Back to GetFilings.com
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1993
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ____ to ____
Commission file number 1-4881
AVON PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 13-0544597
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9 WEST 57TH STREET, NEW YORK, NEW YORK 10019
(Address of principal executive offices)
(212) 546-6015
(Telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ----------------
Common Stock (par value $.50) New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ].
The aggregate market value of Common Stock (par value $.50) held by non-
affiliates at February 28, 1994 was $4.2 billion.
The number of shares of Common Stock (par value $.50) outstanding at
February 28, 1994 was 71,922,660.
Documents Incorporated by Reference
Parts I and II --Portions of the 1993 Annual Report to Shareholders.
Part III --Portions of the Proxy Statement for the 1994 Annual
Meeting of Shareholders.
PART I
ITEM 1. BUSINESS
Avon Products, Inc. ("Avon" or the "Company") is one of the world's leading
manufacturers and marketers of beauty products, which include cosmetics,
fragrances and toiletries; fashion jewelry; gift and decorative products; and
prestige fragrances. Avon commenced operations in 1886 and was incorporated in
the State of New York on January 27, 1916. Avon's business is comprised
of two industry segments: Direct Selling, which includes Avon U.S. and Avon
International, and Retail, which consists of Giorgio Beverly Hills, Inc.
Financial information relating to industry segments and geographic areas is
incorporated by reference to the analysis of net sales and pretax income by
business segment and geographic area on page 18 and to Notes 11 and 12 of
"Notes to Consolidated Financial Statements" on page 35 in Avon's 1993 Annual
Report to Shareholders.
DIRECT SELLING
The direct selling segment consists of Avon U.S. and Avon International.
In the direct selling beauty business, sales are made directly to consumers
principally through Avon Representatives throughout the world. The beauty
products sold include cosmetics, fragrances and toiletries; fashion jewelry and
accessories; and gift and decorative products. Although the products offered
in Europe, the Americas and the Pacific are not as varied as those sold in the
United States, most are substantially the same as those marketed domestically.
Distribution
Avon's products are sold by a worldwide total of approximately 1,745,000
Representatives, 415,000 of whom are in the United States. Almost
all Representatives are women who sell on a part-time basis. Representatives
are independent contractors or independent dealers, and are not agents or
employees of Avon. They purchase products directly from Avon and sell them
directly to their customers.
The Company's products are sold to customers either through independent
Representatives or directly through the mail, by phone or fax. Representatives
go where the customers are, either in the home or in the workplace.
Representatives may sell in a territory, which typically averages 100 homes in
the United States and from 100 to 150 homes in other countries.
Representatives in the United States have the opportunity to take
responsibility for sales in larger areas. Representatives also sell in
offices, factories, schools and hospitals.
In the United States, the Representative contacts customers, selling
primarily through the use of brochures highlighting new products and specially
priced items for each two-week sales campaign. Product samples, demonstration
products, makeup color charts and catalogs are also used. Generally the
Representative forwards an order every two weeks to a designated distribution
center. This order is processed and the products are assembled at the
distribution center and delivered to the Representative's home, usually by a
local delivery service. The Representative then delivers the merchandise and
collects payment from the customer for her own account. Payment by the
Representative to Avon is customarily made when the next order is forwarded to
1
the distribution center. The cost of merchandise to the Representative varies
according to the total order size for each two-week sales campaign and averages
approximately 60 percent of the recommended selling price.
In order to increase support of the Representative in the United States and
allow her to run her business more efficiently as well as to improve order
processing accuracy, Avon has implemented certain electronic order systems
technology. One of these systems permits Avon Representatives to
submit add-on orders with a touch-tone telephone, enabling them to augment
orders already submitted by placing a phone call. Another system, Avon's
Personal Order Entry Terminal, permits approximately 20,000 top-producing
Representatives in the United States to transmit orders electronically by
phone line, 24 hours a day, seven days a week.
Outside the United States, each sales campaign is generally of a three-
week duration. Although terms of payment and cost of merchandise to the
Representative vary from country to country, the basic method of direct selling
by Representatives is essentially the same as that used in the United States,
and substantially the same merchandising and promotional techniques are
utilized.
The recruiting of Representatives is the primary responsibility of
district managers, most of whom are former Representatives. In the United
States, each district manager has responsibility for a market area covered by
225 to 300 Representatives. District managers are employees of Avon and are
paid a salary and a commission based on purchases of Avon products by
Representatives in their district. Personal contacts, including
recommendations from current Representatives and local advertising, constitute
the primary means of obtaining new Representatives. Because of the high rate
of turnover among Representatives, a characteristic of the direct-selling
method, recruiting and training of new Representatives are continually
necessary.
From time to time, the question of the legal status of Representatives has
arisen, usually in regard to possible coverage under social benefit laws that
would require Avon (and in most instances, the Representatives) to make regular
contributions to social benefit funds established for employees. Although Avon
has generally been able to address these questions in a satisfactory manner,
the matter has not been fully resolved in all countries, including the United
States. If there should be a final judicial determination adverse to Avon in a
country, the cost for future, and possibly past contributions could be so
substantial in the context of the volume of business of Avon in that country
that it would have to consider discontinuing operations in that country.
Promotion and Marketing
Sales promotion and sales development activities are directed toward
giving selling assistance to the Representatives by making available sales aids
such as brochures, product samples and demonstration products. In order to
support the efforts of Representatives to reach new customers, especially
working women and other individuals who frequently are not at home, specially
designed sales aids, promotional pieces and customer flyers are used. In
addition, Avon seeks to motivate its Representatives through the use of special
incentive programs that reward superior sales performance. Periodic sales
meetings, to which Representatives are invited, are conducted by the district
manager. The meetings are designed to keep Representatives abreast of product
line changes, explain sales techniques and provide recognition for sales
performance.
