Prospectus Supplement
(to Prospectus dated March 21, 2003)
Registration File Number: 333-103432
$125,000,000
Avon Products, Inc.
4.625% Notes Due 2013
This is an offering of $125,000,000 aggregate principal amount of our
4.625% Notes due 2013. The Notes will mature on May 15, 2013. We will pay
interest on the Notes on each May 15 and November 15, commencing November 15,
2003.
We may redeem some or all of the Notes at any time at the prices described
under the heading "Description of Notes--Optional Redemption."
The Notes are our unsecured senior obligations.
The Notes are not expected to be listed on any securities exchange or
included in any quotation system.
This prospectus supplement and the related prospectus include additional
information about the terms of the Notes.
See "Risk Factors," which begins on page two of the accompanying
prospectus, for a discussion of certain of the risks you should consider before
investing in the Notes.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this prospectus supplement or the prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
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Per Note Total
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Public Offering Price (1)..................... 102.228% $127,785,000
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(1) Plus accrued interest from May 13, 2003.
We expect that delivery of the Notes will be made in New York, New York on
or about May 13, 2003.
Deutsche Bank Securities
The date of this prospectus supplement is May 8, 2003.
You should rely only on the information contained in or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We
have not and the underwriter has not authorized anyone to provide you with
different information. We are not making an offer of these securities in any
state where the offer is not permitted. You should assume that the information
contained in this prospectus supplement and the accompanying prospectus, as
well as information we previously filed with the Securities and Exchange
Commission and incorporated by reference, is accurate only as of their
respective dates. The terms "the Company," "Avon", "we," "us," and "our" refer
to Avon Products, Inc. and our consolidated subsidiaries, where appropriate.
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Table of Contents
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PROSPECTUS SUPPLEMENT
Page
Where You Can Find More Information...................................... S-1
Special Note on Forward Looking Statements............................... S-1
Summary.................................................................. S-2
Use of Proceeds.......................................................... S-4
Consolidated Ratio of Earnings to Fixed Charges.......................... S-4
Description of Notes..................................................... S-5
United States Taxation................................................... S-9
Underwriting............................................................. S-12
Legal Matters............................................................ S-13
Experts.................................................................. S-13
PROSPECTUS
About This Prospectus.................................................... 1
Where You Can Find More Information...................................... 1
Special Note on Forward Looking Statements............................... 1
Risk Factors............................................................. 2
Avon Products, Inc....................................................... 5
Use of Proceeds.......................................................... 6
Consolidated Ratio of Earnings to Fixed Charges.......................... 6
Description of Debt Securities........................................... 8
Selling Securityholder................................................... 17
Plan of Distribution..................................................... 17
Legal Matters............................................................ 18
Experts.................................................................. 18
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Where You Can Find More Information
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document that we file at
the Public Reference Room of the SEC at 450 Fifth Street, NW, Washington, D.C.
20549. You may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an
Internet site at http://www.sec.gov, from which interested persons can
electronically access the registration statement including the exhibits and
schedules thereto.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus supplement and the accompanying
prospectus, and information that we file later with the SEC will automatically
update and supersede earlier information. We incorporate by reference the
documents listed below and any future filings made with the SEC under Sections
13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until we sell
all of the securities:
o Annual Report on Form 10-K for the year ended December 31, 2002.
You may request a copy of this filing at no cost, by writing or
telephoning the office of the Corporate Secretary, Avon Products, Inc., 1345
Avenue of the Americas, New York, New York 10105-0196, telephone (212)
282-5000. Information about us is also available on our web site at
www.avon.com. Information on our web site is not incorporated by reference into
this prospectus supplement.
Special Note on Forward-Looking Statements
Certain statements in, or which we incorporate by reference into, this
prospectus supplement and the accompanying prospectus, which are not historical
facts or information, are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Words such as "anticipates",
"believes", "expects", "estimates", "intends", "plans", "projects", and similar
expressions may identify such forward-looking statements. Such forward-looking
statements are based on management's reasonable current assumptions and
expectations. Such forward-looking statements involve risks, uncertainties and
other factors which may cause our actual results, levels of activity,
performance or achievement to be materially different from any future results,
levels of activity, performance or achievement 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 factors
include, among others, the following:
o general economic and business conditions in our markets, including
economic and political uncertainties in Latin America;
o the possible impact of SARS-related concerns on the Company's
Asia-Pacific business and its Asian-based supply chain;
o our ability to implement our business strategy and our business
transformation initiatives, including the integration of similar
activities across markets to achieve efficiencies;
o our ability to achieve anticipated cost savings and our profitability
and growth targets;
o the impact of substantial currency fluctuations in our principal
foreign markets and the success of our foreign currency hedging and
risk management strategies;
o the impact of possible pension funding obligations and increased
pension expense on our cash flow and results of operations;
o the effect of legal and regulatory proceedings, as well as
restrictions imposed on us, our operations or our Representatives by
foreign governments;
o our ability to successfully identify new business opportunities;
o our access to financing; and
o our ability to attract and retain key executives.
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SUMMARY
This summary may not contain all the information that may be important to
you. You should read the entire prospectus supplement and accompanying
prospectus, as well as all the documents incorporated by reference in them,
before making an investment decision.
The Company
We are a global manufacturer and marketer of beauty and related products.
We presently have operations in 58 countries, including the United States, and
our products are distributed in 85 more for coverage in 143 markets. Sales are
made to the ultimate customer principally through a combination of direct
selling and marketing by approximately 3.9 million independent Avon
Representatives, approximately 463,000 of whom are in the United States.
Representatives are independent contractors or independent dealers, and are not
our agents or employees. Representatives purchase products directly from us and
sell them to their customers.
We commenced operations in 1886 and were incorporated in the State of New
York on January 27, 1916.
Recent Developments
On April 25, 2003 we reported results for the first quarter of 2003.
Earnings for the first quarter of 2003 were $.42 per share, an increase of 5%
from last year's first-quarter earnings of $.40 per share. Our total revenue
increased to $1,481.4 million for the first quarter of 2003 up from $1,383.6
million for the comparable period in 2002.
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The Offering
Issuer................................. Avon Products, Inc.
Securities Offered..................... $125,000,000 principal amount of
4.625% Notes due 2013.
Maturity............................... May 15, 2013.
Interest Rate.......................... 4.625% per year (calculated using a
360-day year).
Interest Payment Dates................. Each May 15 and November 15,
beginning on November 15, 2003.
Interest on the Notes being offered
by this prospectus supplement will
accrue from May 13, 2003.
Ranking................................ The Notes are our unsecured senior
obligations and rank pari passu to
our existing and future unsecured
senior indebtedness and, to the
extent we incur subordinated
indebtedness in the future, senior
to such indebtedness.
Optional Redemption.................... We may redeem some or all of the
Notes at any time at the prices
described under the heading
"Description of Notes--Optional
Redemption."
Use of Proceeds........................ We will not receive any cash
proceeds from the sale of the
Notes. See "Use of Proceeds."
Trustee, Registrar and Paying Agent.... JPMorgan Chase Bank.
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Use of Proceeds
We will not receive any cash proceeds from the sale of the Notes offered
hereby. Prior to this offering, the underwriter purchased from the holders
thereof the entire outstanding $100 million aggregate principal amount of our
privately issued 6.25% Putable/Callable Notes due May 1, 2018, Putable/Callable
May 1, 2003. Pursuant to an agreement with the underwriter, we then modified
the Putable/Callable Notes into $125 million aggregate principal amount of
4.625% Notes due May 15, 2013, such modified principal amount representing the
value of the Putable/Callable Notes and their related call option, plus
approximately $4 million principal amount of additional notes issued to the
underwriter for cash. We have agreed with the underwriter to exchange the
modified notes it holds for $125,000,000 aggregate principal amount of the
Notes. The underwriter will retain all cash proceeds from the sale of the Notes
offered hereby.
Consolidated Ratio of Earnings to Fixed Charges
The following table sets forth our consolidated ratios of earnings to
fixed charges for the years indicated:
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Year Ended December 31,
----------------------------------------
2002 2001 2000 1999 1998
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Consolidated Ratio of Earnings to Fixed Charges 11.01 7.72 7.0 7.6 3 8.24
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(1) Includes net charges of $36.3 million pre-tax ($25.2 million after tax).
The net charges represent charges of $43.6 million pre-tax ($30.4 million
after tax), primarily associated with supply chain initiatives, workforce
reduction programs and sales transformation initiatives, partially offset
by an adjustment of $7.3 million pre-tax ($5.2 million after tax) to the
charge recorded in the fourth quarter of 2001.
(2) Includes charges of $97.4 million pre-tax ($68.3 million after tax),
primarily associated with facility rationalizations and workforce
reduction programs related to implementation of certain business
transformation initiatives; a charge of $6.4 million pre-tax ($3.4 million
after tax) related to the settlement of a contested tax assessment in
Argentina; and a contract settlement gain, net of related expenses, of
$25.9 million pre-tax ($15.7 million after tax) related to the
cancellation of a retail agreement between Avon and Sears Roebuck &
Company.
(3) Includes charges of $136.4 million pre-tax ($111.9 million after tax)
related to our Business Process Redesign (BPR) program, and an asset
impairment charge of $38.1 million pre-tax ($24.0 million after tax)
related to the write-off of the carrying value of an order management
software system that had been under development.
