Second-Quarter Charge of Approximately $77 Million Includes
Initiatives to Realign Supply Chain Manufacturing and Improve
Operating Model Effectiveness in Key Geographies 2009 Program on
Track to Achieve Total Annualized Savings of Approximately $200
Million by 2012-2013 NEW YORK, July 22 /PRNewswire-FirstCall/ --
Avon Products, Inc. (NYSE: AVP) today highlighted the initial
restructuring actions under the new 2009 program it announced in
February to continue driving the long-term transformation of its
cost structure and to increase efficiency and organization
effectiveness across its global operations. Avon said that it
expects total costs to implement the initiatives approved to date
to be approximately $165 million, including a charge of
approximately $77 million pretax in the second quarter of 2009.
When combined with costs of approximately $13 million to implement
initiatives from its 2005 restructuring program, the company said
that it will incur a total charge of approximately $90 million in
the quarter, or $0.19 per share, including $0.05 per share for a
one-time restructuring tax charge. Charles Cramb, Avon's Vice
Chairman, Chief Finance and Strategy Officer, said, "When fully
implemented, the initiatives approved to date reflect almost half
the costs to implement the 2009 restructuring program, and are
expected to generate approximately 60% of the targeted annualized
savings. As a result, we are on track to achieve our stated goal of
approximately $200 million in total annualized savings by
2012-2013, with costs to implement all initiatives expected to be
in the range of $300-$400 million." Summary of Restructuring
Initiatives Avon said that the restructuring initiatives announced
today will include realignments in its global supply chain
manufacturing footprint and improvements in operating model
effectiveness in key geographies. As a result, the company said
that approximately 2,300 positions will be impacted globally, with
a net reduction of approximately 1,200 positions when the
initiatives are fully implemented by 2012-2013. Supply Chain
Manufacturing. Avon said that the second-quarter 2009 charge will
include costs-to-implement realignments of supply chain
manufacturing operations, primarily in North America, Western
Europe, and Central and Eastern Europe. In North America, the
company said that it will close its facility in Springdale, Ohio by
mid-2012. The company said that production will shift to its
manufacturing sites in Morton Grove, IL, and Celaya, Mexico, and to
contract manufacturers. In line with this, the Springdale-based
return goods operation will also close, with the function being
relocated to another Avon U.S. facility or outsourced in the U.S.
The existing customer service call center will continue to operate
and will relocate in Springdale or the greater Cincinnati, Ohio
vicinity. In Western Europe, Avon said that it is planning to close
its manufacturing facility in Neufahrn, Germany and that it has
entered into the required formal information and consultation
processes with the economic committee and works council in Germany.
The company said that it expects to phase-out operations by
mid-2011 and plans to transfer production volume to other Avon
manufacturing facilities, including Garwolin, Poland and to
contract manufacturers. In Russia, the company said that it is
planning to improve processes, reconfigure equipment and streamline
operations at its facility in Naro Forminsk in order to meet
increasing demand more cost-effectively. Operating Model
Effectiveness. Also included in the second-quarter 2009 charge are
costs to continue improving Avon's operating model effectiveness in
Latin America and Western Europe. In Latin America, the company
said that it plans to regionalize commercial marketing and leverage
other key business support functions such as sales support, supply
chain and administration across multiple markets. Avon also said
that it plans to integrate its commercial marketing departments in
the U.K. and Spain to create a single consolidated commercial
marketing organization to better serve the company's markets across
Western Europe, the Middle East and North Africa. "The initiatives
announced today result from our 'constant turnaround mentality' and
reflect our continuing determination to transform our cost
structure, improve operating efficiencies, and be a stronger
competitor globally as we drive Avon's turnaround strategies and
address the current macro-economic challenges," Mr. Cramb said.