2
A number of merchandising techniques, including the introduction of new
products, the use of combination offers, the use of trial sizes and the
promotion of products packaged as gift items, are used. In general for each
sales campaign, a distinctive brochure is published, in which new products are
introduced and selected items are offered at special prices or are given
particular prominence in the brochure. In the United States, all cosmetic,
toiletry and fragrance products are featured in each brochure at a constant low
price, while maintaining introductory specials and periodic sales on selected
items for limited time periods.
From time to time, various federal and state regulations or laws have been
proposed or adopted that would, in general, restrict the frequency or duration
of, or volume of sales resulting from new product introductions, special prices
or other special price offers. The Company's U.S. pricing policy discussed
above, will mitigate the effect of these regulations.
Avon also utilizes marketing programs that combine direct selling and
direct marketing to meet the diverse needs of customers. One of the direct
marketing programs, Select, enables customers to purchase Avon products in a
number of convenient ways: through a Representative, by mail through a Select
catalog, or by telephone. For most transactions this program also provides
commission income for Representatives.
Competitive Conditions
The cosmetics, fragrances and toiletries industry, the fashion jewelry
industry and the gift and decorative products industry are highly competitive.
Avon is one of the leading manufacturers and distributors of cosmetics and
fragrances in the United States. Its principal competitors are the large and
well-known cosmetics and fragrances companies that manufacture and sell broad
product lines through various types of retail establishments. There are many
other companies that compete in particular products or product lines sold
through retail establishments. There are also a number of direct-selling
cosmetics and fragrances companies that compete in the United States,
although none has total sales or income comparable with those of Avon.
Avon is one of the leading distributors of fashion jewelry for women in
the United States. Its principal competition in the fashion jewelry industry
consists of a few large companies and many small companies that manufacture and
sell fashion jewelry for women through retail establishments. There are also a
number of direct-selling fashion jewelry companies that compete in the United
States, although none has total sales or income comparable with those of Avon.
Avon has many competitors in the gift and decorative products industry in
the United States, including retail establishments, principally department
stores and gift shops, and direct-mail companies specializing in these
products. There are also a number of direct-selling companies selling gift and
decorative products in the United States, although none has total sales and
income comparable with those of Avon.
The number of competitors and degree of competition that Avon faces in its
foreign cosmetics, fragrances and fashion jewelry markets varies widely from
country to country. Avon is one of the leading manufacturers and distributors
in the cosmetics and fragrances industry in most of its foreign markets, as
well as in the fashion jewelry industry in Europe.
3
Avon believes that the personalized customer service offered by
Representatives; the high quality, attractive designs and reasonable prices of
its products; new product introductions; and the guarantee of satisfaction are
significant factors in establishing and maintaining its competitive position.
Avon's consolidated net sales by classes of principal products follows:
Years ended December 31
------------------------------
1993 1992 1991
---- ---- ----
(In millions)
Cosmetics, fragrances and toiletries...... $2,538.2 $2,392.0 $2,293.6
Fashion jewelry and accessories........... 809.9 734.6 672.8
Gift and decorative....................... 659.5 683.3 626.9
-------- -------- --------
$4,007.6 $3,809.9 $3,593.3
======== ======== ========
International Operations
Avon's international operations are subject to certain customary risks
inherent in carrying on business abroad, including the risk of adverse currency
fluctuations, currency remittance restrictions and unfavorable economic and
political conditions.
Avon's international operations are conducted primarily through wholly
owned subsidiaries in 39 countries and our products are distributed in 79 other
countries.
Manufacturing
Avon manufactures and packages almost all of its cosmetics, fragrances and
toiletries products. Raw materials, consisting chiefly of essential oils,
chemicals, containers and packaging components, are purchased from various
suppliers. Packages, consisting of containers and packaging components, are
designed by its staff of artists and designers.
The design and development of new products are affected by the cost and
availability of materials such as glass, plastics and chemicals. Avon believes
that it can continue to obtain sufficient raw materials and supplies to
manufacture and supply its products.
Avon has nineteen manufacturing laboratories around the world, three of
which are principally devoted to the manufacture of fashion jewelry. In the
United States, its cosmetics, fragrances and toiletries products are produced
in three manufacturing laboratories for the four distribution centers located
throughout the country. Most products sold in foreign countries are
manufactured in its facilities abroad.
The fashion jewelry line is generally developed by Avon's staff and
produced in its two manufacturing laboratories in Puerto Rico and a
manufacturing laboratory in Ireland or by several independent manufacturers.
4
Trademarks and Patents
Although Avon owns several patents and has several more patent
applications pending in the United States Patent Office, its business, both in
the United States and abroad, is not materially dependent upon patents or
patent protection. Avon has no material licenses, franchises or concessions.
Avon's major trademarks are protected by registration in the United States
and the other countries where its products are marketed as well as in many
other countries throughout the world.
RETAIL
The retail segment consists of Giorgio Beverly Hills, Inc. Among the
upscale fragrances offered are: Giorgio Beverly Hills, Red by Giorgio Beverly
Hills and Red for Men. A new fragrance, Wings, introduced on a limited basis
in 1992, was launched nationwide in the United States and in the United Kingdom
during 1993.
The prestige fragrance products are sold through a select group of
department stores and specialty shops in the United States and Europe, and in
duty-free shops around the world. These products are advertised in upscale
magazines and in cooperative department store advertisements in newspapers, as
well as by spot commercials on television, in selected markets. The prestige
fragrance market is highly competitive. Major competitors include companies
based in the United States and Europe.
The products sold by Giorgio are produced to its specifications by Avon
and by third-party manufacturers in the United States and Europe. The
trademarks of Giorgio are protected in the United States and the other
countries where its products are marketed as well as in many other countries
throughout the world.
