-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TjUwky9rktK8+wKHIwEN3og0WJePWKJOvRnw5qHXX4keQIu4Wc8noSuJuICBzuPc wxX+b8Jpj/Ze8+x0GCnO9A== 0000008868-96-000010.txt : 19960816 0000008868-96-000010.hdr.sgml : 19960816 ACCESSION NUMBER: 0000008868-96-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AVON PRODUCTS INC CENTRAL INDEX KEY: 0000008868 STANDARD INDUSTRIAL CLASSIFICATION: PERFUMES, COSMETICS & OTHER TOILET PREPARATIONS [2844] IRS NUMBER: 130544597 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04881 FILM NUMBER: 96612096 BUSINESS ADDRESS: STREET 1: 9 W 57TH ST CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2125466015 10-Q 1 JUN 30, 1996 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 1996 [ ] 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 10019-2683 (Address of principal executive offices) (212) 546-6015 (telephone number) 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 ___ The number of shares of Common Stock (par value $.25) outstanding at July 31, 1996 was 133,053,426 reflecting a two-for-one stock split distributed in June 1996. 2 Table of Contents Part I. Financial Information Page Numbers ------- Item 1. Financial Statements Consolidated Statement of Income Three Months Ended June 30, 1996 and June 30, 1995.................................... 3 Six Months Ended June 30, 1996 and June 30, 1995.................................... 4 Consolidated Balance Sheet June 30, 1996 and December 31, 1995.............. 5 Consolidated Statement of Cash Flows Six Months Ended June 30, 1996 and June 30, 1995.................................... 6 Notes to Consolidated Financial Statements.......... 7-9 Item 2. Management's Discussion and Analysis of the Results of Operations and Financial Condition....... 10-21 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K.................... 22 Signatures................................................... 23 2 3 PART I. FINANCIAL INFORMATION AVON PRODUCTS, INC. CONSOLIDATED STATEMENT OF INCOME (In millions, except per share data) Three months ended June 30 ------------------ 1996 1995 ---- ---- (unaudited) Net sales................................. $1,128.7 $1,064.0 Costs, expenses and other: Cost of sales............................. 437.1 404.9 Marketing, distribution and administrative expenses................. 546.0 523.1 Interest expense.......................... 10.4 10.3 Interest income........................... (3.7) (5.6) Other (income)/expense, net............... .2 (2.4) -------- -------- Total costs, expenses and other........... 990.0 930.3 -------- -------- Income before taxes and minority interest. 138.7 133.7 Income taxes.............................. 52.7 53.4 -------- -------- Income before minority interest........... 86.0 80.3 Minority interest......................... (.3) .1 -------- -------- Net income................................ $ 85.7 $ 80.4 ======== ======== Income per share.......................... $ .64 $ .59* ======== ======== Average shares outstanding................ 133.91 136.92* ======== ======== *Restated to reflect a two-for-one stock split distributed in June 1996. The accompanying notes are an integral part of these statements. 3 4 AVON PRODUCTS, INC. CONSOLIDATED STATEMENT OF INCOME (In millions, except per share data) Six months ended June 30 ------------------ 1996 1995 ---- ---- (unaudited) Net sales................................. $2,144.8 $2,040.2 Costs, expenses and other: Cost of sales............................. 838.7 792.2 Marketing, distribution and administrative expenses................. 1,087.0 1,040.1 Interest expense.......................... 20.0 19.3 Interest income........................... (7.6) (9.7) Other expense, net........................ 8.2 8.1 -------- -------- Total costs, expenses and other........... 1,946.3 1,850.0 -------- -------- Income before taxes and minority interest. 198.5 190.2 Income taxes.............................. 75.4 75.9 -------- -------- Income before minority interest........... 123.1 114.3 Minority interest......................... .3 .5 -------- -------- Net income................................ $ 123.4 $ 114.8 ======== ======== Income per share.......................... $ .92 $ .84* ======== ======== Average shares outstanding................ 134.26 137.13* ======== ======== *Restated to reflect a two-for-one stock split distributed in June 1996. The accompanying notes are an integral part of these statements. 4 5 AVON PRODUCTS, INC. CONSOLIDATED BALANCE SHEET (In millions) June 30 December 31 1996 1995 ------- ----------- (unaudited) ASSETS Current assets: Cash and equivalents..................... $ 72.9 $ 151.4 Accounts receivable...................... 409.9 402.0 Inventories.............................. 551.1 466.3 Prepaid expenses and other............... 213.6 195.3 -------- -------- Total current assets..................... 1,247.5 1,215.0 -------- -------- Property, plant and equipment, at cost... 1,168.6 1,169.5 Less accumulated depreciation............ 637.1 631.7 -------- -------- 531.5 537.8 -------- -------- Other assets............................. 329.0 300.0 -------- -------- Total assets............................. $2,108.0 $2,052.8 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Debt maturing within one year............ $ 312.2 $ 47.3 Accounts payable......................... 298.7 419.7 Accrued compensation..................... 112.2 109.3 Other accrued liabilities................ 241.4 277.3 Sales and other taxes.................... 87.0 101.8 Income taxes............................. 290.4 289.9 -------- -------- Total current liabilities................ 1,341.9 1,245.3 -------- -------- Long-term debt........................... 105.8 114.2 Employee benefit plans................... 400.5 390.8 Deferred income taxes.................... 31.7 33.6 Other liabilities........................ 68.2 76.2 Shareholders' equity: Common stock............................. 43.4 43.4 Additional paid-in capital............... 680.2 672.9 Retained earnings........................ 371.3 325.8 Translation adjustments.................. (208.6) (202.1) Treasury stock, at cost.................. (726.4) (647.3) -------- -------- Total shareholders' equity............... 159.9 192.7 -------- -------- Total liabilities and shareholders' equity................................. $2,108.0 $2,052.8 ======== ======== The accompanying notes are an integral part of these statements. 5 6 AVON PRODUCTS, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (In millions) Six months ended June 30 ------------------ 1996 1995 ---- ---- (unaudited) Cash flows from operating activities: Net income............................................ $123.4 $114.8 Adjustments to reconcile net income to net cash used by operating activities: Depreciation and amortization......................... 31.2 28.9 Provision for doubtful accounts....................... 34.5 35.7 Translation (gains)/losses............................ (.7) 2.1 Deferred income taxes................................. (9.4) (4.3) Other................................................. 3.6 6.3 Changes in assets and liabilities: Accounts receivable................................. (50.0) (52.1) Inventories......................................... (86.6) (91.9) Prepaid expenses and other.......................... (18.4) (30.0) Accounts payable and accrued liabilities............ (104.9) (108.7) Income and other taxes.............................. (11.0) (2.2) Noncurrent assets and liabilities................... (7.6) 9.2 ------ ------ Net cash used by continuing operations................ (95.9) (92.2) Net cash used by discontinued operations.............. (36.8) (2.1) ------ ------ Net cash used by operating activities................. (132.7) (94.3) ------ ------ Cash flows from investing activities: Capital expenditures.................................. (31.6) (26.3) Disposal of assets.................................... 1.9 .5 Acquisition of Justine (Pty) Ltd...................... (6.3) -- ------ ------ Net cash used by investing activities................. (36.0) (25.8) ------ ------ Cash flows from financing activities: Cash dividends........................................ (80.7) (73.0) Debt, net (maturities of three months or less)........ 257.1 150.9 Proceeds from short-term debt......................... 5.1 17.9 Retirement of short-term debt......................... (5.7) (19.6) Retirement of long-term debt.......................... (.6) (16.8) Repurchase of common stock............................ (79.9) (57.8) Proceeds from exercise of stock options............... 4.8 .9 ------ ------ Net cash provided by financing activities............. 100.1 2.5 ------ ------ Effect of exchange rate changes on cash and equivalents......................................... (9.9) 14.5 ------ ------ Net decrease in cash and equivalents.................. (78.5) (103.1) Cash and equivalents beginning of period.............. 151.4 214.8 ------ ------ Cash and equivalents end of period.................... $ 72.9 $111.7 ====== ====== The accompanying notes are an integral part of these statements. 6 7 AVON PRODUCTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except share data) 1. ACCOUNTING POLICIES The accompanying Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and the Notes thereto contained in Avon's 1995 Annual Report to Shareholders. The interim statements are unaudited but include all adjustments, which consisted of only normal recurring accruals, that management considers necessary to fairly present the results for the interim periods. Results for interim periods are not necessarily indicative of results for a full year. The year end balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. To conform to the 1996 presentation, certain reclassifications were made to the prior year's consolidated financial statements. 2. INFORMATION RELATING TO THE STATEMENT OF CASH FLOWS "Net cash used by continuing operations" includes the following cash payments for interest and income taxes: Six months ended June 30 ---------------- 1996 1995 ---- ---- Interest..................................... $16.8 $16.2 Income taxes, net of refunds received........ 87.5 84.1 3. INCOME PER SHARE Income per share of common stock is based on the weighted average number of shares outstanding. The decrease in average shares outstanding for the three and six months ended June 30, 1996 compared to the respective periods of 1995 is primarily due to the shares acquired under the stock repurchase program. During the first six months of 1996, the Company purchased approximately 1.9 million shares of common stock compared to approximately the same number of shares purchased during the first six months of 1995. As of June 30, 1996, the cumulative number of shares repurchased was approximately 11.6 million shares, as restated to reflect the two-for-one stock split distributed in June 1996, for a total cost of approximately $375.1. 7 8 AVON PRODUCTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except share data) At the Annual Meeting on May 2, 1996, the shareholders approved an amendment to the Company's Certificate of Incorporation to increase the number of shares of common stock authorized from 200 million to 400 million and decrease the par value per share from $.50 to $.25. Also on May 2, 1996, the Company's Board of Directors authorized a two-for-one stock split in the form of a 100 percent stock distribution which was made on June 3, 1996 to shareholders of record after the close of business on May 15, 1996. All share and per share data included in this report, unless indicated, have been restated to reflect the stock split. 4. INVENTORIES June 30 December 31 1996 1995 ------- ----------- Raw materials............. $145.5 $133.2 Finished goods............ 405.6 333.1 ------ ------ $551.1 $466.3 ====== ====== 5. DIVIDENDS Cash dividends paid per share of common stock were $.58 for the three months ended June 30, 1996 and $.50 for the corresponding 1995 period on a pre-split basis. On May 2, 1996, the Board of Directors declared a regular quarterly dividend of $.58 per share on the common shares, paid on June 3, 1996, to shareholders of record on May 13, 1996. Future dividends will be paid on a post-split basis. The dividend of $.58 per share is the equivalent of $.29 per share on a post-split basis. The annual dividend rate for 1996, adjusted for the two-for-one stock split, is $1.16 compared to an adjusted post-split dividend rate for 1995 of $1.10. 8 9 AVON PRODUCTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except share data) 6. NEW ACCOUNTING STANDARDS Effective January 1, 1996, the Company adopted Statement of Financial Accounting Standards ("FAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of". This statement requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. There was no impact on the Company's results of operations or financial position upon adoption. Also, effective January 1, 1996, the Company adopted FAS No. 123, "Accounting for Stock-Based Compensation". This statement establishes financial accounting and reporting standards for stock-based employee compensation plans, such as stock purchase plans, stock options, restricted stock and stock appreciation rights as well as non-employee equity transactions. The Company has not changed the method of accounting for its employee stock compensation plans, but as permitted by this statement, will provide the fair value disclosure requirements in the 1996 annual financial statements. 