<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, 1998
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, 1998 was 131,740,152.
<PAGE>2
Table of Contents
Part I. Financial Information
Page
Numbers
-------
Item 1. Financial Statements
Consolidated Statement of Operations
Three Months Ended March 31, 1998 and
March 31, 1997........................................ 3
Consolidated Balance Sheet
March 31, 1998 and December 31, 1997.................... 4
Consolidated Statement of Cash Flows
Three Months Ended March 31, 1998 and
March 31, 1997........................................ 5
Notes to Consolidated Financial Statements................ 6-11
Item 2. Management's Discussion and Analysis of the
Results of Operations and Financial Condition............. 12-20
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders....... 21
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 OPERATIONS
(In millions, except per share data)
Three months ended
March 31
------------------
1998 1997
---- ----
(unaudited)
Net sales........................................... $1,183.4 $1,087.6
Costs, expenses and other:
Cost of sales....................................... 503.1 441.6
Marketing, distribution and
administrative expenses........................... 626.1 572.9
Special charge...................................... 70.5 -
Interest expense.................................... 9.5 9.6
Interest income..................................... (2.3) (2.3)
Other expense, net.................................. 3.1 2.8
-------- --------
Total costs, expenses and other..................... 1,210.0 1,024.6
-------- --------
(Loss) income before taxes and minority interest.... (26.6) 63.0
Income taxes........................................ 6.1 23.3
-------- --------
(Loss) income before minority interest.............. (32.7) 39.7
Minority interest................................... 1.7 1.6
-------- --------
Net (loss) income................................... $ (31.0) $ 41.3
======== ========
(Loss) earnings per share:
Basic ........................................... $ (.24) $ .31
======== ========
Diluted.......................................... $ (.24) $ .31
======== ========
The accompanying notes are an integral part of these statements.
3
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AVON PRODUCTS, INC.
CONSOLIDATED BALANCE SHEET
(In millions)
March 31 December 31
1998 1997
---- ----
(unaudited)
ASSETS
Current assets:
Cash and equivalents............................. $ 84.8 $ 141.9
Accounts receivable.............................. 478.0 444.8
Inventories...................................... 598.5 564.8
Prepaid expenses and other....................... 210.4 192.5
-------- --------
Total current assets............................. 1,371.7 1,344.0
-------- --------
Property, plant and equipment, at cost............. 1,298.6 1,281.6
Less accumulated depreciation.................... 694.2 670.6
-------- --------
604.4 611.0
-------- --------
Other assets..................................... 331.5 317.9
-------- --------
Total assets..................................... $2,307.6 $2,272.9
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Debt maturing within one year.................... $ 201.1 $ 132.1
Accounts payable................................. 382.0 476.0
Accrued compensation............................. 114.6 111.3
Other accrued liabilities........................ 339.5 268.9
Sales and other taxes............................ 94.4 101.0
Income taxes..................................... 252.2 266.6
-------- --------
Total current liabilities........................ 1,383.8 1,355.9
-------- --------
Long-term debt................................... 201.7 102.2
Employee benefit plans........................... 373.2 367.6
Deferred income taxes............................ 28.9 31.2
Other liabilities................................ 129.0 131.0
Shareholders' equity:
Common stock..................................... 43.8 43.7
Additional paid-in capital....................... 743.1 733.1
Retained earnings................................ 585.1 660.9
Accumulated comprehensive income................. (274.2) (270.3)
Treasury stock, at cost.......................... (906.8) (882.4)
-------- --------
Total shareholders' equity....................... 191.0 285.0
-------- --------
Total liabilities and shareholders' equity....... $2,307.6 $2,272.9
======== ========
The accompanying notes are an integral part of these statements.