DISCONTINUED OPERATIONS
During 1993, Avon recorded an additional discontinued operations provision
of $10.0 million after tax, or $.14 per share, for the final settlement and
related expenses in an arbitration proceeding related to a business previously
sold.
During 1992, Avon recorded an additional discontinued operations provision
of approximately $10.0 million principally for claims and litigation relating
to businesses previously sold, which was offset by amounts recovered for notes
and securities previously written off.
During 1991, Avon revised its estimate of loss for previously discontinued
operations by $75.0 million, or $1.05 per share, primarily related to the
writedown of the value of securities previously received.
Although Avon has completed its divestiture of all discontinued operations,
it may be liable for various contingencies relating to, among other things, an
indemnification given to the purchaser of certain discontinued operations. The
indemnification, currently being litigated, covers a patent dispute, various
environmental claims and numerous other lawsuits and claims. Due to the
complex nature of these contingencies, the ultimate outcome and related total
costs to Avon cannot currently be determined. For further discussion of the
5
contingencies see Note 14 of the Notes to the Consolidated Financial
Statements and Item 3 of this report.
PROVISION FOR RESTRUCTURING COSTS
A provision of $96.0 million ($64.4 million after tax, or $.90 per share)
was recorded in the first quarter of 1992 for the restructuring and
reconfiguration of Avon's worldwide manufacturing and distribution facilities.
The restructuring program included closing the manufacturing facility in Spain
during 1992 and the distribution facility in Springdale, Ohio in July 1993, as
well as the reconfiguring of several other international operations. The
program was substantially completed by the end of 1993. When completed in
early 1994, the program will have eliminated over 1,200 positions worldwide.
The restructuring program has increased operating efficiency in distribution,
eliminated redundancies in manufacturing by rationalizing product mix, and
reduced operating expenses. Expense savings of approximately $50.0 million per
year beginning in 1994 are anticipated.
SEASONAL NATURE OF BUSINESS
Avon's sales and earnings have a marked seasonal pattern characteristic of
many companies selling cosmetics, fragrances and toiletries; gift and
decorative products; fashion jewelry; and prestige fragrance products.
Christmas sales cause a sales peak in the fourth quarter of the year. Fourth-
quarter net sales are typically about 30 percent of full-year net sales, and
fourth-quarter pretax income is typically about 43 percent of full-year
pretax income. Fourth quarter net sales were 31 percent of full-year net
sales in 1993 and 1992, and fourth quarter pretax income was 43 percent in 1993
and 1992, excluding the effect of the restructuring charge in 1992.
RESEARCH ACTIVITIES
Avon's research and development department is a leader in the industry,
formulating affordable, effective beauty treatments relevant to women's needs.
A team of researchers and technicians applies the disciplines of science to the
practical aspects of bringing products to market around the world.
Relationships with well known dermatologists and other specialists supplements
Avon's own research to deliver new formulas and ingredients. Each year, Avon
researchers analyze and evaluate more than 600 products in the following
categories: cosmetics, fragrances, toiletries, jewelry, fashions, gifts and
decorative items.
Avon has pioneered many innovative products, including Skin-So-Soft, its
best-selling bath oil; BioAdvance, the first skin care product with stabilized
retinol, the purest form of Vitamin A; and Collagen Booster, the premier
product to capitalize on Vitamin C technology. Avon also introduced the
benefits of aromatherapy to millions of American women, encapsulated color for
the Color-Release line and alpha hydroxy acid for the Anew Perfecting Complex
products.
The amounts spent on research activities relating to the development of
new products and the improvement of existing products were $20.7 million in
1993, $29.4 million in 1992 and $29.6 million in 1991. This research included
the activities of product research and development, and package design and
development. Most of these activities are related to the development of
cosmetics, fragrances and toiletries products.
6
ENVIRONMENTAL MATTERS
Avon conducts regular environmental audits to ensure that its facilities
around the world meet or exceed local regulatory standards in such categories
as waste disposal and air and water emissions, and that opportunities for
environmental performance improvements are reflected in our products and
packaging.
In general, compliance with regulations governing the discharge of
materials into the environment or otherwise relating to the protection of the
environment has not had, and is not anticipated to have, any material effect
upon the capital expenditures, financial position or competitive position of
Avon. Reference is made to Item 3 of this report for additional information
regarding environmental matters.
EMPLOYEES
At December 31, 1993, Avon employed approximately 29,800 persons. Of
these, 8,300 were employed in the United States and 21,500 in other countries.
The number of employees of the direct selling segment tends to rise from a low
point in January to a high point in November and decreases somewhat in December
when Christmas shipments are completed.
ITEM 2. PROPERTIES
Avon's principal properties consist of manufacturing laboratories for the
production of cosmetics, fragrances and toiletries and fashion jewelry and
distribution facilities where offices are located and where finished
merchandise is warehoused and shipped to Representatives in fulfillment of
their orders. Substantially all of these properties are owned by Avon or its
subsidiaries, are in good repair, adequately meet Avon's needs and operate at
reasonable levels of productive capacity.
The domestic manufacturing laboratories are located in Morton Grove, IL;
Springdale, OH; and Suffern, NY; and the distribution centers are located in
Atlanta, GA; Glenview, IL; Newark, DE; and Pasadena, CA. The Springdale, OH
distribution center was closed in July 1993, as part of a previously announced
restructuring plan. International properties include four manufacturing
laboratories, including a fashion jewelry manufacturing laboratory in Ireland,
and six distribution centers in Europe, six manufacturing laboratories and
twelve distribution centers in the Americas and four manufacturing laboratories
and nine distribution centers in the Pacific. The research and development
laboratories are located in Suffern, NY. Avon leases space for its executive
and administrative offices in New York City and its fashion jewelry
manufacturing facilities in Puerto Rico.