7. CONTINGENCIES Various lawsuits and claims (asserted and unasserted) arising in the ordinary course of business or related to businesses previously sold are pending or threatened against Avon. The most significant of these is described below. In 1991, a class action suit was initiated against Avon on behalf of certain classes of holders of Avon's Preferred Equity-Redemption Cumulative Stock ("PERCS"). This lawsuit alleges various contract and securities law claims relating to the PERCS (which were fully redeemed that year). Avon has rejected the assertions in this case, believes it has meritorious defenses to the claims and is vigorously contesting this lawsuit. In the opinion of Avon's management, based on its review of the information available at this time, the difference, if any, between the total cost of resolving such contingencies and reserves recorded by Avon at June 30, 1996 should not have a material adverse impact on Avon's consolidated financial position, results of operations or cash flows. 9 10 AVON PRODUCTS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Dollars in millions, except share data) ITEM 2. Management's Discussion and Analysis of the Results of Operations and Financial Condition All share and per share data included in this report have been restated to reflect a two-for-one stock split distributed in June 1996. Results of Operations--Three Months Ended June 30, 1996 and 1995. Consolidated Avon's net income for the three months ended June 30, 1996 of $85.7, or $.64 per share, increased 7 percent and 8 percent, respectively, from net income of $80.4, or $.59 per share, in the comparable period of 1995. The percent increase in income per share exceeded the percent increase in net income due to the impact of lower average shares outstanding in 1996 versus 1995 resulting from the ongoing stock repurchase program. Pretax income of $138.7 increased 4 percent due to higher sales, an improved operating expense ratio and lower corporate non-operating expenses in 1996. These favorable results were partially offset by a decline in the gross margin, lower interest income in 1996 and the favorable net effect of one-time items in 1995, discussed below. Net income was favorably impacted by a lower effective income tax rate in 1996 (38.0 percent versus 39.9 percent in 1995) primarily attributable to the mix of earnings and tax rates of international subsidiaries, including a decrease in Brazil's statutory income tax rate. The 1995 results for the second quarter included the following one-time pretax items: a gain of $25.0, net of related costs, from a cash settlement of a lease dispute and charges of $12.0 related to an early retirement program implemented in Japan and $11.0 for severance costs, primarily in Europe, as part of Avon's program to reduce fixed expenses in certain markets. The lease dispute related to the overpayment of previous years' rent for the Company's headquarters building. The $25.0 gain represented a $14.0 recovery of disputed rent, which is included in marketing, distribution and administrative expenses, and $11.0 of interest, net of related costs, which is included in other (income)/expense, net. The expenses in Japan and Europe are included in marketing, distribution and administrative expenses. The net effect of these one-time items was to increase net income in the second quarter of 1995 by $3.0, or $.02 per share. 10 11 AVON PRODUCTS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued) (Dollars in millions, except share data) On a consolidated basis, Avon's worldwide net sales for the three months ended June 30, 1996 of $1,128.7 increased $64.7, or 6 percent, over the comparable period of the prior year. The increase in sales was due to a 7 percent increase in international and a 4 percent increase in U.S. The international sales increase resulted from strong growth throughout most of the Americas region, Russia, Central Europe, Italy and the Pacific Rim markets. These improvements were partially offset by sales declines in Japan, and to a lesser extent, Germany, Venezuela and France. Excluding the impact of foreign currency exchange, net sales rose 14 percent over the comparable period of the prior year. Cost of sales as a percentage of sales was 38.7 percent in the second quarter of 1996 compared to 38.1 percent in the second quarter of 1995. The decline in the gross margin resulted from lower margins in Venezuela due to the impact of two bolivar devaluations, in Japan due to a shift to sales of lower-priced products, in Brazil due to an investment to reduce excess inventory and in the U.S. due to higher sales of the lower margin apparel line in 1996. These declines were partially offset by margin improvements in Argentina and Mexico. Marketing, distribution and administrative expenses of $546.0 increased $22.9, or 4 percent, over the comparable period of 1995 but decreased as a percentage of sales to 48.4 percent from 49.2 percent in 1995. Excluding the effect of the 1995 one-time items previously mentioned, operating expenses increased $32.3 and the operating expense ratio increased slightly. The increase in operating expenses was primarily in Brazil, the Pacific Rim, the U.S. and Argentina. These increases were partially offset by lower expenses in Japan, and to a lesser extent, Germany and Venezuela. Interest income decreased $1.9 over the comparable period of last year primarily due to lower levels of funds invested in Brazil and in the U.S. in 1996. Other (income)/expense, net, of $.2 was $2.6 unfavorable to the comparable period last year primarily due to the interest portion of the previously discussed favorable lease settlement in 1995, substantially offset by lower corporate non-operating expenses in 1996. 11 12 AVON PRODUCTS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued) (Dollars in millions, except share data) U.S. Net sales increased 4 percent in the second quarter of 1996 compared with the second quarter of 1995 reflecting a 2 percent increase in both the number of Representative orders and average order size. The sales improvement was driven by a significant increase in apparel, and to a lesser extent, in color cosmetics, gift and decorative, including home entertainment products, partially offset by a decline in fashion jewelry and accessories and skin care products. The increase in the average order size was the result of the strong growth in apparel sales, particularly Casual Wear and Accessories items, which includes the Diane Von Furstenberg line, as well as Legwear. Pretax income decreased 2 percent over the comparable period of last year due to a decline in the gross margin and an unfavorable operating expense ratio partially offset by higher sales. The gross margin decline reflects increased sales of the lower margin apparel line in the second quarter of 1996. The increase in the operating expense ratio resulted from increased investments directed towards consumer motivation and direct access strategies, including scented strips and Olympic sweepstake inserts in the Avon brochure as well as a new beauty and fashion catalog. These factors combined with higher paper costs in 1996 resulted in the decline in pretax income. International Net sales increased 7 percent over the comparable period of 1995 and pretax income increased 40 percent. Excluding the 1995 one-time pretax charges for Japan's early retirement program and European severance costs, pretax income increased 14 percent. The sales increase was driven primarily by strong unit growth throughout most of the Americas, predominantly in Brazil, and to a lesser extent, Mexico, Chile and Argentina. Brazil's improvement included double- digit increases in unit volume and number of customers. The growth in number of customers resulted from the revision of pricing strategies aimed at increasing customer transactions in response to an increasingly intense competitive environment in Brazil. The continued impact of the peso devaluation in Mexico was more than offset by increases in the number of orders as well as average order size. In addition, the number of active Representatives in Mexico grew 10 percent over 1995 resulting from implementation of incentive programs focused on retention and increasing the number of orders. The international sales improvement was also due to improvements in the 12 13 AVON PRODUCTS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued) (Dollars in millions, except share data) Pacific Rim, mainly in the Philippines and China, Russia and Central Europe reflecting unit growth, and in Italy resulting from a favorable exchange impact. These favorable results were partially offset by continuing sales declines in Japan caused by the unfavorable exchange impact of a stronger U.S. dollar in 1996 as well as declines in units sold and average order size. These shortfalls were caused, in part, by a new commission structure implemented at the beginning of the year. In addition to a change in Japan's management, new programs are being implemented to address the field sales and marketing issues that have been contributing to the operational shortfalls. Sales were also lower in Germany and France due to operational declines and reduced consumer spending resulting from weak economic conditions and rising unemployment as well as a negative currency impact. Additionally, the continued negative impact of the bolivar devaluation resulted in sales declines in Venezuela. Excluding the impact of foreign currency exchange, international sales rose 20 percent. Excluding the one-time charges, previously discussed, the higher pretax income reflected increases primarily in Mexico, the Pacific Rim, Argentina, and most European markets. The increase in Mexico was primarily due to the sales growth without a significant increase in operating expenses. Higher pretax results in the Pacific Rim and Argentina were attributed to operational improvements driven by higher units sold. Improvements in Europe were most significant in Russia and Italy due to higher sales, and in Germany due to lower operating expenses resulting from a continued focus on expense reduction. These favorable results were partially offset by decreases in Japan, and to a lesser extent, in Venezuela. Japan continues to face operational challenges. Japan's gross margin has declined due to price discounting and extra commission offers and the operating expense ratio has increased reflecting the sales decline. Lower pretax results in Venezuela were mainly due to the impact of two maxi-devaluations of the bolivar in the past seven months. Results of Operations - Six Months Ended June 30, 1996 and 1995. Consolidated Avon's net income for the six months ended June 30, 1996 of $123.4, or $.92 per share, increased 7 percent and 10 percent, respectively, compared to net income of $114.8, or $.84 per share, in 13 14 AVON PRODUCTS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued) (Dollars in millions, except share data) the comparable period of 1995. The 10 percent increase in income per share exceeded the 7 percent increase in net income due to the impact of lower average shares outstanding in 1996 as a result of the ongoing share repurchase program. Pretax income of $198.5 increased 4 percent due to higher sales partially offset by higher operating expenses and cost of sales, higher net interest and the net effect of the previously discussed 1995 one-time items. Net income was also favorably impacted by a lower effective income tax rate in 1996 (38.0 percent versus 39.9 percent in 1995) resulting primarily from the mix of earnings and tax rates of international subsidiaries, including a decrease in Brazil's statutory income tax rate. The 1995 results include the previously discussed one-time items which had the net effect of increasing net income by $3.0, or $.02 per share. Consolidated net sales for the six months ended June 30, 1996 of $2,144.8 increased $104.6, or 5 percent, over the comparable period of the prior year. This increase was primarily due to a 6 percent increase in international and a 4 percent increase in U.S. sales. The international sales growth resulted from strong growth in most markets in the Americas and the Pacific Rim, and to a lesser extent, in Russia, Central Europe, Spain and Italy. These improvements were partially offset by sales declines in Japan, and to a lesser extent, Germany, Venezuela, and France. Excluding the impact of foreign currency exchange, net sales rose 12 percent over the comparable period of the prior year. Cost of sales as a percentage of sales was 39.1 percent compared to 38.8 percent in 1995. The higher cost ratio was primarily due to gross margin declines in Venezuela due to the impact of the bolivar devaluations, in Japan due to a shift to sales of lower-priced products, and in the U.S. mainly due to increased sales of the lower margin apparel line. Marketing, distribution and administrative expenses of $1,087.0 increased $46.9, or 5 percent, over the comparable period of 1995 and decreased as a percentage of sales to 50.7 percent from 51.0 percent in 1995. Excluding the one-time charges in Japan and Europe and the one-time lease settlement gain, previously mentioned, the operating expenses increased $56.3 and the operating expense 14 15 AVON PRODUCTS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued) (Dollars in millions, except share data) ratio increased to 50.7 percent from 50.5 percent in 1995. The increase in operating expenses was primarily in Brazil, the Pacific Rim and the U.S., partially offset by lower expenses in Japan, and to a lesser extent, Germany and Venezuela. The increase in the overall operating expense ratio was primarily due to unfavorable expense ratios in Brazil reflecting increased advertising and distribution expenses due to the recent expansion of shipping facilities and in Japan due to the sales decline. These declines were partially offset by improved expense ratios in most European markets due to continued fixed expense reduction efforts, in Venezuela due to the impact of the bolivar devaluations and in Mexico due to higher sales. Interest expense increased $.7 over the comparable period of 1995 as a result of higher domestic debt levels reflecting borrowings for the ongoing stock repurchase program and for a litigation settlement with Mallinckrodt Group Inc. ("Mallinckrodt"), partially offset by reductions of debt in Japan and the Central European markets in 1996. Interest income decreased $2.1 from the comparable period of 1995 due to a lower level of