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FORM 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


[x] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

For the quarterly period ended June 30, 2002

OR

[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

For the transition period from ___ to ___

Commission file number 1-4881



AVON PRODUCTS, INC.
(Exact name of registrant as specified in its charter)



New York 13-0544597
(State or other jurisdiction of (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
(Telephone Number)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No ___

The number of shares of Common Stock (par value $.25) outstanding at
July 31, 2002 was 235,980,558.








Table of Contents

Page
Numbers
-------
Part I. Financial Information

Item 1. Financial Statements (Unaudited)

Consolidated Statements of Income
Three Months Ended June 30, 2002 and
June 30, 2001.................................... 3
Six Months Ended June 30, 2002 and
June 30, 2001.................................... 4

Consolidated Balance Sheets
June 30, 2002 and December 31, 2001................. 5

Consolidated Statements of Cash Flows
Six Months Ended June 30, 2002 and
June 30, 2001 .................................... 6

Notes to Consolidated Financial Statements............. 7-15



Item 2. Management's Discussion and Analysis of the
Results of Operations and Financial Condition.......... 16-23

Item 3. Quantitative and Qualitative Disclosures
About Market Risk ..................................... 23




Part II. Other Information

Item 1. Legal Proceedings ..................................... 24

Item 4. Submission of Matters to a Vote of Security Holders.... 24

Item 6. Exhibits and Reports on Form 8-K....................... 24

Signature ...................................................... 25











PART I. FINANCIAL INFORMATION

AVON PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In millions, except per share data)

Three months ended
June 30
----------------------
2002 2001
-------- --------

Net sales........................................... $1,513.5 $1,457.0

Other revenue....................................... 13.7 10.2
-------- -------
Total revenue....................................... 1,527.2 1,467.2

Costs, expenses and other:
Cost of sales..................................... 565.3 535.7
Marketing, distribution and administrative expenses 718.8 695.4
-------- --------
Operating profit.................................... 243.1 236.1

Interest expense.................................. 12.9 18.9
Interest income................................... (4.0) (4.2)
Other (income) expense, net....................... (7.3) 7.3
-------- --------
Total other expense, net............................ 1.6 22.0
-------- --------


Income before taxes and minority interest........... 241.5 214.1
Income taxes........................................ 84.0 74.7
-------- --------
Income before minority interest..................... 157.5 139.4
Minority interest................................... (2.5) (1.5)
-------- --------
Net income ......................................... $ 155.0 $ 137.9
======== ========

Earnings per share:
Basic ............................................ $ .66 $ .58
Diluted........................................... $ .64 $ .57

The accompanying notes are an integral part of these statements.






AVON PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In millions, except per share data)

Six months ended
June 30
----------------------
2002 2001
-------- --------

Net sales........................................... $2,885.6 $2,803.4

Other revenue....................................... 25.2 20.8
-------- --------
Total revenue....................................... 2,910.8 2,824.2

Costs, expenses and other:
Cost of sales..................................... 1,083.8 1,048.2
Marketing, distribution and administrative expenses 1,429.6 1,394.1
-------- --------
Operating profit.................................... 397.4 381.9

Interest expense.................................. 26.3 38.6
Interest income................................... (8.5) (6.2)
Other (income) expense, net....................... (11.4) 8.9
-------- --------
Total other expense, net............................ 6.4 41.3
-------- --------
Income from continuing operations before taxes,
minority interest and cumulative effect of
accounting change................................. 391.0 340.6
Income taxes........................................ 136.1 119.2
-------- --------
Income from continuing operations before minority
interest and cumulative effect of accounting change 254.9 221.4
Minority interest................................... (3.6) (1.5)
-------- --------
Income from continuing operations before
cumulative effect of accounting change............ 251.3 219.9

Cumulative effect of accounting change, net of tax.. - (0.3)
-------- --------
Net income ......................................... $ 251.3 $ 219.6
======== ========
Basic earnings per share:
Continuing operations ............................ $ 1.06 $ .93
Cumulative effect of accounting change............ - -
-------- --------
$ 1.06 $ .93
======== ========
Diluted earnings per share:
Continuing operations............................. $ 1.04 $ .91
Cumulative effect of accounting change............ - -
-------- --------
$ 1.04 $ .91
======== =========

The accompanying notes are an integral part of these statements.