ITEM 3. LEGAL PROCEEDINGS
Various lawsuits and claims (asserted and unasserted) arising in the
ordinary course of business are pending or threatened against Avon. The most
significant of these are described below.
In April 1991, Wertheim Schroder & Co. Incorporated, a holder of Avon's
Preferred Equity-Redemption Cumulative Stock (the "PERCS"), filed, on behalf of
certain classes of PERCS holders, a suit against Avon in the United States
District Court for the Southern District of New York alleging various contract
and securities law claims relating to the PERCS. Avon's motion for summary
7
judgment was denied, except as to one claim, on April 1, 1993. Avon rejects
the assertions in this case, believes it has meritorious defenses to the claims
and intends to vigorously contest this lawsuit.
In June 1988, Mallinckrodt, Inc. ("Mallinckrodt") and International
Minerals & Chemical Corporation ("IMC"), now known as Imcera Group Inc., filed
a lawsuit against Avon in the St. Louis Missouri City Circuit Court arising
from Avon's sale of Mallinckrodt to IMC in 1986. The suit alleged that a
certain patent dispute and a settlement, referred to as the DuPont patent case,
various environmental claims and numerous other lawsuits and claims are
contingent liabilities covered by an indemnification given by Avon in
connection with the sale of Mallinckrodt. In October 1991, the Missouri
Supreme Court affirmed the Circuit Court's decision that Avon has the
obligation to indemnify IMC and Mallinckrodt in connection with the DuPont
patent case, but remanded the matter for a trial on the damages, if any,
suffered by the parties. On July 27, 1992 a jury returned a verdict in the
DuPont patent case for $16.0 million, and a judgment for that amount plus
approximately $6.5 million interest was entered. On August 11, 1992 IMC and
Mallinckrodt filed post-trial motions, including a motion for a judgment
notwithstanding the verdict or, in the alternative, a motion for a new trial.
On November 5, 1992, the St. Louis Missouri City Circuit Court granted IMC's
and Mallinckrodt's motion for a judgment notwithstanding the verdict and
directed a verdict for plaintiffs in the amount of $27.1 million plus interest.
As of November 5, 1992, the interest amounted to approximately $11.7 million.
Avon, IMC and Mallinckrodt have appealed this decision. Pre-trial proceedings
and discovery activities are ongoing with respect to the environmental and
general litigation portions of the case.
With respect to the environmental contingencies which constitute a part of
the indemnification litigation, the total cost to Avon cannot be determined
with certainty as a result of such factors as the preliminary status of
information relating to the sites owned by the purchaser, the preliminary
regulatory involvement, the unknown magnitude and timing of cleanup efforts, if
any, to be undertaken by the purchaser or Mallinckrodt, the possibility of
recoveries against other parties, the uncertainty of the success of Avon's
defenses, and unasserted claims, if any. However, these factors have been
assessed and will continue to be assessed by Avon in estimating reserves to be
recorded in its financial statements.
The ultimate outcome and aggregate cost of resolving all of the above
contingencies will be based on a number of factors and will be determined over
a number of years. Accordingly, the total cost to Avon cannot currently be
determined with certainty. The reserves for such contingencies at December 31,
1993, which are recorded gross without anticipation of insurance recoveries or
other third party recoveries, if any, have been estimated by Avon's management
based on its review of currently known facts and circumstances at December 31,
1993. In the opinion of Avon's management, based on its review of the
preliminary information available at this time, the difference, if any, between
the total cost of resolving such contingencies and reserves recorded by Avon at
December 31, 1993 should not have a material adverse impact on Avon's
consolidated financial position or results of operations, based on the current
levels of such amounts. However, this difference, if any, could have a
material effect on results of operations in a future period when resolved.
Avon is involved in a number of proceedings arising out of the federal
Superfund law and similar state laws. In some instances Avon, along with other
companies, has been designated as a potentially responsible party which may be
8
liable for costs associated with these various hazardous waste sites. Based
upon Avon's current knowledge of these proceedings, management believes,
without taking into consideration any insurance recoveries, if any, that in the
aggregate they would not have a material adverse impact on Avon's consolidated
financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the quarter
ended December 31, 1993.
- - ----------
Executive Officers of the Registrant
Officers are elected by the Board of Directors at its first meeting
following the Annual Meeting of Shareholders. Officers serve until the first
meeting of the Board of Directors following the Annual Meeting of Shareholders
at which Directors are elected for the succeeding year, or until their
successors are elected, except in the event of death, resignation or removal,
or the earlier termination of the term of office.
Information regarding employment contracts between Avon and named executive
officers is incorporated by reference to the "Contracts with Executives"
section of Avon's Proxy Statement for the 1994 Annual Meeting of Shareholders.
Listed below are the executive officers of Avon, each of whom (except as
noted) has served in various executive and operating capacities with Avon
during the past five years:
Elected
Title Name Age Officer
----- ---- --- -------
Chairman of the Board,
Chief Executive Officer and Director. James E. Preston 60 1971
President, Chief Operating Officer
and Director......................... Edward J. Robinson 53 1989 (1)
Executive Vice President............... John I. Novosad 53 1989
Senior Vice President, General Counsel
and Secretary........................ Siri S. Marshall 45 1985
Senior Vice President and Chief
Financial Officer.................... Edwina D. Woodbury 42 1990
Senior Vice Presidents................. Christina A. Gold 46 1993
Robert F. McCracken 55 1992 (2)
Marcia L. Worthing 51 1988
Group Vice President, Controller....... Robert J. Conologue 45 1989 (3)
Group Vice President, Taxes/Finance.... Robert J. Corti 44 1988
[FN]
- - ----------
(1) Edward J. Robinson was elected President and Chief Operating Officer
in November 1993 and a member of the Board of Directors of Avon in May 1992.
