Avon 2010 Annual Report Download

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Empowering
women
for
annual report 2010

Table of contents

  • Page 1
    a n n u a l re p o r t 2 010 Empowering women for

  • Page 2
    "Deep down in the heart of every person there lingers a spark of hope-a secret longing to be, or to have something more." David H. McConnell, Avon's Founder, 1886

  • Page 3
    ... the reins of a Fortune 500 company... Empowering women 34 years before women in the U.S. had the right to vote... 17 years before the first woman won the Nobel Prize...Avon offered women the opportunity to be CEOs of their own businesses and control their economic destinies. 2010 Annual Repor t

  • Page 4
    ...of 2010 largely reï¬,ected execution and operational challenges in several key markets. Our direct-selling model and world-class Beauty portfolio remain as relevant as ever. Avon continues to command 90% consumer brand awareness and strong market shares, and we hold the number one position in direct...

  • Page 5
    ...meet the more complex needs of the business today. To respond, in February 2011, Avon announced a comprehensive management realignment to enhance the company's operational rigor and better position us to execute more effectively across the portfolio. The new management structure increases management...

  • Page 6
    ... Sales Leadership model to include more leadership titles and levels, increasing the overall compensation opportunity. In addition, we have launched new advertising in the U.S. as well as the U.K. to promote the benefits of shopping through the direct-selling channel. Among our developing markets...

  • Page 7
    ... benefit tax changes that impacted our first year Sales Leaders, we are introducing a new Sales Leadership compensation plan that increases their earnings potential by 25%. We are also strengthening field incentives and consumer promotions to drive improvements in Representative productivity. In...

  • Page 8
    ... end violence against women. Avon's Hello Green Tomorrow program raised funds to plant 2 million *Source: Euromonitor International; Beauty and Personal Care 2010; mass fragrances category; global values sales at retail selling price for the year 2009; all retail channels. Empowering Women for 125...

  • Page 9
    ... brochure paper from certified or post-consumer recycled content sources within 10 years. So as we celebrate the company's 125th anniversary this year, we also celebrate Avon's many unique strengths and our continuing belief in the opportunities ahead. This year we are traveling to 16 cities around...

  • Page 10
    ...get the business back on track. With focus and resolve, and with your support, we are determined to reach the goal for which we are striving: sustainable growth and increased profitability for your company. Andrea Jung Chairman and Chief Executive Officer March 2011 Empowering Women for 125 years

  • Page 11
    ... (I.R.S. Employer incorporation or organization) Identification No.) 1345 Avenue of the Americas, New York, N.Y. 10105-0196 (Address of principal executive offices) (212) 282-5000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Name of...

  • Page 12
    ... About Market Risk 46 Item 11 Executive Compensation 47 15 (a) 2 Financial Statement Schedule 15 - 16 Item 2 Properties 16 Item 3 Legal Proceedings 44 Item 8 Financial Statements and Supplementary Data 46 Item 12 Security Ownership of Certain Beneficial Owners and Management and Related...

  • Page 13
    ... operating margins and projected benefits (in the amounts and time schedules we expect) from, our global business strategy, including our multi-year restructuring initiatives, product mix and pricing strategies, enterprise resource planning, customer service initiatives, product line simplification...

  • Page 14
    ...number of consumers served per Representative and their engagement online, to enhance the Representative and consumer experience and increase Representative productivity through Service Model Transformation and other investments in the direct-selling channel, and to compete with other direct-selling...

  • Page 15
    ... accounts for more than 10% of our net sales. A Representative contacts customers directly, selling primarily through our brochure, which highlights new products and special promotions for each sales campaign. In this sense, the Representative, together with the brochure, are the "store...

  • Page 16
    .... Promotion and Marketing Sales promotion and sales development activities are directed at assisting Representatives, through sales aids such as brochures, product samples and demonstration products. In order to support the efforts of Representatives to reach new customers, specially designed sales...

  • Page 17
    ... sell fashion jewelry through retail establishments and direct-selling. We believe that the personalized customer service offered by our Representatives; the amount and type of field incentives we offer our Representatives on a market-by-market basis; the high quality, attractive designs and prices...

  • Page 18
    ..., containers and packaging components, are purchased for our Beauty products from various suppliers. Almost all of our Fashion and Home products are purchased from various suppliers. Additionally, we design the brochures that are used by the Representatives to sell our products. The loss of any one...

