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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 26, 2000
AVON PRODUCTS, INC.
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(Exact Name of Registrant as Specified in its Charter)
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<S> <C> <C>
New York 1-4881 13-0544597
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(State or Other Jurisdiction of (Commission File Number) (IRS Employer Identification No.)
Incorporation)
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1345 Avenue of the Americas
New York, New York 10105-0196
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(Address of Principal Executive Offices) (Zip Code)
(212) 282-5000
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(Registrant's telephone number, including area code)
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. Other Events.
On January 26, 2000, Avon Products, Inc., a New York corporation, issued a
press release announcing its fourth quarter and full year earnings for 1999. A
copy of the press release is attached hereto as Exhibit 99.1 and is hereby
incorporated by reference herein.
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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 hereunto duly authorized.
AVON PRODUCTS, INC.
Dated: February 2, 2000 By: /s/ Ward M. Miller, Jr.
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Name: Ward M. Miller, Jr.
Title: Senior Vice President,
General Counsel and Secretary
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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99.1 Press Release of Avon Products, Inc., dated January 26, 2000
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EXHIBIT 99.1
AVON REPORTS RECORD SALES AND EARNINGS PER SHARE
FOR FOURTH QUARTER AND FULL YEAR
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Fourth Quarter E.P.S. Up 4% to $.58;
Sales Rise 1% but Increase 8% in Local Currencies
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Full-Year E.P.S. Up 11% Excluding One-Time Charges
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NEW YORK, January 26, 2000 -- Avon Products, Inc. (NYSE:AVP) today
reported that earnings per share in the fourth quarter of 1999 increased 4% to a
record $.58 per share, versus $.56 per share in the fourth quarter of 1998. The
1999 per-share figures, which are the same on a basic and diluted basis, are in
line with guidance given by the company in late September and early December,
and exceed the consensus estimate of $.56 per share among Wall Street analysts.
Sales in the quarter were also at a record level, rising 1% to $1.57
billion, versus $1.55 billion a year ago. Excluding the impact of foreign
currency translation, sales increased 8%, driven by sound fundamentals,
including a strong 11% unit growth and a healthy 10% increase in the number of
sales representatives worldwide.
Gross margin improved by 0.4 points to 61.3% in the quarter and
operating margin improved by 0.9 points to 15.9% -- the highest level in 7
years. The company's continuing success with Business Process Redesign (BPR)
initiatives contributed to the profit improvement.
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Operating profit rose 7% in the quarter. However, several non-operating
items -- principally higher foreign exchange losses and higher interest expense
to fund share repurchases -- resulted in a net income decline of 4% to $141.7
million, versus $148.1 million in the 1998 period.
Earnings per share in the quarter reflect a decrease of about 20
million in the average number of shares outstanding versus prior year, as a
result of accelerated share repurchases by the company in 1999.
Commenting on the performance, Andrea Jung, Avon's president and chief
executive officer, said, "We finished the quarter on a strong note and we're
seeing continued momentum into 2000. Our global portfolio is very healthy, with
significant year-over-year gains in the quarter in Asia and Europe, as well as a
solid profit performance in the U.S. In addition, all geographic regions --
most importantly including the U.S. -- posted excellent unit growth and the
highest operating margins in recent years, indicating the underlying strength of
our direct selling operations around the world."
Ms. Jung also said, "We are committed to making meaningful investments
this year to strengthen our core business and enhance our brand image, while at
the same time, continuing to improve our operating margins. We are confident
that our strategic initiatives will enable us to expand Avon's customer base and
accelerate revenue growth."
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Regional Performance
International sales in the fourth quarter of 1999 increased 3% (up 14%
in local currency terms). International units and active representatives rose by
14% and 12%, respectively. International operating profit increased 16%, with
gross margin advancing 1.3 points to 63.7% and operating margin improving 2.5
points to 21.9%.
In Asia, sales in the quarter rose 21% (up 13% in local currencies).
Every market generated double-digit sales growth, reflecting the strength of
Avon's business throughout the region and the continuing economic recovery
there. The sales gains were driven by a 15% increase in units and an 8% rise in
active representatives. Operating profit in Asia surged 56% and operating margin
advanced 4.3 points to 19.2%.
In Europe, sales advanced 4% in the quarter (up 15% in local
currencies). Units grew 29%, driven by strong gains in the U.K. and
Central/Eastern Europe, and the number of active representatives climbed 26%.
Operating profit in Europe increased 31% and operating margin improved by 4.1
points to 19.9% -- a record level. The dramatic profit gain was due to
continued rapid growth in Central/Eastern European markets and a significant
year-over-year improvement in Russia.
In Latin America, sales in the quarter declined 5% due principally to
the maxi-devaluation of Brazil's currency early in 1999. Sales in the region
rose 13% in local currencies. Units and active representatives each increased 8%
despite economic volatility in some major markets.
