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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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) September 30, 2002
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AVON PRODUCTS, INC.
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(Exact Name of Registrant as Specified in Its Charter)
New York
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(State or Other Jurisdiction of Incorporation)
1-4881 13-0544597
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(Commission File Number) (IRS Employer Identification No.)
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.
As previously announced, the Company is currently implementing certain of its
Business Transformation initiatives, including an end-to-end evaluation of
business processes in key operating areas, with target completion dates through
2004. Specifically, the initiatives focus on simplifying Avon's marketing
processes, driving supply chain opportunities, strengthening Avon's sales model
through the Sales Leadership program and the Internet, and streamlining the
Company's organizational structure, which includes plans to integrate certain
similar activities across markets to achieve efficiencies.
On September 30, 2002, the Company committed to the execution of additional
programs related to the implementation of its Business Transformation
initiatives. In connection with these initiatives, in the third quarter of
2002, Avon will record special and non-recurring charges of approximately $43.6
million pretax ($30.4 million after tax, or $.12 per diluted share), primarily
associated with the following initiatives:
o Supply Chain initiatives including changes in manufacturing sourcing
and other initiatives to realize efficiencies within the supply chain;
o Workforce Reduction Programs based on productivity improvements and
leveraging a regional structure; and
o Sales Transformation initiatives including a shift to a more variable
expense base and changes in the selling structure associated with the
rollout of Avon's Sales Leadership program.
Approximately 90% of the charge will result in future cash expenditures.
Beginning in 2003, Avon expects to see savings, net of transitional costs, of
approximately $15 million from actions associated with this special charge. It
is expected that the savings will provide additional financial flexibility to
achieve profit targets, while enabling further investment in consumer growth
strategies and driving operating margin expansion. Cost savings from current
initiatives should accelerate thereafter, with net savings in 2004 expected to
be approximately $40 to $50 million and incremental cash flow from operations
in 2004 of $20 to $30 million.
In the fourth quarter of 2001, Avon recorded special and non-recurring charges
of $97.4 million pretax ($68.3 million after-tax, or $.28 per diluted share),
primarily associated with facility rationalizations and workforce reduction
programs related to implementation of certain Business Transformation
initiatives. While project plans associated with these initiatives have not
changed, the Company has experienced favorable adjustments to its original cost
estimates. As a result, in the third quarter 2002, the Company will reverse
$7.3 million pretax ($5.2 million after-tax, or $.02 per diluted share) against
the Special Charge line in the Statement of Income, where the estimates were
originally recorded.
The third quarter charge (net of adjustments) will affect all business segments
as follows:
Corporate
North Latin and
America* U.S. America Europe Pacific Other Total
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Third Quarter
Special Charge $ 4.7 $ 6.2 $ 4.1 $17.5 $ 7.2 $ 3.9 $43.6
Adjustments (2.0) (4.4) - - - (0.9) (7.3)
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Net $ 2.7 $ 1.8 $ 4.1 $17.5 $ 7.2 $ 3.0 $36.3
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*Excludes amounts related to the U.S.
Initiatives associated with the third quarter special charge will continue
to help the Company achieve its target of a 250 basis-point expansion of
its operating margin by the end of 2004.
This report contains forward looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. The Company refers you
to the section on Forward-Looking Statements in its Form 10-K/A filed on
August 13, 2002.
SIGNATURE
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: October 2, 2002 By: /s/ Gilbert L. Klemann, II
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Name: Gilbert L. Klemann, II
Title: Senior Vice President,
General Counsel and Secretary