4
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AVON PRODUCTS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
Three months ended
March 31
------------------
1998 1997
---- ----
(unaudited)
Cash flows from operating activities:
Net (loss) income....................................... $(31.0) $ 41.3
Adjustments to reconcile net (loss) income to net cash
used by operating activities:
Special and non-recurring charges....................... 100.3 --
Depreciation and amortization........................... 16.5 16.3
Provision for doubtful accounts......................... 24.8 16.8
Translation gains....................................... (.5) --
Deferred income taxes................................... (5.3) (4.5)
Other................................................... 1.4 3.3
Changes in assets and liabilities:
Accounts receivable................................... (62.2) (18.1)
Inventories........................................... (73.9) (51.1)
Prepaid expenses and other............................ (14.7) (10.8)
Accounts payable and accrued liabilities.............. (66.3) (155.1)
Income and other taxes................................ (19.5) (20.1)
Noncurrent assets and liabilities..................... (4.5) (4.6)
------ ------
Net cash used by operating activities................... (134.9) (186.6)
------ ------
Cash flows from investing activities:
Capital expenditures.................................... (26.5) (24.6)
Disposal of assets...................................... 1.1 1.1
Other investing activities.............................. (.2) (10.4)
------ ------
Net cash used by investing activities................... (25.6) (33.9)
------ ------
Cash flows from financing activities:
Cash dividends.......................................... (46.3) (41.9)
Debt, net (maturities of three months or less).......... 132.7 203.9
Proceeds from short-term debt........................... 39.8 12.9
Retirement of short-term debt........................... (3.8) (1.0)
Retirement of long-term debt............................ (.1) (.2)
Repurchase of common stock.............................. (24.8) (30.2)
Proceeds from exercise of stock options................. 8.2 5.6
------ ------
Net cash provided by financing activities............... 105.7 149.1
------ ------
Effect of exchange rate changes on cash and equivalents. (2.3) (7.1)
------ ------
Net decrease in cash and equivalents.................... (57.1) (78.5)
Cash and equivalents beginning of period................ 141.9 184.5
------ ------
Cash and equivalents end of period...................... $ 84.8 $106.0
====== ======
The accompanying notes are an integral part of these statements.
5
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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 1997 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.
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards ("FAS") No. 130, "Reporting Comprehensive Income." FAS
No. 130 requires disclosure of comprehensive income in interim periods and
additional disclosures of the components of comprehensive income on an annual
basis. Comprehensive income includes all changes in equity during a period
except those resulting from investments by and distributions to the Company's
stockholders. The components of comprehensive income are included in Note 7.
Effective January 1, 1998, the Company adopted AICPA Statement of
Position ("SOP") No. 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." SOP No. 98-1 requires certain costs
in connection with developing or obtaining internal-use software to be
capitalized that previously would have been expensed as incurred. The
adoption of SOP No. 98-1 did not have a material impact on the Company's
results of operation, financial position, or cash flows.
2. INFORMATION RELATING TO THE STATEMENT OF CASH FLOWS
"Net cash used by operating activities" includes the following cash
payments for interest and income taxes:
Three months ended
March 31
------------------
1998 1997
---- ----
Interest............................................ $ 9.6 $ 3.2
Income taxes, net of refunds received............... 28.9 35.1
6
<PAGE>7
AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except share data)
In May 1998, the Company issued $100.0 of long-term debt and the net
proceeds will be used to pay down commercial paper borrowings. As a result of
the refinancing of commercial paper borrowings with the new long-term debt,
$100.0 of commercial paper borrowings as of March 31, 1998 were reclassified
to long-term debt.
3. EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share ("EPS") are computed by dividing net
income (loss) by the weighted-average number of shares outstanding during the
year. Diluted earnings (loss) per share are calculated to give effect to all
potentially dilutive common shares that were outstanding during the year.
For the three months ended March 31, 1998 and 1997, the number of shares
used in the computation of basic and diluted earnings (loss) per share are as
follows:
1998 1997
------ ------
Basic EPS 131.78 132.88
Weighted-average shares
Incremental shares from
conversion of:
Stock options (1) - 1.22
------ ------
Diluted EPS
Adjusted weighted-
average shares 131.78 134.10
====== ======
(1) In 1998, the calculation of EPS assuming dilution is antidilutive and
accordingly, EPS have not been adjusted for the conversion of stock options
into additional common shares.
During the first three months of 1998, the Company purchased approximately
396,500 shares of common stock for $24.8 compared to approximately 532,500
shares purchased for $30.2 during the first three months of 1997. As of March
31, 1998, the cumulative number of shares repurchased under the three-year
stock repurchase program which ended in February 1997 was approximately
12,664,000 shares for a total cost of approximately $424.4. Under a new
repurchase program, which began in February 1997, the Company repurchased
7
<PAGE>8
AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except share data)
approximately 2,235,400 shares at a total cost of approximately $134.2 as of
March 31, 1998. Under 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.
