Avon Announces Special Charge for Third Quarter; Company on Track For 2002 EPS Target
Oct 2, 2002
Avon Products, Inc. (NYSE: AVP) said today that it will record a special charge in the third quarter of 2002 of $43.6 million pretax ($30.4 million after tax, or $.12 per share) related to the company's Business Transformation initiatives. The size of the charge is in line with Avon's previous estimate announced September 3.
Avon also said it will record a benefit in the third quarter of $7.3 million pretax ($5.2 million after tax, or $.02 per share) from an adjustment to the special charge for Business Transformation initiatives it recorded in the fourth quarter of 2001. The adjustment reflects favorable updated estimates of costs associated with certain Business Transformation projects.
The net effect of the two unusual items in the third quarter will be a charge of $36.3 million pretax ($25.2 million after tax, or $.10 per share).
Business Transformation is a comprehensive series of initiatives designed to streamline Avon's processes and operations and enable the company to achieve its target of a 250 basis-point expansion in operating margin by the end of 2004. Avon said no additional special charges for Business Transformation are expected in order for the company to achieve its operating margin goal.
The third-quarter charge announced today will be approximately 90% cash and will primarily cover severance expense in the areas of organizational structure and supply chain in all geographic regions.
Avon said it expects to realize net savings of approximately $15 million pretax in 2003, accelerating to $40-$50 million in 2004, from actions related to the third-quarter charge.
"Our operations around the world continue to be very strong and Business Transformation is helping us to improve service and responsiveness to our Representatives and customers as well as drive greater efficiencies throughout our business," said Andrea Jung, Avon's chairman and chief executive.
Ms. Jung also said Avon remains on track to achieve its previously stated earnings target of $2.30 per share for full year 2002, excluding unusual items, despite recent further currency weakness in Brazil.
"We expect to offset the effects of a weaker Brazilian real through robust operating results in local currencies and effective currency hedging strategies that are in place for the balance of the year," Ms. Jung said.
"We look forward to reporting our third consecutive year of double-digit earnings growth before unusual items, despite the headwinds we've faced with weak Latin currencies most of this year," she said.
Avon is scheduled to report third-quarter results on October 18.
Avon is the world's leading direct seller of beauty and related products, with approximately $6.0 billion in annual revenues. Avon markets to women in 143 countries through 3.5 million independent sales Representatives. Avon product lines include such recognizable brand names as Avon Color, Anew, Skin-So-Soft, Advance Techniques Hair Care, beComing and Avon Wellness. Avon also markets an extensive line of fashion jewelry and apparel. More information about Avon and its products can be found on the company's web site http://www.avon.com/.
Cautionary Statement under the Private Securities Litigation Reform Act of 1995
Statements in this release, which are not historical facts or information, are "forward-looking statements" within the meaning of the Private Securities Litigation Act of 1995. Such forward-looking statements are based on management's reasonable current assumptions and expectations. Such forward-looking statements involve risks, uncertainties and other factors which may cause the actual results, levels of activity, performance or achievement of the Company to be materially different from any future results, expressed or implied by such forward-looking statements, and there can be no assurance that actual results will not differ materially from management's expectations. Such factors include, among others, the following: general economic and business conditions in the Company's markets, including economic and political uncertainties in Latin America; the Company's ability to implement its business strategy and its Business Transformation initiatives, including the integration of similar activities across markets to achieve efficiencies; the Company's ability to achieve anticipated cost savings and profitability targets; the impact of substantial currency exchange fluctuations in the Company's principal foreign markets and the success of the Company's foreign currency hedging and risk management strategies; the impact of possible pension funding obligations on the Company's cash flow and results of operations; and the effect of legal and regulatory proceedings and restrictions imposed on the Company or its operations by foreign governments. Additional information identifying such important factors is contained in the Company's Form 10-K/A report for the year ended December 31, 2001, filed with the S.E.C. The Company undertakes no obligation to update any such forward-looking statements.
SOURCE: Avon Products, Inc.
CONTACT: Brian T. Martin, +1-212-282-5103, Investor - Rob Foresti,
+1-212-282-5320, both of Avon Products, Inc.
Web site: http://www.avon.com/
Company News On-Call: http://www.prnewswire.com/comp/079575.html
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