AVON PRODUCTS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions)

June 30 December 31
2002 2001
-------- --------

ASSETS
Current assets:
Cash and cash equivalents........................ $ 429.4 $ 508.5
Accounts receivable.............................. 492.1 519.5
Inventories...................................... 668.9 612.5
Prepaid expenses and other....................... 246.1 248.6
-------- --------
Total current assets............................. 1,836.5 1,889.1
-------- --------

Property, plant and equipment, at cost........... 1,538.7 1,552.4
Less accumulated depreciation.................... 789.8 779.7
-------- --------
748.9 772.7
Other assets..................................... 542.5 530.8
-------- --------
Total assets..................................... $3,127.9 $3,192.6
======== ========
LIABILITIES AND SHAREHOLDERS'(DEFICIT)EQUITY
Current liabilities:
Debt maturing within one year.................... $ 79.3 $ 88.8
Accounts payable................................. 322.4 404.1
Accrued compensation............................. 116.4 145.2
Other accrued liabilities........................ 318.0 338.2
Sales and taxes other than income................ 108.3 108.8
Income taxes..................................... 363.8 375.9
-------- --------
Total current liabilities........................ 1,308.2 1,461.0
-------- --------
Long-term debt................................... 1,263.2 1,236.3
Employee benefit plans........................... 462.6 436.6
Deferred income taxes............................ 32.5 30.6
Other liabilities................................ 101.1 103.2

Contingencies (Note 5)

Shareholders'(deficit)equity:
Common stock..................................... 89.5 89.1
Additional paid-in capital....................... 990.7 938.0
Retained earnings................................ 1,546.2 1,389.4
Accumulated other comprehensive loss ........... (554.4) (489.5)
Treasury stock, at cost.......................... (2,111.7) (2,002.1)
-------- --------
Total shareholders'(deficit)equity............... (39.7) (75.1)
-------- --------
Total liabilities and shareholders'(deficit)equity $3,127.9 $3,192.6
======== ========

The accompanying notes are an integral part of these statements.









AVON PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)

Six months ended
June 30
--------------------
2002 2001
------- -------
Cash flows from operating activities:
Net income.............................................. $ 251.3 $ 219.6
Adjustments to reconcile net income to net cash
provided by operating activities:
Special and non-recurring payments...................... (14.7) (4.1)
Cumulative effect of accounting change ................. - .3
Depreciation and amortization........................... 60.7 53.0
Provision for doubtful accounts......................... 50.4 52.4
Amortization of debt discount........................... 7.6 7.3
Foreign exchange (gains)losses.......................... (21.0) 8.1
Deferred income taxes................................... 5.1 (5.6)
Other................................................... 5.1 8.2
Changes in assets and liabilities:
Accounts receivable................................... (47.9) (45.2)
Income tax receivable................................. - 95.2
Inventories........................................... (76.3) (89.0)
Prepaid expenses and other............................ (6.0) (20.0)
Accounts payable and accrued liabilities.............. (81.0) (67.5)
Income and other taxes................................ 1.8 18.3
Noncurrent assets and liabilities..................... 12.4 3.0
------- -------
Net cash provided by operating activities............... 147.5 234.0
------- -------
Cash flows from investing activities:
Capital expenditures.................................... (38.2) (68.1)
Disposal of assets...................................... .8 6.2
Purchases of investments................................ (10.0) -
Other investing activities.............................. (.2) (5.3)
------- -------
Net cash used in investing activities................... (47.6) (67.2)
------- -------
Cash flows from financing activities:
Cash dividends.......................................... (96.8) (91.8)
Book overdraft.......................................... (.9) (1.0)
Debt, net (maturities of three months or less).......... 1.7 56.8
Proceeds from short-term debt........................... 35.1 41.7
Retirement of short-term debt........................... (48.3) (52.4)
Retirement of long-term debt............................ - (.1)
Repurchase of common stock.............................. (108.1) (100.3)
Proceeds from exercise of stock options, net of taxes... 49.1 16.7
------- -------
Net cash used in financing activities................... (168.2) (130.4)
------- -------
Effect of exchange rate changes on cash and equivalents. (10.8) (7.4)
------- -------
Net (decrease)increase in cash and equivalents.......... (79.1) 29.0
Cash and equivalents at beginning of period............. 508.5 122.7
------- -------
Cash and equivalents at end of period................... $ 429.4 $ 151.7
======= =======
The accompanying notes are an integral part of these statements.







AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share data)

1. ACCOUNTING POLICIES

Basis of Presentation

The accompanying Consolidated Financial Statements should be read in
conjunction with the Consolidated Financial Statements and the Notes thereto
contained in Avon's Restated 2001 Annual Report to Shareholders. The interim
statements are unaudited but include all adjustments, consisting of normal
recurring adjustments, that management considers necessary to fairly present
the results for the interim periods. Results for interim periods are not
necessarily indicative of results for a full year. The year-end balance sheet
data was derived from audited financial statements, but does not include all
disclosures required by accounting principles generally accepted in the U.S.

Accounting for Certain Sales Incentives

Effective January 1, 2002, Avon adopted Emerging Issues Task Force
("EITF") No. 00-14, "Accounting for Certain Sales Incentives," which requires
the cost of certain products and cash incentives used in Avon's promotional
activities, which were previously reported in Marketing, distribution and
administrative expenses, to be classified as Cost of sales or as a reduction of
Net sales. The adoption of EITF No. 00-14 had no impact on Operating profit,
Net income or Earnings per share; however, gross margin decreased by
approximately 0.7 points for both the three and six-month periods in 2002 and
2001, offset by a decrease in Marketing, distribution and administrative
expenses.

Effective January 1, 2002, Avon adopted EITF No. 00-25, "Accounting for
Consideration from a Vendor to a Retailer in Connection with the Purchase or
Promotion of the Vendor's Products" and EITF No. 01-09 "Accounting for
Consideration Given by a Vendor to a Customer or Reseller of the Vendor's
Products," which require certain expenses related to the U.S. Retail business
previously included in Marketing, distribution and administrative expenses to
be classified as a reduction of Net sales. The adoption of EITF No. 00-25 and
EITF No. 01-09 was not material to the Consolidated Financial Statements.
There was no impact on the three and six-month periods of 2001, as the U.S.
Retail business was not launched until the third quarter of 2001.

Accounting for Goodwill and Other Intangibles Assets

Effective January 1, 2002, Avon adopted Statement of Financial Accounting
Standards ("FAS") No. 142, "Goodwill and Other Intangible Assets." Under FAS
No. 142, goodwill and intangible assets with indefinite lives are no longer
amortized, but are assessed for impairment annually and upon the occurrence of
an event that indicates impairment may have occurred. In accordance with FAS
No. 142, Avon completed its transitional goodwill impairment assessment based
on an evaluation of estimated future cash flow and no adjustments to goodwill
were recorded.

The pro-forma effect of FAS No. 142 assuming Avon had adopted this
standard on January 1, 2001 was not material to Avon's Income from continuing
operations before cumulative effect of accounting change, Net income or Basic
and Diluted earnings per share for the three and six-months ended June 30,
2001.

Cumulative Effect of Accounting Change

In the first quarter of 2001, Avon recorded a charge to earnings of $0.3,
net of taxes of $0.2, and a charge to Shareholders' (deficit) equity of $3.9,
net of taxes of $2.1, to reflect the adoption of FAS No. 133, "Accounting for
Certain Derivative Instruments and Hedging Activities," on January 1, 2001.



AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share data)


2. EARNINGS PER SHARE

Basic earnings per share ("EPS") are computed by dividing net income by
the weighted-average number of shares outstanding during the period. Diluted
EPS were calculated to give effect to all potentially dilutive common shares
that were outstanding during the period.


For the three and six months ended June 30, 2002 and 2001, the components
of basic and diluted earnings per share were as follows:

Three Months Six Months
Ended June 30 Ended June 30
2002 2001 2002 2001

Numerator:
Basic:
Income from continuing operations
before cumulative effect of
accounting change $ 155.0 $ 137.9 $ 251.3 $ 219.9
Cumulative effect of accounting change - - - (0.3)

Net income $ 155.0 $ 137.9 $ 251.3 $ 219.6

Diluted:
Income from continuing operations
before cumulative effect of accounting
change $ 155.0 $ 137.9 $ 251.3 $ 219.9

Interest expense on convertible notes,
net of taxes 2.6 2.5 5.2 5.0

Income for purposes of computing diluted
EPS before cumulative effect of
accounting change $ 157.6 $ 140.4 $ 256.5 $ 224.9

Cumulative effect of accounting change - - - (0.3)
_______ ________ _______ ______
Net income for purposes of computing
diluted EPS $ 157.6 $ 140.4 $ 256.5 224.6

Denominator:
Basic EPS weighted-average shares
outstanding 236.43 236.74 236.57 237.32
Dilutive effect of:
Assumed conversion of
stock options and settlement of
forward contracts (1) 2.89 2.10 2.77 2.00
Assumed conversion of convertible notes 6.96 6.96 6.96 6.96

Diluted EPS adjusted weighted-average
shares outstanding 246.28 245.80 246.30 246.28

Basic EPS:
Continuing operations $ .66 $ .58 $ 1.06 $ .93
Cumulative effect of accounting change - - - -
$ .66 $ .58 $ 1.06 $ .93
Diluted EPS:
Continuing operations $ .64 $ .57 1.04 $ .91
Cumulative effect of accounting change - - - -
$ .64 $ .57 $ 1.04 $ .91



(1) At June 30, 2002, stock options and forward contracts to purchase Avon
common stock totaling 0.3 million shares are not included in the earnings
per share calculation since their impact is anti-dilutive.



AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share data)


Avon purchased approximately 2.1 million shares of Avon common stock for
$109.5 during the first six months of 2002, as compared to approximately 2.6
million shares of Avon common stock for $101.1 during the first six months of
2001. At June 30, 2002, 27,094 shares repurchased for $1.4 were not settled
until July 2002 and were included in Other accrued liabilities on the
Consolidated Balance Sheet.


3. INVENTORIES
June 30 December 31
2002 2001
------ ------
Raw materials................ $168.5 $167.0
Finished goods............... 500.4 445.5
------ ------
$668.9 $612.5
====== ======

4. DIVIDENDS

Cash dividends paid per share of common stock were $.20 and $.40 for the
three and six months ended June 30, 2002, respectively, and $.19 and $.38 for
the corresponding 2001 periods, respectively. On January 31, 2002, Avon
increased the annualized dividend rate to $.80 from $.76.


5. CONTINGENCIES

Avon is a defendant in a class action suit commenced in 1991 on behalf of
certain classes of holders of Avon's Preferred Equity-Redemption Cumulative
Stock ("PERCS"). Plaintiffs allege various contract and securities law claims
related to the PERCS (which were fully redeemed in 1991) and seek aggregate
damages of approximately $145.0, plus interest. A trial of this action took
place in the United States District Court for the Southern District of New
York and concluded in November 2001. At the conclusion of the trial, the
judge reserved decision in the matter. Avon believes it presented meritorious
defenses to the claims asserted. However, it is not possible to predict the
outcome of litigation and it is reasonably possible that the trial, and any
possible appeal, could be decided unfavorably. Management is unable to make a
meaningful estimate of the amount or range of loss that could result from an
unfavorable outcome but, under some of the damage theories presented, an
adverse award could be material to the Consolidated Financial Statements.