(4) Includes charges of $154.4 million pre-tax ($122.8 million after tax)
related to our BPR program.
For purposes of computing the ratio of earnings to fixed charges,
"earnings" consist of earnings before income taxes, minority interest and
cumulative effect of accounting changes, plus fixed charges and the
amortization of capitalized interest. "Fixed charges" consist of interest
incurred on indebtedness, amortization of debt discount, fees and expenses plus
one-third of the rental expense from operating leases, which management
believes is a reasonable approximation of the interest component of rental
expense. The ratios of earnings to fixed charges are calculated as follows:
(Income before income taxes, minority interest and cumulative effect of accounting
----------------------------------------------------------------------------------
changes) + (Fixed charges) + (Amortization of capitalized interest)
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(Fixed charges)
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DESCRIPTION OF NOTES
General
The Company will issue the Notes under an indenture between itself and
JPMorgan Chase Bank, as trustee, to be dated as of May 13, 2003. The following
is a summary of the material provisions of the Indenture. It does not include
all of the provisions of the Indenture. The following description of the
particular terms of the Notes supplements the description in the accompanying
prospectus of the general terms and provisions of our debt securities. We urge
you to read the Indenture because it defines your rights. The terms of the
Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended. A copy
of the form of Indenture has been filed as an exhibit to the registration
statement of which the accompanying prospectus is a part.
The Company will issue the Notes in fully registered form in denominations
of $1,000 and integral multiples thereof. The trustee will initially act as
Paying Agent and Registrar for the Notes. The Notes may be presented for
registration or transfer and exchange at the offices of the Registrar. The
Company may change any Paying Agent and Registrar without notice to holders of
the Notes. The Company will pay principal (and premium, if any) on the Notes at
the trustee's corporate office in New York, New York. At the Company's option,
interest may be paid at the trustee's corporate trust office or by check mailed
to the registered address of holders.
Principal, Maturity and Interest
The Notes will initially be limited to $125,000,000 in aggregate principal
amount. The Notes will mature on May 15, 2013. Interest on the Notes will
accrue at the rate of 4.625% per annum and will be payable semiannually in cash
on each May 15 and November 15, commencing on November 15, 2003, to the persons
who are registered holders on the fifteenth calendar day immediately preceding
the applicable interest payment date. Interest on the Notes will accrue from
the most recent date to which interest has been paid or, if no interest has
been paid, from and including the date of issuance.
The Notes will not be entitled to the benefit of any mandatory sinking
fund.
Ranking
The Notes will be unsecured obligations of the Company, ranking pari passu
in right of payment with all other unsecured senior obligations of the Company.
Optional Redemption
The Notes will be redeemable, as a whole or in part, at our option, at any
time or from time to time, by mailing notice to the registered address of each
holder of Notes at least 30 days but not more than 60 days prior to the
redemption. The redemption price will be equal to the greater of (1) 100% of
the principal amount of the Notes to be redeemed or (2) the sum of the present
values of the Remaining Scheduled Payments (as defined below) on those Notes
discounted, on a semiannual basis (assuming a 360-day year consisting of twelve
30-day months), at a rate equal to the sum of the applicable Treasury Rate (as
defined below) plus 25 basis points. Accrued interest, if any, will be paid to
the date of redemption.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Notes that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining
term of the Notes. "Independent Investment Banker" means one of the Reference
Treasury Dealers appointed by the trustee at our direction.
"Comparable Treasury Price" means, with respect to any Redemption Date, as
determined by the trustee (i) the average of the Reference Treasury Dealer
Quotations (as defined below) for such Redemption Date, after excluding the
highest and lowest of such Reference Treasury Dealer Quotations, or (ii) if the
trustee obtains fewer than four such Reference Treasury Dealer Quotations, the
average of all such quotations.
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"Redemption Date" when used with respect to any Note to be redeemed, means
the date which is a business day fixed for such redemption by the Company
pursuant to the Indenture.
"Reference Treasury Dealer" means each of Deutsche Bank Securities Inc.
and its successors and three additional nationally recognized investment
banking firms selected by the Company. If any Reference Treasury Dealer shall
cease to be a primary U.S. Government securities dealer, we will substitute
another nationally recognized investment banking firm that is a primary U.S.
Government securities dealer.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined
by the trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the trustee by such Reference Treasury Dealer, at 5:00 p.m., New
York City time, on the third business day preceding such Redemption Date.
"Remaining Scheduled Payments" means, with respect to the Notes to be
redeemed, the remaining scheduled payments of principal of and interest on
those Notes that would be due after the related Redemption Date but for that
redemption; provided, however, that if such Redemption Date is not an interest
payment date with respect to the Notes to be redeemed, the amount of the next
succeeding scheduled interest payment on those Notes will be reduced by the
amount of interest accrued on such Notes to such Redemption Date.
"Treasury Rate" means, with respect to any Redemption Date, the rate per
annum equal to the semiannual equivalent yield to maturity (computed as of the
second business day immediately preceding that Redemption Date) of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for that Redemption Date.
On or after the Redemption Date, interest will cease to accrue on the
Notes or any portion of the Notes called for redemption (unless we default in
the payment of the redemption price and accrued interest). On or before the
Redemption Date, we will deposit with a paying agent (or the trustee) money
sufficient to pay the redemption price of and accrued interest on the Notes to
be redeemed on that date. If less than all of the Notes are to be redeemed, the
Notes to be redeemed shall be selected by the Trustee, pro rata, by lot or by a
method the trustee deems to be fair and appropriate.
Further Issues of the Same Series
We may, from time to time, without the consent of the existing holders of
the Notes, issue additional notes under the Indenture having the same terms as
the Notes in all respects, except for the issue date, the issue price and the
initial interest payment date. Any such additional notes will be consolidated
with and form a single series with the Notes being offered by this prospectus
supplement.
In addition to the Notes, we may issue other series of debt securities
under the Indenture. There is no limit on the total aggregate principal amount
of debt securities that we can issue under the Indenture.
Book-Entry System
Upon sale, the Notes will be represented by a single "Global Security."
The Global Security representing the Notes will be deposited with, or on behalf
of, DTC and will be registered in the name of Cede & Co., as nominee of DTC.
The Global Security may not be transferred except as a whole by a nominee of
DTC to DTC or to another nominee of DTC, or by DTC or any such nominee to a
successor of DTC of such successor. All Notes will be denominated in United
States dollars.
So long as DTC or its nominee is the registered owner of the Global
Security, DTC or its nominee, as the case may be, will be the sole holder of
the Notes represented thereby for all purposes under the indenture. Except as
otherwise provided in this section, the beneficial owners of the Global
Security representing the Notes will not be entitled to receive physical
delivery of certificated Notes and will not be considered the holders thereof
for any purpose under the indenture, and the Global Security representing the
Notes shall not be exchangeable or
S-6
transferable. Accordingly, each person owning a beneficial interest in the
Global Security must rely on the procedures of DTC and, if such person is not a
participant, on the procedures of the participant through which such person
owns its interest, in order to exercise any rights of a holder under the
indenture. The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in certificated form. Such
limits and such laws may impair the ability to transfer beneficial interests in
the Global Security representing the Notes.
The Global Security representing the Notes is exchangeable for
certificated Notes of like tenor and terms and of differing authorized
denominations aggregating a like amount, only if:
o DTC notifies us that it is unwilling or unable to continue as
depositary for the Global Security;
o DTC ceases to be a clearing agency registered under the Securities
Exchange Act of 1934;
o we, in our sole discretion, determine that the Global Security shall
be exchangeable for certificated Notes; or
o there shall have occurred and be continuing an Event of Default under
the indenture with respect to the Notes.
Upon any such exchange, the certificated Notes shall be registered in the names
of the beneficial owners of the Global Security representing the Notes as
provided by DTC's relevant participants (as identified by DTC).
The description of the operations and procedures of DTC set forth below
are provided solely as a matter of convenience. These operations and procedures
are solely within the control of the respective settlement systems and are
subject to change by them from time to time. Neither we nor the initial
purchaser take any responsibility for these operations or procedures, and
investors are urged to contact the relevant system or its participants directly
to discuss these matters.
The following is based on information furnished by DTC:
o DTC is a limited-purpose trust company organized under the laws of
the State of New York, a "banking organization" within the meaning of
the New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act of 1934. DTC holds
securities that its participants deposit with DTC. DTC also
facilitates the settlement among participants of securities
transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in participants'
accounts, thereby eliminating the need for physical movement of
securities certificates. Direct participants include securities
brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. Access to DTC's system is available
to securities brokers and dealers, banks and trust companies that
clear through or maintain a custodial relationship with a direct
participant, either directly or indirectly.
o Persons who are not participants may beneficially own the Notes held
by DTC only through direct participants or indirect participants.