4. INVENTORIES
March 31 December 31
1998 1997
---- ----
Raw materials................ $165.9 $147.4
Finished goods............... 432.6 417.4
------ ------
$598.5 $564.8
====== ======
5. DIVIDENDS
Cash dividends paid per share of common stock were $.34 for the three
months ended March 31, 1998 and $.315 for the corresponding 1997 period. On
February 17, 1998, the Company increased the annual dividend rate to $1.36
from $1.26.
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.
8
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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, 1998 should not have a material adverse impact on Avon's consolidated
financial position, results of operations, or cash flows.
7. COMPREHENSIVE (LOSS) INCOME
For the three-months ended March 31, 1998 and 1997, the components of
comprehensive (loss) income are, as follows:
1998 1997
----- -----
Net (loss) income $(31.0) $41.3
Other comprehensive (loss) income:
Change in equity due to
foreign currency
translation and
transaction adjustments (3.9) (9.8)
----- -----
Comprehensive (loss) income $(34.9) $31.5
===== =====
9
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AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except share data)
8. SPECIAL AND NON-RECURRING CHARGES
In October 1997, the Company announced a worldwide re-engineering program
in order to streamline operations and improve profitability, through gross
margin improvement and expense reductions. The one-time charges resulted in a
pretax charge of $108.4 ($84.2 net of tax, or $.64 per share on a basic and
diluted basis) for the three months ended March 31, 1998.
Special and non-recurring charges by category of expenditures are, as
follows:
Special Cost of Sales
Charge Charge Total
------- ------------- -----
Employee severance costs $51.0 $51.0
Inventories $37.9 37.9
Write-down of assets to net
realizable value 10.9 10.9
Other 8.6 8.6
----- ----- -----
$70.5 $37.9 $108.4
===== ===== =====
The write-down of assets relates to the closure of a Far East buying
office and manufacturing facilities in Puerto Rico and the Dominican Republic.
Additionally, as a result of on-going government restrictions, the Company has
decided to close certain branches and a regional office in China.
Inventory-related charges represent losses to write-down the carrying value
of non-strategic inventory, prior to disposal. The charge relates to the
closure of facilities, discontinuation of certain product lines, size-of-line
reductions and a change in strategy for product dispositions.
Employee severance costs are expenses, both domestic and international,
associated with the realignment of the Company's global operations. The
workforce will be reduced by approximately 2,200 employees, or 6% of the
total. Approximately one-half of the employees to be terminated relate to the
facility closures.
The liability balance at March 31, 1998 is as follows:
Special Cost of
Charge Sales Charge Total
Provision $ 70.5 $37.9 $108.4
Cash Expenditures (8.1) (8.1)
Non-cash write-offs (12.4) (37.9) (50.3)
---- ---- ----
Balance at March 31, 1998 $ 50.0 $(50.0)
==== ==== ====
10
<PAGE>11
AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except share data)
The remaining balance at March 31, 1998 relates primarily to employee
severance costs that will be paid during 1998 and 1999.
The Company expects to record additional charges in 1998 and early 1999 as
additional plans are finalized.
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)
ITEM 2. Management's Discussion and Analysis of the Results of Operations
and Financial Condition
Results of Operations--Three Months Ended March 31, 1998 and 1997.
Consolidated
Avon's net loss for the three months ended March 31, 1998 was $31.0, or
$.24 per share on a basic and diluted basis, compared with net income of
$41.3, or $.31 per share on a basic and diluted basis in 1997. Pretax loss
was $26.6 in 1998 compared with pretax income of $63.0 in 1997. Special and
non-recurring charges were recorded in the first quarter of 1998 for the
Company's previously announced business process redesign program. These
charges totaled $108.4 pretax, which reduced net income by $84.2 after tax, or
$.64 per share on a basic and diluted basis. The special charge of $70.5 is
primarily related to employee severance benefits as well as facility
rationalizations in Puerto Rico, Dominican Republic and China. In addition,
$37.9 was charged to cost of sales for inventory write-downs. The one-time
charges represent the first part of an estimated $200.0 total charge that will
help the Company deliver the higher sales and profit targets previously
communicated. Before the charges, net income for the three months ended March
31, 1998 of $53.2, or $.40 per share on a basic and diluted basis, increased
29% from the comparable period in 1997. Pretax income, before the charges, of
$81.8 increased 30% over 1997 due to higher sales, an improved gross margin
and favorable foreign exchange partially offset by a slightly higher operating
expense ratio.