Operating profit in Latin America was flat versus the prior year's
exceptionally strong fourth quarter. Brazil's business was very healthy, with
double-digit growth in both local currency sales and units, but profits declined
23% in the quarter, reflecting the
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1999 currency devaluation. However, Brazil's profit decrease was offset in the
region by growth in Mexico, Venezuela and Central America. Latin America's
operating margin in the quarter improved by 1.2 points to 24.6%.
In the U.S., sales in the quarter rose 1%. Sales of Cosmetics,
Fragrance and Toiletries (CFT) were even with 1998, which represents a
significant improvement from the third quarter, when CFT sales declined 10%
versus prior year. Unit growth in the U.S. was the strongest in over two years,
with total units up 7% and CFT units up an impressive 9%.
Quarterly operating profit in the U.S. exceeded $100 million for the
first time ever, rising 8%, on top of the 23% increase in last year's fourth
quarter. Operating margin advanced 1.4 points to 19.1%, which was the highest
fourth quarter level in over 10 years.
Record Results for Full-Year 1999
For the full-year 1999, Avon reported that diluted earnings per share
before one-time charges rose 11% to a record $1.64, versus $1.48 per share for
full-year 1998. Both years included one-time charges related to the company's
BPR program.
In 1999, one-time charges totaled $151.2 pretax ($121.9 million after
tax or $.47 per diluted share). Charges in 1998 totaled $154.4 pretax ($122.8
million after tax or $.46 per diluted share). Including the charges, diluted
earnings per share for full-year 1999 rose 15% to $1.17 compared with $1.02 per
share in 1998.
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Sales in 1999 increased 1% to a record $5.29 billion versus $5.21
billion in 1998. Excluding the effects of foreign currency translation, sales
rose 9% for the year, reflecting 9% unit growth and a 10% increase in active
representatives.
Margins improved significantly in 1999. Gross margin rose 1.2 points to
62.5% and operating margin rose 1.3 points to 13.3%.
Avon is the world's leading direct seller of beauty and related
products, with $5.3 billion in annual revenues. Avon markets to women in 136
countries through 3 million independent sales representatives. Avon product
lines include such recognizable brands as Anew, Skin-So-Soft, Avon Color, Far
Away, Rare Gold, Perceive and Women of Earth. Avon also markets an extensive
line of fashion jewelry, apparel, gifts and collectibles. More information on
Avon and its products can be found on the company's award-winning web site
htpp://www.avon.com.
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Cautionary Statement under the Private Securities Litigation
Reform Act of 1995
Statements in this release which are not historical facts or
information are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements are
based on management's reasonable current assumptions and expectations. Such
forward-looking statements involve risks, uncertainties and other important
factors which may cause the actual results of the Company to be materially
different from any future results expressed or implied by such forward-looking
statements, and there can be no assurance that actual results will not differ
materially from management's expectations. Such important factors include, among
others, the following: general economic and business conditions in the Company's
markets; the Company's ability to implement its business strategy; the Company's
ability to achieve anticipated cost savings and profitability targets; the
impact of substantial currency exchange devaluations in the Company's principal
foreign markets; and the effect of legal and regulatory proceedings and
restrictions imposed on the Company or its operations by foreign governments.
Additional information identifying such important factors is contained in the
Company's Form 10-Q report for the quarter ended September 30, 1999, filed with
the S.E.C. The Company undertakes no obligation to update any such
forward-looking statements.
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AVON PRODUCTS, INC.
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share data)
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Three months ended Percent Year ended Percent
December 31 Change December 31 Change
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1999 1998 1999 1998
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Net sales $ 1,566.6 $ 1,548.9 1% $ 5,289.1 $ 5,212.7 1%
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Cost of sales* 606.6 606.1 2,031.5 2,053.0
Marketing, distribution and
administrative expenses 711.4 709.8 2,603.0 2,570.0
Special charges - - 105.2 116.5
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Operating profit 248.6 233.0 7% 549.4 473.2 16%
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Interest expense 15.4 9.1 43.2 34.7
Interest income (3.3) (4.4) (11.1) (15.9)
Other expense (income), net 15.3 (4.1) 10.7 (1.5)
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Total other expenses 27.4 0.6 42.8 17.3
Income before taxes and minority
interest 221.2 232.4 -5% 506.6 455.9 11%
Income taxes 77.2 84.1 204.2 190.8
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Income before minority interest 144.0 148.3 -3% 302.4 265.1 14%
Minority interest (2.3) (0.2) 0.0 4.9
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Net income $ 141.7 $ 148.1 -4% $ 302.4 $ 270.0 12%
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Earnings per share:
Basic $ 0.58 $ 0.56 4% $ 1.18 $ 1.03 15%
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Diluted $ 0.58 $ 0.56 4% $ 1.17 $ 1.02 15%
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Average shares outstanding:
Basic 243.36 262.68 256.78 263.27
Diluted 245.01 265.23 259.37 265.95
* Years ended 1999 and 1998 include one-time charges of $46.0 and $37.9,
respectively, for inventory write-downs.
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