Purchases of the Notes under DTC's system must be made by or through
direct participants, which will receive a credit for such Notes on
DTC's records. The ownership interest of each actual purchaser of
each Note represented by the Global Security ("Beneficial Owner") is
in turn to be recorded on the direct participants' and indirect
participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchase, but Beneficial Owners are
expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from
the direct participants or indirect participants through which such
Beneficial Owner entered into the transaction. Transfers of ownership
interests in the Global Security representing the Notes are to be
accomplished by entries made on the books of
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participants acting on behalf of Beneficial Owners. Beneficial Owners
of the Global Security representing the Notes will not receive
certificated Notes representing their ownership interests therein,
except in the event that use of the book-entry system for such the
Notes is discontinued.
o Principal, premium, if any, and interest payments on the Global
Security representing the Notes will be made to DTC. DTC's practice
is to credit direct participants' accounts on the applicable payment
date in accordance with their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not receive
payment on such date. Payments by participants to Beneficial Owners
will be governed by standing instructions and customary practices, as
is the case with securities held for the accounts of customers in
bearer form or registered in "street name," and will be the
responsibility of such participant and not of DTC, the trustee or
Avon, subject to any statutory or regulatory requirements as may be
in effect from time to time. Payment of principal, premium, if any,
and interest to DTC is our and the trustee's responsibility,
disbursement of such payments to direct participants is the
responsibility of DTC, and disbursement of such payments to the
Beneficial Owners is the responsibility of direct participants and
indirect participants.
o DTC may discontinue providing its services as securities depository
with respect to the Notes at any time by giving reasonable notice to
us or the trustee. Under such circumstances, in the event that a
successor securities depository is not obtained, certificated Notes
are required to be printed and delivered.
The information in this section concerning DTC and DTC's system has been
obtained from sources that we believe to be reliable, but we take no
responsibility for the accuracy thereof. Transfers between participants in DTC
will be effected in accordance with DTC's procedures and will be settled in
same-day funds.
Governing Law
The indenture and the Notes shall be governed by, and construed in
accordance with the laws of the State of New York, without regard to the
conflicts of laws principles thereof.
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UNITED STATES TAXATION
The following are the material United States federal tax consequences of
ownership and disposition of the Notes. This discussion only applies to Notes
that meet all of the following conditions:
o they are purchased by those initial holders who purchase Notes at the
"issue price", which will equal the first price to the public (not
including bond houses, brokers or similar persons or organizations
acting in the capacity of underwriters, placement agents or
wholesalers) at which a substantial amount of the Notes is sold for
money; and
o they are held as capital assets.
This discussion does not describe all of the tax consequences that may be
relevant to a holder in light of his particular circumstances or to holders
subject to special rules, such as:
o certain financial institutions;
o insurance companies;
o dealers in securities or foreign currencies;
o persons holding Notes as part of a hedge;
o United States Holders (as defined below) whose functional currency is
not the U.S. dollar;
o partnerships or other entities classified as partnerships for U.S.
federal income tax purposes; or
o persons subject to the alternative minimum tax.
This summary is based on the Internal Revenue Code of 1986, as amended to
the date hereof, administrative pronouncements, judicial decisions and final,
temporary and proposed Treasury Regulations, changes to any of which subsequent
to the date of this prospectus supplement may affect the tax consequences
described herein. Persons considering the purchase of Notes are urged to
consult their tax advisers with regard to the application of the United States
federal income tax laws to their particular situations as well as any tax
consequences arising under the laws of any state, local or foreign taxing
jurisdiction.
Tax Consequences to United States Holders
As used herein, the term "United States Holder" means a beneficial owner
of a Note that is for United States federal income tax purposes:
o a citizen or resident of the United States;
o a corporation, or other entity taxable as a corporation for U.S.
federal income tax purposes, created or organized in or under the
laws of the United States or of any political subdivision thereof; or
o an estate or trust the income of which is subject to United States
federal income taxation regardless of its source.
The term United States Holder also includes certain former citizens and
residents of the United States.
Payments of Interest
Interest paid on a Note will be taxable to a United States Holder as
ordinary interest income at the time it accrues or is received in accordance
with the Holder's method of accounting for federal income tax purposes.
Amortizable Bond Premium
Because the Notes will be issued for an amount that is greater than the
principal amount, the holder of a Note will be considered to have purchased the
Note with amortizable bond premium. The holder may elect to amortize this
premium, using a constant yield method, over the remaining term of the Note. A
United States Holder may generally use the amortizable bond premium allocable
to an accrual period to offset interest required to be included in such
Holder's income with respect to the note in that accrual period. A Holder who
elects to amortize bond premium must reduce his tax basis in the note by the
amount of the premium amortized in any year. An
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election to amortize bond premium applies to all taxable debt obligations then
owned and thereafter acquired by the Holder and may be revoked only with the
consent of the Internal Revenue Service.
A United States Holder may make an election to include in gross income all
interest that accrues on any Notes (adjusted by any amortizable bond premium)
in accordance with a constant yield method based on the compounding of interest
(a "constant yield election"). If a Holder makes a constant yield election for
a Note with amortizable bond premium, such election will result in a deemed
election to amortize bond premium for all of the Holder's debt instruments with
amortizable bond premium and may be revoked only with the permission of the
Internal Revenue Service with respect to debt instruments acquired after
revocation.
Sale, Exchange or Retirement of the Notes
Upon the sale, exchange or retirement of a Note, a United States Holder
will recognize taxable gain or loss equal to the difference between the amount
realized on the sale, exchange or retirement and the Holder's adjusted tax
basis in the Note. A United States Holder's adjusted tax basis in a note will
equal the cost of the Note to the Holder reduced by any amortized premium and
any principal payments received by the Holder. For these purposes, the amount
realized does not include any amount attributable to accrued interest. Amounts
attributable to accrued interest are treated as interest as described under
"Payments of Interest" above.
Except as described below, gain or loss realized on the sale, exchange or
retirement of a Note will generally be capital gain or loss and will be
long-term capital gain or loss if at the time of sale, exchange or retirement
the Note has been held for more than one year.
A United States Holder who sells the Notes at a loss that meets certain
thresholds may be required to file a disclosure statement with the Internal
Revenue Service under newly promulgated Treasury Regulations.
Backup Withholding and Information Reporting
Information returns will be filed with the Internal Revenue Service in
connection with payments on the Notes and the proceeds from a sale or other
disposition of the Notes. A United States Holder will be subject to United
States backup withholding tax on these payments if the United States Holder
fails to provide its taxpayer identification number to the paying agent and
comply with certain certification procedures or otherwise establish an
exemption from backup withholding. The amount of any backup withholding from a
payment to a United States Holder will be allowed as a credit against the
United States Holder's United States federal income tax liability and may
entitle the United States Holder to a refund, provided that the required
information is furnished to the Internal Revenue Service.
Tax Consequences to Non-United States Holders
As used herein, the term "Non-United States Holder" means a beneficial
owner of a Note that is, for United States federal income tax purposes:
o an individual who is classified as a nonresident for U.S. federal
income tax purposes;
o a foreign corporation; or
o a nonresident alien fiduciary of a foreign estate or trust.
"Non-United States Holder" does not include a Holder who is an individual
present in the United States for 183 days or more in the taxable year of
disposition and who is not otherwise a resident of the United States for U.S.
federal income tax purposes. Such a Holder is urged to consult his or her own
tax advisor regarding the U.S. federal income tax consequences of the sale,
exchange or other disposition of a note.
Subject to the discussion below concerning backup withholding:
S-10
o payments of principal, interest and premium on the Notes by the
Company or any paying agent to any Non-United States Holder will not
be subject to United States federal withholding tax, provided that,
in the case of interest,
o the Holder does not own, actually or constructively, 10 percent
or more of the total combined voting power of all classes of
stock of the Company entitled to vote and is not a controlled
foreign corporation related, directly or indirectly, to the
Company through stock ownership and is not a bank receiving
certain types of interest; and o the certification requirement
described below has been fulfilled with respect to the
beneficial owner, as discussed below;
o a Non-United States Holder of a Note will not be subject to
United States federal income tax on gain realized on the sale,
exchange or other disposition of such Note, unless the gain is
effectively connected with the conduct by the Holder of a trade
or business in the United States.
Certification Requirement
Interest will not be exempt from withholding tax unless the beneficial
owner of that Note certifies on Internal Revenue Service Form W-8BEN, under
penalties of perjury, that it is not a United States person.
If a Non-United States Holder of a Note is engaged in a trade or business
in the United States, and if interest on the Note is effectively connected with
the conduct of this trade or business, the Non-United States Holder, although
exempt from the withholding tax discussed in the preceding paragraph, will
generally be taxed in the same manner as a United States Holder (see "Tax
Consequences to United States Holders" above), except that the Holder will be
required to provide to the Company a properly executed Internal Revenue Service
Form W-8ECI in order to claim an exemption from withholding tax. These Holders
should consult their own tax advisors with respect to other U.S. tax
consequences of the ownership and disposition of Notes including the possible
imposition of a 30% branch profits tax.
Subject to benefits provided by an applicable estate tax treaty, a Note or
coupon held by an individual who is a Non-United States Holder may be subject
to United States federal estate tax upon the individual's death if, at such
time, interest payments on the Note would have been:
o subject to United States federal withholding tax (even if the W-8BEN
certification requirement described above were satisfied); or
o effectively connected to the conduct by the Holder of a trade or
business in the United States.
Backup Withholding and Information Reporting
Information returns will be filed with the United States Internal Revenue
Service in connection with payments on the Notes. Unless the Non-United States
Holder complies with certification procedures to establish that it is not a
United States person, information returns may be filed with the United States
Internal Revenue Service in connection with the proceeds from a sale or other
disposition and the Non-United States Holder may be subject to United States
backup withholding tax on payments on the Notes or on the proceeds from a sale
or other disposition of the Notes. The certification procedures required to
claim the exemption from withholding tax on interest described above will
satisfy the certification requirements necessary to avoid the backup
withholding tax as well. The amount of any backup withholding from a payment to
a Non-United States Holder will be allowed as a credit against the Non-United
States Holder's United States federal income tax liability and may entitle the
Non-United States Holder to a refund, provided that the required information is
furnished to the Internal Revenue Service.