Consolidated net sales for the three months ended March 31, 1998 of
$1,183.4 increased $95.8, or 9%, over the comparable period of the prior year.
The increase in sales was due to an 11% increase in international and a 5%
increase in U.S sales. The international sales improvement resulted from
strong growth in all major markets in the Americas, most significantly in
Mexico, Brazil and Argentina, as well as the United Kingdom. These
improvements were partially offset by sales declines in the Philippines,
Thailand and Malaysia. Excluding the impact of foreign currency exchange,
consolidated net sales rose 16% over the comparable period of the prior year.
Cost of sales as a percentage of net sales was 42.5% in the first quarter
of 1998 compared to 40.6% in the first quarter of 1997. Excluding the one-
time charge of $37.9, cost of sales as a percentage of sales was 39.3%. The
increase in the gross margin of 1.3 points, resulted from higher margins in
all major markets in the Americas, most significantly in Brazil, the latter
due to actions taken to reduce inventory levels which had an unfavorable
impact on margins in 1997 and to a lesser extent in Mexico and Argentina due
to increased cosmetics, fragrance and toiletries ("CFT") sales with higher
margins. In Europe, the United Kingdom and Germany reported strong margin
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)
improvements primarily as a result of a shift in mix to selling higher margin
products. The U.S. also reported a favorable gross margin as compared to 1997
which was attributable to pricing strategies and cost improvements. These
improvements were partially offset by margin declines in most major markets in
the Pacific, as a result of unfavorable foreign currency impacts.
Marketing, distribution and administrative expenses of $626.1 increased
$53.2, or 9%, over the comparable period of 1997 and increased as a percentage
of net sales to 52.9% from 52.7%. The increase in operating expenses was
primarily in markets which have experienced strong sales growth, including all
major markets in the Americas, the United Kingdom and the U.S. These
increases were partially offset by lower expenses in the Pacific primarily due
to lower sales and the impact of currency devaluations. The overall increase
in the expense ratio was primarily due to higher expense ratios in Mexico due
to increased marketing and promotional expenses associated with new product
launches and in Venezuela due to increased administrative expenses as a result
of the implementation of a new labor law. This increase was partially offset
by improvements throughout Europe and in Japan due to continued active focus
on reducing operating expenses.
Interest income and interest expense remained level with the comparable
period of 1997.
Other expense, net, of $3.1 was $.3 unfavorable to the comparable period
of last year, primarily due to non-recurring corporate expenses partially
offset by favorable foreign currency exchange.
Excluding the charges, the effective tax rate was 37.0% in the first
quarter of 1998 and 1997. The tax benefit on the one-time charges was 22.3%
due to the mix of countries and tax jurisdictions incurring the charges.
U.S.
Net sales increased 5% and pretax income decreased 74% compared with the
first quarter of 1997. A 2% increase in the average order size along with a
3% increase in the number of active Representatives contributed to the sales
increase. The sales increase resulted from increases in CFT, fashion jewelry
and accessories, style and home entertainment categories partially offset by a
decline in the gift and decorative category. The increase in the CFT category
was mainly due to the successful launch of the Diane Von Furstenburg
fragrance, Forest Lily, and the Far Away and Rare Gold gift with purchase
event, coupled with the successful launch of Avon's transfer-resistant
technology lipstick and Avon Color's Spring Shade Collection with eye shadow
samples in the brochure. Accessories showed strong performance with the
introduction of licensed Winnie the Pooh carryalls and watches. Higher sales
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)
in the style and home entertainment categories were primarily driven by an
increase in the sales of demonstration products purchased by Representatives,
as well as the launch of a collection of inspirational and religious products.