  • Page 19
    ... website the charters of our Board Committees, our Corporate Governance Guidelines and our Code of Business Conduct and Ethics. Copies of these SEC reports and other documents are also available, without charge, from Investor Relations, Avon Products, Inc., 1345 Avenue of the Americas, New York, NY...

  • Page 20
    ...their productivity through Service Model Transformation and other investments in the direct-selling channel; • increase the number of consumers served per Representative and their engagement online, as well as to reach new consumers through a combination of new brands, new businesses, new channels...

  • Page 21
    ... related products in channels other than in direct-selling, this could reduce our sales and have a material adverse effect on our business, financial condition and results of operations. If our competitors establish greater market share in the directselling channel, our business, financial condition...

  • Page 22
    ... regions, or the current global macro-economic pressures, could adversely affect our business. Recent global economic events over the past few years, especially in North America, including job losses, the tightening of credit markets and failures of financial institutions and other entities...

  • Page 23
    ..., we compete within a distinct business model where providing a compelling earnings opportunity for our Representatives is as critical as developing and marketing new and innovative products. Therefore, in contrast to a typical consumer packaged goods ("CPG") company which operates within a broad...

  • Page 24
    ... financial reporting, an enterprise resource planning system which we are implementing on a worldwide basis, and an internal communication and data transfer network. We also employ information technology systems to support Representatives in many of our markets, including electronic order collection...

  • Page 25
    ...and preferences for beauty and related products. We must continually work to develop, produce and market new products, maintain and enhance the recognition of our brands, achieve a favorable mix of products, and refine our approach as to how and where we market and sell our products. While we devote...

  • Page 26
    ...our pension cost. Our funding policy for pension plans is to accumulate plan assets that, over the long run, will approximate the present value of projected benefit obligations. Our pension cost is materially affected by the discount rate used to measure pension obligations, the level of plan assets...

  • Page 27
    ... distribution centers are located in Atlanta, GA; Zanesville, OH; and Pasadena, CA. Our research and development facility is located in Suffern, NY. We also lease office space in three locations in New York City and own property in Rye, NY, for our executive and administrative offices. In early 2010...

  • Page 28
    ...in mid-2010. Both properties are listed for sale. In January 2008, we announced plans to realign certain Latin America distribution and manufacturing operations. We are building a new distribution center in Brazil that is expected to open in 2011. We will phase-out our current distribution center in...

  • Page 29
    ... not "shareholders of record" but who beneficially own and vote shares through nominee holders such as brokers and benefit plan trustees. High and low market prices and dividends per share of our common stock, in dollars, for 2010 and 2009 are listed below. For information regarding future dividends...

  • Page 30
    ...Financial Statements and related Notes. 2010 Income Data Total revenue Operating profit (2) Income from continuing operations, net of tax Diluted earnings per share from continuing operations Cash dividends per share Balance Sheet Data Total assets Debt maturing within one year Long-term debt Total...

  • Page 31
    ... & Africa; Asia Pacific; and China. We have centralized operations for Global Brand Marketing, Global Sales and Supply Chain. Our product categories are Beauty, Fashion and Home. Beauty consists of color cosmetics, fragrances, skincare and personal care. Fashion consists of fashion jewelry, watches...

  • Page 32
    ... innovating our direct-selling channel through technological and service model enhancements for our Representatives and assessing new product category opportunities. In July 2010, we purchased substantially all the assets and liabilities of Silpada, a direct seller of jewelry products, primarily in...

  • Page 33
    ... the fee structure and brochure costs to enhance Representative economics; Recalibrating the frequency of campaigns to maximize Representative selling opportunities; Service Model Transformation initiatives; Applying the optimal balance of advertising and field investment in our key markets; and Web...

  • Page 34
    ... finance, information technology, human resource and customer service processes, and the move of certain services from markets to lower cost shared service centers; • the restructure of certain international direct-selling operations; • the realignment of certain distribution and manufacturing...

  • Page 35
    ... These savings have been offset by approximately $650 of investments in advertising and RVP. New Accounting Standards Information relating to new accounting standards is included in Note 2, New Accounting Standards, of our consolidated financial statements contained in this 2010 Annual Report. Key...