S-11
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting
agreement between us and Deutsche Bank Securities Inc., we have agreed to
deliver to the underwriter all, but not less than all, of the Notes, in
exchange for the delivery by the underwriter of our outstanding privately
issued 4.625% Notes due May 15, 2013.
In consideration for its services we have agreed to pay the underwriter a
flat fee of $937,500 upon completion of the offering of the Notes.
We estimate that our expenses for this offering, excluding the fee paid to
the underwriter, will be approximately $400,000.
The underwriting agreement provides that the obligations of the
underwriter are subject to certain conditions precedent.
We have been advised by the underwriter that the underwriter proposes to
offer the Notes to the public at the public offering price set forth on the
cover page of this prospectus supplement. After commencement of the offering,
the offering price and other selling terms may be changed by the underwriter.
The Notes are not listed on any securities exchange. The underwriter has
advised us that it will act as a market-maker for the Notes. However, the
underwriter is not obligated to do so and may discontinue any market-making at
any time without notice. No assurance can be given as to the liquidity of the
trading market for the Notes.
We have agreed to indemnify the underwriter and certain controlling
persons against certain liabilities, including certain liabilities under the
Securities Act.
The underwriter has advised us that, pursuant to Regulation M under the
Securities Exchange Act of 1934, as amended, certain persons participating in
the offering may engage in transactions, including overallotment, stabilizing
bids, syndicate covering transactions or the imposition of penalty bids, which
may have the effect of stabilizing or maintaining the market price of the Notes
at a level above that which might otherwise prevail in the open market.
Overallotment involves syndicate sales in excess of the offering size, which
creates a syndicate short position. A stabilizing bid is a bid for the purchase
of Notes on behalf of the underwriter for the purpose of fixing or maintaining
the price of the Notes. A syndicate covering transaction is the bid for or the
purchase of Notes on behalf of the underwriter to reduce a short position
incurred by the underwriter in connection with the offering. A penalty bid is
an arrangement permitting the underwriter to reclaim the selling concession
otherwise accruing to a syndicate member in connection with the offering if the
Notes originally sold by such syndicate member are purchased in a syndicate
covering transaction and therefore have not been effectively placed by such
syndicate member. The underwriter is not obligated to engage in these
activities and, if commenced, any of the activities may be discontinued at any
time.
The underwriter has advised us that it does not intend to confirm sales to
any account over which it exercises discretionary authority.
The underwriter and its predecessors and affiliates have from time to time
provided, and expect to continue to provide, financial and advisory services to
us for customary compensation.
S-12
LEGAL MATTERS
The legality of the Notes offered by this prospectus supplement and the
accompanying prospectus will be passed upon for us by Davis Polk & Wardwell.
Certain legal matters relating to this offering will be passed upon for the
underwriter by Shearman & Sterling.
Experts
The consolidated financial statements of Avon Products, Inc. incorporated
in this prospectus by reference to the Annual Report on Form 10-K for the year
ended December 31, 2002 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
S-13
PROSPECTUS
$1,000,000,000
AVON PRODUCTS, INC.
DEBT SECURITIES
---------------
We may offer debt securities from time to time. Specific terms of these
securities will be provided in supplements to this prospectus. This prospectus
may also be used by selling securityholders to sell securities they own that
are issued by us. You should read this prospectus and any supplement carefully
before you invest.
---------------
This investment involves risk. See "Risk Factors" beginning on page 2.
---------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
This prospectus may not be used to consummate any sale of securities
unless accompanied by a prospectus supplement.
The date of this prospectus is March 21, 2003
You should rely only on the information contained in or incorporated by
reference in this prospectus and the accompanying prospectus supplement. We
have not authorized anyone to provide you with different information. We are
not making an offer of these securities in any state where the offer is not
permitted. You should assume that the information contained in this prospectus
and any accompanying prospectus supplement as well as information we previously
filed with the Securities and Exchange Commission and incorporated by
reference, is accurate as of the dates on the front cover of those documents
only. The terms "Avon", "we," "us," and "our" refer to Avon Products, Inc. and
our consolidated subsidiaries, where appropriate.
------------------------------------
Table of Contents
------------------------------------
Page
About This Prospectus................................................... 1
Where You Can Find More Information..................................... 1
Special Note on Forward Looking Statements.............................. 1
Risk Factors............................................................ 2
Avon Products, Inc...................................................... 5
Use of Proceeds......................................................... 6
Consolidated Ratio of Earnings to Fixed Charges......................... 6
Description of Debt Securities.......................................... 8
Selling Securityholder.................................................. 17
Plan of Distribution.................................................... 17
Legal Matters........................................................... 18
Experts................................................................. 18
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
SEC utilizing a "shelf" registration process. Under this shelf process, we may
sell the securities described in this prospectus in one or more offerings up to
a total dollar amount of $1,000,000,000. This prospectus provides you with a
general description of the securities we may offer. Each time we sell
securities, we will provide a prospectus supplement that will contain specific
information about the terms of that offering. The prospectus supplement may
also add, update or change information contained in this prospectus. You should
read both this prospectus and any prospectus supplement together with
additional information described under the heading "Where You Can Find More
Information."
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document that we file at
the Public Reference Room of the SEC at 450 Fifth Street, NW, Washington, D.C.
20549. You may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an
Internet site at http://www.sec.gov, from which interested persons can
electronically access the registration statement including the exhibits and
schedules thereto.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede earlier information. We
incorporate by reference the documents listed below and any future filings made
with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934 until we sell all of the securities:
o Current Reports on Form 8-K filed on July 19, 2002, August 13,
2002, October 2, 2002 and January 31, 2003;
o Quarterly Report on Form 10-Q/A for the quarterly period ended
March 31, 2002, and Quarterly Reports on Form 10-Q for the
quarterly periods ended June 30, 2002 and September 30, 2002;
and
o Annual Report on Form 10-K/A for the year ended December 31,
2001.
You may request a copy of these filings at no cost, by writing or
telephoning the office of the Corporate Secretary, Avon Products, Inc., 1345
Avenue of the Americas, New York, New York 10105-0196, telephone (212)
282-5000.
Information about us is also available on our web site at www.avon.com.
Information on our web site is not incorporated by reference into this
prospectus.
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
Certain statements in, or which we incorporate by reference into, this
prospectus, which are not historical facts or information, are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. Words such as "anticipates", "believes", "expects", "estimates",
"intends", "plans", "projects", and similar expressions may identify such
forward-looking statements. Such forward-looking statements are based on
management's reasonable current assumptions and expectations. Such
forward-looking statements involve risks, uncertainties and other factors which
may cause our actual results, levels of activity, performance or achievement to
be materially different from any future results, levels of activity,
performance or achievement expressed or implied
1
by such forward-looking statements, and there can be no assurance that actual
results will not differ materially from management's expectations. Such factors
include, among others, the following:
o general economic and business conditions in our markets, including
economic and political uncertainties in Latin America;
o our ability to implement our business strategy and our business
transformation initiatives, including the integration of similar
activities across markets to achieve efficiencies;
o our ability to achieve anticipated cost savings and our profitability
and growth targets;
o the impact of substantial currency fluctuations in our principal
foreign markets and the success of our foreign currency hedging and
risk management strategies;
o the impact of possible pension funding obligations and increased
pension expense on our cash flow and results of operations;
o the effect of legal and regulatory proceedings, as well as
restrictions imposed on us, our operations or our Representatives by
foreign governments;
o our ability to successfully identify new business opportunities;
o our access to financing; and
o our ability to attract and retain key executives.
As a result of the foregoing and other factors, no assurance can be given
as to our future results and achievements. Neither Avon nor any other person
assumes responsibility for the accuracy and completeness of such
forward-looking statements, nor undertakes an obligation to update them.
RISK FACTORS
You should carefully consider each of the following risks, which we
believe are the principal risks that we face, and all of the other information
in this prospectus. Some of the following risks relate principally to our
business in general and the industry in which we operate. Other risks relate
principally to the offering of the debt securities. Our business may also be
adversely affected by risks and uncertainties not presently known to us or that
we currently believe to be immaterial.
We May Not Be Able to Execute Fully Our Global Business Strategy
Our ability to implement the key growth initiatives of our global business
strategy is dependent upon a number of factors, including our ability to:
o execute our business transformation initiatives, and achieve our
profitability and growth targets;
o increase our beauty sales and market share, and strengthen our brand
image;
o realize anticipated cost savings and reinvest such savings
effectively in consumer-oriented investments and other aspects of our
business;
o enhance the Representative experience and their productivity;
o achieve sustainable rates of growth and profitability in new and
emerging markets; and
o reach new consumers through a combination of new brands, new channels
and pursuit of strategic opportunities such as acquisitions and joint
ventures with other companies.
We cannot assure you that any of these initiatives will be successfully
and fully executed within the planned time periods.
