Avon Products (NYSE:AVP)
Historical Stock Chart
From Aug 2019 to Aug 2024
![Click Here for more Avon Products Charts. Click Here for more Avon Products Charts.](/p.php?pid=staticchart&s=NY%5EAVP&p=8&t=15)
Avon Reports 16% Increase in First-Quarter Earnings to $.36 Per
Share - Exceeding Expectations
Revenues Advance 7%; Operating Profit Up 14%
NEW YORK, May 2 /PRNewswire-FirstCall/ -- Avon Products, Inc. (NYSE:AVP) today
reported earnings for the first quarter of 2005 of $.36 per share, up 16% from
last year's first-quarter earnings of $.31 per share and $.01 ahead of
expectations due to strong operating profit growth.
Avon also raised its previous full-year 2005 earnings outlook to $2.12 -- $2.17
per share from $1.95 -- $2.00 per share, reflecting a second-quarter benefit of
approximately $80 million, or about $.17 per share, relating to prior years'
tax-audit settlements.
Avon said that in the first quarter of 2005, revenue grew 7% -- on top of a 20%
gain in last year's first quarter -- to $1.88 billion. Local-currency revenue
rose 4%, with units up 3% and active Representatives up 9%. Sales of Beauty
products were 8% higher, with solid advances in every category.
Operating profit increased 14% in the quarter. Operating margin improved
90-basis points to 13.9%, and gross margin expanded 60-basis points to 62.9%.
Net income in the quarter was $172.0 million, compared with $148.1 million in
the year-ago period.
First-Quarter 2005 Regional Highlights
In the U.S., as expected, revenue and operating profit in the first quarter of
2005 decreased 6% and 15%, respectively, versus the first quarter of 2004.
Beauty sales declined 10% reflecting the challenge of anniversarying a 32%
increase in skin care during the prior-year period, as well as the timing of
product innovation. Beauty Plus sales increased 7% and Beyond Beauty sales
declined 12% as expected, in line with the planned mix shift between these two
categories as part of the repositioning strategy for this market. Units and
active Representatives declined 9% and 1%, respectively. Operating margin was
14.8%, or 150-basis points below the prior-year quarter.
In Europe, first-quarter revenue and operating profit increased 17% and 26%,
respectively, on top of the 38% and 84% respective gains from a year ago.
Local-currency revenue in the first quarter of 2005 grew 10%, driven by growth
in units and active Representatives of 6% and 13%, respectively. Operating
margin in the region advanced to 20.7%, up 150-basis points year over year even
after more than doubling advertising and investing 80-basis points of margin to
launch the company's ERP initiative in the region.
Topline growth in Europe in the first quarter was impacted by the U.K., where
revenues were 3% lower compared with the year-ago period as the U.K.
anniversaried the highly successful launch of Anew Clinical Line and Wrinkle
Corrector. Revenues in Central and Eastern Europe increased 27% in the
quarter, with Russia up 24% on top of extraordinary 89% growth in the
prior-year quarter.
In Latin America, first-quarter revenue grew 10% in dollars and 8% in local
currency as continued strong growth in Brazil and Venezuela more than offset
softer sales in Mexico. Units rose 5%, and active Representatives were up 10%.
Operating profit increased 12%, and operating margin was 20.6%, up 40-basis
points year over year.
The Asia Pacific region posted first-quarter revenue growth of 10% in dollars
and 8% in local currency, driven by gains in units and active Representatives
of 16% and 12%, respectively. Operating profit rose 20% and operating margin
increased to 18.5%, up 150-basis points year over year. China, Avon's largest
long-term growth opportunity, was again the biggest contributor to the region's
growth, with revenue up nearly 40%. In April 2005, Avon China was approved as
the first company to conduct a direct-selling test in that market.
Second-Quarter Outlook
Avon said that revenue growth in the second-quarter 2005 should accelerate
ahead of the first quarter, with dollar-denominated and local-currency growth
expected to be in the ranges of 10% and 6%, respectively. Operating profit is
forecast to increase approximately in line with revenue growth, including an
acceleration of consumer investments in emerging markets as well as funding for
the China direct-selling test.
Avon said that it expects U.S. results in the second quarter to be in line with
those of the first quarter as it continues to reposition the U.S. business for
improved performance in the second half of this year and a return to profitable
growth in 2006. With regard to the second-quarter outlook for each
international region, the company said that Europe's revenue is projected to
grow in the high teens, with operating profit increasing slightly ahead of
revenue. Latin America's revenue and operating profit should each increase in
the mid-teens. Asia Pacific's revenue is expected to be up double-digits while
operating profit should grow in the high-single digits.
In addition, Avon said that second-quarter earnings are forecast to be in the
range of $.66 per share, reflecting a non-cash benefit of approximately $80
million, or about $.17 per share, relating to prior years' tax-audit
settlements. This compares to earnings of $.49 per share in last year's second
quarter, which included a tax benefit of $.05 per share. The company said that
additional tax settlements are possible during 2005, which could result in
further benefits.