Avon is a defendant in an action commenced in the Supreme Court of the
State of New York by Sheldon Solow d/b/a Solow Building Company, the landlord
of the Company's former headquarters in New York City. Plaintiff seeks
aggregate damages of approximately $80.0, plus interest, for the Company's
alleged failure to restore the leasehold premises at the conclusion of the
lease term in 1997. A trial of this matter had been scheduled for February
2002, but has been stayed pending the determination of (i) an interlocutory
appeal by plaintiff of an order that denied the plaintiff's motion for summary
judgment and granted partial summary judgment in favor of the Company on one
of the plaintiff's claims; and (ii) an appeal by plaintiff of a decision in an
action against another former tenant that dismissed plaintiff's claims after
trial. While it is not possible to predict the outcome of litigation,
management believes that there are meritorious defenses to the claims asserted
and that this action should not have a material adverse effect on the
Consolidated Financial Statements. This action is being vigorously contested.


AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share data)


Various other lawsuits and claims (asserted and unasserted), arising in
the ordinary course of business or related to businesses previously sold, are
pending or threatened against Avon. In the opinion of Avon's management,
based on its review of the information available at this time, the total cost
of resolving such other contingencies at June 30, 2002 should not have a
material adverse effect on the Consolidated Financial Statements.

In July 2002, Avon settled a previously disclosed formal investigation by
the Securities and Exchange Commission. See Note 10, Subsequent Events.


6. COMPREHENSIVE INCOME
For the three and six months ended June 30, 2002 and 2001, the components
of comprehensive income were as follows:


Three Months Six Months
Ended June 30 Ended June 30
2002 2001 2002 2001
------- ------- ------- -------

Net income $ 155.0 $ 137.9 $ 251.3 $ 219.6
Other comprehensive loss:
Foreign currency translation and
transaction adjustments (32.7) (2.5) (61.9) (19.5)
Unrealized gains(losses) from available-
for-sale securities (1.9) 1.1 (2.1) (1.5)
Net derivative losses on cash
flow hedges (1.4) (.7) (.9) (2.1)
------- ------- ------- -------
Comprehensive income $ 119.0 $ 135.8 $ 186.4 $ 196.5
======= ======= ======= =======



Under FAS 133, cash flow hedges impacted other comprehensive loss as
follows:


Three Months Six Months
Ended June 30 Ended June 30
2002 2001 2002 2001
------- ------- ------- -------

Cumulative effect of accounting change $ - $ - $ - $ (3.9)
Net gains(losses) on derivative instruments 2.1 (3.1) .6 (2.6)
Reclassification of (gains)losses to earnings (3.5) 2.4 (1.5) 4.4
------- ------- ------- -------
Net decrease to Other comprehensive loss $ (1.4) $ (0.7) $ (.9) $ (2.1)
======= ======= ======= =======





AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share data)

7. SPECIAL AND NON-RECURRING CHARGES

In May 2001, Avon announced its new Business Transformation plans, which
are designed to significantly reduce costs and expand profit margins, while
continuing to focus on consumer growth strategies. Business Transformation
initiatives include an end-to-end evaluation of business processes in key
operating areas, with target completion dates through 2004. Specifically, the
initiatives focus on simplifying Avon's marketing processes, driving supply
chain opportunities, strengthening Avon's sales model through the Sales
Leadership program and the Internet, and streamlining the Company's
organizational structure, and also include plans to integrate certain similar
activities across markets to achieve efficiencies. Avon anticipates
significant benefits from these Business Transformation initiatives, but the
scope and complexity of these initiatives necessarily involve planning and
execution risk.

