Avon 2006 Annual Report Download - page 68

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Cash proceeds, tax benefits, and intrinsic value related to total
stock options exercised during 2006, 2005 and 2004, were as
follows:
2006 2005 2004
Cash proceeds from stock options
exercised $32.5 $61.4 $122.3
Tax benefit realized for stock options
exercised 4.1 20.6 36.6
Intrinsic value of stock options
exercised 11.7 57.1 116.1
Restricted Stock and Restricted Stock Units
The fair value of restricted stock and restricted stock units was
determined based on the average of the high and low market
prices of our common stock on the grant date.
A summary of restricted stock and restricted stock units as of
December 31, 2006, and changes during 2006, is as follows:
Restricted
Stock
And Units
(in 000's)
Weighted-
Average
Grant-Date
Fair Value
Nonvested at January 1, 2006 1,036 $33.53
Granted 1,307 31.04
Vested (280) 29.38
Forfeited (83) 30.02
Nonvested at December 31, 2006 1,980 $32.54
The total fair value of restricted stock and restricted stock units
that vested during 2006 was $8.2, based upon market prices on
the vesting dates. As of December 31, 2006, there was approx-
imately $33.6 of unrecognized compensation cost related to
restricted stock and restricted stock unit compensation arrange-
ments. That cost is expected to be recognized over a weighted-
average period of 2.1 years.
2005-2007 Performance Cash Plan
In 2005, we established a three-year performance cash plan for
the period 2005-2007 (the “Plan”). Awards were set with the
objective of payouts ranging from 30% of target for the
achievement of threshold financial objectives aligned with our
long-term business plan to 200% of target if maximum
performance objectives are achieved. The Compensation Com-
mittee of the Board of Directors has designated total revenues
and operating margin as the key performance measures under
the Plan. If the objectives under the Plan are achieved, total cash
payments in the range of approximately $9.0 to $57.0 would be
made in the first quarter of 2008. Management has determined
that the likelihood of achieving the objectives is remote; there-
fore, no expense has been recognized during 2006 or 2005.
NOTE 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 else-
where 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
program under which we may buy up to $1,000.0 of our out-
standing stock over the next five years. This $1,000.0 program
was completed during August 2005. 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. In
February 2005, we announced that we would begin a new five-
year, $1,000.0 share repurchase program upon completion of
our previous share repurchase program. At December 31, 2006,
there was $647.7 remaining to be repurchased under the
$1,000.0 share repurchase program announced in February