funds invested in Brazil and the U.S. Other expense, net, of $8.2 increased $.1 from the comparable period of 1995 primarily due to the interest portion of the previously discussed favorable lease settlement in 1995 substantially offset by lower corporate expenses and lower foreign exchange losses in 1996. U.S. Net sales increased 4 percent reflecting a 2 percent increase in the number of Representative orders and a 2 percent increase in average order size. There were improvements in sales of apparel, home entertainment, color cosmetics and personal care products. These increases were partially offset by declines in sales of fashion jewelry and accessories, skin care, fragrance and gift and decorative products. The most significant growth was in the apparel category reflecting the success of the Diane Von Furstenberg collections, novelty and children's lines and the launch of Legwear in 1996. Pretax income increased 1 percent in the first half of 1996 compared with the first half of 1995 due to the sales increase partially offset by higher cost of sales. A gross margin decline was 15 16 AVON PRODUCTS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued) (Dollars in millions, except share data) attributable to increased sales of the lower margin apparel line, promotional pricing of certain products and the successful sale of the lower-margin collectible Springtime Barbie doll, a gift and decorative product. The operating expense ratio was level with the prior year. International Net sales increased 6 percent and pretax income increased 31 percent over the comparable period of 1995. Excluding the 1995 one-time charges for Japan's early retirement program and European severance costs, pretax income increased 11 percent. The sales increase was primarily due to growth in most markets in the Americas, most significantly in Brazil due to double-digit increases in unit volume and customers, and in Mexico due to price increases and unit growth partially offset by the continued impact of the peso devaluation. Sales were also higher in Chile, Central America and Argentina due to unit growth. In addition, the international sales improvement was driven by unit growth in almost all Pacific Rim markets, most significantly in the Philippines and China, and in Russia, Central Europe and Spain. These favorable results were partially offset by a significant sales decline in Japan resulting from the unfavorable exchange impact of a stronger U.S. dollar in 1996 and a shift in pricing strategy to sales of lower-priced products due to a continued decline in consumer spending. Strategies are being put in place in Japan that focus on improving the field sales and marketing areas. Sales also declined in Germany and France due to weakening economic conditions and increasing unemployment, and in Venezuela primarily due to the negative impact of the bolivar devaluations. Excluding the impact of foreign currency exchange, international sales were up 17 percent over the comparable period of 1995. Excluding the one-time charges previously discussed, the increase in pretax income reflected increases in Europe, most markets in the Americas, the Philippines and Malaysia. The increase in Europe reflected sales increases and operational improvements including improved gross margins in Italy, Germany, Spain and Russia and favorable operating expense ratios in most markets in the region due to the continued effect of fixed expense reduction efforts. 16 17 AVON PRODUCTS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued) (Dollars in millions, except share data) Increases in Mexico, Argentina, Central America and Chile were due to sales growth. The improvements in the Philippines and Malaysia reflected higher sales and improved expense ratios. These favorable results were partially offset by decreases in Japan, and to a lesser extent in Venezuela. The decline in Japan was due to the decrease in sales and continuing operational difficulties including a decline in the gross margin due to a continued focus on lower-priced impulse items in an attempt to increase consumer appeal, as well as an unfavorable expense ratio. Lower pretax results in Venezuela were caused by the bolivar devaluations. Liquidity and Capital Resources Cash Flows Excluding changes in debt, there was a net decrease in cash of $334.4 in the first half of 1996 compared with $235.5 in the comparable period of 1995. The $98.9 variance primarily reflects the final payment of the Mallinckrodt settlement in January 1996, an unfavorable exchange rate impact on cash, higher cash used for the repurchase of common stock and higher dividends. Cash usage was also affected by investing activities including the purchase of Justine (Pty) Ltd., a direct selling business in South Africa, and higher capital spending in the Pacific Rim, mainly in China, in 1996. For the first half of 1996, under the stock repurchase program, the Company purchased approximately 1.9 million shares of common stock for $79.9 compared with $57.8 spent for the repurchase of approxi- mately the same number of shares during the comparable period in 1995. As of June 30, 1996, the cumulative number of shares repurchased was approximately 11.6 million shares. Capital Resources Total debt increased $256.5 to $418.0 at June 30, 1996 from $161.5 at December 31, 1995, principally due to normal seasonal working capital requirements during the first six months of 1996 and a payment made relating to the Mallinckrodt settlement. Total debt at June 30, 1996 of $418.0 was $102.7 higher than total 17 18 AVON PRODUCTS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued) (Dollars in millions, except share data) debt of $315.3 at June 30, 1995 primarily due to the Mallinckrodt settlement, the ongoing share buyback program and higher borrowings in the United Kingdom, France and China. These increases were partially offset by the repayment of a yen note obligation of Avon's Japanese subsidiary in the second half of 1995 and lower debt levels in Central Europe. At June 30, 1996, there were no borrowings under the $600 revolving credit and competitive advance facility agreement ("Credit Agreement"). This agreement is also used to support the Company's commercial paper borrowings of which $250.8 was outstanding at June 30, 1996. At June 30, 1996, there were no borrowings under the Company's bankers' acceptance facilities. Management currently believes that cash from operations and available financing alternatives are adequate to meet anticipated requirements for working capital, dividends, capital expenditures, the stock repurchase program and other cash needs. Working Capital As of June 30, 1996 and December 31, 1995, current liabilities exceeded current assets by $94.4 and $30.3, respectively. The increase of current liabilities over current assets of $64.1 was mainly due to an increase in debt, partially offset by a decrease in accounts payable, and a decrease in cash and equivalents. These changes resulted from higher inventory levels, which reflects the seasonal pattern of Avon's operations as well as higher U.S. apparel inventory to support increased sales, and the final Mallinckrodt settlement payment. Although current liabilities exceeded current assets at June 30, 1996, management believes this highlights the effectiveness of its working capital management and does not adversely affect liquidity. Avon's liquidity results from its ability to generate significant cash flows from operations and its ample unused borrowing capacity. Actions that would eliminate the working capital deficit are not anticipated at this time. Avon's credit agreements do not contain any provisions or requirements with respect to working capital. 18 19 AVON PRODUCTS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued) (Dollars in millions, except share data) Financial Instruments and Risk Management Strategies The Company operates globally, with manufacturing and distribution facilities in various locations around the world. The Company may reduce its exposure to fluctuations in interest rates and foreign exchange rates by creating offsetting positions through the use of derivative financial instruments. The Company currently does not use derivative financial instruments for trading or speculative purposes, nor is the Company a party to leveraged derivatives. The Company periodically uses interest rate swaps to hedge portions of interest payable on its debt. In addition, the Company may periodically employ interest rate caps to reduce exposure, if any, to increases in variable interest rates. At June 30, 1996, the Company had three interest rate swap agreements on its 170 million 6-1/8 percent Deutsche Mark Notes ("Notes"), due May 1998. Each agreement has a notional principal amount of $100.0. In July 1995, the Company entered into an interest rate swap agreement, which effectively converted the interest payable on the Notes from a floating to a fixed interest rate basis of approximately 7.2 percent through maturity. The fixed interest rate on this swap agreement is slightly below 5.8 percent. As a result of this swap, the interest rate is established at 1.4 percentage points above the 5.8 percent interest rate on this swap. The Company has two interest rate cap contracts, each with a notional principal amount of $100.0, used to economically hedge the Company's short-term variable interest rate working capital debt. One of the cap contracts expires in early 1997 and the other expires in May 1998. These cap contracts have been marked-to-market yielding an insignificant income statement adjustment. The Company may periodically hedge foreign currency royalties, net investments in foreign subsidiaries, firm purchase commitments and contractual foreign currency cash flows or obligations, including third-party or intercompany foreign currency transactions. The Company regularly monitors its foreign currency exposures and ensures that hedge contract amounts do not exceed the amounts of the underlying exposures. 19 20 AVON PRODUCTS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued) (Dollars in millions, except share data) At June 30, 1996, the Company held foreign currency forward contracts with notional amounts totaling $168.5 and option contracts with notional amounts totaling $87.9 to hedge foreign currency items. These contracts have maturities in early 1997 or prior. The Company also entered into certain foreign currency forward contracts with notional amounts totaling $84.0 and option contracts with notional amounts of $25.8 to economically hedge certain foreign currency exposures, which do not qualify as hedging transactions under the current accounting definitions and, accordingly, have been marked-to-market. The mark-to-market adjustment on these contracts at June 30, 1996 was insignificant The Company's risk of loss on the options in the future is limited to premiums paid, which are insignificant. The Company attempts to minimize its credit exposure to counterparties by entering into interest rate swap and cap contracts only with major international financial institutions with "A" or higher credit ratings as issued by Standard & Poor's Corporation. The Company's foreign currency and interest rate derivatives are comprised of over-the-counter forward contracts or options with major international financial institutions. Although the Company's theoretical credit risk is the replacement cost at the then estimated fair value of these instruments, management believes that the risk of incurring losses is remote and that such losses, if any, would not be material. New Accounting Standards Effective January 1, 1996, the Company adopted Statement of Financial Accounting Standards ("FAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of". This statement requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. There was no impact on the Company's results of operations or financial position upon adoption. 2 21 AVON PRODUCTS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued) (Dollars in millions, except share data) Also, effective January 1, 1996, the Company adopted FAS No. 123, "Accounting for Stock-Based Compensation". This statement establishes financial accounting and reporting standards for stock-based employee compensation plans, such as stock purchase plans, stock options, restricted stock and stock appreciation rights as well as non-employee equity transactions. The Company has not changed the method of accounting for its employee stock compensation plans but, as permitted by this statement, will provide the fair value disclosure requirements in the 1996 annual financial statements. 21 22 AVON PRODUCTS, INC. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit Number Description ------- ----------- 3.1 --Restated Certificate of Incorporation of Avon filed May 13, 1996. 3.2 --By-Laws of Avon, as restated, effective June 6, 1996. 11.1 --Statement re computation of primary income per share. 11.2 --Statement re computation of fully diluted income per share. 27 --Financial Data Schedule. (b) Reports on Form 8-K There were no reports on Form 8-K filed during the second quarter of 1996. 22 23 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AVON PRODUCTS, INC. (Registrant) Date: August 13, 1996 By /s/ MICHAEL R. MATHIESON ------------------------------- Michael R. Mathieson Vice President & Controller Principal Accounting Officer Signed both on behalf of the registrant and as principal accounting officer. 23 EX-99 2 EX-99 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------- FORM 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended June 30, 1996 Commission file number 1-4881 ----------------------- AVON PRODUCTS, INC. (Exact name of registrant as specified in its charter) ----------------------- EXHIBITS AVON PRODUCTS, INC. INDEX TO EXHIBITS Exhibit Number Description - ------- ----------- 3.1 --Restated Certificate of Incorporation of Avon filed May 13, 1996. 3.2 --By-Laws of Avon, as restated, effective June 6, 1996. 11.1 --Statement re computation of primary income per share. 