Avon, the company for women, is a leading global beauty company,
with over $10 billion in annual revenue. As the world's largest
direct seller, Avon markets to women in more than 100 countries
through 5.8 million independent Avon Sales Representatives. Avon's
product line includes beauty products, as well as fashion and home
products, and features such well-recognized brand names as Avon
Color, Anew, Skin-So-Soft, Advance Techniques, Avon Naturals, and
Mark. Learn more about Avon and its products at
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 release 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," "forecast," "plan,"
"believe," "may," "expect," "anticipate," "intend," "planned,"
"potential," "can," "expectation" and similar expressions, or the
negative of those 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: -- our ability to implement
the key initiatives of and realize the gross and 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 program, sales and operation planning process,
strategic sourcing initiative, outsourcing strategies,
zero-overhead-growth philosophy, cash flow from operations and cash
management, tax, foreign currency hedging and risk management
strategies; -- our ability to realize the anticipated benefits
(including any projections concerning future revenue and operating
margin increases) from our multi-year restructuring initiatives or
other strategic initiatives on the time schedules or in the amounts
that we expect, and our plans to invest these anticipated benefits
ahead of future growth; -- the possibility of business disruption
in connection with our multi-year restructuring initiatives or
other strategic initiatives; -- our ability to realize sustainable
growth from our investments in our brand and the direct-selling
channel; -- a general economic downturn, a recession globally or in
one or more of our geographic regions, such as North America, or
sudden disruption in business conditions, and the ability of our
broad-based geographic portfolio to withstand such economic
downturn, recession or conditions; -- the inventory obsolescence
and other costs associated with our product line simplification
program; -- our ability to effectively implement initiatives to
reduce inventory levels in the time period and in the amounts we
expect; -- our ability to achieve growth objectives or maintain
rates of growth, particularly in our largest markets and developing
and emerging markets; -- our ability to successfully identify new
business opportunities and identify and analyze acquisition
candidates, and our ability to negotiate and consummate
acquisitions as well as to successfully integrate or manage any
acquired business; -- the effect of political, legal and regulatory
risks, as well as foreign exchange or other restrictions, imposed
on us, our operations or our Representatives by governmental
entities; -- our ability to successfully transition our business in
China in connection with the resumption of direct selling in that
market in 2006, our ability to operate using the direct-selling
model permitted in that market and our ability to retain and
increase the number of Active Representatives there over a
sustained period of time; -- the effect of economic factors,
including inflation and fluctuations in interest rates and currency
exchange rates, and the potential effect of such fluctuations on
our business, results of operations and financial condition; --
general economic and business conditions in our markets, including
social, economic and political uncertainties in the international
markets in our portfolio; -- any consequences of the internal
investigation of our China operations; -- information technology
systems outages, disruption in our supply chain or manufacturing
and distribution operations, or other sudden disruption in business
operations beyond our control as a result of events such as acts of
terrorism or war, natural disasters, pandemic situations and large
scale power outages; -- the risk of product or ingredient shortages
resulting from our concentration of sourcing in fewer suppliers; --
the quality, safety and efficacy of our products; -- the success of
our research and development activities; -- our ability to attract
and retain key personnel and executives; -- competitive
uncertainties in our markets, including competition from companies
in the cosmetics, fragrances, skin care and toiletries industry,
some of which are larger than we are and have greater resources; --
our ability to implement our Sales Leadership program globally, to
generate Representative activity, to enhance the Representative
experience and increase Representative productivity through
investments in the direct-selling channel, and to compete with
other direct-selling organizations to recruit, retain and service
Representatives; -- the impact of the seasonal nature of our
business, adverse effect of rising energy, commodity and raw
material prices, changes in market trends, purchasing habits of our
consumers and changes in consumer preferences, particularly given
the global nature of our business and the conduct of our business
in primarily one channel; -- our ability to protect our
intellectual property rights; -- the risk of an adverse outcome in
our material pending and future litigations; -- our ratings and our
access to financing and ability to secure financing at attractive
rates; and -- the impact of possible pension funding obligations,
increased pension expense and any changes in pension regulations or
interpretations thereof on our cash flow and results of operations.
Additional information identifying such factors is contained in
Item 1A of our Annual Report on Form 10-K for the year ended
December 31, 2008, filed with the U.S. Securities and Exchange
Commission. We undertake no obligation to update any such
forward-looking statements. DATASOURCE: Avon Products, Inc.
CONTACT: Media: in New York, NY, Sharon Samuel, +1-212-282-5322, or
in Springdale, OH, Jennifer Vargas, +1-212-282-5404, or Investors:
Renee Johansen, or Yana Friedman, +1-212-282-5320 Web Site:
http://www.avoncompany.com/
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