
-------- --------
Net income.......................................... $ 41.3 $ 37.7
======== ========
Income per share.................................... $ .31 $ .28
======== ========
Average shares outstanding.......................... 132.88 134.51
======== ========
The accompanying notes are an integral part of these statements.
3
<PAGE>4
AVON PRODUCTS, INC.
CONSOLIDATED BALANCE SHEET
(In millions)
March 31 December 31
1997 1996
---- ----
(unaudited)
ASSETS
Current assets:
Cash and equivalents............................. $ 106.0 $ 184.5
Accounts receivable.............................. 431.9 437.0
Inventories...................................... 578.9 530.0
Prepaid expenses and other....................... 211.2 198.1
-------- --------
Total current assets............................. 1,328.0 1,349.6
-------- --------
Property, plant and equipment, at cost........... 1,228.8 1,224.9
Less accumulated depreciation.................... 665.0 658.3
-------- --------
563.8 566.6
-------- --------
Other assets..................................... 325.2 306.2
-------- --------
Total assets..................................... $2,217.0 $2,222.4
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Debt maturing within one year.................... $ 312.9 $ 97.1
Accounts payable................................. 359.2 469.3
Accrued compensation............................. 83.1 142.4
Other accrued liabilities........................ 246.7 238.7
Sales and other taxes............................ 112.4 124.6
Income taxes..................................... 308.2 319.2
-------- --------
Total current liabilities........................ 1,422.5 1,391.3
-------- --------
Long-term debt................................... 103.8 104.5
Employee benefit plans........................... 375.9 384.8
Deferred income taxes............................ 32.5 33.9
Other liabilities................................ 71.0 66.2
Shareholders' equity:
Common stock..................................... 43.5 43.5
Additional paid-in capital....................... 702.7 693.6
Retained earnings................................ 488.2 488.8
Translation adjustments.......................... (220.5) (210.7)
Treasury stock, at cost.......................... (802.6) (773.5)
-------- --------
Total shareholders' equity....................... 211.3 241.7
-------- --------
Total liabilities and shareholders' equity....... $2,217.0 $2,222.4
======== ========
The accompanying notes are an integral part of these statements.
4
<PAGE>5
AVON PRODUCTS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
Three months ended
March 31
------------------
1997 1996
---- ----
(unaudited)
Cash flows from operating activities:
Net income.............................................. $ 41.3 $ 37.7
Adjustments to reconcile net income to net cash
used by operating activities:
Depreciation and amortization........................... 16.3 15.8
Provision for doubtful accounts......................... 16.8 16.4
Translation losses...................................... -- .3
Deferred income taxes................................... (4.5) (4.7)
Other................................................... 3.3 1.1
Changes in assets and liabilities:
Accounts receivable................................... (18.1) (19.1)
Inventories........................................... (51.1) (65.7)
Prepaid expenses and other............................ (10.8) (16.8)
Accounts payable and accrued liabilities.............. (155.1) (103.8)
Income and other taxes................................ (20.1) 4.6
Noncurrent assets and liabilities..................... (4.6) (3.3)
------ ------
Net cash used by continuing operations.................. (186.6) (137.5)
Net cash used by discontinued operations................ -- (37.0)
------ ------
Net cash used by operating activities................... (186.6) (174.5)
------ ------
Cash flows from investing activities:
Capital expenditures.................................... (24.6) (10.1)
Disposal of assets...................................... 1.1 1.0
Other investing activities.............................. (10.4) (6.3)
------ ------
Net cash used by investing activities................... (33.9) (15.4)
------ ------
Cash flows from financing activities:
Cash dividends.......................................... (41.9) (40.3)
Debt, net (maturities of three months or less).......... 203.9 209.8
Proceeds from short-term debt........................... 12.9 .2
Retirement of short-term debt........................... (1.0) (1.0)
Retirement of long-term debt............................ (.2) (.4)
Repurchase of common stock.............................. (30.2) (45.4)
Proceeds from exercise of stock options................. 5.6 1.7
------ ------
Net cash provided by financing activities............... 149.1 124.6
------ ------
Effect of exchange rate changes on cash and equivalents. (7.1) (4.0)
------ ------
Net decrease in cash and equivalents.................... (78.5) (69.3)
Cash and equivalents beginning of period................ 184.5 151.4
------ ------
Cash and equivalents end of period...................... $106.0 $ 82.1
====== ======
The accompanying notes are an integral part of these statements.