11.2 --Statement re computation of fully diluted income per share. 27 --Financial Data Schedule. EX-3.13 EXHIBIT 3.1 RESTATED CERTIFICATE OF INCORPORATION OF AVON PRODUCTS, INC. Under Section 807 of the Business Corporation Law We, JAMES E. PRESTON and WARD M. MILLER, JR., being respectively Chairman of the Board and Secretary of AVON PRODUCTS, INC. (the "Corporation"), do hereby certify as follows: 1. The name of the Corporation is AVON PRODUCTS, INC. and the name under which the Corporation was formed is California Perfume Company, Inc. 2. The Certificate of Incorporation of the Corporation was filed by the Department of State of the State of New York on January 27, 1916. 3. The Certificate of Incorporation of the Corporation as heretofore amended is hereby further amended to reflect an amendment of the first paragraph of Article III authorized by a majority vote of the Corporation's Board of Directors followed by authorization by vote of the holders of a majority of all the outstanding shares of stock of the Corporation entitled to vote thereon at the Corporation's Annual Meeting of Shareholders held on May 2, 1996. Such amendment changed the number of shares of Common Stock which the Corporation has authority to issue from 200,000,000 shares, $.50 par value, of which 86,750,705 shares are presently issued and outstanding, and 113,249,295 shares which are currently unissued at a rate of change of two to one, to 400,000,000 shares, $.25 par value, of which 173,501,410 shares are presently issued and outstanding and 226,498,590 shares which are currently unissued at a rate of change of two to one. 4. Article IIIB, which established a series of the Corpora- tion's authorized shares of Preferred Stock designated the "$2.00 Preferred Equity-Redemption Cumulative Stock", has been deleted in its entirety to reflect the complete redemption and cancellation by the Corporation of all such Preferred Stock. 5. The text of the Certificate of Incorporation of the Corpo- ration as heretofore amended is hereby restated to read as herein set forth in full: ARTICLE I: The corporate name is AVON PRODUCTS, INC. ARTICLE II: The purposes for which the Corporation is formed are: To develop, manufacture, produce, provide, operate, distribute and deal in and with services, property and goods of all kinds including without limitation engaging in the manufacture and distribution of cosmetics and toiletries. To engage in any lawful act or activity for which corporations may be organized under the Business Corporation Law of the State of New York. ARTICLE III: The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is 425,000,000 shares, divided into two classes consisting of 400,000,000 shares of Common Stock, par value $.25 per share (the "Common Stock"), and 25,000,000 shares of Preferred Stock, par value $1.00 per share (the "Preferred Stock"). The shares of authorized Common Stock of the Corporation shall be identical in all respects and shall have equal rights and privileges. The Board of Directors shall have authority by resolution to issue the shares of Preferred Stock from time to time on such terms as it may determine and to divide the Preferred Stock into one or more classes or series and, in connection with the creation of any such class or series, to determine and fix by the resolution or resolutions providing for the issuance of shares thereof the designation, powers and relative participating, optional, or other special rights of such class or series, and the qualifications, limitations or restrictions thereof, to the full extent now or hereafter permitted by law. The holders of capital stock of the Corporation shall not have any preemptive rights. ARTICLE lllA. Series A Junior Participating Preferred Stock: 1. Designation and Amount. An aggregate of 800,000 shares of Preferred Stock, par value $l.00, of the Corporation are hereby constituted as a series designated as "Series A Junior Participating Preferred Stock" (the "Series A Preferred Stock"). Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issu- ance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corpo- ration convertible into Series A Preferred Stock. 2. Dividends and Distributions. (a) Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar stock) ranking prior and superior to the Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock, in preference to the holders of Common Stock, par value $0.25 per share (the "Common Stock"), of the Corporation, and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends pay- able in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $10 or (b) subject to the pro- vision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sen- tence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock out- standing immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding imme- diately prior to such event. (b) The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in paragraph (a) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $l0 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (c) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock en- titled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof. 3. Voting Rights. The holders of shares of Series A Preferred Stock shall have the following voting rights: (a) Subject to the provision for adjustment, hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the shareholders of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassi- fication or otherwise than by payment of a dividend in shares of Com- mon Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (b) Except as otherwise provided herein, in any Certificate of Amendment creating a series of Preferred Stock or any similar stock, or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of shareholders of the Corpo- ration. (c) Except as set forth herein, or as otherwise provided by law, holders of Series A Preferred Stock shall have no voting rights. 4. Certain Restrictions. (a) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock out- standing shall have been paid in full, the Corporation shall not: (i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to divi- dends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock; (ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation, or winding up) to the Series A Preferred Stock; or (iv) redeem or purchase or otherwise acquire for consideration shares of Series A Preferred Stock, or any shares of stock ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and prefer- ences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (b) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under this Section 4, purchase or otherwise acquire such shares at such time and in such manner. 5. Reacquired Shares. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but on issued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Certificate of Incorporation, in any other Certificate of Amendment creating a series of Preferred Stock or any similar stock or as otherwise required by law. 6. Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (i) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series A Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the pro- vision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (ii) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation , dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the proviso in clause (i) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other trans- action in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immedi- ately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. 8. Redemption. The shares of Series A Preferred Stock shall not be redeemable. 9. Rank. The Series A Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, junior to all series of any other class of the Corporation's Preferred Stock. 10. Amendment. The Certificate of Incorporation of the Corporation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Preferred Stock, voting together as a single series. ARTICLE IV: The office of the Corporation is to be located in the City and County of New York, State of New York. ARTICLE V: The number of directors of the Corporation shall be not less than ten (10) nor more than twenty (20). The number of directors to be chosen within said maximum and minimum limits shall be determined in the manner prescribed by the By-Laws. The Board of Directors shall be divided into three classes as nearly equal in number as possible, with each class having at least three members, with the term of office of one class expiring each year. At the annual meeting of shareholders in 1986, directors of the first class shall be elected to hold office for a term expiring at the next succeeding annual meeting, directors of the second class shall be elected to hold office for a term expiring at the second succeeding annual meeting and directors of the third class shall be elected to hold office for a term expiring at the third succeeding annual meeting. At each annual meeting of shareholders after 1986, successors to the directors whose terms shall then expire shall be elected to hold office for terms expiring at the third succeeding annual meeting. Any vacancies in the Board of Directors, by reason of an increase in the number of directors or otherwise, shall be filled solely by the Board of Directors, by majority vote of the directors then in office, though less than a quorum, but any such director so elected shall hold office only until the next succeeding annual meeting of shareholders. At such annual meeting, such director shall be elected and qualified in the class in which such director is assigned to hold office for the term or remainder of the term of such class. Directors shall continue in office until others are chosen and qualified in their stead. When the number of directors is changed, any newly created directorships or any decrease in directorships shall be so assigned among the classes by a majority of the directors then in office, though less than a quorum, so as to make all classes as nearly equal in number as possible. To the extent of any inequality within the limits of the foregoing, the class or classes caused to have the greatest or greater number of directorships shall be the class or classes then having the last date or the later dates for the expiration of its or their terms. No decrease in the number of directors shall shorten the term of any incumbent director. Any director may be removed from office as a director but only for cause by the affirmative vote of the holders of eighty percent (80%) of the combined voting power of the then outstanding shares of stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class. Notwithstanding anything contained in this Restated Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least eighty percent (80%) of the combined voting power of the then outstanding shares of the stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to alter, amend or adopt any provisions inconsistent with or repeal this Article V. The directors need not be shareholders of the Corporation. ARTICLE VI: At all elections of directors of the Corporation each shareholder shall be entitled to as many votes as shall equal the number of votes which (except for the provisions of this Article) he would be entitled to cast for the election of directors with respect to his shares of stock multiplied by the number of directors to be elected, and he may cast all of such votes for a single director or may distribute them among the number to be voted for, or any two or more of them, as he may see fit. ARTICLE VII: (A) In addition to any affirmative vote required by law or this Restated Certificate of Incorporation: 1. any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (a) an Interested Shareholder (as hereinafter defined) or (b) any other corporation (whether or not itself an Interested Shareholder) which is, or after such merger or consolidation would be, an Affiliate (as hereinafter defined) of an Interested Shareholder, or 2. any sale, lease, exchange, mortgage, pledge, grant of a security interest, transfer or other disposition (in one transaction or a series of transactions) to or with (a) an Interested Shareholder or (b) an Affiliate of an Interested Shareholder of assets of the Corporation or any Subsidiary having an aggregate Fair Market Value (as hereinafter defined) of $25,000,000 or more, or 3. the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the Corporation or any Subsidiary, having an aggregate Fair Market Value of $25,000,000 or more to an Interested Shareholder or any Affiliate of an Interested Shareholder in exchange for cash, securities or other property (or combination thereof), or 4. the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of an Interested Shareholder or any Affiliate of an Interested Shareholder, or 5. any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Shareholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the Corporation or any Subsidiary directly or indirectly beneficially owned by (a) an Interested Shareholder or (b) an Affiliate of an Interested Shareholder shall require either: (a) the approval of a majority of the Disinterested Directors (as hereinafter defined) or (b) the affirmative vote of the holders of that amount of the voting power of the Voting Stock (as hereinafter defined) equal to the sum of (1) the voting power of the shares of Voting Stock of which their Interested Shareholder is the beneficial owner and (2) a majority of the voting power of the remaining outstanding shares of Voting Stock, voting together as a single class; provided, however, that no such vote shall be required for the purchase by the Corporation of shares of Voting Stock from an Interested Shareholder unless such vote is required by Paragraph (B) of this Article VII. (B) Any purchase by the Corporation of shares of Voting Stock from an Interested Shareholder, other than pursuant to an offer to the holders of all of the outstanding shares of the same class of Voting Stock as those so purchased, at a per share price in excess of the Market Price (as hereinafter defined), at the time of such purchase, of the shares so purchased, shall require the affirmative vote of the holders of that amount of the voting power of the Voting Stock equal to the sum of (i) the voting power of the shares of Voting Stock of which the Interested Shareholder is the beneficial owner (as hereinafter defined) and (ii) a majority of the voting power of the remaining out- standing shares of Voting Stock, voting together as a single class. (C) It shall be the duty of any Interested Shareholder: (i) to give or cause to be given written notice to the Corporation, immediately upon becoming an Interested Shareholder, of such person's status as an Interested Shareholder and of such other information as the Corporation may reasonably require with respect to identifying all owners and amount of ownership of the outstanding Voting Stock of which such Interested Shareholder is the beneficial owner, and (ii) to notify the Corporation promptly in writing of any change in the information provided in subparagraph (i) of this Paragraph (C), provided, however, that the failure of an Interested Shareholder to comply with the provisions of this Paragraph (C) shall not in any way be construed to prevent the Corporation from enforcing the provisions of Paragraphs (A) and (B) of this Article VII. (D) For the purposes of this Article VII: 1. "Voting Stock" shall mean the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors. 2. "Person" shall mean any individual, firm, corporation or other entity. 