Avon 2003 Annual Report Download - page 68

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The following table presents consolidated net sales by classes of principal
products, for the years ended December 31:
2003 2002 2001
Beauty* $4,487.7 $3,903.4 $3,724.3
Beauty Plus** 1,259.6 1,238.8 1,233.3
Beyond Beauty*** 1,057.3 1,028.4 1,000.2
Total Net sales $6,804.6 $6,170.6 $5,957.8
*** Beauty includes cosmetics, fragrances and toiletries.
*** Beauty Plus includes fashion jewelry, watches, apparel and accessories.
*** Beyond Beauty includes home products, gift and decorative products and candles.
Sales from Health and Wellness products and the Mark. brand are included in
the above categories based on product type.
12. Leases and Commitments
Minimum rental commitments under noncancellable operating leases, prima-
rily for equipment and office facilities at December 31, 2003, consisted of
the following:
Year
2004 $ 77.5
2005 57.9
2006 42.4
2007 34.0
2008 32.1
Later years 143.4
Sublease rental income (13.8)
Total $373.5
Rent expense in 2003 was $94.1 (2002 - $90.8; 2001 - $92.1). Various con-
struction and information systems projects were in progress at December 31,
2003, with an estimated cost to complete of approximately $180.0.
13. Special Charges
In May 2001, Avon announced its new Business Transformation plans, which
are designed to significantly reduce costs and expand profit margins, while
continuing to focus on consumer growth strategies. Business Transformation
initiatives include an end-to-end evaluation of business processes in key
operating areas, with target completion dates through 2004. Specifically, the
initiatives focus on simplifying Avon’s marketing processes, taking advantage
of supply chain opportunities, strengthening Avon’s sales model through the
Sales Leadership program and the Internet, streamlining the Company’s orga-
nizational structure and integrating certain similar activities across markets to
achieve efficiencies. Avon anticipates significant benefits from these Business
Transformation initiatives, but the scope and complexity of these initiatives
necessarily involve planning and execution risk.
Special Charges — Fourth Quarter 2001
In the fourth quarter of 2001, Avon recorded Special charges of $97.4 pretax
($68.3 after tax, or $.28 per share on a diluted basis) primarily associated with
facility rationalizations and workforce reduction programs related to implemen-
tation of certain Business Transformation initiatives. The charges of $97.4 were
included in the Consolidated Statement of Income for 2001 as Special charges
($94.9) and as inventory write-downs, which were included in Cost of sales
($2.5). Approximately 80% of the charges related to future cash expenditures.
Approximately 85% of these cash expenditures were made by December
2003. All payments are funded by cash flow from operations.
In May 2001, Avon announced its new Business Transformation
plans, which are designed to significantly reduce costs and
expand profit margins, while continuing to focus on consumer
growth strategies.
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