Mr. Robinson had been Vice Chairman, Chief Financial and Administrative Officer
of Avon since May 1992; he joined the Company in April 1989 as Executive Vice
9
President and Chief Financial Officer. Immediately prior to joining Avon, he
served as Executive Vice President - Finance and Chief Financial Officer of RJR
Nabisco, Inc. from October 1987 to March 1989. Mr. Robinson was associated
with RJR Nabisco, Inc. and its predecessor companies, Nabisco Brands, Inc. and
Standard Brands Incorporated for 16 years. During that time, he served in a
number of financial positions, including senior financial officer capacities,
as a Controller, Treasurer or Chief Financial Officer. Prior to that time, Mr.
Robinson was associated with Ward Foods, Inc. (1970 to 1972) and Peat Marwick
Mitchell & Co. (1963 to 1970).
(2) Robert F. McCracken joined Avon and was elected Senior Vice President in
February 1992. Prior to joining Avon, he was Vice President of the Sears
Specialty Merchandising Group of Sears Roebuck & Co. Mr. McCracken joined
Sears and was elected Vice President of Sears World Trade, Inc. in 1984. Prior
to joining Sears, Mr. McCracken was with General Electric Co. from 1975.
(3) Robert J. Conologue was elected Group Vice President and Controller in
November 1992. Mr. Conologue joined Avon in July 1989 as Vice President and
Controller. Prior to joining Avon, he was Vice President and Corporate
Controller of Emery Air Freight Corporation since 1986. Mr. Conologue joined
Emery Air Freight as Assistant Corporate Controller in 1982 and was appointed
Controller U.S. Operations in 1984. Prior to joining Emery Air Freight
Corporation, he was with Arthur Andersen & Co. from 1970.
PART II
ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
This information is incorporated by reference to "Market Prices of Common
Stock by Quarter" on page 24 of Avon's 1993 Annual Report to Shareholders.
ITEM 6. SELECTED FINANCIAL DATA
The information for the five-year period 1989 through 1993 is incorporated
by reference to the "Eleven-Year Review" on pages 38 and 39 of Avon's 1993
Annual Report to Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
This information is incorporated by reference to "Management's Discussion
and Analysis" on pages 16 through 23 of Avon's 1993 Annual Report to
Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This information is incorporated by reference to the "Consolidated
Financial Statements and Notes" on pages 25 through 36, together with the
report thereon of Coopers & Lybrand, on page 37, and "Results of Operations by
Quarter" on page 24 of Avon's 1993 Annual Report to Shareholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
10
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors is incorporated by reference to the
"Election of Directors" and "Information Concerning the Board of Directors"
sections of Avon's Proxy Statement for the 1994 Annual Meeting of Shareholders.
Information regarding executive officers is presented in Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION
This information is incorporated by reference to the "Information
Concerning the Board of Directors" and "Executive Compensation" sections of
Avon's Proxy Statement for the 1994 Annual Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This information is incorporated by reference to the "Ownership of Shares"
section of Avon's Proxy Statement for the 1994 Annual Meeting of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information is incorporated by reference to the "Compensation
Committee Interlocks and Insider Participation" section and the "Contracts with
Executives" section of Avon's Proxy Statement for the 1994 Annual Meeting of
Shareholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
Annual
Report to
Shareholders Form 10-K
Page Number Page Number
------------ -----------
(a) 1. Consolidated Financial Statements of
Avon Products, Inc. and Subsidiaries
Consolidated statement of income for
each of the years in the three-year
period ended December 31, 1993........ 25
Consolidated balance sheet at
December 31, 1993 and 1992............ 26
Consolidated statement of cash flows for
each of the years in the three-year
period ended December 31, 1993........ 27
11
Consolidated statement of changes in
shareholders' equity for each of
the years in the three-year period
ended December 31, 1993............... 28
Notes to consolidated financial
statements............................ 29
Report of Independent Accountants
Coopers & Lybrand..................... 37
(a) 2. Financial Statement Schedules
Report of Independent Accountants
Coopers & Lybrand..................... S-1
Consent of Independent Accountants
Coopers & Lybrand..................... S-2
Financial statement schedules for each
of the years in the three-year period
ended December 31, 1993
V --Property, plant and
equipment................... S-3
VI --Accumulated depreciation and
amortization--property,
plant and equipment......... S-4
VIII--Valuation and qualifying
accounts.................... S-5
IX --Short-term borrowings......... S-6
X --Supplementary income statement
information................. S-6
Financial statements of the registrant and all other financial
statement schedules are omitted because they are not applicable or
because the required information is shown in the consolidated
financial statements and notes.
(a) 3. Exhibits
Exhibit
Number Description
------- -----------
3.1 --Restated Certificate of Incorporation of Avon, filed with the
Secretary of State of the State of New York on August 12, 1988.
3.2 --By-laws, as amended to April 27, 1990, of Avon (incorporated by
reference to Exhibit 3.1 to Avon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1990).
12
4.1 --Instrument defining the rights of holders of Avon's preferred
share purchase rights to purchase Avon's Series A Junior
Participating Preferred Stock (reference is made to Article
IIIA of the restated Certificate of Incorporation of Avon,
filed with the Secretary of State of New York State on August
12, 1988 and included as Exhibit 3.1 to this Annual Report
on Form 10-K).
4.2 --Rights Agreement, dated as of March 30, 1988 (the "Rights
Agreement"), between Avon and First Chicago Trust Company of
New York (as successor to Morgan Shareholder Services Trust
Company) (incorporated by reference to Exhibit 1 to Avon's
Registration Statement on Form 8-A, filed April 7, 1988).
4.3 --Amendment, dated as of January 3, 1989, to the Rights Agreement
(incorporated by reference to Exhibit 3 to Avon's Amendment No.
