-----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, I2WVTxV77uJNQYsbg4CmWE+ueDweXn4hRIWfHWPAmnwwLnNqg1r6xWYxXFZZZ/X3 68Yj1sikC67ONTLFu/Ca/A== 0000950103-03-000163.txt : 20030131 0000950103-03-000163.hdr.sgml : 20030131 20030131111426 ACCESSION NUMBER: 0000950103-03-000163 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030131 ITEM INFORMATION: Other events FILED AS OF DATE: 20030131 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: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04881 FILM NUMBER: 03533550 BUSINESS ADDRESS: STREET 1: 1345 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10105 BUSINESS PHONE: 9149352588 MAIL ADDRESS: STREET 1: PECK & MIDLAND AVE STREET 2: PECK & MIDLAND AVE CITY: RYE STATE: NY ZIP: 10580 8-K 1 jan3003_8k.txt ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------ FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(D) of the Securities Exchange Act of 1934 Date of report (Date of earliest event reported) December 20, 2002 ----------------------- AVON PRODUCTS, INC. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) New York - -------------------------------------------------------------------------------- (State or Other Jurisdiction of Incorporation) 1-4881 13-0544597 - -------------------------------------------------------------------------------- (Commission File Number) (IRS Employer Identification No.) 1345 Avenue of the Americas New York, New York 10105-0196 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (212) 282-5000 - -------------------------------------------------------------------------------- (Registrant's Telephone Number, Including Area Code) Not Applicable - -------------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) ================================================================================ Item 5. Other Events. 1. On January 30, 2003 the Company issued a press release announcing that it had agreed with J.C. Penney to end the business relationship pursuant to which the Company's beComing line of products has been carried in approximately 90 J.C. Penney stores. A copy of the press release is attached hereto as Exhibit 99.1 and is hereby incorporated by reference. 2. Polish subsidiaries of the Company have been responding to Protocols of Inspection served by the Polish tax authorities in respect of 1999 and 2000 tax audits. The Protocols asserted tax deficiencies, penalties and accruing interest totaling approximately $24 million at current exchange rates: $11 million primarily relating to the documentation of certain sales, and $13 million relating to excise taxes. The procedural rules for conducting audits in Poland changed effective January 1, 2003, and the Company was informed on January 14, 2003 and January 17, 2003, respectively, that the tax authorities had rejected the Company's factual assertions regarding the alleged tax deficiencies. Under the new procedures, the matters now await the commencement of a second stage of proceeding at which the applicable legal conclusions will be determined. In the event that assessments are finally established at the second stage of the proceedings, it may be necessary to pay the assessments in order to pursue further appeals, which may result in a charge to income. Management believes that there are meritorious defenses to these proceedings and they are being vigorously contested. It is not possible to make a meaningful estimate of the amount or range of expense that could result from an unfavorable outcome in these proceedings but management does not believe that the proceedings ultimately will have a material impact on the Consolidated Financial Statements. 3. On December 20, 2002 a Brazilian subsidiary of the Company received a series of tax assessments from the Brazilian tax authorities asserting that the establishment in 1995 of separate manufacturing and distribution companies in that country was done without a valid business purpose. The assessments assert tax deficiencies during portions of the years 1997 and 1998 of approximately $50 million at the current exchange rate, plus penalties and accruing interest totaling approximately $84 million at the current exchange rate. In the event that the assessments are upheld in the earlier stages of review, it may be necessary for the Company to provide security to pursue further appeals, which, depending on the circumstances, may result in a charge to income. It is not possible to make a meaningful estimate of the amount or range of expense that could result from an unfavorable outcome in respect of these or any additional assessments that may be issued for subsequent periods. The structure adopted in 1995 is comparable to that used by many companies in Brazil, and the Company believes it is appropriate, both operationally and legally, and that the assessments are unfounded. This matter is being vigorously contested and in the opinion of the Company's outside counsel the likelihood that the assessments ultimately will be upheld is remote. Management believes that the likelihood that the assessments will have a material impact on the Consolidated Financial Statements is also remote. