Avon 2000 Annual Report Download - page 32

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fas No. 123, net income and earnings per share (after the
cumulative effect of the accounting change) would have
been the pro forma amounts indicated below:
2000 1999 1998
Pro forma net income $460.9 $291.0 $263.0
Pro forma earnings per share:
Basic $1.94 $ 1.13 $ 1.00
Diluted $1.92 $ 1.12 $ .99
The fair value for these options was estimated at
the date of grant using a Black-Scholes option pricing
model with the following weighted-average assumptions:
2000 1999 1998
Risk-free interest rate 6.7% 5.4% 5.5%
Expected life 5years 5years 5years
Expected volatility 40% 30% 25%-30%
Expected dividend yield 2.0% 2.0% 2.0%
The weighted-average grant date fair values of
options granted during 2000, 1999 and 1998 were
$11.73, $10.09, and $7.67, respectively.
9Shareholders’ (Deficit) Equity
Stock Split > On July 22, 1998, the Company declared a
two-for-one stock split in the form of a 100% stock divi-
dend which was distributed in September 1998 to share-
holders of record as of the close of business on August 24,
1998. Accordingly, the stock split has been recognized by
reclassifying the par value of the additional shares result-
ing from the split from retained earnings to common
stock and treasury stock. All references to the number of
share and per share amounts elsewhere in the consolidated
financial statements and related footnotes have been restated
to reflect the effect of the split for all periods presented.
Share Rights Plan > Avon has a Share Rights Plan under
which one right has been declared as a dividend for each
outstanding share of its common stock. Each right, which
is redeemable at $.005 at any time at Avon’s option, enti-
tles the shareholder, among other things, to purchase one
share of Avon common stock at a price equal to one-half
of the then current market price, if certain events have
occurred. The right is exercisable if, among other events,
one party obtains a beneficial ownership of 20% or more
of Avon’s voting stock.
Stock Repurchase Programs > During 1994, Avon’s Board
authorized a stock repurchase program under which Avon
could buy back up to 10% of its then outstanding com-
mon stock, or approximately 28.0 million shares. As of
February 1997, when the plan ended, the cumulative
number of shares repurchased was 25.3 million shares at a
total cost of $424.4 which are included in Treasury stock.
In February 1997, Avon’s Board authorized a new repur-
chase program under which the Company was authorized
to buy back up to $1,100.0 of its currently outstanding
common stock through open market purchases over a
period of up to five years. In the third quarter of 2000,
when the program was completed, the cumulative num-
ber of shares repurchased was 33.7 million shares at a
total cost of $1,060.0. In September 2000, Avon’s Board
approved a new share repurchase program under which
the Company may buy up to $1,000.0 of its outstanding
stock over the next five years. As of December 31, 2000,
the Company repurchased approximately 0.6 million
shares at a total cost of approximately $25.8 under this
new program.
Savings Plan > The Company offers a qualified defined
contribution plan, the Avon Products, Inc. 401(k)
Personal Savings Account, which allows eligible partici-
pants to contribute 1% to 20% of qualified compensation
through payroll deductions. Effective July 1, 1998, the
Company matches employee contributions dollar for dol-
lar up to the first 3% of eligible compensation and $.50
for each $1.00 contributed from 4% to 6% of eligible
compensation. Prior to July 1, 1998, the Company
matched contributions in an amount equal to 25% of an
employee’s qualified contribution. In 2000 and 1999,
matching contributions approximating $12.7 and $12.8,
respectively, were made in cash, which was then used to
purchase Avon shares in the open market. In 1998, Avon
contributed 62,520 shares of treasury stock to the
employees’ savings plan and recognized expense for its
fair value.
Board of Directors Remuneration > Effective May 1, 1997,
the Company discontinued the Board retirement plan,
which was applicable only to non-management directors.
Directors retiring after that date have had the actuarial
value of their accrued retirement benefits converted to a
one-time grant of common stock which is restricted as to
transfer until retirement. 52,786 shares were issued to
directors as a result of the discontinuance of the plan. As a
replacement for such plan, effective on and after May 1,
1997, each non-management director is annually granted
options to purchase 4,000 shares of common stock, at an
exercise price based on the fair market price of the stock
on the date of grant. The annual grant made in 2000 and
1999 consisted of 34,000 and 36,000 options, respectively,
with an exercise price of $38.25 and $51.38, respectively.
Also effective as of May 1, 1997, the annual retainer
paid to non-management directors was changed to consist
of twenty-five thousand dollars cash plus an annual grant
of shares having a value of twenty-five thousand dollars
based on the average closing market price of the stock for