5
<PAGE>6
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 1996 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.
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:
Three months ended
March 31
------------------
1997 1996
---- ----
Interest............................................ $ 3.2 $ 4.7
Income taxes, net of refunds received............... 35.1 23.8
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 months ended March 31, 1997 compared to the respective period of 1996 is
primarily due to the shares acquired under the stock repurchase programs.
During the first three months of 1997, the Company purchased approximately
532,500 shares of common stock compared to approximately 1,148,000 shares
purchased during the first three months of 1996. As of March 31, 1997, the
cumulative number of shares repurchased under the three-year stock repurchase
program begun in February 1994 was approximately 12.7 million shares for a
total cost of approximately $424.4. Under a new repurchase program, which
began in February 1997, the Company repurchased approximately 507,500 shares
at a total cost of approximately $28.7 million as of March 31, 1997. Under
6
<PAGE>7
AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except share data)
this new program, the Company may buy back up to $500 million of its currently
outstanding common stock through open market purchases over a period of up to
three to five years.
Statement of Financial Accounting Standards ("FAS") No. 128, "Earnings Per
Share", was issued in February 1997 and is effective for the Company's
financial statements for the year ending December 31, 1997. Early adoption is
not permitted. After the effective date, all prior period earnings per share
("EPS") data shall be restated. SFAS No. 128 establishes standards for
computing and presenting EPS and replaces the presentation of previously
disclosed EPS with both basic and diluted EPS. Based upon the Company's
current capitalization structure, the EPS amounts calculated in accordance
with FAS No. 128 are expected to approximate the Company's EPS amounts
computed in accordance with Accounting Principles Board of Opinion No. 15,
"Earnings Per Share."
4. INVENTORIES
March 31 December 31
1997 1996
---- ----
Raw materials................ $150.1 $136.7
Finished goods............... 428.8 393.3
------ ------
$578.9 $530.0
====== ======
5. DIVIDENDS
Cash dividends paid per share of common stock were $.315 for the three
months ended March 31, 1997 and $.29 for the corresponding 1996 period. On
February 6, 1997, the Company increased the annual dividend rate to $1.26 from
$1.16.
6. 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.
7
<PAGE>8
AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except share data)
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 March
31, 1997 should not have a material adverse impact on Avon's consolidated
financial position, results of operations, or cash flows.
8
<PAGE>9
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
Results of Operations--Three Months Ended March 31, 1997 and 1996.
Consolidated
Avon's net income for the three months ended March 31, 1997 of $41.3, or
$.31 per share, increased 10% and 11%, respectively, from net income of $37.7,
or $.28 per share, in the comparable period of 1996. Pretax income of $63.0
increased 5% due to higher sales, an improved expense ratio, favorable net
foreign exchange and lower corporate non-operating expenses in 1997. These
favorable results were partially offset by a decline in the gross margin and
lower interest income in 1997. Net income was also favorably impacted by a
lower effective tax rate (37.0% versus 38.0% in 1996) and a favorable minority
interest impact due mainly to the results in Japan. The lower effective tax
rate resulted primarily from the mix of earnings and tax rates of
international subsidiaries.
Consolidated net sales for the three months ended March 31, 1997 of
$1,087.6 increased $71.5, or 7%, over the comparable period of the prior year.
The increase in sales was due to a 12% increase in international partially
offset by a 1% decrease in U.S. sales which includes the results of Discovery
Toys, Inc. The international sales improvement resulted from strong growth in
Mexico, the Pacific Rim, the United Kingdom, Russia, Chile, Central America
and Central Europe. These improvements were partially offset by a sales
decline in Germany. Excluding the impact of foreign currency exchange,
consolidated net sales rose 11% over the comparable period of the prior year.
Cost of sales as a percentage of sales was 40.6% in the first quarter of
1997 compared to 39.5% in the first quarter of 1996. The decline in the gross
margin resulted from lower margins in Brazil due to actions taken to reduce
inventory levels and, to a lesser extent, in Japan due to a 20% across the
board reduction in CFT prices and an emphasis on lower-priced items and in
Central Europe due to continued targeted pricing investments aimed at
accelerating market penetration. These declines were partially offset by a
margin improvement in Venezuela due to a shift in sales mix to higher-margin
items.