  • Page 36
    ... Accounts Receivable Representatives contact their customers, selling primarily through the use of brochures for each sales campaign. Sales campaigns are generally for a two-week duration in the U.S. and a two- to four-week duration outside the U.S. The Representative purchases products directly...

  • Page 37
    ..., Employee Benefit Plans, to our 2010 Annual Report for further information on our benefit plans. Pension plan expense and the requirements for funding our major pension plans are determined based on a number of actuarial assumptions. These assumptions include the expected rate of return on pension...

  • Page 38
    ...challenged and may or may not be sustained on review by tax authorities. We adjust these additional accruals in light of changing facts and circumstances. We file income tax returns in many jurisdictions. In 2011, a number of open tax years are scheduled to close due to the expiration of the statute...

  • Page 39
    ...2010 Total revenue Cost of sales Selling, general and administrative expenses Operating profit Interest expense Interest income Other expense, net Net income attributable to Avon Diluted earnings per share attributable to Avon Advertising expenses(1) Gross margin CTI restructuring Venezuelan special...

  • Page 40
    ... of our largest markets, Brazil and Russia. Brazil's performance in the second half of 2010 was primarily driven by service disruptions resulting in shorting of products. The mid-year implementation of government mandated e-invoicing exacerbated our legacy order processing systems and capacity which...

  • Page 41
    ... as compared to the 2008 rate also included a higher tax cost associated with the repatriation of 2009 earnings, offset by favorable changes in the earnings mix of international subsidiaries. The effective tax rate for 2008 was favorably impacted by 3.6 points due to an audit settlement. AVON 2010...

  • Page 42
    ... among other things, costs related to our executive and administrative offices, information technology, research and development, and marketing. Certain planned global expenses are allocated to our business segments primarily based on planned revenue. The unallocated costs remain as global and other...

  • Page 43
    ...was primarily driven by service disruptions resulting in shorting of products. The mid-year implementation of government mandated e-invoicing exacerbated our legacy order processing systems and capacity which have also been pressured by a significant increase in order scale in recent years as Brazil...

  • Page 44
    ... assurance that the Company will be able to recover the higher cost of obtaining foreign currency in the SITME market as compared to the official rate through operating activities, such as increased pricing or cost reductions in other areas. At December 31, 2010, we had a net asset position of $158...

  • Page 45
    ... with non-government sources where the exchange rate was less favorable than the official rate (the "parallel market"). Partially offsetting these negative impacts was the benefit of higher revenues and fixed overhead expense. North America - 2010 Compared to 2009 %/Point Change 2010 Total revenue...

  • Page 46
    PART II The total revenue decline during 2010 was due to a decline in Active Representatives and a lower average order received from Representatives. The decline in Active Representatives for 2010 was largely due to a decline in additions compared with last year's record recruiting. This resulted ...

  • Page 47
    ... revenue growth in the second half of 2010. During the first quarter of 2011, we launched a new sales leadership compensation plan to help offset the tax burden on these Representatives. During 2010, operating margin benefited by 1.7 points due to lower CTI restructuring compared to the prior year...

  • Page 48
    ...completed the roll-out of Sales Leadership and improved the discount structure we offered Representatives in Russia. The Constant $ revenue increase in Ukraine for 2009 was primarily due to growth in Active Representatives and a higher average order due to increased pricing from inflation, partially...

  • Page 49
    ... of 2010. Total revenue during 2010 increased due to favorable foreign exchange and growth in Active Representatives, partially offset by a lower average order. Revenue grew 15% during 2010 in the Philippines, benefiting partially from favorable foreign exchange. Constant $ revenue during 2010 in...

  • Page 50
    ... transactions as well as translation, which negatively impacted operating margin by an estimated 2 points. Partially offsetting these items were the benefits of growth derived from higher margin markets. China - 2010 Compared to 2009 %/Point Change 2010 Total revenue Operating (loss) profit $229...

  • Page 51
    on direct-selling and updating our service center model is expected to include a realigned field compensation structure and recalibrated merchandising and campaign management strategies to support direct-selling. We anticipate that this will position us to expand our directselling penetration and ...

  • Page 52
    .... Inventory days are up 4 days in 2010 as compared to 2009, due to lower-than-expected sales offset by the benefit of favorable foreign exchange. We maintain defined benefit pension plans and unfunded supplemental pension benefit plans (see Note 12, Employee Benefit Plans). Our funding policy for...