These increases were partially offset by a decline in the gift and decorative
category primarily attributable to softer Easter and Barbie sales.
Excluding the one-time charges, pretax income increased 11% due to the
improved sales and a favorable gross margin primarily driven by revised
pricing strategies, cost improvements and reduced clearance activity.
International
Net sales increased 11%, or 21% excluding the effect of foreign currency
exchange, over the comparable period of 1997 and pretax income decreased 49%.
Excluding the one-time charges, pretax income increased 44% over the
comparable period of 1997.
The sales increase reflects double-digit growth in the Americas and
Europe regions partially offset by declines in the Pacific region. Sales
increases in the Americas were highlighted by significant growth in Brazil,
Argentina and Mexico with these countries showing strong growth in units,
active Representatives and orders. Mexico's sales increases resulted from the
success of new product launches such as Anew Night Force, as well as apparel
and home line extensions with superior design and promotions. Brazil's growth
in sales was also driven by attractive pricing and successful new product
launches. In Europe, sales rose significantly in the United Kingdom due to
increases in units and orders; however, other major European markets reported
flat sales growth. Total sales for Central Europe and Russia grew 50% versus
1997 with all countries showing strong double-digit growth in the number of
active Representatives, units and orders.
These higher sales were partially offset by sales declines in most major
markets in the Pacific caused by unfavorable foreign currency translation.
After years of strong economic growth throughout the Pacific, the aftermath of
the currency crisis is causing subdued economic growth as markets struggle to
enact economic reform programs. However, most markets, especially the
Philippines, Australia, Taiwan, and to a lesser extent Japan, showed growth in
local currency sales driven by improvements in the number of active
Representatives, orders and customers served. Excluding the effect of foreign
currency exchange, sales in the Pacific grew 10%.
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 44% increase in pretax income reflects increases in all major markets
in Europe and the Americas, most significantly in Germany, the United Kingdom
and Brazil and, to a lesser extent, in Argentina and Mexico. The increase in
pretax income over the prior year is due to the sales increases discussed
above and strong margin improvements in the United Kingdom, Germany and Brazil
as compared to 1997. An improved gross margin due to a change in category mix
towards higher margin products and lower operating expenses due to ongoing
expense reduction programs contributed to the pretax income increases in
Germany and the United Kingdom. Margins improved significantly in Brazil due
to declines in 1997 resulting from actions taken to reduce inventory. Despite
the weak economic conditions in the Pacific, pretax income for the quarter was
slightly favorable as compared to the prior year, due to an improved operating
expense ratio in Japan as a result of cost reduction strategies and business
redesign efforts.
Liquidity and Capital Resources
Cash Flows
Excluding changes in debt, there was a net decrease in cash of $225.7 in
the first quarter of 1998 compared with a decrease of $294.1 in the comparable
period of 1997. The $68.4 variance primarily reflects lower net cash used by
operations and investing activities and a more positive effect of foreign
currency exchange. The decrease in cash used by operations reflects the
conclusion of the three-year long-term incentive plan which resulted in a cash
payment in the first quarter of 1997 and a higher net income in 1998 (adjusted
for the non-cash portion of the one-time charges). Cash used for investing
activities is lower in 1998 due to the acquisition of Discovery Toys, Inc. in
the first quarter of 1997.
15
<PAGE>16
AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Dollars in millions, except share data)
During the first quarter of 1998, the Company purchased approximately
396,500 shares of common stock for $24.8 compared with $30.2 spent for the
repurchase of approximately 532,500 shares during the comparable period in
1997.
Capital Resources
Total debt increased $168.5 to $402.8 from $234.3 at December 31, 1997,
principally due to normal seasonal working capital requirements during the
first three months of 1998. Total debt of $402.8 at March 31, 1998 remained
relatively level with total debt of $416.7 at March 31, 1997. In addition, at
March 31, 1998, and December 31, 1997, other non-current liabilities include
approximately $58.0 and $58.6, respectively, related to securities lending
activities.
At March 31, 1998, there were borrowings of $35.0 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 $114.5 was outstanding at March 31, 1998.
At March 31, 1998, there were $10.0 of borrowings outstanding under
uncommitted lines of credit and there were no borrowings under the Company's
bankers' acceptance facilities.