1 on Form 8, filed January 4, 1989, amending its Registration
Statement on Form 8-A, filed April 7, 1988).
4.4 --Second Amendment, dated as of April 5, 1990, to the Rights
Agreement (incorporated by reference to Exhibit 4(c) to Avon's
Current Report on Form 8-K, dated April 5, 1990).
4.5 --Third Amendment, dated as of May 10, 1990, to the Rights
Agreement (incorporated by reference to Exhibit 4(d) to Avon's
Current Report on Form 8-K, dated May 10, 1990).
4.6 --Multifacility Credit Agreement, dated as of June 17, 1992,
among Avon Capital Corporation, Avon and a group of banks
(incorporated by reference to Exhibit 4.1 to Avon's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1992).
4.7 --First Amendment, dated as of April 15, 1993, to the Multi-
facility Credit Agreement, dated as of June 17, 1992, among
Avon Capital Corporation, Avon and a group of banks
(incorporated by reference to Exhibit 4.1 to Avon's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1993).
10.1* --Avon Products, Inc. 1993 Stock Incentive Plan, approved by
stockholders May 6, 1993 (incorporated by reference to Exhibit
10.2 to Avon's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1993).
10.2* --Form of Stock Option Agreement to the Avon Products, Inc. 1993
Stock Incentive Plan.
10.3* --Avon Products, Inc. 1994 Long-Term Incentive Plan, effective as
of January 1, 1994.
10.4* --Avon Products, Inc. 1970 Stock Option Incentive Plan, as
amended and restated through May 4, 1989 (incorporated by
reference to Exhibit 4.6 to Avon's Registration Statement on
Form S-8, Registration No. 33-28653, filed May 18, 1989).
13
10.5* --First Amendment, dated as of November 5, 1992, to the Avon
Products, Inc. 1970 Stock Option Incentive Plan as amended
and restated through May 4, 1989 (incorporated by reference to
Exhibit 10.1 to Avon's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1993).
10.6* --Supplemental Executive Retirement Plan and Supplemental Life
Plan of Avon Products, Inc., as amended and restated through
July 1, 1991 (incorporated by reference to Exhibit 10.2 to
Avon's Annual Report on Form 10-K for the year ended December
31, 1991).
10.7* --First Amendment, dated as of January 21, 1994, to the
Supplemental Executive Retirement Plan and Supplemental Life
Plan of Avon Products, Inc., as amended and restated through
July 1, 1991.
10.8* --The Supplemental Life Plan of Avon, effective as of January 1,
1990 (incorporated by reference to Exhibit 10.1 to Avon's
Quarterly Report on Form 10-Q for the quarter ended September
30, 1991).
10.9* --Trust Agreement, amended and restated as of March 2, 1990,
between Avon and Chase Manhattan Bank, N.A. (incorporated by
reference to Exhibit 10.2 to Avon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1990).
10.10* --First Amendment, dated as of January 30, 1992, to the Trust
Agreement, dated as of March 2, 1990, by and between Avon and
Chase Manhattan Bank, N.A. (incorporated by reference to
Exhibit 10.2 to Avon's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1993).
10.11* --Second Amendment, dated as of June 12, 1992 to the Trust
Agreement, dated as of March 2, 1990, by and between Avon and
Chase Manhattan Bank, N.A. (incorporated by reference to
Exhibit 10.3 to Avon's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1993).
10.12* --Third Amendment, dated as of November 5, 1992, to the Trust
Agreement, dated as of March 2, 1990, by and between Avon and
Chase Manhattan Bank, N.A. (incorporated by reference to
Exhibit 10.4 to Avon's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1993).
10.13* --The Avon Products, Inc. Deferred Compensation Plan, as amended
and restated as of October 8, 1990 (incorporated by reference
to Exhibit 10.5 to Avon's Annual Report on Form 10-K for the
year ended December 31, 1991).
10.14* --First Amendment, dated as of November 5, 1992, to the Avon
Products, Inc. Deferred Compensation Plan, as amended and
restated as of October 8, 1990 (incorporated by reference to
Exhibit 10.5 to Avon's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1993).
14
10.15* --Trust Agreement, dated as of August 3, 1989, between Avon and
Manufacturers Hanover Trust Company (incorporated by reference
to Exhibit 10.4 to Avon's Annual Report of Form 10-K for the
year ended December 31, 1989).
10.16 --Not Used.
10.17* --Instrument of Amendment, effective as of April 1, 1990 amending
various employee benefit plans and agreements as stipulated in
the Instrument of Amendment (incorporated by reference to
Exhibit 10.3 to Avon's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1990).
10.18* --Employment Agreement, dated as of November 5, 1992, between
Avon and James E. Preston (incorporated by reference to Exhibit
10.10 to Avon's Annual Report on Form 10-K for the year ended
December 31, 1992).
10.19* --Non-Qualified Stock Option Award, dated as of December 5, 1991,
granted by Avon to James E. Preston (incorporated by reference
to Exhibit 10.11 to Avon's Annual Report on Form 10-K for the
year ended December 31, 1991).
10.20* --Employment Agreement, dated as of November 5, 1992, between
Avon and Edward J. Robinson (incorporated by reference to
Exhibit 10.12 to Avon's Annual Report on Form 10-K for the
year ended December 31, 1992).
10.21* --Restricted Stock Agreement, effective as of November 4, 1993,
granted by Avon to Edward J. Robinson.
10.22* --Employment Agreement, dated as of January 2, 1993, between Avon
and Siri S. Marshall (incorporated by reference to Exhibit 10.1
to Avon's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1993).
10.23* --Avon Products, Inc. Directors' Retirement Plan, effective as of
January 1, 1988 (incorporated by reference to Exhibit 10.22 to
Avon's Annual Report on Form 10-K for the year ended December
31, 1991).