  • Page 53
    ...pension plans beyond 2011. The amount of debt and contractual financial obligations and commitments excludes amounts due under derivative transactions. The table also excludes information on recurring purchases of inventory as these purchase orders are non-binding, are generally consistent from year...

  • Page 54
    ... 31, 2010, we had no material off-balance-sheet arrangements. Capital Resources We maintain a three-year, $1,000.0 revolving credit and competitive advance facility, which expires in November 2013, and a $300.0, 364 day credit facility, which expires on December 13, 2011, (collectively, the "credit...

  • Page 55
    ... not represent a material potential change in fair value, earnings or cash flows. This potential change was calculated based on discounted cash flow analyses using interest rates comparable to our current cost of debt. Foreign Currency Risk We operate globally, with operations in various locations...

  • Page 56
    ..., the principal executive and principal financial officers concluded that our disclosure controls and procedures were effective as of December 31, 2010, at the reasonable assurance level. Disclosure controls and procedures are designed to ensure that information relating to Avon (including our...

  • Page 57
    ... internal control over financial reporting. Based on the evaluation we conducted, our management has concluded that no such changes have occurred. We are implementing an enterprise resource planning ("ERP") system on a worldwide basis, which is expected to improve the efficiency of our supply chain...

  • Page 58
    ..., free of charge, on our investor website, www.avoninvestor.com. Our Code of Business Conduct and Ethics is also available, without charge, from Investor Relations, Avon Products, Inc., 1345 Avenue of the Americas, New York, NY 10105-0196 or by sending an email to [email protected]...

  • Page 59
    ... or because the required information is shown in the consolidated financial statements and notes. (a) 3. Index to Exhibits Exhibit Number 2.1 Description Asset Purchase Agreement, dated as of July 9, 2010, by and among Avon Products, Inc., SD Acquisition LLC, Silpada Designs, Inc., the stockholders...

  • Page 60
    ... reference to Exhibit 10.14 to Avon's Annual Report on Form 10-K for the year ended December 31, 2008). Form of U.S. Stock Option Agreement under the Avon Products, Inc. Year 2005 Stock Incentive Plan (incorporated by reference to Exhibit 99.1 to Avon's Current Report on Form 8-K filed on September...

  • Page 61
    ...to Avon's Annual Report on Form 10-K for the year ended December 31, 2008). Form of Performance Contingent Restricted Stock Unit Award Agreement under the Avon Products, Inc. 2005 Stock Incentive Plan for the Chief Executive Officer (incorporated by reference to Exhibit 10.2 to Avon's Current Report...

  • Page 62
    .... Management Incentive Plan, effective as of January 1, 2009 (incorporated by reference to Exhibit 10.50 to Avon's Annual Report on Form 10-K for the year ended December 31, 2008). Avon Products, Inc. Compensation Recoupment Policy (incorporated by reference to Exhibit 10.1 to Avon's Current Report...

  • Page 63
    ... registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 24th day of February 2011. Avon Products, Inc. /s/ Stephen Ibbotson Stephen Ibbotson Group Vice President and Corporate Controller - Principal Accounting Officer AVON 2010 51

  • Page 64
    ... the Board and Chief Executive Officer - Principal Executive Officer February 24, 2011 /s/ Charles W. Cramb Charles W. Cramb Vice Chairman, Chief Finance and Strategy Officer - Principal Financial Officer February 24, 2011 /s/ Stephen Ibbotson Stephen Ibbotson Group Vice President and Corporate...

  • Page 65
    ...Statements: Financial Statement Schedule: F-2 Report of Independent Registered Public Accounting Firm F-3 Consolidated Statements of Income for each of the years in the three-year period ended December 31, 2010 F-46 Schedule II - Valuation and Qualifying Accounts F-4 Consolidated Balance Sheets...

  • Page 66
    ..., on the financial statement schedule, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and...

  • Page 67
    ... (In millions, except per share data) Years ended December 31 Net sales Other revenue Total revenue Costs, expenses and other: Cost of sales Selling, general and administrative expenses Operating profit Interest expense Interest income Other expense, net Total other expenses Income from continuing...