Our Ability to Conduct Business, Particularly in International Markets, May Be
Affected by Political, Legal, Regulatory and Foreign Exchange Risks
Our ability to capitalize on growth in new international markets and to
maintain the current level of operations in our existing international markets
is exposed to risks associated with international operations, including:
2
o the possibility that a foreign government might ban or severely
restrict our business method of direct selling, or that local civil
unrest or political instability might disrupt our operations in an
international market;
o the possibility that a government authority might impose legal, tax
or other financial burdens on our Representatives, as direct sellers,
or on Avon, due, for example, to the structure of our operations in
various markets;
o the possibility that a government authority might challenge the
status of our Representatives as independent contractors or impose
employment or social taxes on our Representatives; and
o the possibility that restrictions on foreign currencies and changes
in foreign currency exchange rates may affect our operating results
and financial condition.
We also face legal and regulatory risks in the United States and, in
particular, cannot predict with certainty the outcome of various contingencies
or the impact that legislative and regulatory changes may have on our business
in the future.
We May Not Be Able to Recruit and Retain Our Representatives
Avon's products are sold by approximately 3.9 million Representatives
worldwide. Representatives are independent contractors or independent dealers
who purchase products directly from Avon and sell them to their customers.
There is a high rate of turnover among Representatives, a characteristic of the
direct-selling business. As a result, it is continually necessary to recruit
and retain new Representatives and if we are unable to do so our business will
be adversely affected.
We Face Significant Competition
We face competition from competing products in each of our lines of
business. We compete against products sold directly to consumers by other
direct-selling and direct sales companies and through the internet, and against
products sold through the mass market and prestige retail channels. Consumers'
buying decisions are affected by such factors as brand recognition, product
quality, product performance, pricing and subjective consumer tastes. If our
advertising, promotional or merchandising strategies are not successful, or if
we are unable to deliver new products that represent technological
breakthroughs, or if we do not successfully manage the timing of new product
introductions or the profitability of these efforts, or if for other reasons
our Representatives or end customers perceive competitors' products as having
greater appeal, then our sales, profitability and results of operations may
suffer.
Holders May Not Be Able to Sell the Debt Securities
We cannot predict whether an active trading market for the debt securities
will develop or be sustained. If an active market for the debt securities fails
to develop or be sustained, the trading price of the debt securities could be
adversely affected. In that case, holders may have difficulty reselling the
debt securities or may be unable to sell them at all. If an active trading
market were to develop, the debt securities' future trading price will depend
on many factors, including:
o prevailing interest rates;
o the market for similar securities;
o general economic conditions; and
o our financial condition, historical financial performance and future
prospects.
If Your Debt Securities are Redeemable at Our Option, We May Choose to Redeem
Them
If stated in the applicable prospectus supplement relating to the issuance
of a series of debt securities, we may redeem such debt securities at any time,
or at a specific point in time, in accordance with that prospectus supplement.
If your debt securities are redeemable by us, we will advise you of how and
when we may redeem in the prospectus supplement. If we choose to redeem your
debt securities, you will have to consider what you are going to do with the
proceeds. If interest rates are lower, you may not be able to reinvest in a
comparable security at an effective interest rate as high as the interest rate
on the debt securities being redeemed. Before purchasing
3
redeemable notes from us, you should consult with a competent professional on
the consequences of purchasing redeemable notes.
4
AVON PRODUCTS, INC.
General
We are a global manufacturer and marketer of beauty and related products.
We presently have operations in 58 countries, including the United States, and
our products are distributed in 85 more for coverage in 143 markets. Sales are
made to the ultimate customer principally through a combination of direct
selling and marketing by approximately 3.9 million independent Avon
Representatives, approximately 463,000 of whom are in the United States.
Representatives are independent contractors or independent dealers, and are not
our agents or employees. Representatives purchase products directly from us and
sell them to their customers.
Our products fall into four product categories: "Beauty" which consists of
cosmetics, fragrance and toiletries; "Beauty Plus" which consists of jewelry,
watches and apparel and accessories; "Beyond Beauty" which consists of home
products, gift and decorative and candles; and "Health and Wellness" which
consists of vitamins and nutrition supplements, exercise and fitness items, and
a variety of self-care and stress relief products. In 2001, we launched a
retail line in the U.S. to sell a new line of Avon products called "beComing"
in selected stores of J.C. Penney Company, Inc. In January 2003, we announced
the termination of our business relationship with J.C. Penney and a strategic
repositioning of the beComing brand, which in the future will be sold
exclusively through a select group of Avon Representatives called Avon Beauty
Advisors. In 2003, we plan to launch a new global business targeted to teenage
girls to enhance our share of the worldwide youth market.
We commenced operations in 1886 and were incorporated in the State of New
York on January 27, 1916. Avon's business primarily is comprised of one
industry segment, direct selling, which is conducted in North America, Latin
America, Europe and the Pacific. The Company's reportable segments are based on
these geographic operations.
5
USE OF PROCEEDS
Unless otherwise indicated in a prospectus supplement, the net proceeds
from the sale of the debt securities sold by us will be used for general
corporate purposes. These purposes may include, but are not limited to:
o repayment or refinancing of debt or other corporate obligations;
o working capital;
o capital expenditures;
o repurchases and redemptions of securities;
o equity investments in existing and future projects;
o permanent financing of bridge facilities used to make acquisitions;
and
o acquisitions.
Pending any specific application, we may initially invest funds in
short-term marketable securities or apply them to the reduction of short-term
indebtedness. In addition, we may at our option elect to receive, in lieu of
cash from the sale of the debt securities, other forms of consideration
including other securities.
We will not receive any proceeds from the sale of any debt securities sold
by any selling securityholder.
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our consolidated ratios of earnings to
fixed charges for the years and periods indicated:
---------------------------------------------------------------
Nine Months Ended
September 30, Year Ended December 31,
---------------------------------------------------------------
2002 2001 2001 2000 1999 1998 1997
-------------------------------------------------------------------------------------------------------------------
Consolidated Ratio of Earnings to Fixed Charges 9.31 7.62 7.72 7.0 7.6 3 8.24 9.2
-------------------------------------------------------------------------------------------------------------------
(1) Includes one-time charges of $36.3 million pre-tax ($25.2 million after
tax), or $.10 per diluted share. The one-time charges represent a special
charge of $43.6 million pre-tax ($30.4 million after tax), or $.12 per
diluted share, primarily associated with supply chain initiatives,
workforce reduction programs and sales transformation initiatives,
partially offset by an adjustment, of $7.3 million pre-tax ($5.2 million
after tax) or $.02 per diluted share, to the special charge recorded in
the fourth quarter of 2001. Excluding the one-time charges, the ratio of
earnings to fixed charges for the nine months ended September 30, 2002,
was 9.8.
(2) Includes one-time charges of $97.4 million pre-tax ($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; a charge of
$6.4 million pre-tax ($3.4 million after tax), or $.01 per diluted share,
related to the settlement of a contested tax assessment in Argentina; and
a contract settlement gain, net of related expenses, of $25.9 million
pre-tax ($15.7 million after tax), or $.06 per diluted share, related to
the cancellation of a retail agreement between Avon and Sears Roebuck &
Company. Excluding the one-time charges and the settlement gain, the ratio
of earnings to fixed charges for the nine months ended September 30, 2001
and for the year ended December 31, 2001, was 7.2 and 8.4, respectively.
(3) Includes one-time charges of $136.4 million pre-tax ($111.9 million after
tax), or $.43 per diluted share , related to our Business Process Redesign
(BPR) program, and an asset impairment charge of $38.1 million pre-tax
($24.0 million after tax), or $.09 per diluted share, related to the
write-off of the carrying value of an order management software system
that had been under development. Excluding the one-time charges, the ratio
of earnings to fixed charges for the year ended December 31, 1999, was
10.0.
(4) Includes one-time charges of $154.4 million pre-tax ($122.8 million after
tax), or $0.46 per diluted share, related to our BPR program. Excluding
the one-time charges, the ratio of earnings to fixed charges for the year
ended December 31, 1998, was 10.6.
For purposes of computing the ratio of earnings to fixed charges,
"earnings" consist of earnings before income taxes, minority interest and
cumulative effect of accounting changes, plus fixed charges and the
amortization of capitalized interest. "Fixed charges" consist of interest
incurred on indebtedness, amortization of debt discount, fees and expenses plus
one-third of the rental expense from operating leases, which management
believes is a reasonable
6
approximation of the interest component of rental expense. The ratios of
earnings to fixed charges are calculated as follows:
(Income before income taxes, minority interest and cumulative effect of accounting
----------------------------------------------------------------------------------
changes) + (Fixed charges) + (Amortization of capitalized interest)
-------------------------------------------------------------------
(Fixed charges)
7
DESCRIPTION OF DEBT SECURITIES
This prospectus describes certain general terms and provisions of the debt
securities. The debt securities will constitute senior debt of Avon and will
rank equally and pari passu with all our other unsecured and unsubordinated
debt. We will issue debt securities under the indenture between Avon and
JPMorgan Chase Bank, as trustee. When we or the selling securityholder offer to
sell a particular series of debt securities, we will describe the specific
terms for the securities in a supplement to this prospectus. The prospectus
supplement will also indicate whether the general terms and provisions
described in this prospectus apply to a particular series of debt securities.
We have summarized certain terms and provisions of the indenture. The
summary is not complete. A form of indenture has been filed with the SEC as an
exhibit to the registration statement, of which this prospectus constitutes a
part. You should read the indenture for the provisions which may be important
to you. The indenture is subject to and governed by the Trust Indenture Act of
1939, as amended.