3. "Interested Shareholder" shall mean any person (other than the Corporation or any Subsidiary) who which: (a) is the beneficial owner, directly or indirectly, of 5% or more of the voting power of the outstanding Voting Stock; or (b) is an Affiliate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of 5% or more of the voting power of the then outstanding Voting Stock; or (c) is an assignee of or has otherwise succeeded to the beneficial ownership of any shares of Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by an Interested Shareholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933. For the purposes of determining whether a person is an Interested Shareholder, the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned through application of subparagraph 4 below but shall not include any other shares of Voting Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon conversion rights, warrants or options, or otherwise. 4. A person shall be a "beneficial owner" of any Voting Stock: (a) which such person or any of its Affiliates or Associates beneficially owns, directly or indirectly; or (b) which such person or any of its Affiliates or Associates has (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise or (ii) the right to vote or to direct the voting thereof pursuant to any agreement, arrangement or understanding; or (c) which is beneficially owned, directly or indirectly, by any other person with which such person or its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock. 5. "Affiliate" or "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities and Exchange Act of 1934, as in effect on January 1, 1986. 6. "Subsidiary" shall mean any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the Corporation; provided, however, that, for purposes of the definition of Interested Shareholder set forth in subparagraph 3, the term "Subsidiary" shall mean only a corporation of a majority of the voting power of the capital stock entitled to vote generally in the election of directors is owned, directly or indirectly, by the Corporation. 7. "Disinterested Director" shall mean any member of the Board of Directors of the Corporation who is unaffiliated with an Interested Shareholder and was a member of the Board prior to the time that such Interested Shareholder became an Interested Shareholder, and any successor of a Disinterested Director who is unaffiliated with an Interested Shareholder and is recommended to succeed a Disinterested Director by a majority of Disinterested Directors then on the Board. 8. "Market Price" means the last closing sale price immediately preceding the time in question of a share of the stock in question on the Composite Tape for New York Stock Exchange-Listed Stocks. 9. "Fair Market Value" means: (i) in the case of stock, the Market Price, and (ii) in the case of property other than cash or stock, the Fair Market Value of such property on the date in question as determined by the Board in good faith. (E) A majority of the Disinterested Directors shall have the power to determine for the purpose of this Article VII on the basis of information known to them after reasonable inquiry (1) whether a per- son is an Interested Shareholder, (2) the number of shares of Voting Stock beneficially owned by any person, (3) whether a person is an Affiliate or Associate of another and (4) whether a transaction or series of transactions constitutes one of the transactions specified in Paragraph (A) hereof. The good faith determination of a majority of the Disinterested Directors shall be conclusive and binding for all purposes of this Article VII. (F) Notwithstanding any other provision of this Restated Certificate of Incorporation or the By-Laws of the Corporation or the fact that a lesser percentage may be specified by law, this Restated Certificate of Incorporation or the By-Laws of the Corporation, the affirmative vote of the holders of at least eighty percent (80%) of the combined voting power of the then outstanding Voting Stock, voting together as a single class, shall be required to amend, alter, repeal or adopt any provision inconsistent with this Article VII. The Secretary of State is designed as the agent of the Corporation upon whom process in any action or proceeding against it may be served; and the address to which the Secretary of State shall a copy of any process against the Corporation which may be served upon him pursuant to law is : 9 West 57th Street New York, New York 10019 ARTICLE VIII: No person who is or was a director of the Corporation shall have personal liability to the Corporation or its shareholders for damages for any breach of duty in such capacity, provided that the foregoing shall not limit the liability of any such person (i) if a judgment or other final adjudication adverse to him establishes that his acts or omissions were in bad faith or involved intentional misconduct a knowing violation of law or that he personally gained, in fact, a financial profit or other advantage to which he was not legally entitled or that his acts violated Section 719 of the Business Corporation Law of New York or, (ii) for any act or omission occurring prior to the adoption of this Article VIII. No Amendment to or repeal of this Article VIII shall apply to or have any effect on the liability or alleged liability of any such person to the Corporation for or with respect to any acts or omissions of such person occurring to such amendment or repeal. If the Business Corporation Law of New York is amended hereafter to expand or limit the liability of a director, then the liability of a person who is or was a director of the Corporation shall be deemed to be expanded to the extent required or limited to the extent permitted by the Business Corporation Law of New York, as so amended. 6. This restatement of the Certificate of Incorporation was authorized by the Board of Directors of the Corporation and the holders of a majority of all the outstanding shares of stock of the Corporation. IN WITNESS WHEREOF, we have subscribed this certificate as of the 7th day of May, 1996, and we affirm the statements contained herein as true under the penalties of perjury. /s/ James E. Preston James E. Preston Chairman of the Board /s/ Ward M. Miller, Jr. Ward M. Miller, Jr. Secretary EX-3.2 4 EX-3.2 EXHIBIT 3.2 BY-LAWS OF AVON PRODUCTS, INC. ARTICLE I OFFICES Section 1. Location. The principal office of the corporation shall be located in the City of New York, County of New York. Prior to April 16, 1997, the post office address to which the Secretary of State shall mail a copy of any process against the corporation served upon him is 9 West 57th Street, New York, New York 10019. After that date, such address shall be that for which the Secretary of the corporation has provided written notice. The corporation may also have other offices at such places either within or without the State of New York as the board of directors may from time to time designate or the business of the corporation may require. ARTICLE II MEETINGS OF SHAREHOLDERS Section 1. Annual Meeting. The annual meeting of the shareholders of the corporation, for the election of directors and the transaction of such other business as may properly come before said meeting, shall be held annually at such place within or without the State of New York as may from time to time be designated by the directors and set forth in the notice of the meeting. The meeting shall be held on the first Thursday in May or on such other date during the months of April or May in each year as may from time to time be designated by the directors and set forth in the notice of the meeting. The chairman of the board of directors, or another member of the board of directors appointed by the chairman, shall be the presiding officer at every meeting of the shareholders of the corporation. Section 2. Special Meetings. Special meetings of shareholders, unless otherwise prescribed by law, may be called for any purpose or purposes at any time by the chairman of the board or the president or by the order of the board of directors, and special meetings of shareholder sprescribed by law for the election of directors shall be called by the board or by the secretary or an assistant secretary upon demand as prescribed by law. Such meetings shall, except as otherwise prescribed by law, be held at such time and place within or without the State of New York as shall be designated by the person, or in the order of the board of directors, calling such meeting. Section 3. Notice of Meetings. A copy of the notice of every annual and special meeting of shareholders, other than any meeting the giving of notice of which is otherwise prescribed by law, stating the place, date and hour thereof, and, in the case of any special meeting, indicating that it is being issued by or at the direction of the person or persons calling the meeting and setting forth the purposes for which the meeting is called, shall be given personally or mailed, at least ten but not more than fifty days before such meeting, to each shareholder of record entitled to vote thereat. If mailed, such copy shall be deposited in the United States mail with postage thereon prepaid, directed to each such shareholder at his address as the same appears on the record of shareholders of the corporation or, if he shall have filed with the secretary of the corporation a written request that notices to him be mailed to some other address, then directed to him at such other address. If at any meeting, annual or special, action is proposed to be taken which would, if taken, entitle shareholders fulfilling the requirements of law to receive payment for their shares, the notice of the meeting shall include a statement of that purpose and to that effect. Section 4. Quorum. At all meetings of shareholders, except as otherwise expressly provided by law, there shall be present either in person or by proxy shareholders of record holding at least a majority of the shares entitled to vote at such meetings in order to constitute a quorum, but less than a quorum shall have the power to adjourn any meeting until a quorum shall be present. The presiding officer at any meeting of shareholders may adjourn such meeting at any time for the purpose of determining whether a quorum is present or for any other reason. When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any shareholders. Section 5. Voting. At every meeting of shareholders every shareholder of record shall be entitled to one vote for every share standing in his name on the record of shareholders on any matter to be voted upon at such meeting, unless otherwise provided in the certificate of incorporation, and may exercise such voting right either in person or by proxy, except that no proxy shall be voted on after eleven months from its date unless otherwise provided in the proxy. The vote for directors shall be by written ballot. As provided in the certificate of incorporation, at all elections of directors each shareholder shall be entitled to as many votes as shall equal the number of votes which (except for such provision) he would be entitled to cast for the election of directors with respect to his shares, multiplied by the number of directors to be elected, and he may cast all of such votes for a single director or may distribute them among the number to be voted for, or any two or more of them, as he may see fit. No share of stock shall be voted at any meeting by any person other than (i) the owner thereof registered as such on the corporation's books on the record date fixed by the directors, or (ii) the duly appointed proxy of such registered owner. Section 6. Inspectors of Voting. The board of directors, in advance of any shareholders' meeting, may appoint one or more inspectors to act at the meeting or any adjournment thereof. If inspectors are not so appointed, the person presiding at a shareholders' meeting may, and on the request of any shareholder entitled to vote thereat shall, appoint one or more inspectors. In case any person appointed fails to appear or act, the vacancy may be filled by appointment made by the board of directors in advance of the meeting or at the meeting by the person presiding thereat. Inspectors, none of whom shall be an officer, director or a candidate for the office of director, shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall determine and report to the meeting as to the results of all voting (by ballot or otherwise) on all matters submitted to a vote at the meeting. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. Section 7. Voting List of Shareholders. A list of shareholders as of the record date, certified by the corporate officer responsible for its preparation or by a transfer agent, shall be produced at any meeting of shareholders upon the request thereat or prior thereto of any shareholder. If the right to vote at any meeting is challenged, the inspectors of election, or person presiding thereat, shall require such list of shareholders to be produced as evidence of the right of the persons challenged to vote at such meeting, and all persons who appear from such list to be shareholders entitled to vote thereat may vote at such meeting. Section 8. Conduct of Meetings of Shareholders. Subject to the following and any other provisions of the corporation's certificate of incorporation or by-laws, meetings of shareholders generally shall follow accepted rules of parliamentary procedure, as determined by the presiding officer at such meeting. (a) The presiding officer of the meeting shall have absolute authority over matters of procedure, and there shall be no appeal from the ruling of the presiding officer. If the presiding officer, in his absolute discretion, deems it advisable to dispense with the rules of parliamentary procedure as to any meeting or any part thereof, the presiding officer shall so state and shall also state the rules under which the meeting or any part thereof shall be conducted. (b) In order to prevent disruption or disorder which could interfere with the conduct of the business of the meeting or for any other reason deemed necessary or advisable, the presiding officer at any meeting may, in his sole discretion, quit the chair and announce the adjournment of the meeting; and upon his so doing, the meeting is thereupon adjourned. (c) Any other motion for adjournment, if otherwise properly made other than a motion to adjourn at the close of business of the meeting or a motion to adjourn for the purpose of tabulating votes or proxies, shall be disposed of by a per share vote. (d) The presiding officer of the meeting may require that any person not a bona fide shareholder of record or the proxy of a bona fide shareholder of record leave the meeting. (e) A resolution or motion shall be considered for a vote at a meeting only if (i) proposed by a bona fide shareholder of record or a duly authorized proxy of such a shareholder of record, (ii) seconded by a bona fide shareholder of record or a duly authorized proxy of such a shareholder of record (other than the individual proposing the resolution or motion) and (iii) such resolution or motion is ruled in order by the presiding officer of the meeting in his sole discretion, which order shall not be appealable. (f) At any meeting called for the election of directors, the polls shall be opened and closed at the times and in the manner directed by the presiding officer of such meeting. Once the presiding officer has announced the closing of the polls, no further voting shall be permitted. Section 9 Notice of Proposed Shareholder Business. (a) A proposal of business to be considered by the shareholders at an annual meeting of shareholders ("annual meeting") may be made (i) pursuant to the corporation's notice of meeting, (ii) by or at the direction of the board of directors or (iii) by any shareholder of the corporation who was a shareholder of record at the time of giving notice provided for in this Section 9, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 9. (b) For an item of business to be properly brought before an annual meeting by a shareholder pursuant to clause (iii) of paragraph (a) of this Section 9, the shareholder must have given timely notice thereof in writing to the secretary of the corporation and such item of business must otherwise be a proper matter for shareholder action. To be timely, a shareholder's notice shall be delivered to the secretary at the principal office of the corporation not later than the close of business on the 90th day nor earlier than the close of business on the 120th day prior to the first anniversary of the preceding year's annual meeting. In the event that the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the shareholder to be timely must be so delivered not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by the corporation. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a shareholder's notice as described above. Such shareholder's notice shall set forth (i) a brief description of the business desired to be brought before the meeting, the reasons for considering such business at the meeting and any material interest in such business of such shareholder and the beneficial owner, if any, on whose behalf the proposal is made and (ii) as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the proposal is made, (A) the name and address of such shareholder, as they appear on the corporation's books, and of such beneficial owner, and (B) the class and number of shares of the corporation which are owned beneficially and of record by such shareholder and such beneficial owner. (c) Only such business shall be conducted at an annual meeting as shall have been brought before the meeting in accordance with the procedures set forth in this Section 9. Except as otherwise provided by law, the presiding officer of the meeting shall have the power and duty to determine whether any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the notice procedures set forth in this Section 9 and, if any proposed business is not in compliance with this Section 9, to declare that such proposal shall be disregarded. (d) For purposes of this Section 9, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Securities and Exchange Act of 1934, as amended ("the "Exchange Act"). (e) Notwithstanding the foregoing provisions of this Section 9, a shareholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 9. Nothing in this Section 9 shall be deemed to adversely affect any rights of shareholders to request inclusion of proposals in the corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act. ARTICLE III DIRECTORS Section 1. Number, Election and Terms. The number of the directors constituting the entire board of directors shall be not less than ten (10) nor more than twenty (20). Subject to such limitation the number shall be fixed by the board of directors. The directors shall be classified, with respect to the time for which they shall severally hold office, into three classes, as nearly equal in number as possible, as determined by the board of directors of the corporation, one class originally elected for a term expiring at the annual meeting of shareholders held in 1987, another class originally elected for a term expiring at the annual meeting of shareholders held in 1988, and another class originally elected for a term expiring at the annual meeting of shareholders held in 1989, with each director to hold office until his or her successor is duly elected and qualified. At each annual meeting of shareholders of the corporation, the successors of the class of directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of shareholders held in the third year following the year of their election. Except as otherwise provided by law, by the certificate of incorporation, or by the by-laws of this corporation, the directors in each class shall be elected by ballot at the applicable annual meeting of shareholders by a plurality of the votes of the shareholders cast in person or by proxy at such election. In voting for the election of directors, shareholders shall be entitled to cumulative voting. Each director shall be elected to serve until the expiration of his or her term or until his or her successor shall have been elected and qualified except in the event of the death, resignation or removal or the earlier termination of the term of office of any such director. Each director shall be at least 21 years of age. It is not necessary for a director to be a shareholder of the corporation. Section 2. Newly Created Directorships and Vacancies. Newly created directorships resulting from any increase in the number of directors and any vacancies on the board of directors resulting from death, resignation, disqualification, removal or other cause shall be filled only by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the board of directors. Any director elected in accordance with the preceding sentence shall hold office until the next meeting of shareholders at which the election of directors is in the regular order of business, and until such director's successor shall have been duly elected and qualified. No decrease in the number of directors constituting the board of directors shall shorten the term of any incumbent director. Section 3. Removal. Any director, or the entire board of directors, may be removed from office at any time only for cause and only by the affirmative vote of the holders of at least eighty percent of the voting power of all shares of the corporation entitled to vote generally in the election of directors, voting together as a single class. Section 4. Powers and Duties of the Board of Directors. Except as otherwise provided by law or by the certificate of incorporation, the business of the corporation shall be managed by the board of directors, which may adopt such rules and regulations for that purpose and for the conduct of its meetings as it may deem proper. The board of directors may have one or more offices and keep the books, records and minutes of the corporation, except such records as are required to be kept in the State of New York, at such places as it may from time to time determine. Any of such records may be in written form or in any other form capable of being converted into written form within a reasonable time. In addition to the powers and authority expressly conferred upon it by these by-laws, the board of directors may exercise all such powers of the corporation and do all such lawful acts and things as are allowed by the certificate of incorporation or by law. Section 5. First Meeting of the Board of Directors. The first meeting of the board of directors to be held after an annual meeting of shareholders for the election of directors shall be called and held for the purposes of organization, the election or appointment of officers and the transaction of such other business as may be stated in the notice thereof. The first meeting shall be held at such time and place as shall be fixed in written notice mailed to each newly elected director at his last known post office address at least two days prior to such meeting. Section 6. Regular Meetings. Regular meetings of the board of directors shall be held at such time and place within or without the State of New York as may be determined by resolution of the board, and no notice shall be required for any regular meeting. Except as otherwise provided by law, any business may be transacted at any regular meeting. Section 7. Special Meetings. Special meetings of the board of directors may, unless otherwise prescribed by law, be called from time to time by the chairman of the board or the president. Upon the written request directed to the chairman of the board, president or the secretary of a majority of the directors stating the time, place and purposes of such special meeting, the chairman of the board, president or the secretary shall call a special meeting of the board of directors. Special meetings of the board of directors shall be held at the place where regular meetings of the board are held unless otherwise fixed by the board. Section 8. Notice of Special Meetings. Notice of the time, place and purpose of each special meeting of the board of directors, other than any meeting the giving of notice of which is otherwise prescribed by law, shall be given to each director at least two hours prior to such meeting. For the purpose of this Section, notice will be deemed to be duly given to a director if given to him orally (including by telephone) or if such notice be delivered to such director in person or be mailed, sent by facsimile transmission, or cabled to his address as it appears upon the books of the corporation or to the address last made known in writing to the secretary of the corporation by such director as the address to which such notices are to be given. Section 9. Quorum. At each meeting of the board of directors, one-half (1/2) of the entire board shall constitute a quorum for the transaction of business, except as provided in Section 2 of this Article III, but less than a quorum may, without notice other than announcement at the meeting, adjourn a meeting until a quorum shall be present. Every act of a majority of the directors present at any meeting or adjourned session of a meeting at which there is a quorum shall be the act of the board of directors. Section 10. Compensation of Directors and Members of Committees. The board of directors may from time to time, in its discretion, fix the amount which shall be payable to members of the board of directors and to members of any committee for attendance at the meetings of the board or of such committee and for services rendered to the corporation. A director or member of the committee may serve the corporation in any other capacity and receive compensation therefor. Section 11. Meetings By Communication Equipment. The board of directors or any committee of the board may hold a meeting by means of conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at the meeting. Section 12. Nomination of Director Candidates. Nominations for the election of directors may be made by the board of directors or a proxy committee appointed by the board of directors or by any shareholder entitled to vote in the election of directors generally. However, any shareholder entitled to vote in the election of directors generally may nominate one or more persons for election as directors at