FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1994
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.)
9 WEST 57TH STREET, NEW YORK, NEW YORK 10019
(Address of principal executive offices)
(212) 546-6015
(Telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ----------------
Common Stock (par value $.50) New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ].
The aggregate market value of Common Stock (par value $.50) held by non-
affiliates at February 28, 1995 was $3.9 billion.
The number of shares of Common Stock (par value $.50) outstanding at
February 28, 1995 was 68,658,266.
Documents Incorporated by Reference
Parts I and II --Portions of the 1994 Annual Report to Shareholders.
Part III --Portions of the Proxy Statement for the 1995 Annual
Meeting of Shareholders.
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PART I
ITEM 1. BUSINESS
Avon Products, Inc. ("Avon" or "Company") is one of the world's leading
manufacturers and marketers of beauty and related products, which include
cosmetic, fragrance and toiletry; gift and decorative; apparel; and fashion
jewelry and accessories. Avon commenced operations in 1886 and was
incorporated in the State of New York on January 27, 1916. Avon's business is
comprised of one industry segment, direct selling, with worldwide operations.
Financial information relating to geographic areas is incorporated by
reference to the analysis of net sales and pretax income from operations by
geographic area on page 26 in Avon's 1994 Annual Report to Shareholders.
During 1994, Avon sold Giorgio Beverly Hills, Inc. ("Giorgio"), its remaining
retail business. For further discussion, see Discontinued Operations section
included herein, and Note 3 of the Notes to the Consolidated Financial
Statements on page 40 in Avon's 1994 Annual Report to Shareholders.
Avon's direct selling business consists of the U.S. and International
operations. Sales are made directly to consumers principally through Avon
Representatives throughout the world. Although some of the products offered
internationally may vary by market, most are substantially the same as those
marketed domestically.
Distribution
Avon's products are sold worldwide by approximately 1.9 million Repre-
sentatives, approximately 440,000 of whom are in the United States. Almost
all Representatives are women who sell on a part-time basis. Representatives
are independent contractors or independent dealers, and are not agents or
employees of Avon. Representatives purchase products directly from Avon and
sell them directly to their customers.
The Company's products are sold to customers through a combination of
direct selling and marketing utilizing independent Representatives, the mail,
by phone or fax. Representatives go where the customers are, either in the
home or in the workplace. Representatives may sell in a territory, which
typically averages 100 homes in the United States and from 100 to 150 homes in
other countries. Representatives in the United States have the opportunity to
take responsibility for sales in larger areas. Representatives also sell in
offices, factories, schools and hospitals.
In the United States, the Representative contacts customers, selling
primarily through the use of brochures which also highlight new products and
specially priced items for each two-week sales campaign. Product samples,
demonstration products, make-up color charts and catalogs are also used.
Generally the Representative forwards an order every two weeks to a designated
distribution center. This order is processed and the products are assembled
at the distribution center and delivered to the Representative's home, usually
by a local delivery service. The Representative then delivers the merchandise
and collects payment from the customer for their own account. Payment by the
Representative to Avon is customarily made when the next order is forwarded to
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the distribution center. The cost of merchandise to the Representative varies
according to the total order size for each two-week sales campaign and
averages approximately 60 percent of the recommended selling price.
In order to increase support of the Representative in the United States
and allow them to run their business more efficiently as well as to improve
order processing accuracy, Avon has implemented certain electronic order
systems technology. One of these systems permits Avon Representatives to
submit add-on orders with a touch-tone telephone, enabling them to augment
orders already submitted by placing a phone call. Another system, Avon's
Personal Order Entry Terminal, permits approximately 20,000 top-producing
Representatives in the United States to transmit orders electronically by
phone line, 24 hours a day, seven days a week.
Outside the United States, each sales campaign is generally of a three or
four week duration. Although terms of payment and cost of merchandise to the
Representative vary from country to country, the basic method of direct
selling and marketing by Representatives is essentially the same as that used
in the United States, and substantially the same merchandising and promotional
techniques are utilized.
The recruiting and training of Representatives are the primary
responsibility of district managers. In the United States, each district
manager has responsibility for a market area covered by 225 to 300
Representatives. District managers are employees of Avon and are paid a
salary and a commission based on purchases of Avon products by Representatives
in their district. Personal contacts, including recommendations from current
Representatives and local advertising, constitute the primary means of
obtaining new Representatives. Because of the high rate of turnover among
Representatives, a characteristic of the direct-selling method, recruiting and
training of new Representatives are continually necessary.