The indenture will not limit the amount of debt securities which we may
issue. The prospectus supplement relating to a particular series of debt
securities will describe the terms of such debt securities being offered,
including:
o the designation, aggregate principal amount and authorized
denominations;
o the maturity date;
o the interest rate, if any, and the method for calculating the
interest rate;
o the interest payment dates and the record dates for the interest
payments;
o any mandatory or optional redemption terms or prepayment, conversion,
sinking fund terms;
o the place where we will pay principal and interest;
o if other than denominations of $1,000 or multiples of $1,000, the
denominations the debt securities will be issued in;
o whether the debt securities will be issued in the form of global
securities or certificates;
o additional provisions, if any, relating to the defeasance of the debt
securities;
o the currency or currencies, if other than the currency of the United
States, in which principal and interest will be paid;
o any United States federal income tax consequences;
o the dates on which premium, if any, will be paid;
o our right, if any, to defer payment of interest and the maximum
length of this deferral period;
o any listing on a securities exchange;
o the initial public offering price; and
o other specific terms, including any additional events of default or
covenants.
We may, from time to time, without notice to or the consent of registered
holders of a particular series of debt securities, create and issue further
securities ranking pari passu with that series of debt securities in all
respects (or in all respects except for the payment of interest accruing prior
to the issue date of such further debt securities or except for the first
payment of interest following the issue date of such further debt securities)
and so that such
8
further debt securities shall be consolidated and form a single series with
that particular series of debt securities and shall have the same terms as to
status, redemption or otherwise as that series of debt securities.
The debt securities will be issuable only in fully registered form without
coupons or in the form of one or more global securities, as described below
under "--Global Securities". Unless the prospectus supplement specifies
otherwise, debt securities denominated in U.S. dollars will be issued only in
denominations of U.S.$1,000 and any integral multiple of this amount. The
prospectus supplement relating to debt securities denominated in a foreign or
composite currency will specify the authorized denominations.
If the amount of payments of principal of and premium, if any, or any
interest on debt securities of any series is determined with reference to any
type of index or formula or changes in prices of particular securities or
commodities, the federal income tax consequences, specific terms and other
information with respect to these debt securities and this index or formula,
securities or commodities will be described in the relevant prospectus
supplement.
If the principal of and premium, if any, or any interest on debt
securities of any series are payable in a foreign or composite currency, the
restrictions, elections, federal income tax consequences, specific terms and
other information with respect to such debt securities and such currency will
be described in the relevant prospectus supplement.
Payment of principal of and premium, if any, on debt securities will be
made in the designated currency against surrender of any debt securities at the
Corporate Trust Office of the trustee in The City of New York. Unless otherwise
indicated in the prospectus supplement, payment of any installment of interest
on debt securities will be made to the person in whose name a relevant debt
security is registered at the close of business on the regular record date for
such interest. Unless otherwise indicated in the prospectus supplement,
payments of such interest will be made at the Corporate Trust Office of the
trustee in The City of New York or by a check in the designated currency mailed
to the holder at such holder's registered address.
Debt securities may be issued as original issue discount securities to be
offered and sold at a substantial discount below their stated principal amount.
Federal income tax consequences and other special considerations applicable to
any original issue discount securities will be described in the relevant
prospectus supplement. "Original issue discount security" means any debt
security that provides for an amount less than the principal amount thereof to
be due and payable upon a declaration of acceleration of the maturity thereof
upon the occurrence of an event of default and the continuation thereof.
Covenants
Negative Pledge
Under the indenture, we will agree that if we or any Significant
Subsidiary shall issue, assume, incur or guarantee any Indebtedness secured by
a lien, except Permitted Liens, on any Principal Property (as defined below) or
on any shares of capital stock of any Significant Subsidiary ("Secured Debt"),
we will secure, or cause such Significant Subsidiary to secure, the outstanding
debt securities equally and ratably with such Secured Debt, unless after giving
effect thereto the aggregate amount of all such Secured Debt, together with all
Attributable Debt (as defined below) of Avon and our subsidiaries in respect of
sale and leaseback transactions to which the restrictions referred to below
applies, would not exceed 20% of the Consolidated Net Tangible Assets (as
defined below) of Avon and our consolidated subsidiaries.
Permitted Liens include:
(a) liens on any Principal Property acquired by us or a subsidiary after
the date of the indenture to secure or provide for the payment or
financing of all or any part of the purchase price thereof or construction
of fixed improvements thereon (prior to, at the time of or within 180 days
after the latest of the acquisition, completion of construction or
commencement of commercial operation thereof);
9
(b) liens on any shares of stock or Principal Property acquired by us or a
subsidiary after the date of the indenture existing at the time of such
acquisition;
(c) liens on any shares of stock or Principal Property of a corporation
which is merged into or consolidated with us or a subsidiary or
substantially all of the assets of which are acquired by us or a
subsidiary;
(d) liens securing indebtedness of a subsidiary owing to us or another
subsidiary;
(e) liens existing at the date of the indenture;
(f) liens on any Principal Property being constructed or improved securing
loans to finance such construction or improvements;
(g) liens in favor of governmental bodies of the United States or any
state thereof or any other country or political subdivision thereof to
secure partial, progress or advance payments pursuant to any contract or
statute, or to secure any indebtedness incurred or guaranteed for the
purpose of financing all or any part of the cost of acquiring,
constructing or improving the property subject to such liens;
(h) liens securing taxes, assessments or governmental charges or levies
not yet delinquent, or already delinquent but the validity of which is
being contested in good faith;
(i) liens arising by reason of deposits necessary to qualify us or any
subsidiary to conduct business, maintain self-insurance, or obtain the
benefit of, or comply with, any law;
(j) liens arising out of judgments or awards against Avon or any
subsidiary with respect to which Avon or such subsidiary shall in good
faith be prosecuting an appeal or proceedings for review; provided that
Avon or such subsidiary shall have secured, within 60 days after the
creation thereof, an effective stay of execution pending such appeal or
review; and
(k) extensions, renewals or replacement of liens referred to in the
foregoing clauses provided that the indebtedness secured is not increased
or the lien extended to any additional assets.
Restrictions on Sale and Leaseback Transactions
We will also agree that neither we nor any Significant Subsidiary will
enter into, assume, guarantee, or otherwise become liable with respect to any
sale and leaseback transaction involving any Principal Property, unless
immediately after giving effect thereto the sum, without duplication, of
(i) the aggregate principal amount of all Secured Debt then outstanding;
and
(ii) the aggregate amount of all Attributable Debt in respect of sale and
leaseback transactions to which this restriction applies
would not exceed 20% of the Consolidated Net Tangible Assets of Avon and our
consolidated subsidiaries.
This restriction will not apply to the extent that, during the period
commencing 60 days prior to and ending 120 days after a sale and leaseback
transaction, we or a subsidiary apply an amount equal to the Attributable Debt
with respect to such sale and leaseback transaction: (i) to the acquisition,
directly or indirectly and in whole or in part, of Principal Properties, or
(ii) to the retirement of long-term indebtedness (other than mandatory
prepayment or retirement) of Avon or any subsidiary. This restriction will also
not apply to any sale and leaseback transaction, (i) between us and a
subsidiary or between subsidiaries, or (ii) involving the taking back of a
lease for a period of three years or less.
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Definitions
"Attributable Debt" means, as of the time of determination, the present
value (discounted at the rate per annum equal to the rate of interest implicit
in the lease involved in such sale and leaseback transaction, as determined in
good faith by us) of the obligation of the lessee under a sale and leaseback
transaction for rental payments (excluding, however, any amounts required to be
paid by such lessee, whether or not designated as rent or additional rent, on
account of maintenance and repairs, insurance, taxes, assessments, water rates
or similar charges or any amounts required to be paid by such lessee thereunder
contingent upon the amount of sales or similar contingent awards) during the
remaining term of such lease (including any period for which such lease has
been extended or may, at the option of the lessor, be extended). In the case of
any lease which is terminable by the lessee upon the payment of a penalty, such
rental payments shall also include the amount of such penalty, but no rental
payments shall be considered as required to be paid under such lease subsequent
to the first date upon which it may be so terminated.
"Consolidated Net Tangible Assets" means the total assets (less applicable
reserves and other properly deductible items) which under United States
Generally Accepted Accounting Principles ("GAAP") would be included on the most
recent audited annual consolidated balance sheet of Avon and our consolidated
subsidiaries, after deducting the amount of all current liabilities and
intangible assets.
"Indebtedness" means, with respect to any person, any indebtedness of such
person, whether or not contingent, in respect of (i) borrowed money evidenced
by bonds, notes, debentures or similar instruments, (ii) indebtedness secured
by a mortgage, pledge, lien, charge, encumbrance of any security interest
existing on property owned by such person, (iii) the reimbursement obligations,
contingent or otherwise, in connection with any letters of credit actually
issued or amounts representing the balance that constitutes an accrued expense
or trade payable or (iv) any lease of property by such person as lessee which
is reflected in such person's consolidated balance sheet as a capitalized lease
in accordance with GAAP, in the case of items of Indebtedness under (i) through
(iii) above to the extent that any such items (other than letters of credit)
would appear as a liability on such person's consolidated balance sheet in
accordance with GAAP, and also includes, to the extent not otherwise included,
any obligation by such person to be liable for, or to pay, as obligor,
guarantor or otherwise (other than for purposes of collection in the ordinary
course of business), Indebtedness of another person.