  • Page 68
    ... one year Accounts payable Accrued compensation Other accrued liabilities Sales and taxes other than income Income taxes Current liabilities of discontinued operations Total current liabilities Long-term debt Employee benefit plans Long-term income taxes Other liabilities Non-current liabilities...

  • Page 69
    ... doubtful accounts Provision for obsolescence Share-based compensation Foreign exchange losses (gains) Deferred income taxes Charge for Venezuelan monetary assets and liabilities Other Changes in assets and liabilities: Accounts receivable Inventories Prepaid expenses and other Accounts payable and...

  • Page 70
    ... losses and prior service credit, net of taxes of $12.2 Net actuarial losses and prior service cost arising during 2010, net of taxes of $5.1 Sale of Avon Japan, net of taxes of $8.1 Net derivative losses on cash flow hedges, net of taxes of $2.2 Total comprehensive income Dividends - $.88 per share...

  • Page 71
    ... & Africa; Asia Pacific; and China. We have centralized operations for Global Brand Marketing, Global Sales and Supply Chain. Our product categories are Beauty, Fashion and Home. Beauty consists of color cosmetics, fragrances, skincare and personal care. Fashion consists of fashion jewelry, watches...

  • Page 72
    ... for sales returns based on historical experience with product returns. In addition, we estimate an allowance for doubtful accounts receivable based on an analysis of historical data and current circumstances. Other Revenue Other revenue primarily includes shipping and handling and order processing...

  • Page 73
    ... with selling; marketing; and distribution activities, including shipping and handling costs; advertising; net brochure costs; research and development; information technology; and other administrative costs, including finance, legal and human resource functions. Shipping and Handling Shipping and...

  • Page 74
    ... share-based payments to employees are recognized in the financial statements based on their fair values using an option-pricing model at the date of grant. We use a Black-Scholes-Merton option-pricing model to calculate the fair value of options. Restructuring Reserves We record severance-related...

  • Page 75
    ... 31, 2010 for Avon and did not have any impact on our financial statements. Required disclosures related to activity in Level 3 fair value measurements is effective beginning January 1, 2011 for Avon and is not expected to have a significant impact on our financial statements. AVON 2010 F-11

  • Page 76
    ... that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only...

  • Page 77
    NOTE 5. Debt and Other Financing Debt Debt at December 31 consisted of the following: 2010 Debt maturing within one year: Notes payable Current portion of long-term debt Total Long-term debt: 5.125% Notes, due January 2011 4.80% Notes, due March 2013 4.625% Notes, due May 2013 5.625% Notes, due ...

  • Page 78
    ...coupon rate of 5.75%, payable semi-annually, and mature on March 1, 2018 (the "2018 Notes"). The net proceeds from the offering of $496.3 were used to repay outstanding indebtedness under our commercial paper program and for general corporate purposes. The carrying value of the 2013 Notes represents...

  • Page 79
    ... funds rate, or 1% plus one month LIBOR. The three-year credit facility has an annual fee of $1.5, payable quarterly, based on our current credit ratings. The 364 day credit facility has an annual fee of $0.2, payable quarterly. The credit facilities contain various covenants, including a financial...

  • Page 80
    ...for tax and financial reporting purposes at December 31 consisted of the following: 2010 Deferred tax assets: Accrued expenses and reserves Pension and postretirement benefits Asset revaluations Capitalized expenses Share-based compensation Restructuring initiatives Postemployment benefits Tax loss...

  • Page 81
    ... 391.9 1.2 (.4) .8 $340.5 The effective tax rate for the years ended December 31 was as follows: 2010 Statutory federal rate State and local taxes, net of federal tax benefit Taxes on foreign income, including translation Tax audit settlements, refunds, and amended returns Net change in valuation...

  • Page 82
    ... total amount of unrecognized tax benefits could decrease in the range of $45 to $55 within the next 12 months due to the closure of tax years by expiration of the statute of limitations and audit settlements. NOTE 8. Financial Instruments and Risk Management We operate globally, with manufacturing...

  • Page 83
    ... Payable $ 8.2 8.0 $16.2 $19.0 Accounting Policies Derivatives are recognized on the balance sheet at their fair values. When we become a party to a derivative instrument, we designate, for financial reporting purposes, the instrument as a fair value hedge, a cash flow hedge, a net investment...