Commenting on the year, Andrea Jung, Avon's chairman and chief executive
officer said, "We're pleased with Avon's performance in the first quarter,
especially given the very challenging year-over-year comparisons. Looking
ahead, we're projecting that local-currency revenue will accelerate, as
increased innovation in our second-half product pipeline drives stronger Beauty
sales. Continuing strong results in our international regions are offsetting
U.S. performance during this period of repositioning, with our emerging markets
once again expected to deliver another full year of stand-out revenue growth,"
she said.
Avon will conduct a conference call this morning at 9:00 A.M. New York time to
discuss the results for the quarter and its outlook for the second quarter and
full-year 2005. The conference call will be webcast live and can be accessed
at http://www.avoninvestor.com/.
Avon is the world's leading direct seller of beauty and related products, with
$7.7 billion in annual revenues. Avon markets to women around the world
through 4.9 million independent sales Representatives. Avon product lines
include such recognizable brand names as Avon Color, Anew, Skin-So-Soft, Avon
Solutions, Advance Techniques Hair Care, Avon Naturals, Mark, and Avon
Wellness. Avon also markets an extensive line of fashion jewelry and apparel.
More information about Avon and its products can be found on the company's web
site http://www.avoncompany.com/.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" STATEMENT UNDER THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Statements in this report that are not historical facts or information are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Words such as "estimate," "project," "plan,"
"believe," "expect," "anticipate," "intend," "planned," "potential" and similar
expressions may identify forward-looking statements. Such forward-looking
statements are based on management's reasonable current assumptions and
expectations. Such forward-looking statements involve risks, uncertainties and
other factors, which may cause the actual results, levels of activity,
performance or achievement of Avon to be materially different from any future
results expressed or implied by such forward-looking statements, and there can
be no assurance that actual results will not differ materially from
management's expectations. Such factors include, among others, the following:
general economic and business conditions in our markets, including social,
economic and political uncertainties in Latin America, Asia Pacific and Central
and Eastern Europe and the Middle East; our ability to implement our business,
cash management and tax strategies and our Business Transformation initiatives;
our ability to achieve anticipated cost savings and our profitability and
growth targets, particularly in our largest markets; our ability to implement
appropriate product mix and pricing strategies; the impact of changes in
consumer spending patterns and preferences, particularly given the global
nature of our business, our ability to replace lost sales attributable to the
repositioning of the U.S. Beyond Beauty business; the impact of substantial
currency fluctuations on the results of our foreign operations and the cost of
sourcing foreign products and the success of our foreign currency hedging and
risk management strategies; our ability to implement our Sales Leadership
program globally, to increase Representative productivity and recruit
Representatives; our ability to implement our enterprise resource planning
project; the impact of possible pension funding obligations and increased
pension expense on our cash flow and results of operations; the impact of stock
option expense pursuant to Statement of Financial Accounting Standards No.
123(R); the effect of legal, regulatory and tax proceedings, as well as
restrictions imposed on us, our operations or our Representatives by foreign
governments; our ability to successfully identify new business opportunities;
our access to financing; and our ability to attract and retain key personnel
and executives.
Additional information identifying such factors is contained in our Annual
Report on Form 10-K for the year ended December 31, 2004, filed with the U.S.
Securities and Exchange Commission. We undertake no obligation to update any
such forward-looking statements.
AVON PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share data)
Three months ended Percent
March 31 Change
2005 2004
Net sales (1) $1,860.9 $1,741.4 7%
Other revenue 20.2 23.4
Total revenue (1) 1,881.1 1,764.8 7%
Cost of sales (1)(2) 698.2 666.2
Marketing, distribution and
administrative expenses (1)(2) 922.4 869.2
Operating profit 260.5 229.4 14%
Interest expense 10.1 6.1
Interest income (7.8) (4.5)
Other expense, net (3) 4.5 3.2
Total other expenses 6.8 4.8
Income before taxes and minority interest 253.7 224.6 13%
Income taxes 79.8 73.9
Income before minority interest 173.9 150.7
Minority interest (1.9) (2.6)
Net income $172.0 $148.1 16%
Earnings per share:
Basic $.36 $.31 16%
Diluted $.36 $.31 16%
Average shares outstanding: (4)
Basic 471.95 471.56
Diluted 477.00 476.61
Notes:
(1) For the three months ended March 31, 2004, certain Brazilian taxes
were reclassified from operating expenses to a reduction of sales and
cost of sales. These reclassifications did not affect operating
profit.
(2) For the three months ended March 31, 2004, certain U.S. expenses
were reclassified from operating expenses to cost of sales. These
reclassifications did not affect operating profit.
(3) For the three months ended March 31, 2005 and 2004, Other expense,
net includes foreign exchange losses of $1.9 and $2.0, respectively.
(4) 2004 shares were restated to reflect the two-for-one stock split
that took place in May 2004.