9
<PAGE>10
AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Dollars in millions, except share data)
Marketing, distribution and administrative expenses of $572.9 increased
$31.9, or 6%, over the comparable period of 1996, but decreased as a
percentage of sales to 52.7% from 53.2% in 1996. The increase in operating
expenses was primarily in markets which have experienced strong sales growth,
including Mexico and the Pacific Rim markets. These increases were partially
offset by lower expenses in the U.S. primarily due to lower sales and in
Germany due to the impact of a stronger U.S. dollar in 1997 as well as a
continued focus on fixed expense reductions. The decrease in the overall
operating expense ratio was due to improved ratios throughout Europe due to
fixed expense reduction efforts and in Mexico and the Pacific Rim due to
higher sales.
Interest income decreased $1.6 versus the comparable period of 1996,
primarily due to lower cash and short-term investment balances in Venezuela.
Other expense, net, of $2.8 was $5.2 favorable to the comparable period
last year primarily due to favorable net foreign exchange and lower corporate
non-operating expenses in 1997.
U.S.
Net sales decreased 1% and pretax income declined 2% in the first quarter
of 1997 compared with the first quarter of 1996. Excluding results for
Discovery Toys, which was acquired in January 1997, sales were down 2% and
pretax income increased 2%. A 5% decrease in the number of Representative
orders partially offset by a 3% increase in the average order size contributed
to the sales decrease. Units sold decreased 2%. The sales decline resulted
from decreases of fashion jewelry and accessories and home entertainment
products due in part to a recent change in the pricing of demonstration
products which caused a significant drop in the number of demonstration
products purchased by Representatives. Plans are being implemented to modify
the pricing structure to simplify this process and rebuild sales of
demonstration products. The declines in fashion jewelry, accessories and home
entertainment products were partially offset by increases in the cosmetics,
fragrance and toiletries ("CFT") and gift and decorative categories. Growth
in the CFT category was driven by the enormous success of product
introductions in the specialty bath segment, such as the California Bath line
and the Soft and Sensual line extension of the Skin-So-Soft brand. The launch
of the Diane Von Furstenberg line of home fragrance products contributed to
the increase in the gift and decorative category.
10
<PAGE>11
AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Dollars in millions, except share data)
Pretax income increased 2%, excluding the results of Discovery Toys, due
to a lower operating expense ratio and a slightly favorable gross margin in
1997 which more than offset the sales decline. The operating expense ratio
was favorable despite increased strategic investments including the
centralization of certain operational areas such as the call center and the
launch of the renovated Anew line.
International
Net sales increased 12%, or 19% excluding the effect of foreign currency
exchange, over the comparable period of 1996 and pretax income increased 13%.
The sales increase reflects improvements in all regions. Sales growth in the
Americas was highlighted by significant sales growth in Mexico and strong unit
growth in Chile and Central America. Mexico's growth in sales was driven by
increases in orders, average order size and number of active Representatives.
There has been a strong emphasis on customer development and image building in
Mexico through sampling, advertising and Representative training. Sales in
the Pacific region increased due to strong unit growth in the Pacific Rim,
most significantly in the Philippines, Taiwan and China. The sales
improvement in Europe reflected increases in the United Kingdom due to double-
digit increases in the average order size, and in Russia and Central Europe
due to continued rapid growth in number of units and Representatives.
These higher sales were partially offset by a decline in Germany caused
by the unfavorable exchange impact of a stronger U.S. dollar in 1997. In
addition, sales in Germany reflected the continued weak economic environment
which created a general decline in consumer confidence and spending. As a
result, there was a decline in the number of customers served and active
Representatives. Sales in Japan were slightly lower in 1997 due to a negative
currency impact. However, there was a dramatic improvement in Japan's number
of customers, units sold and active Representatives in the first quarter of
1997. These increases resulted from the launching of aggressive programs,
which began in late 1996, to offer more competitive prices, including a 20%
across-the-board reduction in CFT prices, and a new recruiting program which
simplified and improved the recruiting process.
11
<PAGE>12
AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Dollars in millions, except share data)
The 13% increase in pretax income reflected increases in Mexico,
Philippines, the United Kingdom, Germany, and to a lesser extent, Russia and
Central America. The increase in Mexico was primarily due to the sales growth
and a significant improvement in the operating expense ratio reflecting the
impact of an expense control program put in place during the second half of
1996. Higher pretax results in the Philippines, the United Kingdom, Russia
and Central America were driven by higher sales. The increase in Germany
resulted from a significant reduction in operating expenses due to the
continued active focus on reducing fixed expenses.