From time to time, the question of the legal status of Representatives has
arisen, usually in regard to possible coverage under social benefit laws that
would require Avon (and in most instances, the Representatives) to make
regular contributions to social benefit funds. Although Avon has generally
been able to address these questions in a satisfactory manner, the matter has
not been fully resolved in all countries. If there should be a final
determination adverse to Avon in a country, the cost for future, and possibly
past, contributions could be so substantial in the context of the volume of
business of Avon in that country that it would have to consider discontinuing
operations in that country.
Promotion and Marketing
Sales promotion and sales development activities are directed toward
giving selling assistance to the Representatives by making available sales
aids such as brochures, product samples and demonstration products. In order
to support the efforts of Representatives to reach new customers, especially
working women and other individuals who frequently are not at home, specially
designed sales aids, promotional pieces, customer flyers and product and image
enhancing media advertising are used. In addition, Avon seeks to motivate
its Representatives through the use of special incentive programs that reward
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superior sales performance. Periodic sales meetings with Representatives are
conducted by the district manager. The meetings are designed to keep
Representatives abreast of product line changes, explain sales techniques and
provide recognition for sales performance.
A number of merchandising techniques, including the introduction of new
products, the use of combination offers, the use of trial sizes and the
promotion of products packaged as gift items, are used. In general for each
sales campaign, a distinctive brochure is published, in which new products are
introduced and selected items are offered at special prices or are given
particular prominence in the brochure. Cosmetic, fragrance and toiletry
products are available each sales campaign at a constant low price, while
maintaining introductory specials and periodic sales on selected items for
limited time periods.
From time to time, various regulations or laws have been proposed or
adopted that would, in general, restrict the frequency or duration of, or
volume of sales resulting from new product introductions, special prices or
other special price offers. The Company's pricing flexibility and broad
product lines are expected to be able to mitigate the effect of these
regulations.
Competitive Conditions
The cosmetic, fragrance and toiletry; gift and decorative; apparel; and
fashion jewelry and accessory industries are highly competitive. Avon is
one of the leading manufacturers and distributors of cosmetics and fragrances
in the United States. Its principal competitors are the large and well-known
cosmetics and fragrances companies that manufacture and sell broad product
lines through various types of retail establishments. There are many
other companies that compete in particular products or product lines sold
through retail establishments.
Avon has many competitors in the gift and decorative products industry in
the United States, including retail establishments, principally department
stores, gift shops and direct-mail companies, specializing in these products.
Avon is one of the leading distributors of fashion jewelry and accessories
for women in the United States. Its principal competition in the fashion
jewelry industry consists of a few large companies and many small companies
that manufacture and sell fashion jewelry for women through retail
establishments.
The number of competitors and degree of competition that Avon faces in its
foreign cosmetics, fragrances, toiletries and fashion jewelry markets varies
widely from country to country. Avon is one of the leading manufacturers and
distributors in the cosmetics, fragrances and toiletries industry in most of
its foreign markets, as well as in the fashion jewelry industry in Europe.
There are a number of direct-selling companies which sell product lines
similar to Avon's, some of which also have worldwide operations and compete
with Avon, although none have comparable sales or income.
Avon believes that the personalized customer service offered by
Representatives; the high quality, attractive designs and reasonable prices of
its products; new product introductions; and the guarantee of satisfaction are
significant factors in establishing and maintaining its competitive position.
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Avon's consolidated net sales, by classes of principal products, are as
follows:
Years ended December 31
------------------------------
1994 1993 1992
---- ---- ----
(In millions)
Cosmetics, fragrances and toiletries...... $2,604.2 $2,375.2 $2,243.1
Gift and decorative....................... 769.2 663.6 683.3
Apparel................................... 480.3 350.0 296.9
Fashion jewelry and accessories........... 412.8 455.3 437.2
-------- -------- --------
$4,266.5 $3,844.1 $3,660.5
======== ======== ========
International Operations
Avon's International operations are subject to certain customary risks
inherent in carrying on business abroad, including the risk of adverse
currency fluctuations, currency remittance restrictions and unfavorable
economic and political conditions.
Avon's International operations are conducted primarily through
subsidiaries in 40 countries and Avon's products are distributed in some 80
other countries.
Manufacturing
Avon manufactures and packages almost all of its cosmetic, fragrance and
toiletry products. Raw materials, consisting chiefly of essential oils,
chemicals, containers and packaging components, are purchased from various
suppliers. Packages, consisting of containers and packaging components, are
designed by its staff of artists and designers.
The design and development of new products are affected by the cost and
availability of materials such as glass, plastics and chemicals. Avon
believes that it can continue to obtain sufficient raw materials and supplies
to manufacture and supply its products.