  • Page 84
    ... hedge ineffectiveness for the years ended December 31, 2010, 2009 and 2008, related to these interest rate swaps. During 2007, we entered into treasury lock agreements (the "locks") with notional amounts totaling $500.0 that expired on July 31, 2008. The locks were designated as cash flow hedges of...

  • Page 85
    ... not probable of occurring were not material. As of December 31, 2010, we expect to reclassify $3.9, net of taxes, of net losses on derivative instruments designated as cash flow hedges from AOCI to earnings during the next 12 months. For the years ended December 31, 2010 and 2009, cash flow hedges...

  • Page 86
    ... of December 31, 2010: Level 1 Assets: Available-for-sale securities Interest-rate swap agreements Foreign exchange forward contracts Total Liabilities: Interest-rate swap agreements Foreign exchange forward contracts Total $1.8 - - $1.8 $ - - $ - Level 2 $ - 124.8 11.1 $ Total 1.8 124.8 11.1 $135...

  • Page 87
    ...: 2010 Carrying Amount Cash and cash equivalents Available-for-sale securities Grantor trust cash and cash equivalents Short term investments Debt maturing within one year Long-term debt, net of related discount or premium Foreign exchange forward contracts Interest-rate swap agreements $1,179...

  • Page 88
    ... rights Total income tax benefit recognized for share-based arrangements $57.6 18.7 2009 2008 $54.9 18.5 $54.8 18.8 All of the compensation cost for stock options, restricted stock, restricted stock units, and stock appreciation rights for 2010, 2009, and 2008 was recorded in selling, general...

  • Page 89
    ... and noncontributory retirement plans for substantially all employees of those subsidiaries. Benefits under these plans are generally based on an employee's years of service and average compensation near retirement. Plans are funded based on legal requirements and cash flow. AVON 2010 F-25

  • Page 90
    ...CONSOLIDATED FINANCIAL STATEMENTS We provide health care and life insurance benefits for the majority of employees who retire under our retirement plans in the U.S. and certain foreign countries. In the U.S., the cost of such health care benefits is shared by us and our retirees for employees hired...

  • Page 91
    ...: Funded status at end of year Amount Recognized in Balance Sheet: Other assets Accrued compensation Employee benefit plans liability Net amount recognized Pretax Amounts Recognized in Accumulated Other Comprehensive Loss: Net actuarial loss Prior service credit Transition obligation Total pretax...

  • Page 92
    ... adequate investments and cash flows to fund the liabilities associated with the unfunded non-qualified plans. Components of Net Periodic Benefit Cost and Other Amounts Recognized in Other Comprehensive Income Pension Benefits U.S. Plans Non-U.S. Plans 2008 Postretirement Benefits 2008 2010 Net...

  • Page 93
    ... rates of return and current economic forecasts, among other factors. We evaluate the expected rate of return on plan assets annually and adjust as necessary. In determining the net cost for the year ended December 31, 2010, the assumed rate of return on assets globally was 7.65%, which represents...

  • Page 94
    ... a recurring basis as of December 31, 2010: U.S. Pension and Postretirement Plans Asset Category Equity Securities: Domestic equity International equity Emerging markets Fixed Income Securities: Corporate bonds Government securities Cash Total $ Level 1 7 .7 Level 2 $148.2 73.8 31.1 253.1 188.7 52...

  • Page 95
    .... Mutual funds are valued at quoted market prices. Real estate is valued by reference to investment and leasing transactions at similar types of property and are supplemented by third party appraisals. The overall objective of our U.S. pension plan is to provide the means to pay benefits to...

  • Page 96
    ... have been made to the Avon Personal Savings Account Plan (the "PSA") but that are in excess of U.S. Internal Revenue Code limits on contributions to the PSA. Participants may elect to have their deferred compensation invested in one or more of three investment alternatives. Expense associated with...

  • Page 97
    ...business units in Latin America; North America; Central & Eastern Europe; Western Europe, Middle East & Africa; Asia Pacific; and China. Global expenses include, among other things, costs related to our executive and administrative offices, information technology, research and development, marketing...

  • Page 98
    ...STATEMENTS Summarized financial information concerning our reportable segments as of December 31 is shown in the following tables. Total Revenue & Operating Profit 2010 Total Revenue Latin America North America Central & Eastern Europe Western Europe, Middle East & Africa Asia Pacific China Total...