In the fourth quarter of 2001, Avon recorded special and non-recurring
charges of $97.4 pretax ($68.3 after-tax, or $.28 per share on a diluted
basis) primarily associated with facility rationalizations and workforce
reduction programs related to implementation of certain Business
Transformation initiatives. The $97.4 was included in the Consolidated
Statement of Income for 2001 as a Special charge ($94.9) and as inventory
write-downs, which were included in Cost of sales ($2.5).

Special and non-recurring charges by business segment were as follows:

Corporate
North Latin and
America* U.S. America Europe Other Total
Facility
rationalizations** $ 16.8 $14.3 $ 17.7 $ 13.2 $ - $ 62.0
Workforce reduction
programs .9 9.7 6.4 2.1 14.0 33.1
Other - 2.1 - - .2 2.3
Total accrued charge $ 17.7 $26.1 $ 24.1 $ 15.3 $ 14.2 $ 97.4

*Excludes amounts related to the U.S.
**Includes accrued severance and related costs associated with facility
rationalizations.

Special and non-recurring charges by category of expenditures were as
follows:






Accrued
Facility
Accrued Rational-
Severance Asset ization
and Cost of Impair- Special Contract and
Related Sales ment Termination Termination Other
Costs Charge Charge Benefits Costs Costs Total

Facility
rationalizations $ 42.9 $ 2.5 $ 5.1 $ 5.0 $ 2.2 $ 4.3 $ 62.0
Workforce reduction
programs 26.9 - - 6.2 - - 33.1
Other - - .3 - 1.3 .7 2.3
Total accrued charge $ 69.8 $ 2.5 $ 5.4 $ 11.2 $ 3.5 $ 5.0 $ 97.4



Accrued severance and related costs are expenses, both domestic and
international, associated with facility rationalizations and workforce
reduction programs. Employee severance costs were accounted for in accordance
with the Company's existing FAS No. 112, "Employers' Accounting for Post
employment Benefits," severance plans, or in accordance with other accounting
literature. Approximately 3,500 employees, or 8.0% of the total workforce,
will receive severance benefits. As of June 30, 2002, approximately 600 of
these employees were receiving severance benefits. The facility
rationalizations will primarily result in either expanding an existing
facility, building a new facility or sourcing product through third party
vendors. In certain circumstances, employees terminated due to facility


AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share data)


rationalizations will need to be replaced. The majority of the employee
severance costs will be paid in 2002 and 2003 in accordance with the original
plan.

The Cost of sales charge represents losses associated with a facility
closure in Puerto Rico.

Primarily as a result of facility rationalizations, management identified
indicators of possible impairment of certain long-lived assets, consisting of
buildings and improvements, equipment and other assets. In assessing and
measuring impairment of long-lived assets, the Company applied the provisions
of FAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of". Recoverability of assets to be held and
used was measured by the comparison of the carrying amount of the assets with
expected future cash flows of the assets (assets were grouped at the lowest
level for which there were identifiable cash flows that were largely
independent of the cash flows of other groups of assets). As a result of the
impairment review, an asset impairment charge was recorded. Approximately
$4.0 of the asset impairment charge relates to the closure of a facility in
Puerto Rico and reflects the reduction in the carrying value of equipment to
its estimated fair market value based on selling prices for comparable
equipment. The equipment was sold in the first half of 2002. The remaining
charge relates to assets (leasehold improvements and other assets) that have
been abandoned.

Special termination benefits represent the impact of employee
terminations on the Company's benefit plans in the U.S. and certain
international locations. In accordance with FAS No. 88, "Employers'
Accounting for Settlements and Curtailment of Defined Benefit Pension Plans
and for Termination Benefits," the plans experienced a net loss from
curtailment and special termination benefits of $1.3 and $9.9, respectively.
The curtailment charge reflects the difference between the liabilities
assuming all of the participants terminate as of their severance date versus
the ongoing liability for these participants assuming continued active
employment. The special termination benefits include a loss resulting from an
increase in a liability due to additional service and pay earned during the
severance period, coupled with an additional liability attributable to paying
benefits at an actual rate versus an assumed rate.