Avon has eighteen manufacturing laboratories around the world, three of
which are principally devoted to the manufacture of fashion jewelry. In the
United States, Avon's cosmetic, fragrance and toiletry products are produced
in three manufacturing laboratories for the four distribution centers located
throughout the country. Most products sold in foreign countries are
manufactured in Avon's facilities abroad.
The fashion jewelry line is generally developed by Avon's staff and
produced in its two manufacturing laboratories in Puerto Rico, and Avon's
manufacturing laboratory in Ireland or by several independent manufacturers.
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Trademarks and Patents
Although Avon owns several patents and has several more patent
applications pending in the United States Patent Office, its business, both in
the United States and abroad, is not materially dependent upon patents or
patent protection. Avon has no material licenses, franchises or concessions.
Avon's major trademarks are protected by registration in the United States
and the other countries where its products are marketed as well as in many
other countries throughout the world.
DISCONTINUED OPERATIONS
During 1994, the Company sold Giorgio, its remaining retail business for
cash of $150.0 million. The Company recorded a loss of $25.0 million on the
sale. Since the Company has excess capital loss carryforwards, no tax
benefits have been recognized on the loss. For further discussion, see Note 3
of the Notes to the Consolidated Financial Statements on page 40 to Avon's
1994 Annual Report to Shareholders.
During 1993, Avon recorded a discontinued operations provision of
$10.0 million after tax, or $.14 per share, for the final settlement and
related expenses in an arbitration proceeding related to a business previously
sold.
During 1992, Avon recorded a discontinued operations provision of
approximately $10.0 million principally for claims and litigation relating
to businesses previously sold, which was offset by amounts recovered for notes
and securities previously written off.
Although Avon has completed its divestiture of all discontinued
operations, it may be liable for various contingencies relating to, among
other things, indemnifications given to the purchasers of certain
discontinued operations. An indemnification, currently being litigated,
covers a patent dispute, various environmental claims and numerous other
lawsuits and claims. Due to the complex nature of these contingencies, the
ultimate outcome and related total costs to Avon cannot currently be
determined. For further discussion of the contingencies, see Note 13 of the
Notes to the Consolidated Financial Statements and Item 3 of this report.
SEASONAL NATURE OF BUSINESS
Avon's sales and earnings have a marked seasonal pattern characteristic of
many companies selling cosmetics, fragrances and toiletries; gift and
decorative products; and fashion jewelry. Christmas sales cause a sales peak
in the fourth quarter of the year. Fourth quarter net sales were 32 percent
and 31 percent of full year net sales in 1994 and 1993, respectively, and
fourth quarter pretax income from continuing operations was 42 percent in 1994
and 1993.
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RESEARCH ACTIVITIES
Avon's research and development department is a leader in the industry,
based on the number of new product launches, including formulating affordable,
effective beauty treatments relevant to women's needs.
A team of researchers and technicians applies the disciplines of science to
the practical aspects of bringing products to market around the world.
Relationships with well known dermatologists and other specialists supplements
Avon's own research to deliver new formulas and ingredients. Each year, Avon
researchers test and develop more than 600 products in the cosmetic,
fragrance, toiletry and jewelry categories as well as analyze, evaluate and
develop gift and decorative products.
Avon has pioneered many innovative products, including Skin-So-Soft, its
best-selling bath oil; BioAdvance, the first skin care product with stabilized
retinol, the purest form of Vitamin A; and Collagen Booster, the premier
product to capitalize on Vitamin C technology. Avon also introduced the
benefits of aromatherapy to millions of American women, encapsulated color for
the Color-Release line and introduced alpha-hydroxy acid for the Anew
Perfecting Complex products.
The amounts incurred on research activities relating to the development of
new products and the improvement of existing products were $27.9 million in
1994, $28.5 million in 1993 and $27.9 million in 1992. This research included
the activities of product research and development and package design and
development. Most of these activities are related to the development of
cosmetic, fragrance and toiletry products.
ENVIRONMENTAL MATTERS
Pursuant to Avon's global environmental policy, environmental audits are
conducted to ensure Avon facilities around the world meet or exceed local
regulatory standards in such categories as waste disposal and air and water
emissions. A corporate environmental operations committee ensures that
opportunities for environmental performance improvements are reflected in our
products and packaging.
In general, compliance with environmental regulations which impact Avon's
global operations has not had, and is not anticipated to have, any material
effect upon the capital expenditures, financial position or competitive
position of Avon. Reference is made to Item 3 of this report for additional
information regarding environmental matters.
EMPLOYEES
At December 31, 1994, Avon employed approximately 30,400 persons. Of
these, approximately 7,900 were employed in the United States and approximate-
ly 22,500 in other countries. The number of employees tends to rise from a
low point in January to a high point in November and decreases somewhat in
December when Christmas shipments are completed.
