Avon 2005 Annual Report Download - page 8

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MANAGEMENT’S฀DISCUSSION฀AND฀ANALYSIS฀
OF฀FINANCIAL฀CONDITION฀AND฀RESULTS฀OF฀OPERATIONS
Gross margin was impacted by the segments, as follows:
2005 2004
Increase/(Decrease) Weighted Impact Increase/(Decrease) Weighted Impact
Gross Margin on Avon Gross Margin on Avon
North America (1.0) (.3) (.8) (.2)
Europe (1.2) (.4) .7 .2
Latin America .1 – 1.1 .3
Asia Pacific (.6) (.1) 1.0 .2
Impact of country mix N/A .1 N/A .2
Consolidated (decrease) increase (.7) .7
See the “Segment Review” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional
information related to changes in gross margin by segment.
Marketing, Distribution
and Administrative Expenses
Marketing, distribution and administrative expenses increased
$280.6 in 2005, primarily due to the following:
• a 5% increase in revenue,
• costs associated with the implementation of our restructuring
initiatives of $48.1,
• an increase in consumer and strategic investments (including
brochures and Sales Leadership) of $51.0, and
• higher pension expense of approximately $15.0.
Marketing, distribution and administrative expenses increased $415.6
in 2004 as compared to 2003, primarily due to the following:
• a 13% increase in revenue,
• an increase in consumer and strategic investments of $104.0
(including Sales Leadership and spending on brochures),
• an increase in various marketing expenses of approximately
$56.0 (including public relations, direct marketing and promo-
tional material),
• merit salary increases of approximately $26.0 for certain mar-
keting, distribution and administrative personnel around the
world, and
• an increase in pension expense of $10.9.
These increases in expenses during 2004 as compared to 2003
were partially offset by incremental net savings from workforce
reduction programs associated with our supply chain initiatives
that began in 2001, and have subsequently been completed, of
approximately $45.0 in 2004 and a favorable comparison to 2003,
which included costs from severance and asset write-downs asso-
ciated with the repositioning of the beComing line of products of
$10.5 in 2003.