a meeting only if written notice of such shareholder's intent to make such nomination is given to the secretary of the corporation not later than (i) with respect to an election to be held at an annual meeting of shareholders, 60 days in advance of such meeting, and (ii) with respect to an election to be held at a special meeting of shareholders for the election of directors, the close of business on the seventh day following the date on which notice of such meeting is first given to shareholders. Each such notice shall set forth: (a) the name and address of the shareholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the shareholder is a holder of record of common stock of the corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder; (d) such other information regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the nominee been nominated, or intended to be nominated, by the board of directors; and (e) the consent of each nominee to serve as a director of the corporation if so elected. The chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure. ARTICLE IV COMMITTEES OF THE BOARD OF DIRECTORS Section 1. Committees. The board of directors, by resolution or resolutions passed by a majority of the entire board, may designate from among its members various committees, each consisting of three or more of the directors, and each of which, to the extent provided in said resolution or resolutions, shall have and may exercise such powers and authority as may be specified by the board of directors, except that no such committee shall have authority as to (1) the submission to shareholders of any action that needs shareholders' authorization under law, (2) the filling of vacancies in the board or in any committee, (3) the fixing of compensation of the directors for serving on the board or on any committee, (4) the amendment or repeal of the by-laws, or the adoption of new by-laws, or (5) the amendment or repeal of any resolution of the board which by its terms shall not be so amendable or repealable. The board of directors may designate one or more directors as alternate members of any such committee. Each such committee and the members thereof shall serve at the pleasure of the board of directors. Section 2. Standing Committees. There shall at all times be at least three standing committees of the board of directors, namely an audit committee, a compensation committee, and a nominating committee, each of which shall consist of three or more directors, none of whom may be a current or former officer or employee of the corporation. The compensation committee shall, in addition to such other duties as the board of directors may specify, administer the corporation's 1993 Stock Incentive Plan and be responsible for reviewing and approving all stock option awards or other forms of stock incentive awards, whether or not granted pursuant to that plan. Section 3. General Rules. At each meeting of a committee, one- third of the entire committee, but not less than two (2) members, shall constitute a quorum for the transaction of business. Notice of the time and place of each committee meeting shall be subject to the same notice rules as are applicable to special meetings of the board of directors, except that no notice of the purpose of a committee meeting need be stated. Any action required or permitted to be taken at any meeting of a committee of the board of directors may be taken without a meeting if all members of such committee consent to such action in writing and such writing or writings are filed with the minutes of proceedings of the committee. Except as otherwise provided in this Article IV, each committee of the board of directors may adopt its own rules of procedure, may meet at stated times or on such notice as the committee may determine and shall keep regular minutes of its proceedings and report the same to the board of directors when required. ARTICLE V OFFICERS Section 1. Number and Designation. The officers of the corporation will consist of a chairman of the board, a president, one or more vice presidents, a treasurer and a secretary and such other officers as the board of directors may elect, including, but not limited to, one or more "executive" vice presidents, "senior" vice presidents or "group" vice presidents. Any two offices may be held by one person, except that the chairman of the board or president may not also be the secretary, and except that, where the by-laws or resolutions of the board of directors provide for signatures of the incumbents of two offices of the corporation upon certificates for shares, notes, checks or other instruments or documents issued by the corporation, such offices must be held by two separate persons. Section 2. Election. The board of directors shall, at their first meeting after their election, elect a chairman of the board and a president from their number and shall also elect one or more vice- presidents, a secretary and a treasurer who need not be members of the board of directors, but in the event of the failure of the board so to elect any officer, such officer may be elected at any subsequent meeting of the board. Each officer so elected shall hold office until the first meeting of the board of directors following the next annual meeting of shareholders for the election of directors and until his successor is elected, except in the event of his death, resignation or removal or the earlier termination of his term of office, and except that the terms of office of all vice-presidents shall terminate with each annual election of officers at which any vice-president is elected. Any vacancy in an office may be filled for the unexpired portion of the term of such office by the board of directors at any regular or special meeting. The board of directors may also elect other officers, including a controller, who need not be members of the board of directors, and may prescribe, and from time to time change, their respective powers and duties, except as the powers and duties of the controller are prescribed by these by-laws. Each officer so elected shall hold office at the pleasure of the board of directors. Section 3. Chairman of the Board. The chairman of the board shall preside at all meetings of the shareholders and of the board of directors. He shall perform such other duties as may be required in the management of the business. Section 4. The President. The president shall have the general powers and duties of supervision and management of the corporation. In the absence or incapacity of the chairman of the board, he shall also preside at all meetings of the shareholders and of the board of directors. Section 4A. The function of chief executive officer, and chief operating officer of the corporation, shall be discharged by such officer or officers as the board of directors may from time to time designate. Section 5. Vice Presidents. Each vice-president, including any executive vice presidents, senior vice presidents and/or group vice presidents, shall have such powers and shall perform such duties as may be assigned to him by the board, the chairman of the board or the president. Section 6. The Treasurer. The treasurer shall have the care and custody of all the funds and securities of the corporation and shall deposit the same in the name of the corporation in such bank or banks, trust company or trust companies and in such safe deposit company or companies as the board of directors may designate. He shall be responsible for the disbursement of funds of the corporation and shall perform the duties and exercise all the powers usually incident to the office of the treasurer and such other duties as from time to time may be assigned to him by the board, the chairman of the board or the president. Section 7. The Secretary. The secretary shall keep the minutes and act as secretary of all meetings of the board of directors and of the shareholders. He shall attend to the giving and serving of all notices of the corporation. He shall be the custodian of the records and of the corporate seal of the corporation. He shall attend to such correspondence as may be assigned to him and perform all the duties incidental to his office. He shall be empowered to affix the corporate seal to all documents, execution of which, on behalf of the corporation, under its seal, is duly authorized and when so affixed may attest the same; and, in general, he shall perform the duties and exercise all the powers usually incident to the office of a secretary of a corporation and such other duties as, from time to time, may be assigned to him by the board, the chairman of the board or the president. Section 8. The Controller. The controller shall maintain and supervise proper books and records of all assets, liabilities, disbursements and transactions of the corporation. He shall prepare such financial statements and reports as shall be required, and shall perform such other duties as from time to time may be assigned to him by the board, the chairman of the board or the president. Section 9. Appointed Officers. The chief executive officer of the corporation may from time to time appoint one or more officers with the title of vice president with such powers and duties as the chief executive officer may specify. The chief executive officer may from time to time also appoint (a) one or more assistant treasurers who may perform some or all of the duties and powers usually incident to the treasurer, (b) one or more assistant secretaries who may perform some or all of the duties and powers usually incident to the secretary and (c) one or more assistant controllers who may perform some or all of the duties assigned to the controller. Any of said appointed officers may be removed at any time by the chief executive officer. The chief executive officer or the president also may appoint one or more officers of operating business units or divisions of the corporation, who shall not be officers of the corporation, but shall have such powers and duties as the chief executive officer, president or the head of the operating business unit or division shall specify. Any appointed officers of operating business units or divisions may be removed at any time by the chief executive officer, the president, or the head of the business unit or division to whom such appointed officer reports. Section 10. Stockholder Consents and Proxies. The chief executive officer, president, treasurer and secretary of the corporation or any one of them or their designees, shall have the power and authority on behalf of the corporation to execute any consents or proxies, authorizing any person to attend and act and vote in person or by proxy at any meetings of the stockholders or members of any corporation or other entity in which the corporation owns stock or otherwise has an ownership interest, or to attend such meetings themselves, and at any such meetings they or their designees or proxies, as the case may be, shall possess and may exercise any and all the rights and powers incident to such ownership as the corporation as the owner thereof might have possessed and executed if present. Section 11. Delegation of Duties of Officers. The board of directors may delegate the duties and powers of any officer, agent or employee of the corporation to any other officer, agent or employee or director for a specified time during the absence of any such person or for any other reason that the board may deem sufficient. Section 12. Removal. Any officer of the corporation elected or appointed by the board of directors may be removed by the board with or without cause. Section 13. Bond. The board of directors shall have power, to the extent permitted by law, to require any officer, agent or employee of the corporation to give bond for the faithful discharge of his duties in such form and with such surety or sureties as the board may deem advisable. ARTICLE VI CAPITAL SHARES Section 1. Form. The certificates for shares shall be in such forms as may be prescribed by law and as shall be approved by the board of directors. Section 2. Issuance. All certificates for shares shall be signed by the chairman of the board or the president or a vice-president and the secretary or an assistant secretary or the treasurer or an assistant treasurer and shall have the seal of the corporation affixed thereto. Such seal may be a facsimile, engraved or printed. Where any such certificate is countersigned by a transfer agent or registered by a registrar, other than the corporation itself or its employee, the signatures of any such officers or assistant officers upon such certificate may be facsimiles, engraved or printed. Section 3. Transfer. The board of directors shall have the power and authority to make such rules and regulations as it may deem expedient concerning the issue, registration and transfer of certificates for shares, and may appoint transfer agents or clerks and registrars thereof. Section 4. Fixing of Record Date. The board of directors may at any time fix a record date not more than fifty nor less than ten days prior to (a) the date of any meeting of shareholders or (b) the last day on which the shareholders are entitled to express consent or dissent from any proposal without a meeting, as the date as of which shareholders entitled to notice of or to vote at such a meeting, or whose consent or dissent is required or may be expressed, for any purpose, as the case may be, shall be determined, and, except as otherwise provided by law, all persons who were the holders of record of voting shares at such date and no others shall be entitled to notice of and to vote at such meeting or to express their consent or dissent, as the case may be. The board of directors may at any time fix a record date not exceeding fifty days prior to the date fixed for the payment of any dividend or the making of any distribution or for the delivery or allotment of evidences of rights or evidences of interest arising out of any change, conversion, or exchange of capital shares, as the date for the