ITEM 2. PROPERTIES
Avon's principal properties consist of manufacturing laboratories for the
production of cosmetics, fragrances and toiletries and fashion jewelry and
distribution facilities where offices are located and where finished
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merchandise is warehoused and shipped to Representatives in fulfillment of
their orders. Substantially all of these properties are owned by Avon or its
subsidiaries, are in good repair, adequately meet Avon's needs and operate at
reasonable levels of productive capacity.
The domestic manufacturing laboratories are located in Morton Grove, IL;
Springdale, OH; and Suffern, NY; and the distribution centers are located in
Atlanta, GA; Glenview, IL; Newark, DE; and Pasadena, CA. International
properties include three manufacturing laboratories, including a fashion
jewelry manufacturing laboratory in Ireland, and eight distribution
centers in Europe; five manufacturing laboratories and eleven distribution
centers in Latin America; one manufacturing and one distribution center in
Canada; and four manufacturing laboratories and nine distribution centers in
the Pacific. The research and development laboratories are located in
Suffern, NY. Avon leases space for its executive and administrative offices
in New York City and its fashion jewelry manufacturing facilities in Puerto
Rico. The manufacturing laboratory in Italy was sold in December 1994.
ITEM 3. LEGAL PROCEEDINGS
Various lawsuits and claims (asserted and unasserted), arising in the
ordinary course of business or related to businesses previously sold, are
pending or threatened against Avon. The most significant of these are
described below.
In 1991, a class action suit was initiated against Avon on behalf of
certain classes of holders of Avon's Preferred Equity-Redemption Cumulative
Stock ("PERCS"), alleging 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 June 1988, Mallinckrodt, Inc. ("Mallinckrodt") and International
Minerals & Chemical Corporation ("IMC"), now known as Mallinckrodt Group Inc.,
filed a lawsuit against Avon in the St. Louis Missouri City Circuit Court
arising from Avon's sale of Mallinckrodt to IMC in 1986. The suit alleged
that a certain patent dispute and a settlement, referred to as the DuPont
patent case, various environmental claims and numerous other lawsuits and
claims are contingent liabilities covered by an indemnification given by Avon
in connection with the sale of Mallinckrodt. In October 1991, the Missouri
Supreme Court affirmed the Circuit Court's decision that Avon has the
obligation to indemnify IMC and Mallinckrodt in connection with the DuPont
patent case, but remanded the matter for a trial on the damages, if any,
suffered by the parties. On July 27, 1992, a jury returned a verdict in the
DuPont patent case for $16.0 million, and a judgment for that amount plus
approximately $6.5 million interest was entered. On August 11, 1992, IMC and
Mallinckrodt filed post-trial motions, including a motion for a judgment
notwithstanding the verdict or, in the alternative, a motion for a new trial.
On November 5, 1992, the St. Louis Missouri City Circuit Court granted IMC's
and Mallinckrodt's motion for a judgment notwithstanding the verdict and
directed a verdict for plaintiffs in the amount of $27.1 million plus
interest. As of November 5, 1992, the interest amounted to approximately
$11.7 million. Avon, IMC and Mallinckrodt appealed this decision. This
issue was argued before the Missouri Court of Appeals, Eastern District on May
11, 1994. On November 8, 1994, the Court of Appeals overturned the judgment
notwithstanding the verdict and ordered a new trial. All possible further
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judicial review has now been exhausted and a retrial is expected during 1995.
Pre-trial proceedings and discovery activities are ongoing with respect to the
environmental and general litigation portions of the case.
With respect to the environmental contingencies which constitute a part of
the indemnification litigation, the total cost to Avon cannot be determined
with certainty as a result of such factors as the preliminary status of
information relating to the sites owned by the purchaser, the preliminary
regulatory involvement, the unknown magnitude and timing of cleanup efforts,
if any, to be undertaken by the purchaser or Mallinckrodt, the possibility of
recoveries against other parties, the uncertainty of the success of Avon's
defenses, and unasserted claims, if any. However, these factors have been
assessed and will continue to be assessed by Avon in estimating reserves to be
recorded in its consolidated financial statements.
The ultimate outcome and aggregate cost of resolving all of the above
contingencies will be based on a number of factors and will be determined over
a number of years. Accordingly, the total cost to Avon cannot currently be
determined with certainty. The reserves for such contingencies at December
31, 1994, which are recorded gross without anticipation of insurance
recoveries or other third-party recoveries, if any, have been estimated by
Avon's management based on its review of currently known facts and
circumstances at December 31, 1994. In the opinion of Avon's management,
based on its review of the preliminary information available at this time, the
difference, if any, between the total cost of resolving such contingencies and
reserves recorded by Avon at December 31, 1994 should not have a material
adverse impact on Avon's consolidated financial position or results of
operations, based on the current levels of such amounts. However, this
difference, if any, could have a material effect on results of operations in a
future period when resolved.
