Avon 2000 Annual Report Download - page 24

For each of the three years ended December 31,
the components of basic and diluted earnings per share
are as follows:
2000 1999 1998
Numerator:
Basic:
Income from continuing
operations before cumulative
effect of accounting change $ 485.1 $ 302.4 $270.0
Cumulative effect of
accounting change (6.7) ——
Net Income $ 478.4 $ 302.4 $270.0
Diluted:
Income from continuing
operations before cumulative
effect of accounting change $ 485.1 $ 302.4 $270.0
Interest expense on
Convertible Notes, net of taxes 4.5 ——
Income for purposes of
computing diluted eps
before cumulative effect
of accounting change 489.6 302.4 270.0
Cumulative effect of
accounting change (6.7) ——
Net income for purposes
of computing diluted eps $ 482.9 $ 302.4 $270.0
Denominator:
Basic eps weighted-average
shares outstanding 237.67 256.78 263.27
Dilutive effect of:
Assumed conversion of
stock options and settlement
of forward contracts 2.06* 2.59* 2.68
Assumed conversion of
Convertible Notes 3.22 ——
Diluted eps adjusted weighted-
average shares outstanding 242.95 259.37 265.95
Basic eps:
Continuing operations $2.04 $ 1.18 $ 1.03
Cumulative effect of
accounting change (.03) ——
$2.01 $ 1.18 $ 1.03
Diluted eps:
Continuing operations $2.02 $ 1.17 $ 1.02
Cumulative effect of
accounting change (.03) ——
$1.99 $ 1.17 $ 1.02
* At December 31, 2000 and 1999, stock options and forward contracts
to purchase Avon common stock totaling 1.1 million and 3.8 million shares,
respectively, are not included in the diluted eps calculation since their
impact is anti-dilutive.
Reclassifications > To conform to the 2000 presentation,
certain reclassifications were made to the prior years’
consolidated financial statements and the accompanying
footnotes.
2Accounting Changes
In June 1999, the Financial Accounting Standards Board
(“fasb”) issued Financial Accounting Standard (“fas”)
No. 137, “Accounting for Derivative Instruments and
Hedging Activities–Deferral of the Effective Date of
fas No. 133,” which delayed the effective date of fas
No. 133, “Accounting for Derivative Instruments and
Hedging Activities,” by one year. fas No. 133 is now
effective for all fiscal quarters of all fiscal years beginning
after June 15, 2000 (January 1, 2001 for the Company).
In June 2000, the fasb issued fas No. 138, “Accounting
for Certain Derivative Instruments and Certain Hedging
Activities–an Amendment of fasb Statement No. 133.”
fas No. 138 amends fas No. 133 and will be adopted
concurrently with fas No. 133. fas No. 133 requires that
all derivative instruments be recorded on the balance
sheet at their fair value. Changes in the fair value of deriv-
atives will be recorded each period in current earnings or
accumulated other comprehensive income, depending on
whether the derivative is designated as part of a hedge
transaction. For fair-value hedge transactions in which the
Company is hedging changes in the fair value of an asset,
liability, or firm commitment, changes in the fair value of
the derivative instrument will be included in the income
statement along with the offsetting changes in the
hedged item’s fair value. For cash-flow hedge transactions
in which the Company is hedging the variability of cash
flows related to a variable rate asset, liability, or a fore-
casted transaction, changes in the fair value of the deriva-
tive instrument will be reported in accumulated other
comprehensive income. The gains and losses on the deriv-
ative instruments that are reported in accumulated other
comprehensive income will be reclassified to earnings in
the periods in which earnings are impacted by the vari-
ability of the cash flows of the hedged item. The ineffec-
tive portion of all of the hedges will be recognized in
current period earnings. The impact of fas No. 133 as
amended by fas No. 138 on the Company’s financial
statements will depend on a variety of factors, including
the future level of forecasted and actual foreign currency
transactions, the extent of the Company’s hedging activi-
ties, the types of hedging instruments used and the effec-
tiveness of such instruments. Based on Avon’s financial
instruments outstanding at December 31, 2000, the
Company has determined that the cumulative effect of
adoption will not be material to the Consolidated
Financial Statements.
54