In May 1998, the Company issued $100.0 of long-term debt and the net
proceeds will be used to pay down commercial paper borrowings. As a result of
the refinancing of commercial paper borrowings with the new long-term debt,
$100.0 of commercial paper borrowings as of March 31, 1998 were reclassified
to long-term debt.
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 March 31, 1998 and December 31, 1997, current liabilities exceeded
current assets by $12.1 and $11.9, respectively. The increase of current
liabilities over current assets of $.2 was mainly due to an increase in net
debt (debt less cash and equivalents), as discussed in the Debt section, an
increase in other accrued liabilities primarily due to the accrual for one-
time charges offset by a decrease in accounts payable.
16
<PAGE>17
AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Dollars in millions, except share data)
Although current liabilities exceeded current assets at March 31, 1998,
management believes this is due to the Company's direct selling business
format which results in lower receivable and working capital levels as well as
the Company's practice of repurchasing shares with available cash. 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, 1998, 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. On May 7, 1998, the Notes were repaid
and the related contracts expired.
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.
17
<PAGE>18
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, 1998, the Company held foreign currency forward contracts
with notional amounts totaling $234.8 and option contracts with notional
amounts totaling $65.3 to hedge foreign currency items. These contracts have
maturities in 1999. The Company also entered into certain foreign currency
forward contracts with notional amounts totaling $20.0 and option contracts
with notional amounts of $4.2 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, 1998 was
insignificant. The Company's risk of loss on the options in the future is
limited to premiums paid, which are insignificant.
The Company has entered into two forward contracts and two put option
contracts to purchase shares of Avon common stock. The notional amount of the
forward contracts total $10.0 ($5.0 per contract), with forward rates at
$57.572 and $58.111 for the purchase of 86,848 and 86,042 shares,
respectively. The put option contracts give the purchaser the right to sell
86,000 and 87,335 shares of Company stock to Avon at strike prices of $56.852
and $57.080, respectively. The contracts mature in 1998 and give the Company
the choice of either net cash or share settlement. Accordingly, no adjustment
for subsequent changes in fair value have been recognized.
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.
18
<PAGE>19
AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Dollars in millions, except share data)
Other Information
On October 23, 1997, the Company announced that it had raised its long-
term growth targets for sales and earnings and that it expected to record
special charges in connection with a major re-engineering program. Commencing
in 1998, the long-term target for sales growth has been raised to 8-10%
compounded annually, and its target for earnings-per-share growth has been
raised to 16-18% annually. Previously, the Company targeted long-term sales
growth of 6-8% and long-term earnings-per-share growth of 13-15%. The higher
targets come largely as a result of initiatives currently underway and others
under review intended to reduce costs by up to $400.0 per year by 2000, with
$200.0 of the savings being reinvested concurrently in advertising and
marketing programs to boost sales. The Company expects to record special
charges of approximately $200.0 pretax to cover one-time costs associated with
the re-engineering program. In the first quarter of 1998, the Company
recorded $108.4 pretax of such one-time charges ($84.2 after tax, or $.64 per
share on a basic and diluted basis) in connection with the re-engineering
program. Slightly more than half of the total pretax charges in the quarter
were cash related and will be paid in 1998 and 1999. The Company expects to
record the balance of such one-time charges in 1998 and early 1999.
On April 21, 1998, the Chinese government issued a directive banning all
direct selling in China. As of May 13, 1998, there is considerable
uncertainty as to how this directive would be interpreted and applied going
forward. In the meantime, the Company is complying with this directive by
suspending its selling activities in China and is considering alternative
methods of distribution and selling. The Company remains confident that China
will have significant long-term potential. In any event, the ban on direct
selling would not have a material adverse effect on the Company's overall
financial position or results of operations.
Year 2000
Management has developed a worldwide program to prepare the Company's
computer systems and applications for the Year 2000. Based on a comprehensive
assessment of key systems, the Company has commenced a project plan to address
all necessary code changes, testing and implementation required to ensure Year
2000 compliance by December 31, 1999. Management does not expect the
incremental costs of making the required system modifications to have a
material impact on the Company's consolidated financial position, results of
operations or cash flows.