Avon is involved in a number of proceedings arising out of the federal
Superfund law and similar state laws. In some instances Avon, along with
other companies, has been designated as a potentially responsible party which
may be liable for costs associated with these various hazardous waste sites.
Based upon Avon's current knowledge of proceedings, management believes,
without taking into consideration any insurance recoveries, if any, that in
the aggregate they would not have a material adverse impact on Avon's
consolidated financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the quarter
ended December 31, 1994.
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Executive Officers of the Registrant
Officers are elected by the Board of Directors at its first meeting
following the Annual Meeting of Shareholders. Officers serve until the first
meeting of the Board of Directors following the Annual Meeting of Shareholders
at which Directors are elected for the succeeding year, or until their
successors are elected, except in the event of death, resignation or removal,
or the earlier termination of the term of office.
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Information regarding employment contracts between Avon and named
executive officers is incorporated by reference to the "Contracts with
Executives" section of Avon's Proxy Statement for the 1995 Annual Meeting of
Shareholders.
Listed below are the executive officers of Avon, each of whom (except as
noted) has served in various executive and operating capacities with Avon
during the past five years:
Elected
Title Name Age Officer
----- ---- --- -------
Chairman of the Board,
Chief Executive Officer and Director. James E. Preston 61 1971
President, Chief Operating Officer
and Director......................... Edward J. Robinson 54 1989
Executive Vice President............... John I. Novosad 54 1989
Senior Vice President, General Counsel
and Secretary........................ Ward M. Miller, Jr. 62 1993 (1)
Senior Vice President and Chief
Financial Officer.................... Edwina D. Woodbury 43 1990
Senior Vice Presidents................. Christina A. Gold 47 1993
Marcia L. Worthing 52 1988
Group Vice President, Controller....... Robert J. Conologue 46 1989
Group Vice President, Taxes and
Treasurer............................ Robert J. Corti 45 1988
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(1) Ward M. Miller, Jr. was elected Senior Vice President, General Counsel
and Secretary in October 1994. Mr. Miller joined Avon in February 1993 as
Vice President. Prior to joining Avon, he was Senior Vice President and
General Counsel of Nabisco Brands; and Vice President, Associate General
Counsel and Secretary of its parent, RJR Nabisco.
PART II
ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
This information is incorporated by reference to "Market Prices of Common
Stock by Quarter" on page 34 of Avon's 1994 Annual Report to Shareholders.
ITEM 6. SELECTED FINANCIAL DATA
The information for the five-year period 1990 through 1994 is incorporated
by reference to the "Eleven-Year Review" on pages 52 and 53 of Avon's 1994
Annual Report to Shareholders.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
This information is incorporated by reference to "Management's Discussion
and Analysis" on pages 24 through 33 of Avon's 1994 Annual Report to
Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This information is incorporated by reference to the "Consolidated
Financial Statements and Notes" on pages 35 through 50, together with the
report thereon of Coopers & Lybrand, L.L.P., on page 51, and "Results of
Operations by Quarter" on page 34 of Avon's 1994 Annual Report to
Shareholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors is incorporated by reference to the
"Election of Directors" and "Information Concerning the Board of Directors"
sections of Avon's Proxy Statement for the 1995 Annual Meeting of
Shareholders. Information regarding executive officers is presented in Part I
of this report.
ITEM 11. EXECUTIVE COMPENSATION
This information is incorporated by reference to the "Information
Concerning the Board of Directors" and "Executive Compensation" sections of
Avon's Proxy Statement for the 1995 Annual Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This information is incorporated by reference to the "Ownership of Shares"
section of Avon's Proxy Statement for the 1995 Annual Meeting of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information is incorporated by reference to the "Compensation
Committee Interlocks and Insider Participation" section and the "Contracts
with Executives" section of Avon's Proxy Statement for the 1995 Annual Meeting
of Shareholders.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
Annual
Report to
Shareholders Form 10-K
Page Number Page Number
------------ -----------
(a) 1. Consolidated Financial Statements of
Avon Products, Inc. and Subsidiaries
Consolidated statement of income for
each of the years in the three-year
period ended December 31, 1994........ 35
Consolidated balance sheet at
December 31, 1994 and 1993............ 36
Consolidated statement of cash flows for
each of the years in the three-year
period ended December 31, 1994........ 37
Consolidated statement of changes in
shareholders' equity for each of
the years in the three-year period
ended December 31, 1994............... 38
Notes to consolidated financial
statements............................ 39-50
Report of Independent Accountants
Coopers & Lybrand L.L.P............... 51
(a) 2. Financial Statement Schedules
Report of Independent Accountants
Coopers & Lybrand L.L.P............... S-1
Consent of Independent Accountants
Coopers & Lybrand L.L.P............... S-2
Financial statement schedule for each
of the years in the three-year period
ended December 31, 1994
VIII--Valuation and qualifying
accounts.................... S-3
Financial statements of the registrant and all other financial
statement schedules are omitted because they are not applicable or
because the required information is shown in the consolidated
financial statements and notes.