"Principal Property" means any manufacturing plant, testing or research
and development facility, distribution facility, processing plant or warehouse
(including, without limitation, land, fixtures and equipment), owned or leased
by us or any subsidiary (including any of the foregoing acquired or leased
after the date of the indenture) and located within the United States of
America, its territories and possessions, unless our board of directors
determines in good faith that such plant or facility is not of material
importance to the total business conducted by us and our consolidated
subsidiaries.
"Significant Subsidiary" means any direct or indirect subsidiary of Avon
that generates five percent or more of the Company's revenue or income or that
holds five percent or more of the Company's assets. In addition, the Board of
Directors of Avon may designate any other subsidiary as a Significant
Subsidiary.
The indenture will not otherwise restrict the incurrence of debt by us or
our subsidiaries.
Consolidation, Merger and Sale of Assets
We will also agree that we will not consolidate with or merge into, or
convey, transfer or lease our properties and assets substantially as an
entirety to, any Person (a "successor Person"), and may not permit any Person
to merge into, or convey, transfer or lease its properties and assets
substantially as an entirety to, us, unless:
(i) the successor Person (if not Avon) is a corporation, partnership or
trust organized and validly existing under the laws of any domestic
jurisdiction and assumes our obligations on any outstanding debt
securities and under the indentures;
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(ii) immediately after giving effect to the transaction, and treating any
Indebtedness which becomes our obligation as a result of the transaction
as having been incurred by it at the time of the transaction, no event of
default and no event which, after notice or lapse of time or both, would
become an event of default, shall have occurred and be continuing; and
(iii) the trustee receives an officers' certificate and an opinion of
counsel stating that such action complies with the indenture.
Events of Default
The indenture specifies that each of the following will constitute an
event of default with respect to the debt securities of a particular series:
(a) failure to pay principal of any debt security of that series at its
maturity;
(b) failure to pay any interest on any debt security of that series when
due, continued for 30 days;
(c) failure to deposit any sinking fund payment, when and as due by the
terms of that series;
(d) failure to perform any covenant of ours applicable to that series in
the indenture, continued for 60 days after written notice of such failure
is given as provided in the indenture;
(e) our failure to pay when due (subject to any applicable grace period)
the principal of, or acceleration of, any indebtedness for money borrowed
by us having an aggregate principal amount outstanding of at least
$100,000,000, if, in the case of any such failure, such indebtedness has
not been discharged or, in the case of any such acceleration, such
acceleration has not been rescinded or annulled, in each case within 30
days after written notice has been given by the trustee, or the holders of
at least 25% in principal amount of the outstanding debt securities of
that series, as provided in the indenture; and
(f) certain events in bankruptcy, insolvency or reorganization.
If an event of default (other than an event of default described in clause
(f) above) shall occur and be continuing, either the trustee or the holders of
at least 25% in aggregate principal amount of the outstanding debt securities
of that series by notice as provided in the indenture may declare the principal
amount of such series of the debt securities to be due and payable immediately.
If an event of default described in clause (f) above shall occur, the principal
amount of all the outstanding debt securities of that series will
automatically, and without any action by the trustee or any holder, become
immediately due and payable. After any such acceleration, but before a judgment
or decree for payment of the money due, the holders of a majority in aggregate
principal amount of the outstanding debt securities of that series may, under
certain circumstances, rescind and annul such acceleration if all events of
default, other than the non-payment of accelerated principal, have been cured
or waived as provided in the indenture. For information as to waiver of
defaults, see "--Modification and Waiver."
Subject to the provisions of the indenture relating to the duties of the
trustee in case an event of default shall occur and be continuing, the trustee
will be under no obligation to exercise any of its rights or powers under the
indenture at the request or direction of any of the holders, unless such
holders shall have offered to the trustee reasonable indemnity. Subject to such
provisions for the indemnification of the trustee, the holders of a majority in
aggregate principal amount of the outstanding debt securities of that series
will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the trustee or exercising any trust or
power conferred on the trustee with respect to such series of the debt
securities.
No holder of a debt security will have any right to institute any
proceeding with respect to the indenture, or for the appointment of a receiver
or a trustee, or for any other remedy thereunder, unless:
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(i) such holder has previously given to the trustee written notice of a
continuing event of default with respect to such series of the debt
securities;
(ii) the holders of at least 25% in aggregate principal amount of the
outstanding debt securities of that series have made written request, and
such holder or holders have offered reasonable indemnity, to the trustee
to institute such proceeding as trustee; and
(iii) the trustee has failed to institute such proceeding, and has not
received from the holders of a majority in aggregate principal amount of
the outstanding debt securities of the that series a direction
inconsistent with such request, within 60 days after such notice, request
and offer. However, such limitations do not apply to a suit instituted by
a holder of a debt security for the enforcement of payment of the
principal of or interest on such debt security on or after the applicable
due date specified in such debt security.
We will be required to furnish to the trustee annually a statement by
certain of our officers as to whether or not we, to their knowledge, are in
default in the performance or observance of any of the terms, provisions and
conditions of the indenture and, if so, specifying all such known defaults.
Modification and Waiver
Together with the trustee, we may modify the indenture without the consent
of the holders for limited purposes, including evidencing the succession of
another person to the Company and such person's assumption of our obligations
under the indenture, adding to our covenants or events of default, establishing
forms or terms of debt securities, curing ambiguities and other purposes which
do not adversely affect the holders in any material respect.
Other modifications and amendments of the indenture may be made by us and
the trustee with the consent of the holders of at least a majority in aggregate
principal amount of each series of the outstanding debt securities that is
affected by such modification or amendment, all holders of all such affected
series voting together as one class.
No such modification or amendment may, without the consent of the holder
of each outstanding debt security affected thereby:
(a) change the stated maturity of the principal of, or any installment of
interest on, or the redemption price of, any debt security;
(b) reduce the principal amount of or interest on, any debt security;
(c) change the place or currency of payment of principal of or interest on, any
debt security;
(d) impair the right to institute suit for the enforcement of any payment on
any debt security;
(e) reduce the percentage in principal amount of outstanding debt securities,
the consent of whose holders is required for modification or amendment of the
indenture, or for waiver of compliance with certain provisions of the indenture
or waiver of certain defaults; or
(f) modify such provisions with respect to modification and waiver.
The holders of at least a majority in principal amount of each series of
the outstanding debt securities that is affected by such waiver, all holders of
all such affected series voting together as one class, may waive our compliance
with certain restrictive provisions of the indenture, and may waive any past
default under the indenture, except a default in the payment of principal or
interest and certain covenants and provisions of the indenture which cannot be
amended without the consent of the holder of each outstanding debt security
affected by such default.
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Defeasance and Discharge; Covenant Defeasance
Unless the terms of a particular series provide otherwise, we may elect,
at our option at any time, to have the indenture provisions relating to
defeasance and discharge of indebtedness, or relating to defeasance of certain
restrictive covenants in the indenture, applied to any series of the
outstanding debt securities.
Defeasance and Discharge
The indenture provides that upon our exercise of our option to have the
provisions relating to defeasance and discharge applied to a particular series
of the debt securities, we will be discharged from all our obligations with
respect to such series of the debt securities (except for certain obligations
to exchange or register the transfer of debt securities, to replace stolen,
lost or mutilated debt securities, to maintain paying agencies and to hold
moneys for payment in trust) upon the deposit in trust for the benefit of the
holders of the debt securities of such series of money or U.S. government
obligations, or both, which, through the payment of principal and interest in
respect thereof in accordance with their terms, will provide money in an amount
sufficient to pay the principal of and interest on the debt securities of such
series at maturity in accordance with the terms of the indenture and such debt
securities. Such defeasance or discharge may occur only if, among other things,
we have delivered to the trustee an opinion of counsel to the effect that we
have received from, or there has been published by, the United States Internal
Revenue Service a ruling, or there has been a change in tax law, in either case
to the effect that holders of the debt securities of such series will not
recognize gain or loss for federal income tax purposes as a result of such
deposit, defeasance and discharge and will be subject to federal income tax on
the same amount, in the same manner and at the same times as would have been
the case if such deposit, defeasance and discharge were not to occur.
Defeasance of Certain Covenants
The indenture provides that, upon our exercise of our option to have the
provisions relating to defeasance of certain restrictive covenants applied to a
particular series of the debt securities, we may, with respect to such series,
omit to comply with certain restrictive covenants, including those described
under "Covenants--Negative Pledge," "--Restrictions on Sale and Leaseback
Transactions" and "--Consolidation, Merger and Sale of Assets," and the
occurrence of certain events of default, which are described above in clause
(c) (with respect to such restrictive covenants) and clause (d) under "Events
of Default," will be deemed not to be or result in an event of default, in each
case with respect to such series.
We, in order to exercise such option, will be required, among other things:
(1) to deposit, in trust for the benefit of the holders of such series of
the debt securities, money or U.S. government obligations, or both, which,
through the payment of principal and interest in respect thereof in
accordance with their terms, will provide money in an amount sufficient to
pay the principal of and interest on such series of the debt securities at
maturity in accordance with the terms of the indenture and such debt
securities, and
(2) to deliver to the trustee an opinion of counsel to the effect that
holders of such series of the debt securities will not recognize gain or
loss for federal income tax purposes as a result of such deposit and
defeasance of certain obligations and will be subject to federal income
tax on the same amount, in the same manner and at the same times as would
have been the case if such deposit and defeasance were not to occur.
