Avon 2004 Annual Report Download - page 64

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Global Beauty 85
Notes to Consolidated
Financial Statements
15 Supplemental Income
Statement Information
For the years ended December 31, 2004, 2003 and
2002, the components of other expense (income), net
were as follows:
2004 2003 2002
Foreign exchange
losses (gains), net $ 9.5 $15.9 $(16.0)
Losses for other-than-
temporary declines
in market value on
available-for-sale
securities (Note 5) 13.7 — —
Amortization of debt
issue costs and
other financing 7.0 14.1 6.7
Other (1.9) (1.4) (.6)
Other expense
(income), net $28.3 $28.6 $ (9.9)
16 Other Information
In January 2003, Avon announced that it had agreed
with J.C. Penney to end the business relationship,
which began in 2001, pursuant to which Avon’s
beComing line of products had been carried in approx-
imately 90 J.C. Penney stores. For the year ended
December 31, 2003, costs associated with ending this
business relationship were $18.3, including severance
costs ($4.1), asset and inventory write-downs ($12.1)
and other related expenses ($2.1). These costs, which
were incurred in the first and second quarters, were
included in the Consolidated Statements of Income in
marketing, distribution and administrative expenses
($10.5) and in cost of sales ($7.8).
17 Acquisitions
In June 2004, Avon purchased 20% of the outstanding
shares in its two subsidiaries in China from a minority
interest shareholder for $45.6, including transaction
costs. Avon previously owned 73.845% of these sub-
sidiaries and consolidated their results, while recording
minority interest for the portion not owned. As a result
of this transaction, Avon reduced the minority interest
in the net assets of these subsidiaries as of June 30,
2004. The purchase of these shares did not have a
material impact on Avon’s consolidated net income.
Avon China is included in Avon’s Asia Pacific operating
segment. Avon initially allocated approximately $36.0
of the purchase price to goodwill and is in the process
of reviewing the valuation of intangible assets, if any;
thus, the allocation of the purchase price is subject
to adjustment.
In the second quarter of 2003, Avon purchased the out-
standing 50% of shares in its Turkish business, Eczacibasi
Avon Kozmetik (EAK) from its partner, Eczacibasi Group,
for $18.4, including transaction costs. As a result of the
acquisition agreement, Avon consolidated the remain-
ing 50% of its Turkish joint venture business in the
second quarter of 2003. Prior to the second quarter of
2003, the investment was accounted for under the
equity method. The impact on net sales and operating
profit in 2003 was $47.2 and $14.6, respectively. Avon
Turkey is included in Avon’s European operating
segment. Avon allocated approximately $17.0 of the
purchase price to goodwill.