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(a) 3. Exhibits
Exhibit
Number Description
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3.1 --Restated Certificate of Incorporation of Avon, filed with the
Secretary of State of the State of New York on August 12, 1988
(incorporated by reference to Exhibit 3.1 to Avon's Annual
Report on Form 10-K for the year ended December 31, 1993).
3.2 --By-laws, as amended to April 27, 1990, of Avon (incorporated
by reference to Exhibit 3.1 to Avon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1990).
4.1 --Instrument defining the rights of holders of Avon's preferred
share purchase rights to purchase Avon's Series A Junior
Participating Preferred Stock (reference is made to Article
IIIA of the restated Certificate of Incorporation of Avon,
filed with the Secretary of State of New York State on August
12, 1988 and included as Exhibit 3.1 to the 1993 Annual Report
on Form 10-K).
4.2 --Rights Agreement, dated as of March 30, 1988 (the "Rights
Agreement"), between Avon and First Chicago Trust Company of
New York (as successor to Morgan Shareholder Services Trust
Company) (incorporated by reference to Exhibit 1 to Avon's
Registration Statement on Form 8-A, filed April 7, 1988).
4.3 --Amendment, dated as of January 3, 1989, to the Rights
Agreement (incorporated by reference to Exhibit 3 to Avon's
Amendment No. 1 on Form 8, filed January 4, 1989, amending its
Registration Statement on Form 8-A, filed April 7, 1988).
4.4 --Second Amendment, dated as of April 5, 1990, to the Rights
Agreement (incorporated by reference to Exhibit 4(c) to Avon's
Current Report on Form 8-K, dated April 5, 1990).
4.5 --Third Amendment, dated as of May 10, 1990, to the Rights
Agreement (incorporated by reference to Exhibit 4(d) to Avon's
Current Report on Form 8-K, dated May 10, 1990).
4.6 --Revolving Credit and Competitive Advance Facility Agreement,
dated as of October 5, 1994, among Avon, Avon Capital
Corporation and a group of banks and other lenders
(incorporated by reference to Exhibit 4.1 to Avon's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1994).
10.1* --Avon Products, Inc. 1993 Stock Incentive Plan, approved by
stockholders May 6, 1993 (incorporated by reference to Exhibit
10.2 to Avon's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1993).
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10.2* --Form of Stock Option Agreement to the Avon Products, Inc. 1993
Stock Incentive Plan (incorporated by reference to Exhibit
10.2 to Avon's Annual Report on Form 10-K for the year ended
December 31, 1993).
10.3* --Avon Products, Inc. 1994 Long-Term Incentive Plan, effective
as of January 1, 1994 (incorporated by reference to Exhibit
10.3 to Avon's Annual Report on Form 10-K for the year ended
December 31, 1993).
10.4* --Avon Products, Inc. 1970 Stock Option Incentive Plan, as
amended and restated through May 4, 1989 (incorporated by
reference to Exhibit 4.6 to Avon's Registration Statement on
Form S-8, Registration No. 33-28653, filed May 18, 1989).
10.5* --First Amendment, dated as of November 5, 1992, to the Avon
Products, Inc. 1970 Stock Option Incentive Plan as amended
and restated through May 4, 1989 (incorporated by reference to
Exhibit 10.1 to Avon's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1993).
10.6* --Supplemental Executive Retirement Plan and Supplemental Life
Plan of Avon Products, Inc., as amended and restated as of
September 1, 1994.
10.7* --Benefit Restoration Pension Plan of Avon Products, Inc.,
effective as of January 1, 1994.
10.8* --Trust Agreement, amended and restated as of March 2, 1990,
between Avon and Chase Manhattan Bank, N.A. (incorporated by
reference to Exhibit 10.2 to Avon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1990).
10.9* --First Amendment, dated as of January 30, 1992, to the Trust
Agreement, dated as of March 2, 1990, by and between Avon and
Chase Manhattan Bank, N.A. (incorporated by reference to
Exhibit 10.2 to Avon's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1993).