These favorable results were partially offset by lower pretax income in
Brazil due to a significant gross margin decline resulting from actions taken
to reduce inventory levels. Customer preferences in Brazil during 1997 have
changed to lower-priced products. These changes have created higher inventory
levels since demand on a product by product basis changed from original sales
estimates. In addition, the changeover to a new distribution facility, which
had its first full year of operations in 1996, resulted in higher inventory
levels. This factor combined with the increase in the number of orders and
units required additional costs to be incurred to ensure that orders were
delivered. As a consequence, new programs have been put in place to address
these customer preferences and reduce inventory levels. Pretax results were
also lower in Japan due to an unfavorable gross margin resulting from price
reductions on CFT items, as discussed previously, and from a sales strategy
focused on lower-priced items to increase customer appeal.
Liquidity and Capital Resources
Cash Flows
Excluding changes in debt, there was a net decrease in cash of $294.1 in
the first quarter of 1997 compared with $277.9 in the comparable period of
1996. The $16.2 variance primarily reflects higher net cash used by
operations and higher capital expenditures reflecting capacity expansion in
the Pacific region and for the new office facilities for global and U.S.
operations. These higher capital expenditures were partially offset by lower
repurchases of common stock in 1997. The increase in net cash used by
12
<PAGE>13
AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Dollars in millions, except share data)
operations reflects a higher usage from working capital items, primarily
accounts payable and accrued liabilities, partially offset by the cash used by
discontinued operations in 1996 and higher net income in 1997.
During the first quarter of 1997, the Company purchased approximately
532,500 shares of common stock for $30.2 compared with $45.4 spent for the
repurchase of approximately 1,148,000 shares during the comparable period in
1996. As of March 31, 1997, the cumulative number of shares repurchased under
the three-year stock repurchase program begun in February 1994 was
approximately 12.7 million shares for a total cost of approximately $424.4.
Under a new repurchase program, which began in February 1997, the Company
repurchased approximately 507,500 shares at a total cost of approximately
$28.7 as of March 31, 1997.
Capital Resources
Total debt increased $215.1 to $416.7 at March 31, 1997 from $201.6 at
December 31, 1996, principally due to normal seasonal working capital
requirements during the first three months of 1997. Total debt at March 31,
1997 of $416.7 was $46.2 higher than total debt of $370.5 at March 31, 1996
due to the conclusion of a three-year long-term incentive plan which resulted
in a cash payout in the first quarter of 1997 and cash used for investing
activities.
At March 31, 1997, there were borrowings of $29.0 under the amended and
restated revolving credit and competitive advance facility agreement. This
agreement is also used to support the Company's commercial paper borrowings of
which $269.2 was outstanding at March 31, 1997.
At March 31, 1997, there were $9.8 of borrowings outstanding under
uncommitted lines of credit and 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.
13
<PAGE>14
AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Dollars in millions, except share data)
Working Capital
As of March 31, 1997 and December 31, 1996, current liabilities exceeded
current assets by $94.5 and $41.7, respectively. The increase of current
liabilities over current assets of $52.8 was mainly due to an increase in
debt, previously discussed, and a decrease in cash and equivalents partially
offset by a decrease in accounts payable.
Although current liabilities exceeded current assets at March 31, 1997,
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.
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 March 31, 1997, the Company had three interest rate swap agreements on
its 170 million 6-1/8% Deutsche Mark Notes ("Notes"), due May 1998. Each
agreement has a notional principal amount of $100.0. During 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% through maturity.
The Company has one interest rate cap contract with a notional principal
amount of $100.0, used to economically hedge the Company's short-term variable
interest rate working capital debt. This cap contract expires in May 1998 and
has been marked-to-market yielding an insignificant income statement
adjustment.
14
<PAGE>15
AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Dollars in millions, except share data)
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.
At March 31, 1997, the Company held foreign currency forward contracts
with notional amounts totaling $205.1 and option contracts with notional
amounts totaling $31.8 to hedge foreign currency items. These contracts have
maturities in 1997. The Company also entered into certain foreign currency
forward contracts with notional amounts totaling $65.0 and option contracts
with notional amounts of $70.5 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 March 31, 1997 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.