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. AVON PRODUCTS, INC. Dated: January 31, 2003 By: /s/ Gilbert L. Klemann, II ------------------------------------ Name: Gilbert L. Klemann, II Title: Senior Vice President, General Counsel and Secretary EXHIBIT INDEX EXHIBIT NO. DESCRIPTION - ---------- -------------------------------------------------------------------- 99.1 Press Release of Avon Products, Inc., dated January 30, 2003. EX-99.1 3 jan3003_ex9901.txt EXHIBIT 99.1 NEWS RELEASE MEDIA CONTACTS: INVESTOR CONTACTS: Victor Beaudet Renee Johansen (212) 282-5344 Rob Foresti (212) 292-5320 Debora Coffey (212) 282-5660 AVON ANNOUNCES STRATEGIC REPOSITIONING OF ITS BECOMING BRAND ----------------------------------------- Prestige-Priced Brand to be Sold Through Avon Beauty Advisor Program ----------------------------------------- Avon and J.C. Penney End Retail Alliance NEW YORK, N.Y., January 30, 2003 - Avon Products, Inc. (NYSE:AVP) today announced a strategic repositioning of its beComing beauty brand in the U.S. Following a strategic review of options to optimize the brand, Avon has decided that beComing will now be sold through Avon's direct selling channel in the U.S. exclusively by Avon Beauty Advisors, who are independent Avon sales Representatives with specialized beauty product training and consultative selling skills. Accordingly, Avon has agreed with J.C. Penney to end the alliance through which beComing had been carried in approximately 90 J.C. Penney stores. Commenting on the decision, Andrea Jung, Avon's chairman and chief executive officer, said, "Our research confirms that consumer reaction to this prestige brand has been very positive. By offering beComing through our core business, we expect to accelerate sales of the brand, advance earnings for our Beauty Advisors, and attract new customers with a high-quality, premium product line. "Our direct selling channel in the U.S. has been enjoying robust growth and just completed one of its strongest years ever. We therefore see an outstanding opportunity to leverage the beComing brand with the beauty selling skills of our Avon Beauty Advisors," Ms. Jung said. "Avon remains committed to a multi-brand, multi-channel strategy and we will continue to pursue opportunities to reach new customer segments that prefer a retail shopping experience," Ms. Jung added. She also said Avon's retail president, Steve Bock, a retail beauty industry veteran, will continue to lead Avon's efforts to develop its long-term retail strategy. Avon said details for withdrawing beComing from J.C. Penney are still being finalized, however it doesn't anticipate that costs associated with repositioning the brand will affect the company's earnings outlook for 2003. More than 35,000 of Avon's approximately 500,000 independent sales Representatives in the U.S. are in various stages of completing their training as Beauty Advisors. Training includes three comprehensive phases that develop extensive beauty product knowledge and consultative selling skills. Representatives who have completed the training typically generate higher sales of beauty products than other Representatives. Avon introduced the Beauty Advisor program in 2000. Brian C. Connolly, president, Avon North America, said, "We are very excited to bring beComing to our Beauty Advisors. Sales of beComing will enrich their earnings opportunity, and enable them to win new customers who enjoy prestige beauty products. In addition, beComing will enhance Avon's position as a world-class direct selling company, and provide Avon Beauty Advisors with a clear competitive advantage." Avon said that the beComing line to be sold by the Avon Beauty Advisors will focus on the primary beauty categories of skin care, color cosmetics and fragrance. The company also plans new product launches to expand the line. Avon Beauty Advisors will sell beComing to their customers using a dedicated brochure which will be updated quarterly. Beauty Advisors will also continue to sell the company's full line of products. Avon is the world's leading direct seller of beauty and related products, with approximately $6.0 billion in annual revenues. Avon markets to women in 143 countries through 3.5 million independent sales Representatives. Avon product lines include such recognizable brand names as Avon Color, Anew, Skin-So-Soft, Advance Techniques Hair Care, beComing and Avon Wellness. Avon also markets an extensive line of fashion jewelry and apparel. More information about Avon and its products can be found on the company's web site www.avon.com. # # # Cautionary Statement under the Private Securities Litigation Reform Act of 1995 Statements in this release, which are not historical facts or information, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on management's reasonable current assumptions and expectations. Such forward-looking statements involve risks, uncertainties and other factors, which may cause the actual results of the Company to be materially different from any future results expressed or implied by such forward-looking statements, and there can be no assurance that actual results will not differ materially from management's expectations. Such factors include, among others, the following: general economic and business conditions in the Company's markets, including economic and political uncertainties in Latin America; the Company's ability to implement its business strategy and its Business Transformation initiatives, including the integration of similar activities across markets to achieve efficiencies; the Company's ability to achieve anticipated cost savings and its profitability and growth targets; the impact of substantial currency fluctuations in the Company's principal foreign markets and the success of the Company's foreign currency hedging and risk management strategies; the impact of possible pension funding obligations and increased pension expense on the Company's cash flow and results of operations; and the effect of legal and regulatory proceedings, as well as restrictions imposed on the Company, its operations or its Representatives by foreign governments. Additional information identifying such factors is contained in the Company's Form 10-K/A report for the year ended December 31, 2001, filed with the SEC. The Company undertakes no obligation to update any such forward-looking statements. -----END PRIVACY-ENHANCED MESSAGE-----