10.10* --Second Amendment, dated as of June 12, 1992 to the Trust
Agreement, dated as of March 2, 1990, by and between Avon and
Chase Manhattan Bank, N.A. (incorporated by reference to
Exhibit 10.3 to Avon's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1993).
10.11* --Third Amendment, dated as of November 5, 1992, to the Trust
Agreement, dated as of March 2, 1990, by and between Avon and
Chase Manhattan Bank, N.A. (incorporated by reference to
Exhibit 10.4 to Avon's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1993).
10.12* --The Avon Products, Inc. Deferred Compensation Plan, as amended
and restated as of October 8, 1990 (incorporated by reference
to Exhibit 10.5 to Avon's Annual Report on Form 10-K for the
year ended December 31, 1991).
13
14
10.13* --First Amendment, dated as of November 5, 1992, to the Avon
Products, Inc. Deferred Compensation Plan, as amended and
restated as of October 8, 1990 (incorporated by reference to
Exhibit 10.5 to Avon's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1993).
10.14* --Trust Agreement, dated as of August 3, 1989, between Avon and
Manufacturers Hanover Trust Company (incorporated by reference
to Exhibit 10.4 to Avon's Annual Report of Form 10-K for the
year ended December 31, 1989).
10.15* --Instrument of Amendment, effective as of April 1, 1990
amending various employee benefit plans and agreements as
stipulated in the Instrument of Amendment (incorporated by
reference to Exhibit 10.3 to Avon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1990).
10.16* --Employment Agreement, dated as of November 5, 1992, between
Avon and James E. Preston (incorporated by reference to
Exhibit 10.10 to Avon's Annual Report on Form 10-K for the
year ended December 31, 1992).
10.17* --Non-Qualified Stock Option Award, dated as of December 5,
1991, granted by Avon to James E. Preston (incorporated by
reference to Exhibit 10.11 to Avon's Annual Report on Form
10-K for the year ended December 31, 1991).
10.18* --Employment Agreement, dated as of September 1, 1994, between
Avon and Edward J. Robinson (incorporated by reference to
Exhibit 10.1 to Avon's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1994).
10.19* --Restricted Stock Agreement, effective as of November 4, 1993,
granted by Avon to Edward J. Robinson (incorporated by
reference to Exhibit 10.21 to Avon's Annual Report on Form
10-K for the year ended December 31, 1993).
10.20* --Form of Employment Agreement, dated as of September 1, 1994,
between Avon and certain senior officers (incorporated by
reference to Exhibit 10.2 to Avon's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1994).
10.21* --Avon Products, Inc. Directors' Retirement Plan, effective as
of January 1, 1988 (incorporated by reference to Exhibit 10.22
to Avon's Annual Report on Form 10-K for the year ended
December 31, 1991).
10.22* --First Amendment, dated as of November 5, 1992, to the Avon
Products, Inc. Directors' Retirement Plan (incorporated by
reference to Exhibit 10.6 to Avon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1993).
10.23* --Trust Agreement, dated as of December 31, 1991, between Avon
and Manufacturers Hanover Trust Company (incorporated by
reference to Exhibit 10.23 to Avon's Annual Report on Form
10-K for the year ended December 31, 1991).
14
15
10.24* --First Amendment, dated as of November 5, 1992, to the Trust
Agreement dated as of December 31, 1991, by and between Avon
and Manufacturers Hanover Trust Company (incorporated by
reference to Exhibit 10.7 to Avon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1993).
11.1 --Statement re computation of primary income per share.
11.2 --Statement re computation of fully diluted income per share.
13 --Portions of the Annual Report to Shareholders for the year
ended December 31, 1994 incorporated by reference in response
to Items 1, 5 through 8 in this filing.
21 --Subsidiaries of the registrant.
23 --Consent of Coopers & Lybrand L.L.P. (set forth on page S-2 of
this Annual Report on Form 10-K).
24 --Power of Attorney.
27 --Financial Data Schedule.
99 --Financial statements for the Avon Products, Inc. Employees'
Savings and Stock Ownership Plan and the Avon Mirabella/
Lomalinda Employees' Savings Plan for the year ended December
31, 1994 will be filed by amendment.
*The Exhibits identified above and in the Exhibit Index with an asterisk
(*) are management contracts or compensatory plans or arrangements.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the fourth quarter of
1994.
(c) Avon's Annual Report on Form 10-K for the year ended December 31,
1994, at the time of filing with the Securities and Exchange Commission, shall
modify and supersede all prior documents filed pursuant to Section 13, 14 or
15(d) of the Securities Exchange Act of 1934 for purposes of any offers or
sales of any securities after the date of such filing pursuant to any
Registration Statement or Prospectus filed pursuant to the Securities Act of
1933, which incorporates by reference such Annual Report on Form 10-K.