10.24* --First Amendment, dated as of November 5, 1992, to the Avon
Products, Inc. Directors' Retirement Plan (incorporated by
reference to Exhibit 10.6 to Avon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1993).
15
10.25* --Trust Agreement, dated as of December 31, 1991, between Avon
and Manufacturers Hanover Trust Company (incorporated by
reference to Exhibit 10.23 to Avon's Annual Report on Form 10-K
for the year ended December 31, 1991).
10.26* --First Amendment, dated as of November 5, 1992, to the Trust
Agreement dated as of December 31, 1991, by and between Avon
and Manufacturers Hanover Trust Company (incorporated by
reference to Exhibit 10.7 to Avon's Quarterly Report on Form
10-Q for the quarter ended March 31, 1993).
11.1 --Statement re computation of primary income per share.
11.2 --Statement re computation of fully diluted income per share.
13 --Portions of the Annual Report to Shareholders for the year
ended December 31, 1993 incorporated by reference in response
to Items 5 through 8 in this filing.
21 --Subsidiaries of the registrant.
23 --Consent of Coopers & Lybrand (set forth on page S-2 of this
Annual Report on Form 10-K).
24 --Power of Attorney.
99 --Financial statements for the Avon Products, Inc. Employees'
Savings and Stock Ownership Plan and the Avon Mirabella/
Lomalinda Employees' Savings Plan for the year ended December
31, 1993 will be filed by amendment.
*The Exhibits identified above and in the Exhibit Index with an asterisk
(*) are management contracts or compensatory plans or arrangements.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the fourth quarter of
1993.
(c) Avon's Annual Report on Form 10-K for the year ended December 31, 1993,
at the time of filing with the Securities and Exchange Commission, shall modify
and supersede all prior documents filed pursuant to Section 13, 14 or 15(d) of
the Securities Exchange Act of 1934 for purposes of any offers or sales of any
securities after the date of such filing pursuant to any Registration Statement
or Prospectus filed pursuant to the Securities Act of 1933, which incorporates
by reference such Annual Report on Form 10-K.
16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 23rd day of
March 1994.
Avon Products, Inc.
By/s/ SIRI S. MARSHALL
-----------------------------
Siri S. Marshall
Senior Vice President, General Counsel
and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
Chairman of the Board and
Chief Executive Officer--
* Principal Executive
- - --------------------------- Officer and Director March 23, 1994
James E. Preston
* President, Chief Operating
- - --------------------------- Officer and Director March 23, 1994
Edward J. Robinson
Senior Vice President,
* Chief Financial Officer--
- - --------------------------- Principal Financial Officer March 23, 1994
Edwina D. Woodbury
Group Vice President,
* Controller--Principal
- - --------------------------- Accounting Officer March 23, 1994
Robert J. Conologue
BRENDA BARNES )
DANIEL B. BURKE )
STANLEY C. GAULT )
GEORGE V. GRUNE )
CHARLES S. LOCKE )
ANN S. MOORE ) Directors* March 23, 1994
REMEDIOS DIAZ OLIVER )
JOHN J. PHELAN, JR. )
ERNESTA G. PROCOPE )
JOSEPH A. RICE )
CECILY C. SELBY )
*By/s/ SIRI S. MARSHALL
- - ---------------------------- March 23, 1994
Siri S. Marshall, Attorney-in-fact
17
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of Avon Products, Inc.
Our report on the consolidated financial statements of Avon Products, Inc.
and subsidiaries as of December 31, 1993 and 1992 and for each of the years in
the three-year period ended December 31, 1993 has been incorporated by
reference in this Form 10-K from page 37 of the 1993 Annual Report to
Shareholders of Avon Products, Inc. In connection with our audits of such
financial statements, we have also audited the related financial statement
schedules for each of the years in the three-year period ended December 31,
1993, as listed in the Index under Item 14(a)2 of this Form 10-K.
In our opinion, the financial statement schedules for each of the years in
the three-year period ended December 31, 1993 referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
/s/Coopers & Lybrand
New York, New York
February 3, 1994
S-1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the following Registration
Statements of Avon Products, Inc.: Form S-8 (Reg. No. 2-37955), Form S-8
(Reg. No. 2-48080), Form S-8 (Reg. No. 2-61285), Form S-8 (Reg. No. 2-83235),
Form S-8 (Reg. No. 2-94959), Form S-8 (Reg. No. 33-28653), Form S-8 (Reg. No.
33-47209), Form S-8 (Reg. No. 33-60218), Form S-8 (Reg. No. 33-60918), Form S-8
(Reg. No. 33-65998), Post Effective Amendment No. 1 to Form S-8 (Reg. No.
2-98707), Pre-Effective Amendment No. 1 to Form S-8 (Reg. No. 33-22099),
of our reports dated February 3, 1994 on our audits of (i) the consolidated
financial statements of Avon Products, Inc. as of December 31, 1993 and 1992
and for each of the years in the three-year period ended December 31, 1993,
which report is included in the 1993 Annual Report to Shareholders and
incorporated by reference in this Annual Report on Form 10-K and (ii) the
1993, 1992 and 1991 financial statement schedules of Avon Products, Inc., which
report is included in this Annual Report on Form 10-K.
