Avon to Benefit From Cash Management and Tax Strategies
June 08 2004 - 4:16PM
PR Newswire (US)
Avon to Benefit From Cash Management and Tax Strategies Effective
Tax Rate Expected to Decline to 31% NEW YORK, June 8
/PRNewswire-FirstCall/ -- As a result of implementing new long-term
cash management and tax strategies, Avon Products, Inc. (NYSE:AVP)
today raised its earnings outlook for the second quarter and
full-year 2004 to reflect a significant reduction in the company's
effective tax rate. These cash management and tax strategies are a
further extension of the company's successful Business
Transformation efforts and reflect a decision to permanently invest
a larger share of foreign earnings offshore, enabled by a new
international holding company structure. When the strategies are
fully implemented some time in 2005, Avon expects its recurring
effective tax rate to be reduced from 35% to approximately 31%.
Reflecting these changes, the company raised its second quarter and
full- year 2004 earnings outlooks. For the second quarter, Avon now
expects to earn $.46 per share, 28% above the year-ago period, and
$.03 per share higher than earlier guidance. Full-year earnings are
now projected to be $1.70 per share, up 22% from the year-ago
period, and $.05 higher than earlier expectations. Robert J. Corti,
Avon's chief financial officer, said, "With the continuing success
of our global operations--including consistently strong,
sustainable cash flow in the U.S. -- we no longer need to
repatriate as much of our foreign earnings to meet our domestic
cash needs, including funding increased dividends, share repurchase
programs and debt repayment. We expect these programs to remain
unchanged. Going forward, we are able to retain a larger portion of
the funds generated overseas for investment abroad, thus lowering
our U.S. deferred income taxes and benefiting the company's overall
earnings and shareholder value." Continuing Strength in Business
Operations Avon also said that its global business continues to
perform strongly, as expected, with second quarter sales growth
projected to be up 12% in dollars and 11% in local currencies
versus prior year, driven by an expected 14% increase in Beauty
sales. Units are anticipated to grow 12% in the quarter, following
a similar volume gain in the first quarter. Operating profit in the
second quarter should increase 14%, even after absorbing $6.2
million of pretax expense from the unexpected settlement of a
long-standing lawsuit associated with a restoration claim brought
by Solow Building Co., landlord of the company's former
headquarters. Regional Highlights In terms of regional operating
performance, U.S. second quarter sales are tracking in the
mid-single digits, with an anticipated 4% sales increase driven by
gains of 6% and 3% in Beauty sales and the number of active
Representatives, respectively. Showing improvement over recent
quarters, U.S operating profit is projected to increase in line
with sales. Avon said that Europe continues to generate exceptional
results, driven in large part by another stellar performance in
Russia, the company's fastest growing market. Europe's second
quarter sales are expected to be up over 20% in dollars and in the
high teens in local currencies. Dollar operating profit is forecast
to grow over 40%. Latin America should post a double-digit increase
in dollar sales and a mid-teens increase in local currencies,
driven by an anticipated 12% gain in units that continues the
strong volume growth the region experienced in the first quarter.
Dollar operating profit should grow in line with sales. The
Asia/Pacific region is forecast to generate a high-teens sales gain
(up low-teens in local currency), with dollar operating profit
growth expected to exceed 25%. As anticipated, China continues to
be a standout performer in the region, with sales projected to grow
nearly 50%. Commenting on the outlook, Andrea Jung, Avon's chairman
and chief executive officer, said, "The underlying health of Avon's
business remains extremely strong, and we continue to make
excellent progress with our strategies. Additionally, we are
pleased to extend the scope of our Business Transformation efforts
to include Avon's cash management and tax strategies, improving our
earnings power for shareholders beyond that delivered by the
continuing strength of our global operations," Ms. Jung concluded.
Avon is the world's leading direct seller of beauty and related
products, with $6.8 billion in annual revenues. Avon markets to
women around the world through 4.4 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 under the Private Securities Litigation Reform Act of
1995 Statements in this release that are not historical facts or
information are forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. 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 Products, Inc. ("Avon" or the "Company") 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 the Company's markets,
including social, economic and political uncertainties in Latin
America, Asia and Central and Eastern Europe; the Company's ability
to implement its business, cash management and tax strategies and
its Business Transformation initiatives, including the integration
of similar activities across markets to achieve efficiencies; the
Company's ability to achieve anticipated cost savings and its
profitability and growth targets; the impact of substantial
currency fluctuations on the results of the Company's foreign
operations and the cost of sourcing foreign products and the
success of the Company's foreign currency hedging and risk
management strategies; the Company's ability to implement its
information systems initiatives; the impact of possible pension
funding obligations and increased pension expense on the Company's
cash flow and results of operations; the effect of legal,
regulatory and tax proceedings, as well as restrictions imposed on
the Company, its operations or its Representatives by foreign
governments; the Company's ability to successfully identify new
business opportunities; the Company's access to financing; and the
Company's ability to attract and retain key executives. Additional
information identifying such factors is contained in the Company's
Annual Report on Form 10-K for the year ended December 31, 2003,
filed with the SEC. The Company undertakes no obligation to update
any such forward- looking statements. DATASOURCE: Avon Products,
Inc. CONTACT: Media, Victor Beaudet, +1-212-282-5344, Investor,
Renee Johansen, or Rob Foresti, +1-212-282-5320, all of Avon Web
site: http://www.avon.com/ http://www.avoncompany.com/ Company News
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