In the event we exercise this option and the debt securities are declared
due and payable because of the occurrence of any event of default, the amount
of money and U.S. government obligations so deposited in trust would be
sufficient to pay amounts due on that series of the debt securities at maturity
but may not be sufficient to pay amounts due on that series of the debt
securities upon any acceleration resulting from such event of default. In such
case, we would remain liable for such payments.
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Regarding the Trustee
The indenture provides that, except during the continuance of an event of
default, the trustee will perform only such duties as are specifically set
forth in the indenture. During the existence of an event of default, the
trustee will exercise such rights and powers vested in it under the indenture
and use the same degree of care and skill in its exercise as a prudent person
would exercise under the circumstances in the conduct of such person's own
affairs.
The indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the trustee, should it
become a creditor of the Company, to obtain payment of claims in certain cases
or to realize on certain property received by it in respect of any such claim
as security or otherwise. The trustee is permitted to engage in other
transactions with the Company or any affiliate of the Company; provided,
however, that if it acquires any conflicting interest (as defined in the
indenture or in the Trust Indenture Act), it must eliminate such conflict or
resign.
We and our subsidiaries maintain ordinary banking relationships and credit
facilities with the trustee. The trustee is also the trustee under other
indentures relating to certain of our outstanding indebtedness, the trustee
with respect to our pension assets and the issuing and paying agent with
respect to our commercial paper program and has additional financial
arrangements with us.
Form of Debt Securities
Each debt security will be represented either by a certificate issued in
definitive form to a particular investor or by one or more global securities
representing the entire issuance of securities. Certificated securities in
definitive form and global securities will be issued in registered form.
Definitive securities name you or your nominee as the owner of the
security, and in order to transfer or exchange these securities or to receive
payments other than interest or other interim payments, you or your nominee
must physically deliver the securities to the trustee, registrar, paying agent
or other agent, as applicable.
Global securities name a depositary or its nominee as the owner of the
debt securities represented by these global securities. The depositary
maintains a computerized system that will reflect each investor's beneficial
ownership of the securities through an account maintained by the investor with
its broker/dealer, bank, trust company or other representative, as we explain
more fully below.
Global Securities
We may issue the debt securities in whole or in part in the form of one or
more fully registered global securities that will be deposited with a
depositary or its nominee identified in the prospectus supplement relating to
that series and registered in the name of that depositary or nominee. In those
cases, one or more registered global securities will be issued in a
denomination or aggregate denominations equal to the portion of the aggregate
principal or face amount of the securities to be represented by registered
global securities. Unless and until it is exchanged in whole for securities in
definitive registered form, a registered global security may not be transferred
except as a whole by and among the depositary for the registered global
security, the nominees of the depositary or any successors of the depositary or
those nominees.
If not described below, any specific terms of the depositary arrangement
with respect to any securities to be represented by a registered global
security will be described in the prospectus supplement relating to those
securities. We anticipate that the following provisions will apply to all
depositary arrangements.
Ownership of beneficial interests in a registered global security will be
limited to persons, called participants, that have accounts with the depositary
or persons that may hold interests through participants. Upon the issuance of a
registered global security, the depositary will credit, on its book-entry
registration and transfer system, the participants' accounts with the
respective principal or face amounts of the securities beneficially owned by
the participants. Any dealers, underwriters or agents participating in the
distribution of the securities will designate the accounts to be credited.
Ownership of beneficial interests in a registered global security will be shown
on, and the transfer of ownership interests will be effected only through,
records maintained by the depositary, with respect to interests of
participants, and on the records of participants, with respect to interests of
persons holding through
15
participants. The laws of some states may require that some purchasers of
securities take physical delivery of these securities in definitive form. These
laws may impair your ability to own, transfer or pledge beneficial interests in
registered global securities.
So long as the depositary, or its nominee, is the registered owner of a
registered global security, that depositary or its nominee, as the case may be,
will be considered the sole owner or holder of the securities represented by
the registered global security for all purposes under the indenture. Except as
described below, owners of beneficial interests in a registered global security
will not be entitled to have the securities represented by the registered
global security registered in their names, will not receive or be entitled to
receive physical delivery of the securities in definitive form and will not be
considered the owners or holders of the securities under the indenture.
Accordingly, each person owning a beneficial interest in a registered global
security must rely on the procedures of the depositary for that registered
global security and, if that person is not a participant, on the procedures of
the participant through which the person owns its interest, to exercise any
rights of a holder under the indenture. We understand that under existing
industry practices, if we request any action of holders or if an owner of a
beneficial interest in a registered global security desires to give or take any
action that a holder is entitled to give or take under the indenture, the
depositary for the registered global security would authorize the participants
holding the relevant beneficial interests to give or take that action, and the
participants would authorize beneficial owners owning through them to give or
take that action or would otherwise act upon the instructions of beneficial
owners holding through them.
Principal, premium, if any, and interest payments on debt securities
represented by a registered global security registered in the name of a
depositary or its nominee will be made to the depositary or its nominee, as the
case may be, as the registered owner of the registered global security. None of
Avon, the trustee or any agent of Avon or agent of the trustee will have any
responsibility or liability for any aspect of the records relating to payments
made on account of beneficial ownership interests in the registered global
security or for maintaining, supervising or reviewing any records relating to
those beneficial ownership interests.
We expect that the depositary for any of the securities represented by a
registered global security, upon receipt of any payment of principal, premium
or interest to holders on that registered global security, will immediately
credit participants' accounts in amounts proportionate to their respective
beneficial interests in that registered global security as shown on the records
of the depositary. We also expect that payments by participants to owners of
beneficial interests in a registered global security held through participants
will be governed by standing customer instructions and customary practices, as
is now the case with the securities held for the accounts of customers in
bearer form or registered in "street name," and will be the responsibility of
those participants.
If the depositary for any of these securities represented by a registered
global security is at any time unwilling or unable to continue as depositary or
ceases to be a clearing agency registered under the Securities Exchange Act of
1934, and a successor depositary registered as a clearing agency under the
Securities Exchange Act of 1934 is not appointed by us within 90 days, we will
issue securities in definitive form in exchange for the registered global
security that had been held by the depositary. In addition, we may at any time
and in our sole discretion decide not to have any of the securities represented
by one or more registered global securities. If we make that decision, we will
issue securities in definitive form in exchange for all of the registered
global security or securities representing those securities. Any securities
issued in definitive form in exchange for a registered global security will be
registered in the name or names that the depositary gives to the trustee or
other relevant agent of ours or theirs. It is expected that the depositary's
instructions will be based upon directions received by the depositary from
participants with respect to ownership of beneficial interests in the
registered global security that had been held by the depositary.
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SELLING SECURITYHOLDER
The debt securities may be sold by selling securityholders. The names of
the selling securityholders, if any, will be set forth in the applicable
prospectus supplement. The terms of the debt securities to be sold by a selling
securityholder and the percentage of such class of debt security owned by such
selling securityholder prior to and after an offering will also be specified in
the applicable prospectus supplement.
PLAN OF DISTRIBUTION
We or the selling securityholders, if any, may sell the securities in any
of three ways (or in any combination): (a) through underwriters or dealers; (b)
directly to a limited number of purchasers or to a single purchaser; or (c)
through agents. The prospectus supplement will set forth the terms of the
offering of such securities, including:
(a) the name or names of any underwriters, dealers or agents and the
amounts of securities underwritten or purchased by each of them;
(b) the initial public offering price of the securities and the proceeds
to us and any discounts, commissions or concessions allowed or
reallowed or paid to dealers; and
(c) any securities exchanges on which the securities may be listed.
Any public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
If underwriters are used in the sale of any securities, the securities
will be acquired by the underwriters for their own account and may be resold
from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. The securities may be offered either to the public through
underwriting syndicates represented by managing underwriters, or directly by
underwriters. Generally, the underwriters' obligations to purchase the
securities will be subject to certain conditions precedent. The underwriters
will be obligated to purchase all of the securities if they purchase any of the
securities.
We or the selling securityholders may sell the securities through agents
from time to time. Underwriters, dealers and agents that participate in the
distribution of debt securities may be deemed to be underwriters under the
Securities Act and any discounts or commissions received by them and any profit
on the resale of the debt securities by them may be deemed to be underwriting
discounts and commissions under the Securities Act. Any such underwriter or
agent will be identified and any such compensation will be described in the
applicable prospectus supplement.
We may authorize underwriters, dealers or agents to solicit offers by
certain purchasers to purchase the securities from us at the public offering
price set forth in the prospectus supplement pursuant to delayed delivery
contracts providing for payment and delivery on a specified date in the future.
The contracts will be subject only to those conditions set forth in the
prospectus supplement, and the prospectus supplement will set forth any
commissions we pay for solicitation of these contracts.
Agents and underwriters may be entitled to indemnification by us against
certain civil liabilities, including liabilities under the Securities Act, or
to contribution with respect to payments that the agents or underwriters may be
required to make in respect thereof. Agents and underwriters may be customers
of, engage in transactions with, or perform services for us in the ordinary
course of business.
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LEGAL MATTERS
The validity of the debt securities in respect of which this prospectus is
being delivered will be passed on for us by Davis Polk & Wardwell. The validity
of the securities will be passed on for the underwriters or agents by Shearman
& Sterling.
EXPERTS
The consolidated financial statements of Avon Products, Inc. incorporated in
this prospectus by reference to the Annual Report on Form 10-K/A for the year
ended December 31, 2001 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
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