Contract termination costs primarily represent lease buyout costs related
to the facility closures in North America (including the U.S.) and a
cancellation of a contract with a third party (a supplier of warehousing and
logistical services) in the U.S.

Accrued facility rationalization and other costs primarily represent
incremental costs associated with the facility rationalizations, including
administrative expenses during the shutdown period, employee and union
communication costs and legal fees.

The liability balance at June 30, 2002 was as follows:




Accrued
Facility
Accrued Rational-
Severance Asset ization
and Cost of Impair- Special Contract and
Related Sales ment Termination Termination Other
Costs Charge Charge Benefits Costs Costs Total

Balance at
December 31, 2001 $ 67.1 $ - $ - $ - $ 3.5 $ 4.5 $ 75.1
Cash expenditures (12.4) - - - (1.4) (.9) (14.7)

Balance at
June 30, 2002 $ 54.7 $ - $ - $ - $ 2.1 $ 3.6 $ 60.4





AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share data)

8. SEGMENT INFORMATION

Summarized financial information concerning Avon's reportable segments was
as follows:

Three Months Ended June 30,
-------------------------------------------
2002 2001
-------------------- -------------------
Net Operating Net Operating
Sales Profit Sales Profit
-------- -------- -------- --------

North America:
U.S. $ 514.2 $ 113.2 $ 485.8 $ 101.7
U.S. Retail* 2.3 (6.7) 2.3 (3.8)
Other** 61.2 9.5 57.1 9.5
-------- -------- -------- --------
Total North America 577.7 116.0 545.2 107.4
-------- -------- -------- --------
International:
Latin America North*** 255.5 68.6 251.9 70.4
Latin America South*** 196.9 34.2 242.3 44.7
-------- -------- -------- --------
Latin America 452.4 102.8 494.2 115.1
Pacific 204.5 33.7 184.4 28.5
Europe 278.9 51.3 233.2 42.3
-------- -------- -------- --------
Total International 935.8 187.8 911.8 185.9
-------- -------- -------- --------

Total from operations $1,513.5 $ 303.8 $1,457.0 $ 293.3

Global expenses - (60.7) - (57.2)
-------- -------- -------- --------
Total $1,513.5 $ 243.1 $1,457.0 $ 236.1
======== ======== ======== ========

*Includes U.S. Retail and Avon Centre.
**Includes Canada and Puerto Rico.
***Latin America North primarily includes the markets of Mexico, Venezuela and
Central America. Latin America South primarily includes the markets of
Brazil, Argentina, Chile and Peru. Avon's operations in Mexico reported net
sales for 2002 and 2001 of $170.7 and $157.4, respectively, and operating
profit for 2002 and 2001 of $44.6 and $44.2, respectively.


AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share data)

Six Months Ended June 30,
-------------------------------------------
2002 2001
-------------------- -------------------
Net Operating Net Operating
Sales Profit Sales Profit
-------- -------- -------- --------

North America:
U.S. $1,010.8 $ 206.2 $ 946.8 $ 184.1
U.S. Retail* 4.1 (13.7) 4.5 (7.5)
Other** 114.0 15.7 111.4 15.5
-------- -------- -------- --------
Total North America 1,128.9 208.2 1,062.7 192.1
-------- -------- -------- --------
International:
Latin America North*** 483.3 114.3 468.2 118.0
Latin America South*** 368.9 54.0 455.3 75.3
-------- -------- -------- --------
Latin America 852.2 168.3 923.5 193.3
Pacific 385.5 56.2 366.3 49.2
Europe 519.0 83.2 452.7 69.2
-------- -------- -------- --------
Total International 1,756.7 307.7 1,742.5 311.7
-------- -------- -------- --------