19
<PAGE>20
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" STATEMENT UNDER THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements in this report which are not historical facts or
information are forward-looking statements, including, but not limited to, the
information set forth in "Other Information" herein. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, levels of activity, performance or
achievement of the Company, or industry results, to be materially different
from any future results, levels of activity, performance or achievement
expressed or implied by such forward-looking statements. Such factors
include, among others, the following: general economic and business
conditions; the ability of the Company to implement its business strategy;
the Company's access to financing and its management of foreign currency
risks, the Company's ability to successfully identify new business
opportunities; the Company's ability to attract and retain key executives; the
Company's ability to achieve anticipated cost savings and profitability
targets; changes in the industry; competition; the effect of regulatory and
legal restrictions imposed by foreign governments; the effect of regulatory
and legal proceedings and other factors discussed in Item 1 of the Company's
Form 10-K. As a result of the foregoing and other factors, no assurance can
be given as to the future results and achievements of the Company. Neither
the Company nor any other person assumes responsibility for the accuracy and
completeness of these statements.
20
<PAGE>21
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 7, 1998, 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 four directors to three-
year terms expiring in 2001:
Richard S. Barton................ 114,988,370 -0- 1,538,252
Edward T. Fogarty................ 114,988,370 -0- 1,538,252
George V. Grune.................. 114,988,370 -0- 1,538,252
Charles R. Perrin................ 114,988,370 -0- 1,538,252
To elect three directors to two-year
terms expiring in 2000
Stanley C. Gault................. 115,017,187 -0- 1,509,435
Andrea Jung ..................... 115,017,187 -0- 1,509,435
Susan J. Kropf................... 115,017,187 -0- 1,509,435
(2) To ratify the appointment of
Coopers & Lybrand L.L.P., as
Avon's independent accountants
for 1998.......................... 116,186,548 166,085 173,989
21
<PAGE>22
AVON PRODUCTS, INC.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit
Number Description
------ -----------
3.3 --Certificate of Amendment of the
Certificate of Incorporation of Avon Products, Inc.
27 --Financial Data Schedule.
(b) Reports on Form 8-K.
On March 18, 1998, the Company filed a Form 8-K announcing that on March
5, 1998, the Board of Directors of Avon Products, Inc., adopted a new
shareholder rights plan, effective as of the close of business on March 30,
1998, to replace the Company's existing shareholder rights plan, which expires
at the close of business on March 30, 1998
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: May 13, 1998 By /s/ ROBERT J. CORTI
-------------------------------
Robert J. Corti
Senior Vice President,
Chief Financial Officer
Principal Financial 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 March 31, 1998 Commission file number 1-4881
____________________________
AVON PRODUCTS, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
<PAGE>
____________________________
EXHIBITS
AVON PRODUCTS, INC.
INDEX TO EXHIBITS
Exhibit
Number Description
- ------- -----------
3.3 --Certificate of Amendment of the
Certificate of Incorporation of Avon Products, Inc.
27 --Financial Data Schedule.
CERTIFICATE OF AMENDMENT
of
THE CERTIFICATE OF INCORPORATION
of
AVON PRODUCTS, INC.
(Under Section 805 of the
Business Corporation Law)
Pursuant to the provisions of Sections 502 and 805 of the Business
Corporation Law, the undersigned hereby certify:
1. The name of the corporation is AVON PRODUCTS, INC. (the
"Corporation") 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 is hereby
amended by the addition of the following provision stating the number,
designations, relative rights, preferences and limitations of a series of Series
B Participating Preferred Stock, par value $1.00 per share, as fixed by the
Board of Directors of the Corporation pursuant to the authority vested in it by
the Certificate of Incorporation of the Corporation.
ARTICLE IIIB. Series B Junior Participating Preferred Stock:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series B Junior Participating Preferred Stock" (the "Series B
Preferred Stock") and the number of shares constituting the Series B Preferred
Stock shall be 2,000,000. Such
<PAGE>
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 B Preferred Stock to a number less than the number of shares then
outstanding plus the number of shares reserved for issuance upon the exercise of
outstanding options, rights or warrants or upon the conversion of any
outstanding securities issued by the Corporation convertible into Series B
Preferred Stock.