  • Page 99
    ..., and children's products. Home includes gift and decorative products, housewares, entertainment and leisure products and nutritional products. Other revenue primarily includes shipping and handling and order processing fees billed to Representatives Sales from Health and Wellness products and mark...

  • Page 100
    ... equipment and office facilities at December 31, 2010, are included in the following table under leases. Purchase obligations include commitments to purchase paper, inventory and other services. Purchase Obligations $223.4 88.4 62.9 51.0 50.3 14.6 - $490.6 Year 2011 2012 2013 2014 2015 Later years...

  • Page 101
    ...17.3) (.3) $ 20.5 Non-cash write-offs associated with employee-related costs are the result of settlement, curtailment and special termination benefit charges for pension plans and postretirement due to the initiatives implemented. Inventory write-offs relate to exited businesses. AVON 2010 F-37

  • Page 102
    ... $10.8 Inventory Write-offs $7.2 - $7.2 Contract Terminations/ Other $8.5 - $8.5 Total $370.7 1.9 $372.6 The charges, net of adjustments, of initiatives approved to date under the 2005 Restructuring Program by reportable business segment were as follows: Western Europe, Middle East & Africa $ 11...

  • Page 103
    ....1) (4.0) .6 $106.1 62.5 (16.4) (31.9) (1.7) (3.2) $115.4 $ $ 0.1 Non-cash write-offs associated with employee-related costs are the result of settlement, curtailment and special termination benefit charges for pension plans and postretirement due to the initiatives implemented. AVON 2010 F-39

  • Page 104
    ... of separate manufacturing and distribution companies in that country was done without a valid business purpose and that Avon Brazil did not observe minimum pricing rules to define the taxable basis of excise tax, based on purported market sales data. The structure adopted in 1995 is comparable to...

  • Page 105
    ... against Avon. In management's opinion, based on its review of the information available at this time, the total cost of resolving such other contingencies at December 31, 2010, should not have a material adverse effect on our consolidated financial position, results of operations or cash flows...

  • Page 106
    ... probability-weighting and discounting various potential payments. Avon acquired control of this business on July 28, 2010, and the financial results of the acquired operations are included in these financial statements beginning on that date. Net sales and net income before taxes of the acquired...

  • Page 107
    ...assets (Note 7) Receivables other than trade Prepaid taxes and tax refunds receivable Prepaid brochure costs, paper and other literature Short-term investments Property, plant and equipment held for sale Deferred charge Other Prepaid expenses and other 2010 $ 347.4 145.9 247.1 121.4 17.1 12.8 - 133...

  • Page 108
    ... (Unaudited) 2010 Total revenue Gross profit Operating profit Income from continuing operations, before tax Income from continuing operations, net of tax Discontinued operations, net of tax Net income attributable to noncontrolling interest Net income attributable to Avon Earnings per share from...

  • Page 109
    ... 2011, we announced an increase in our quarterly cash dividend to $.23 per share from $.22 per share, beginning with the first-quarter dividend payable March 1, 2011, to shareholders of record on February 17, 2011. With this increase, the indicated annual dividend rate is $.92 per share. AVON 2010...

  • Page 110
    ... at Beginning of Period Charged to Costs and Expenses Charged to Revenue Balance at End of Period (in millions) Description Deductions 2010 Allowance for doubtful accounts receivable Allowance for sales returns Allowance for inventory obsolescence Deferred tax asset valuation allowance $132...

  • Page 111
    ... company's 2010 Annual Report (Form 10-K) can be viewed on the Internet at www.avoninvestor.com For information about becoming an Avon Representative or purchasing Avon products, please call 1-800-FOR-AVON or visit www.avon.com Annual Report design by Avon Corporate Identity Department New York, NY...

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    1 2 BOARD OF DIRECTORS 1. Andrea Jung Chairman and Chief Executive Offi cer 2. W. Don Cornwell Former Chairman and Chief Executive Offi cer, Granite Broadcasting Corporation 3 4 3. V. Ann Hailey Former Chief Financial Offi cer, Gilt Groupe, Inc. 4. Fred Hassan Managing Director and Partner, ...

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    ...world by Independent Sales Representatives. Avon is the Beauty player in emerging and developing markets. We have raised and awarded more than largest #1 $800M to support our core philanthropic causes. 2 out of 5 women globally have purchased an Avon product in the last year. Avon lipsticks are...

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