15
<PAGE>16
AVON PRODUCTS, INC.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
(a) At the annual meeting of shareholders of Avon, held on May 1, 1997, the
matters described under (c) below were voted upon.
(c) Annual meeting votes:
Against Abstentions
or and Broker
For Withheld Non-Votes
----------- -------- -----------
(1) To elect three directors to three-
year terms expiring in 2000:
Remedios Diaz Oliver.............. 112,433,373 -0- 704,350
Edward J. Robinson................ 112,433,373 -0- 704,750
Paula Stern....................... 112,433,373 -0- 704,750
After the meeting, directors
continuing in office
(a) With terms expiring in 1998:
Richard S. Barton
Edward T. Fogarty
Stanley C. Gault
George V. Grune
Charles R. Perrin
(b) With terms expiring in 1999:
Brenda C. Barnes
Charles S. Locke
Ann S. Moore
James E. Preston
(2) To approve an amendment to the
Avon Products, Inc. 1993 Stock
Incentive Plan.................... 109,987,527 2,631,117 519,079
(3) To approve the Avon Products, Inc.
1997 Long-Term Incentive Plan..... 102,632,380 9,990,811 514,532
(4) To ratify the appointment of
Coopers & Lybrand L.L.P., as
Avon's independent accountants
for 1997.......................... 112,823,581 152,075 162,067
16
<PAGE>17
AVON PRODUCTS, INC.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit
Number Description
------ -----------
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 first
quarter of 1997.
17
<PAGE>18
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: May 12, 1997 By /s/ MICHAEL R. MATHIESON
-------------------------------
Michael R. Mathieson
Vice President and Controller
Principal Accounting Officer
Signed both on behalf of the
registrant and as principal
accounting officer.
18
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 March 31, 1997 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
- ------- -----------
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 11.1
<PAGE>
EXHIBIT 11.1
AVON PRODUCTS, INC.
COMPUTATION OF PRIMARY INCOME PER SHARE
(In millions, except per share data)
Three months ended
March 31
------------------
1997 1996
---- ----
Weighted average shares of common stock:
Weighted average shares outstanding during
the period.............................. 132.877 134.509
Common stock equivalents*................. * *
------- -------
Weighted average shares for primary income
per share computation................... 132.877 134.509
======= =======
Net income................................ $ 41.3 $ 37.7
======= =======
Primary income per share.................. $ .31 $ .28
======= =======
_________
*Common stock equivalents are not reported because they result in
less than three percent dilution.
EXHIBIT 11.2
<PAGE>
EXHIBIT 11.2
AVON PRODUCTS, INC.
COMPUTATION OF FULLY DILUTED INCOME PER SHARE
(In millions, except per share data)
Three months ended
March 31
------------------
1997 1996
---- ----
Weighted average shares of common stock:
Weighted average shares outstanding during
the period................................. 132.877 134.509
Common stock equivalents..................... 1.224 .841
------- -------
Weighted average shares for fully diluted
income per share computation............... 134.101 135.350
======= =======
Net income..................................... $ 41.3 $ 37.7
======= =======
Fully diluted income per share................. $ .31 $ .28
======= =======
<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 March 31, 1997 and for the
three months then ended included in the Form 10-Q as of March 31, 1997 and is
qualified in its entirety by reference to such financial statements.
<MULTIPLIER> 1000000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<S> <C>
<CASH> 106
<SECURITIES> 0
<RECEIVABLES> 467
<ALLOWANCES> (35)
<INVENTORY> 579
<CURRENT-ASSETS> 1,328
<PP&E> 1,229
<DEPRECIATION> (665)
<TOTAL-ASSETS> 2,217
<CURRENT-LIABILITIES> 1,422
<BONDS> 104
0
0
<COMMON> 44
<OTHER-SE> 167
<TOTAL-LIABILITY-AND-EQUITY> 2,217
<SALES> 1,088
<TOTAL-REVENUES> 1,088
<CGS> 442
<TOTAL-COSTS> 997
<OTHER-EXPENSES> 3
<LOSS-PROVISION> 17
<INTEREST-EXPENSE> 10
<INCOME-PRETAX> 63
<INCOME-TAX> 23
<INCOME-CONTINUING> 41
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41
<EPS-PRIMARY> .31
<EPS-DILUTED> .31
</TABLE>