15
16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on the 23rd day
of March 1995.
Avon Products, Inc.
By/s/ WARD M. MILLER, JR.
--------------------------------
Ward M. Miller, Jr.
Senior Vice President, General Counsel
and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
Chairman of the Board and
Chief Executive Officer--
* Principal Executive
--------------------------- Officer and Director March 23, 1995
James E. Preston
* President, Chief Operating
--------------------------- Officer and Director March 23, 1995
Edward J. Robinson
Senior Vice President and
* Chief Financial Officer--
--------------------------- Principal Financial Officer March 23, 1995
Edwina D. Woodbury
Group Vice President,
* Controller--Principal
--------------------------- Accounting Officer March 23, 1995
Robert J. Conologue
BRENDA BARNES )
RICHARD S. BARTON* )
DANIEL B. BURKE* )
REMEDIOS DIAZ OLIVER* )
STANLEY C. GAULT )
GEORGE V. GRUNE* ) Directors March 23, 1995
CHARLES S. LOCKE* )
ANN S. MOORE* )
JOHN J. PHELAN, JR.* )
JOSEPH A. RICE* )
CECILY C. SELBY* )
*By/s/ WARD M. MILLER, JR.
------------------------------- March 23, 1995
Ward M. Miller, Jr. Attorney-in-fact
16
S-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of Avon Products, Inc.
Our report on the consolidated financial statements of Avon Products, Inc.
and subsidiaries as of December 31, 1994 and 1993 and for each of the years in
the three-year period ended December 31, 1994 has been incorporated by
reference in this Form 10-K from page 51 of the 1994 Annual Report to
Shareholders of Avon Products, Inc. In connection with our audits of such
financial statements, we have also audited the related financial statement
schedules for each of the years in the three-year period ended December 31,
1994, as listed in the Index under Item 14(a)2 of this Form 10-K.
In our opinion, the financial statement schedule for each of the years in
the three-year period ended December 31, 1994 referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
New York, New York
February 1, 1995
/s/Coopers & Lybrand L.L.P.
S-1
S-2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the following Registration
Statements of Avon Products, Inc.: Form S-8 (Reg. No. 2-37955), Form S-8
(Reg. No. 2-48080), Form S-8 (Reg. No. 2-61285), Form S-8 (Reg. No. 2-83235),
Form S-8 (Reg. No. 2-94959), Form S-8 (Reg. No. 33-28653), Form S-8 (Reg. No.
33-47209), Form S-8 (Reg. No. 33-60218), Form S-8 (Reg. No. 33-60918), Form
S-8 (Reg. No. 33-65998), Post Effective Amendment No. 1 to Form S-8 (Reg. No.
2-98707), Pre-Effective Amendment No. 1 to Form S-8 (Reg. No. 33-22099),
of our reports dated February 1, 1995 on our audits of (i) the consolidated
financial statements of Avon Products, Inc. as of December 31, 1994 and 1993
and for each of the years in the three-year period ended December 31, 1994,
which report is included in the 1994 Annual Report to Shareholders and
incorporated by reference in this Annual Report on Form 10-K and (ii) the
1994, 1993 and 1992 financial statement schedules of Avon Products, Inc.,
which report is included in this Annual Report on Form 10-K.
New York, New York
March 23, 1995
/s/Coopers & Lybrand L.L.P.
S-2
S-3
AVON PRODUCTS, INC. AND SUBSIDIARIES
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
(In millions)
Years ended December 31
Additions
--------------------
Balance at Charged to Charged Balance
beginning costs and to other at end
of period expenses accounts Deductions of period
---------- ---------- -------- ---------- ---------
1994
Allowance for doubtful
accounts receivable. $22.0 $ 64.9 $ -- $ 59.6(a) $27.3
===== ====== ===== ====== =====
1993
Allowance for doubtful
accounts receivable. $21.4 $ 51.4 $ -- $ 50.8(a) $22.0
===== ====== ===== ====== =====
1992
Allowance for doubtful
accounts receivable. $28.5 $ 45.3 $ -- $ 52.4(a) $21.4
Allowance for long-
term receivables
and investments..... 33.1 -- -- 33.1(b) --
----- ------ ----- ------ -----
$61.6 $ 45.3 $ -- $ 85.5 $21.4
===== ====== ===== ====== =====
------------
Note: Amounts have been restated for the sale of Giorgio, see Note 3 of the
Notes to the Consolidated Financial Statements.
(a)Accounts written off, net of recoveries and foreign currency translation
adjustment.
(b)Write-off of various notes and other securities, which Avon received in
connection with the sale of health care and other businesses.
S-3