determination of the shareholders entitled to receive any such dividend, distribution, rights or interest, and in any such case only shareholders of record at the date so fixed shall be entitled to receive such dividend, distribution, rights or interest. ARTICLE VII NEGOTIABLE INSTRUMENTS, CONTRACTS, ETC. Section 1. Signatures on Checks, etc. All checks, drafts, bills of exchange, notes or other obligations or orders for the payment of money shall be signed in the name of the corporation by such officer or officers, person or persons, as the board of directors may from time to time designate by resolution. Section 2. Execution of Contracts, Deeds. etc. The board of directors or any committee given specific authority in the premises, or given authority to exercise generally the powers of the board during the interval between meetings of the board to the extent permitted by law, may authorize any officer or officers, agent or agents, in the name of and on behalf of the corporation, to enter into or execute and deliver any and all deeds, bonds, mortgages, contracts and other obligations or instruments and to vote on behalf of the corporation shares of stock of other domestic or in the name of the corporation, and such authority may be general or confined to specific instances. ARTICLE VIll CORPORATE SEAL Section 1. Description. The seal of the corporation shall be circularin form with the name of the corporation in the circumference and the words and figures "Corporate Seal--l916--N.Y." in the center. ARTICLE IX FISCAL YEAR Section 1. Definition. The fiscal year of this corporation shall be from the first day of January to the thirty-first day of December, inclusive, in each year or such other twelve consecutive months as the board of directors may by resolution designate. ARTICLE X WAIVER OF NOTICE Section 1. Meetings Held on Waiver. Whenever any notice is required to be given under the provisions of these by-laws, or of the certificate of incorporation, or of any of the laws of the State of New York, a waiver thereof, in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent thereto. The attendance of any shareholder at a meeting, in person or by proxy, without protesting prior to the conclusion of the meeting the lack of notice of such meeting, shall constitute a waiver of notice by him. ARTICLE XI AMENDMENTS Section 1. By the Shareholders. Except as otherwise provided by law, these by-laws may be amended or repealed or new by-laws may be adopted at any meeting of the shareholders of the corporation by the affirmative vote of shareholders holding of record a majority of the issued and outstanding shares entitled to vote, represented either in person or by proxy, provided notice of the proposed amendment be contained in the notice or waiver of notice of such meeting. Section 2. By the Board of Directors. Except as otherwise provided by law, these by-laws may be amended at any meeting of the board of directors of the corporation at which a quorum is present by the affirmative vote of a majority of the directors present at such meeting, provided notice of the proposed amendment is contained in the notice or waiver of notice of such meeting, provided, however, that the board of directors shall have no power to amend or repeal the by-laws, or adopt any new by-laws, with respect to cumulative voting. Section 3. All By-Law Amendments. Notwithstanding anything contained in these by-laws to the contrary, the affirmative vote of the holders of at least eighty percent of the voting power of all shares of the corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to alter, amend or repeal Sections 1, 2, 3 or 12 of Article III, or this Section 3 of this Article XI. ARTICLE XII INDEMNIFICATION Section 1. Indemnification--Third Party and Derivative Actions. (a) The corporation shall indemnify any person made, or threatened to be made, a party to an action or proceeding, whether civil or criminal (other than one by or in the right of the corporation to procure a judgment in its favor), including an action by or in the right of any Mother corporation of any type or kind, domestic or foreign, or any partnership, joint venture, trust, employee benefit plan or other enterprise, which any director, officer or employee of the corporation served in any capacity at the request of the corporation, by reason of the fact that he is or was a director or officer of the corporation, or is or was serving such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise in any capacity, against judgments, fines, including excise taxes, amounts paid in settlement and expenses, including attorney's fees, incurred in connection with any such action or proceeding, or any appeal therein, provided that no indemnification may be made to or on behalf of such person if a judgment or other final adjudication adverse to such person establishes that (i) his acts were committed in bad faith or were the result of his active or deliberate dishonesty and were material to such action or proceeding or (ii) he personally gained in fact a financial profit or other advantage to which he was not legally entitled. (b) The corporation shall indemnify any person made, or threatened to be made, a party to an action by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of any other corporation of any type or kind, domestic or foreign, or of any partnership, joint venture, trust, employee benefit plan or other enterprise, against amounts paid in settlement and expenses, including attorneys' fees, incurred in connection with such action, or any appeal therein, provided that no indemnification may be made to or on behalf of such person if (i) his acts were committed in bad faith or were the result of his active and deliberate dishonesty and were material to such action or (ii) he personally gained in fact a financial profit or other advantage to which he was not legally entitled. (c) The termination of any civil or criminal action or proceeding by judgment, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not in itself create a presumption that any such person has not met the standard of conduct set forth in this Section 1. Section 2. Payment of Indemnification; Repayment. (a) A person who has been successful, on the merits or otherwise, in the defense of a civil or criminal action or proceeding of the character described in Section 1 of this Article shall be entitled to indemnification as authorized in such Section. (b) Any indemnification under Section 1 of this Article, unless ordered by a court, shall be made by the corporation in such manner as provided by law. (c) Expenses incurred by a person referred to in Section 1 of this Article in defending a civil or criminal action or proceeding shall be paid by the corporation in advance of the final disposition of such action or proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount in case he is ultimately found, in accordance with this Article, not to be entitled to indemnification or, where indemnity is granted, to the extent the expenses so paid exceed the indemnification to which he is entitled. (d) Any indemnification of a person under Section 1 of this Article, or advancement of expenses under Section 2(c) of this Article, shall be made promptly, and in any event within 60 days, upon the written request of such person. Section 3. Enforcement; Defenses. The right to indemnification or advancement of expenses granted by this Article shall be enforceable by the person in question in any court of competent jurisdiction if the corporation denies such request, in whole or in part, or if no disposition thereof is made within 60 days. Such person's expenses incurred in connection with successfully establishing his right to indemnification, in whole or in part, in any such action shall also be indemnified by the corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for the advancement of expenses under Section 2(c) of this Article where the required undertaking has been received by the corporation) that the claimant has not met the standard of conduct set forth in Section 1 of this Article, but the burden of proving such defense shall be on the corporation. Neither the failure of the corporation to have made a determination that indemnification of the claimant is proper, nor the fact that there has been an actual determination by the corporation that indemnification of the claimant is not proper, shall be a defense to the action or create a presumption that the claimant is not entitled to indemnification. Section 4. Survival; Savings Clause; Preservation of Other Rights. (a) The foregoing indemnification provisions shall be deemed to be a contract between the corporation and each person who serves in such capacity at any time while these provisions as well as the relevant provisions of the New York Business Corporation Law are in effect and any repeal or modification thereof shall not affect any right or obligation then existing with respect to any state of facts then or previously existing or any action or proceeding previously or thereafter brought or threatened based in whole or in part upon any such state of facts. Such a contract right may not be modified retroactively without the consent of such person. (b) If this Article or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless indemnify each such person against judgments, fines, amounts paid in settlement and expenses, including attorneys' fees, incurred in connection with any actual or threatened action by or in the right of the corporation, or any appeal therein, to the full extent permitted by any applicable portion of this Article that shall not have been invalidated and to the full extent permitted by applicable law. (c) The indemnification provided by this Article shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any by-law, agreement, vote of shareholders or directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer or employee of the corporation and shall inure to the benefit of the heirs, executors and administrators of such a person. The corporation is hereby authorized to provide further indemnification if it deems it advisable by resolution of shareholders or directors, by amendment of these by- laws or by agreement. EX-11.1 5 EX-11.1 EXHIBIT 11.1 EXHIBIT 11.1 AVON PRODUCTS, INC. COMPUTATION OF PRIMARY INCOME PER SHARE (In millions, except per share data) Three months ended June 30 ------------------ 1996 1995 ---- ---- Weighted average shares of common stock: Weighted average shares outstanding during the period.............................. 133.914 136.917** Common stock equivalents*................. -- -- ------- ------- Weighted average shares for primary income per share computation................... 133.914 136.917** ======= ======= Net income................................ $ 85.7 $ 80.4 ======= ======= Primary income per share.................. $ .64 $ .59** ======= ======= - ---------- *Common stock equivalents are not reported because they result in less than three percent dilution. **Restated to reflect a two-for-one stock split distributed in June 1996. EXHIBIT 11.1 AVON PRODUCTS, INC. COMPUTATION OF PRIMARY INCOME PER SHARE (In millions, except per share data) Six months ended June 30 ---------------- 1996 1995 ---- ---- Weighted average shares of common stock: Weighted average shares outstanding during the period.............................. 134.256 137.133** Common stock equivalents*................. -- -- ------- ------- Weighted average shares for primary income per share computation................... 134.256 137.133** ======= ======= Net income................................ $ 123.4 $ 114.8 ======= ======= Primary income per share.................. $ .92 $ .84** ======= ======= - ---------- *Common stock equivalents are not reported because they result in less than three percent dilution. **Restated to reflect a two-for-one stock split distributed in June 1996. EX-11.2 6 EX-11.2 EXHIBIT 11. EXHIBIT 11.2 AVON PRODUCTS, INC. COMPUTATION OF FULLY DILUTED INCOME PER SHARE (In millions, except per share data) Three months ended June 30 ------------------ 1996 1995 ---- ---- Weighted average shares of common stock: Weighted average shares outstanding during the period................................. 133.914 136.917* Common stock equivalents. ................... .944 .412* ------- ------- Weighted average shares for fully diluted income per share computation............... 134.858 137.329* ======= ======= Net income................................... $ 85.7 $ 80.4 ======= ======= Fully diluted income per share............... $ .64 $ .59* ======= ======= *Restated to reflect a two-for-one stock split distributed in June 1996. EXHIBIT 11.2 AVON PRODUCTS, INC. COMPUTATION OF FULLY DILUTED INCOME PER SHARE (In millions, except per share data) Six months ended June 30 ---------------- 1996 1995 ---- ---- Weighted average shares of common stock: Weighted average shares outstanding during the period................................. 134.256 137.133* Common stock equivalents. ................... .956 .416* ------- ------- Weighted average shares for fully diluted income per share computation............... 135.212 137.549* ======= ======= Net income................................... $ 123.4 $ 114.8 ======= ======= Fully diluted income per share............... $ .91 $ .83* ======= ======= *Restated to reflect a two-for-one stock split distributed in June 1996. EX-27 7 ART.5 FDS FOR 2ND QUARTER 10-Q
5 Exhibit 27 Avon Products, Inc. Financial Data Schedule This schedule contains summary financial information extracted from the Avon Products, Inc. financial statements as of June 30, 1996 and for the six months then ended included in the Form 10-Q as of June 30, 1996 and is qualified in its entirety by reference to such financial statements. 1000000 DEC-31-1996 JAN-01-1996 JUN-30-1996 6-MOS 73 0 438 (28) 551 1,248 1,169 (637) 2,108 1,342 106 0 0 43 117 2,108 2,145 2,145 839 1,053 0 34 20 199 75 123 0 0 0 123 .92 .92
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