/s/Coopers & Lybrand
New York, New York
March 23, 1994
S-2
AVON PRODUCTS, INC. AND SUBSIDIARIES
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
(In millions)
Years ended December 31
Balance at Balance
beginning Additions Other at end
of period at cost Retirements changes(c) of period
---------- --------- ----------- ---------- ---------
1993
Land.............. $ 39.4 $ .4 $ -- $ 1.9 $ 41.7
Buildings and
improvements.... 478.9 19.2 6.0 7.2 499.3
Equipment......... 530.6 40.4 31.8 (9.7) 529.5
-------- ----- ----- ------ --------
$1,048.9 $60.0(a) $37.8 $ (.6) $1,070.5
======== ===== ===== ====== ========
1992
Land.............. $ 23.0 $14.6 $ -- $ 1.8 $ 39.4
Buildings and
improvements.... 489.4 15.5 1.0 (25.0) 478.9
Equipment......... 516.3 50.2 23.3 (12.6) 530.6
-------- ----- ----- ------ --------
$1,028.7 $80.3(a) $24.3 $(35.8) $1,048.9
======== ===== ===== ====== ========
1991
Land.............. $ 24.0 $ .2 $ 1.7 $ .5 $ 23.0
Buildings and
improvements.... 477.1 46.2 17.5 (16.4) 489.4
Equipment......... 490.0 18.4 8.9 16.8 516.3
-------- ----- ----- ------ --------
$ 991.1 $64.8(b) $28.1 $ .9 $1,028.7
======== ===== ===== ====== ========
[FN]
- - ------------
(a) 1993 includes $1.5 related to acquisitions of minority interests in two
foreign subsidiaries and 1992 includes $16.9 related to the acquisition of
an additional 5.7 shares of Avon Products Company Limited in 1992.
(b) Includes new distribution center in Gwinnett County, Georgia, which cost
approximately $20.0, including equipment.
(c) Translation adjustments, and transfers and reclassifications between
accounts.
Substantially all plant and equipment is depreciated using the straight-
line method over estimated useful lives, which are generally as follows:
Buildings and improvements............................. 20-45 years
Equipment.............................................. 5-15 years
S-3
AVON PRODUCTS, INC. AND SUBSIDIARIES
SCHEDULE VI--ACCUMULATED DEPRECIATION AND AMORTIZATION
PROPERTY, PLANT AND EQUIPMENT
(In millions)
Years ended December 31
Additions
Balance at charged to Balance
beginning costs and Other at end
of period expenses Retirements changes(a) of period
---------- ---------- ----------- ---------- ---------
1993
Buildings and
improvements. $237.0 $18.9 $ .6 $ 3.5 $258.8
Equipment...... 329.6 31.5 26.8 (3.1) 331.2
------ ----- ----- ------ ------
$566.6 $50.4 $27.4 $ .4 $590.0
====== ===== ===== ====== ======
1992
Buildings and
improvements. $225.5 $18.9 $ .6 $ (6.8) $237.0
Equipment...... 327.9 30.4 17.3 (11.4) 329.6
------ ----- ----- ------ ------
$553.4 $49.3 $17.9 $(18.2) $566.6
====== ===== ===== ====== ======
1991
Buildings and
improvements. $216.0 $17.5 $ 9.5 $ 1.5 $225.5
Equipment...... 303.0 31.3 6.7 .3 327.9
------ ----- ----- ------ ------
$519.0 $48.8 $16.2 $ 1.8 $553.4
====== ===== ===== ====== ======
[FN]
- - ------------
(a) Translation adjustments, and transfers and reclassifications between
accounts.
S-4
AVON PRODUCTS, INC. AND SUBSIDIARIES
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
(In millions)
Years ended December 31
Additions
--------------------
Balance at Charged to Charged Balance
beginning costs and to other at end
of period expenses accounts Deductions of period
---------- ---------- -------- ---------- ---------
1993
Allowance for doubtful
accounts receivable. $23.5 $ 51.7 $ -- $ 52.1(a) $23.1
===== ====== ===== ====== =====
1992
Allowance for doubtful
accounts receivable. $30.8 $ 47.5 $ -- $ 54.8(a) $23.5
Allowance for long-
term receivables
and investments..... 33.1 -- -- 33.1(b) --
----- ------ ----- ------ -----
$63.9 $ 47.5 $ -- $ 87.9 $23.5
===== ====== ===== ====== =====
1991
Allowance for doubtful
accounts receivable. $21.2 $ 55.2 $ -- $ 45.6(a) $30.8
Allowance for long-
term receivables
and investments..... 67.5 73.8 -- 108.2(b) 33.1
----- ------ ----- ------ -----
$88.7 $129.0 $ -- $153.8 $63.9
===== ====== ===== ====== =====
[FN]
- - ------------
(a)Accounts written off, less recoveries and foreign currency translation
adjustment.
(b)Write off of various notes and other securities, which Avon received in
connection with the sale of health care and other businesses.
S-5
AVON PRODUCTS, INC. AND SUBSIDIARIES
SCHEDULE IX--SHORT-TERM BORROWINGS
(In millions)
Years ended December 31
Maximum Average Weighted
Category of Weighted amount amount average
aggregate Balance average outstanding outstanding interest rate
short-term at end of interest during the during the during the
borrowings(a) period rate(b) period period(c) period(b)(c)
- - ------------- --------- -------- ----------- ----------- -------------
1993
Payable to banks. $ 16.1 9% $250.0 $159.9 4%
1992
Payable to banks. $ 4.1 11% $285.2 $198.2 5%
1991
Payable to banks. $104.0 6% $260.9 $173.8 7%
[FN]
- - -------------
(a) Most short-term borrowings are notes payable to banks of domestic and
foreign subsidiaries. Most of the notes of foreign subsidiaries are
payable in local currency.
(b) Includes interest rates for borrowings of foreign subsidiaries operating in
highly inflationary economies.
(c) The average short-term borrowings and the weighted average interest rate
were calculated on borrowings outstanding at the end of each month.
SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION
(In millions)
Years ended December 31
-----------------------
1993 1992 1991
---- ---- ----
Taxes, other than payroll and income taxes........... $60.1 $55.5 $50.7
S-6