Avon 2005 Annual Report Download - page 36

NOTES฀TO฀CONSOLIDATED฀FINANCIAL฀STATEMENTS
Board of Directors Remuneration
Each non-management director is annually granted options to
purchase 8,000 shares of common stock, at an exercise price
based on the market price of the stock on the date of grant. Each
grant of options becomes fully exercisable one year after the
date of grant and expires ten years after the date of grant. The
aggregate annual grant made to all non-management directors in
2005 and 2004 consisted of options in each year with an exercise
price of $41.95 and $36.43, respectively. Additionally, one new
non-management director was granted options to purchase 8,000
shares of common stock with an exercise price of $37.51.
Effective January 1, 2004, the annual retainer paid to non-man-
agement directors consists of $35,000 in cash ($30,000 prior to
January 1, 2004) plus an annual grant of restricted stock having a
value of $35,000 ($30,000 prior to January 1, 2004) based on the
average mean price of the stock for the ten days preceding the date
of grant. These shares are restricted as to transfer until the director
retires from the Board. The aggregate annual grant of restricted
stock made to all non-management directors in 2005 and 2004
consisted of 7,958 and 6,896 shares, respectively. Compensation
expense related to grants of restricted stock to non-management
directors was $.3 in 2005 and $.2 in 2004 and 2003.
In addition to the annual retainer, effective January 1, 2004, non-
management directors are paid a $10,000 retainer for member-
ship on the Audit Committee and $5,000 for membership on each
other committee of the Board of Directors on which he or she
serves. Non-management directors appointed to chair a commit-
tee are paid an additional $10,000 for the Audit Committee and
$5,000 for all other committees.
9฀ SHAREHOLDERS’฀EQUITY฀
Stock Split and Dividends
At the May 6, 2004 Annual Meeting, the shareholders approved
an amendment to our Restated Certificate of Incorporation to
increase the number of shares of authorized common stock from
800 million to 1.5 billion. Conditioned on such approval, the Board
of Directors in February 2004 had declared a two-for-one stock split
in the form of a 100% stock dividend, payable May 28, 2004, to
shareholders of record on May 17, 2004. The stock split has been
recognized by reclassifying the $.25 par value of the additional
shares resulting from the split from retained earnings to common
stock. The effect of this stock split was not retroactively reflected
in the Consolidated Statements of Changes in Shareholders’
Equity for periods prior to the split; therefore, in 2004, shares
issued for option exercises which occurred prior to the stock split
have not been adjusted for the stock split. The effect of the stock
split on such option exercises of approximately 1.7 million shares is
included in the line two-for-one stock split effected in the form
of a dividend on the Consolidated Statements of Changes in
Shareholders’ Equity. All references to the number of shares and
per share amounts elsewhere in the financial statements and
related footnotes have been restated to reflect the effect of the
split for all periods presented.
Share Rights Plan
We have 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 our
option, entitles 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
beneficial ownership of 20% or more of Avon’s voting stock.
The description and terms of the rights are set forth in a Rights
Agreement between Avon and Computer Share Limited.
Stock Repurchase Program
In September 2000, our Board approved a share repurchase pro-
gram under which we may buy up to $1,000.0 of our outstanding
stock over the next five years. This $1,000.0 program was com-
pleted during August 2005. In February 2005, we announced that
we would begin a new five-year, $1,000.0 share repurchase pro-
gram upon completion of our current share repurchase program. In
August 2005, we announced that our Board of Directors authorized
us to repurchase an additional $500.0 of our common stock. The
$500.0 program was completed during December 2005.