AVON PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions)
March 31 December 31
2005 2004
Cash, including cash equivalents $792.0 $769.6
Accounts receivable, net 582.2 599.1
Inventories 815.3 740.5
Prepaid expenses and other 413.4 397.2
Total current assets 2,602.9 2,506.4
Property, plant and equipment, net 1,000.0 1,014.8
Other assets 608.9 626.9
Total assets 4,211.8 4,148.1
Debt maturing within one year 229.4 51.7
Accounts payable 461.8 490.1
Other current liabilities 946.6 983.7
Total current liabilities 1,637.8 1,525.5
Long-term debt 850.7 866.3
Other non-current liabilities 730.3 806.1
Total shareholders' equity 993.0 950.2
Total liabilities and shareholders' equity $4,211.8 $4,148.1
AVON PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
Three months ended
March 31
2005 2004
Cash Flows from Operating Activities:
Net income $172.0 $148.1
Depreciation and amortization 31.1 32.8
Provision for doubtful accounts 28.3 35.5
Provision for obsolescence 14.1 18.8
Deferred income taxes 1.4 (5.7)
Other 6.9 3.9
Changes in assets and liabilities:
Accounts receivable (17.0) (29.4)
Inventories (101.8) (63.8)
Prepaid expenses and other (21.5) (14.6)
Accounts payable and accrued liabilities (51.1) (42.1)
Income and other taxes (2.4) (51.0)
Non-current assets and liabilities (68.8) (44.3)
Net cash used by operating activities (8.8) (11.8)
Cash Flows from Investing Activities:
Capital expenditures (32.5) (30.4)
Disposal of assets 2.8 2.6
Other investing activities (0.2) 7.9
Net cash used by investing activities (29.9) (19.9)
Cash Flows from Financing Activities:
Cash dividends (78.9) (66.9)
Total debt, net change 176.9 (9.7)
Repurchase of common stock (44.9) (59.7)
Proceeds from exercise of stock
options, net of taxes 31.7 45.4
Other financing activities (0.3) (0.2)
Net cash provided (used) by financing activities 84.5 (91.1)
Effect of exchange rate changes on
cash and equivalents (23.4) (9.2)
Net increase (decrease) in cash and equivalents $22.4 $(132.0)
AVON PRODUCTS, INC. - SUPPLEMENTAL SCHEDULE
FIRST QUARTER 2005 - THREE MONTHS ENDED 3/31/05
REGIONAL RESULTS
Total
Revenue
in Local Operating
$ in Millions Total Revenue US$ Currency Profit US$
% var. vs % var. vs % var. vs
1Q04 1Q04 1Q04
North America $594.7 -5% -6% $82.3 -14%
US 516.5 -6 -6 76.7 -15
International (1)(2) 1,286.4 13 9 259.8 19
Latin America (1) 477.2 10 8 98.3 12
Europe 530.0 17 10 109.8 26
Asia Pacific (2) 279.2 10 8 51.7 20
Total from
Operations (1)(2) 1,881.1 7 4 342.1 9
Global Expenses - - - (81.6) 4
Consolidated (1)(2) $1,881.1 7% 4% $260.5 14%
Op. Margin Units Active Reps
2005 % var. vs % var. vs
percent 1Q04 1Q04
North America 13.8% -8% -1%
US 14.8 -9 -1
International (1)(2) 20.2 7 11
Latin America (1) 20.6 5 10
Europe 20.7 6 13
Asia Pacific (2) 18.5 16 12
Total from Operations (1)(2) 18.2 3 9
Global Expenses - - -
Consolidated (1)(2) 13.9% 3% 9%
CATEGORY SALES (US$)
Consolidated
% var. vs
1Q04
Beauty (cosmetics/fragrances/skin
care/toiletries) $1,300.6 8%
Beauty Plus (fashion
jewelry/watches/apparel/accessories) 334.8 7
Beyond Beauty (home products/gift
and decorative/candles) 225.5 0
Net Sales $1,860.9 7%
Other Revenue 20.2 -14
Total Revenue $1,881.1 7%
(1) For the three months ended March 31, 2004, certain Brazilian taxes
were reclassified from operating expenses to a reduction of sales and
cost of sales. These reclassifications did not affect operating
profit.
(2) Growth in Active Representatives was positively impacted by an
increase in the number of sales campaigns in the Philippines in the
second quarter of 2004, resulting in additional opportunities to
order. This change positively impacted Active Representative growth in
Asia Pacific and Consolidated Avon for the three months ended
March 31, 2005 by 9 points and 1 point, respectively.
DATASOURCE: Avon Products, Inc.
CONTACT: Media: Victor Beaudet, +1-212-282-5344, or Sharon Samuel,
+1-212-282-5322, or Investors: Rob Foresti or Renee Johansen, +1-212-282-5320,
all of Avon Products, Inc.
Web site: http://www.avon.com/
http://www.avoninvestor.com/
http://www.avoncompany.com/
Company News On-Call: http://www.prnewswire.com/comp/079575.html