Section 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 B Preferred Stock with respect to dividends, the holders of
shares of Series B 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 payable 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 Payment Date after the first issuance of a
share or fraction of a share of Series B Preferred Stock, in an amount per
share (rounded to the nearest cent) equal to the greater of (a) $10 or (b)
subject to the provision 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 B 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 B
Preferred Stock were entitled immediately prior to such event under clause
(b) 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.
(B) The Corporation shall declare a dividend or distribution on the
Series B 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
<PAGE>
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 $10 per share on
the Series B Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series B 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 B 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 B 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 B Preferred
Stock entitled 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.
Section 3. Voting Rights. The holders of shares of Series B Preferred
Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series B Preferred Stock shall entitle the holder thereof to
100 votes on all matters submitted to a vote of the stockholders 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 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 number of votes per
share to which holders of shares of Series B 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 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.
<PAGE>
(B) Except as otherwise provided herein, in any other Certificate of
Amendment creating a series of Preferred Stock or any similar stock, or by
law, the holders of shares of Series B 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 stockholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by law,
holders of Series B Preferred Stock shall have no special voting rights
and their consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth herein) for
taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series B Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series B Preferred
Stock outstanding 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 dividends or upon
liquidation, dissolution or winding up) to the Series B 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 B
Preferred Stock, except dividends paid ratably on the Series B
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 B 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 B Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series B Preferred Stock, or any shares of stock
ranking on a parity with the Series B Preferred Stock, except in
accordance with a purchase offer made in writing or by publication
(as determined by the Board of Directors) to
<PAGE>
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 preferences 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 paragraph
(A) of this Section 4, purchase or otherwise acquire such shares at such
time and in such manner.
Section 5. Reacquired Shares. Any shares of Series B Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued 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, or in any other Certificate of Amendment creating
a series of Preferred Stock or any similar stock or as otherwise required by
law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made (1) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series B
Preferred Stock unless, prior thereto, the holders of shares of Series B
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 B
Preferred Stock shall be entitled to receive an aggregate amount per share,
subject to the provision 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 (2) 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 B Preferred Stock, except distributions made ratably on the Series B
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 B Preferred Stock were entitled immediately prior to
such event under the proviso in clause (1) 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
<PAGE>
the number of shares of Common Stock that were outstanding immediately prior to
such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction 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 B 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 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 B 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 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.
Section 8. No Redemption. The shares of Series B Preferred Stock
shall not be redeemable.
Section 9. Rank. The Series B 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.
Section 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 B 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 B Preferred Stock, voting
together as a single class.
Section 11. Board Approval. This Certificate of Amendment of the
Certificate of the Incorporation of the Corporation was approved by the Board of
Directors on March 5, 1998.
<PAGE>
IN WITNESS WHEREOF, we have executed and subscribed this Certificate
of Amendment, and do affirm the foregoing as true, this 30th day of March, 1998,
under penalties of perjury.
Name:/s/ James E. Preston
Title: Chairman of the Board
& Chief Executive Officer
Name: Ward M. Miller, Jr.
Title: Senior Vice President,
General Counsel & Secretary
<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, 1998 and for the three
months then ended included in the Form 10-Q as of March 31, 1998 and is
qualified in its entirety by reference to such financial statements.
<MULTIPLIER> 1000000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<S> <C>
<CASH> 85
<SECURITIES> 0
<RECEIVABLES> 478
<ALLOWANCES> (37)
<INVENTORY> 599
<CURRENT-ASSETS> 1,372
<PP&E> 1,299
<DEPRECIATION> 694
<TOTAL-ASSETS> 2,308
<CURRENT-LIABILITIES> 1,384
<BONDS> 101
0
0
<COMMON> 44
<OTHER-SE> 147
<TOTAL-LIABILITY-AND-EQUITY> 2,308
<SALES> 1,183
<TOTAL-REVENUES> 1,183
<CGS> 503
<TOTAL-COSTS> 1,175
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 25
<INTEREST-EXPENSE> 10
<INCOME-PRETAX> (27)
<INCOME-TAX> 6
<INCOME-CONTINUING> (31)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (31)
<EPS-PRIMARY> (.24)
<EPS-DILUTED> (.24)
</TABLE>