Total from operations $2,885.6 $ 515.9 $2,805.2 $ 503.8

Global expenses - (118.5) (1.8) (121.9)
-------- -------- -------- --------
Total $2,885.6 $ 397.4 $2,803.4 $ 381.9
======== ======== ======== ========

*Includes U.S. Retail and Avon Centre.
**Includes Canada and Puerto Rico.
***Latin America North primarily includes the markets of Mexico, Venezuela and
Central America. Latin America South primarily includes the markets of
Brazil, Argentina, Chile and Peru. Avon's operations in Mexico reported net
sales for 2002 and 2001 of $325.4 and $297.2, respectively, and operating
profit for 2002 and 2001 of $74.6 and $74.9, respectively.

In July 2002, the Company announced that it is consolidating the
management of its two Latin American operating business units into one Latin
American operating business unit and will therefore use that one business
unit, for segment reporting purposes. This change will become effective in
the third quarter of 2002.

The following table presents consolidated net sales by classes of
principal products as follows:

Three Months Six Months
Ended June 30 Ended June 30
2002 2001 2002 2001
-------- -------- -------- --------
Beauty* $ 974.7 $ 948.5 $1,859.4 $1,813.0
Beauty Plus** 319.9 291.2 600.6 576.0
Beyond Beauty*** 218.9 217.3 425.6 414.4
-------- -------- -------- --------
Total net sales $1,513.5 $1,457.0 $2,885.6 $2,803.4
======== ======== ======== ========

*Beauty includes cosmetics, fragrance and toiletries.
**Beauty Plus includes fashion jewelry, watches and apparel and accessories.
***Beyond Beauty includes home products, gift and decorative, and candles.

Sales from Health and Wellness products are presented among the three
categories based on product segmentations.


AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except share data)

9. Financial Instruments

In April 2002, Avon terminated an interest rate swap contract with a
notional amount of $50.0. At inception, the swap was designated as a hedge of
a portion of Avon's $100.0, 6.25% Bonds due 2018 and, accordingly, both the
interest rate swap and underlying debt were adjusted to reflect their fair
values at termination. Effective with the termination of the swap, the fair
value adjustment to the underlying debt is being amortized over the remaining
term.

At June 30, 2002, Avon had forward contracts to purchase approximately
271,000 shares of Avon Common Stock at an average price of $46.21 per share.
Under the contracts, Avon can choose physical, net-share or net-cash
settlement. The maturities of forward contracts are accelerated in the event
that Avon's credit rating declines to Baa2, its stock price closes at or below
the trigger price of approximately $16.00 per share for a two-day period or
the number of shares available for settlement drops below 50.0 million. The
contracts mature in October 2002 and were recorded as equity instruments. As
equity instruments, no adjustments for changes in fair value were recognized.


10. Subsequent Events

On August 8, 2002, Avon declared a quarterly dividend on its common stock
of $.20 per share, payable September 3, 2002, to shareholders of record on
August 19, 2002.

On July 17, 2002, Avon settled a previously disclosed formal
investigation by the Securities and Exchange Commission ("SEC"), which
commenced in August 2000, concerning Avon's write-off of a customized order
management software system known as the FIRST project. Avon had written off
approximately $15.0 (pretax) of FIRST assets in the first quarter of 1999 and
approximately $24.0 (pretax) of FIRST assets in the third quarter of 2001.
The SEC determined that the entire FIRST asset should have been written off in
the first quarter of 1999 and that the disclosure regarding the partial write
off was inaccurate. Avon has restated its financial statements for all
periods from the first quarter of 1999 through the first quarter of 2002 to
reflect the write off of the FIRST project in the first quarter of 1999, the
reversal of the charge recorded in the third quarter of 2001 and the
restatement of other FIRST-related activity that had been recorded during
1999-2002.













AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(In millions, except share data)


ITEM 2. Management's Discussion and Analysis of the Results of Operations
and Financial Condition


RESULTS OF OPERATIONS-THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001.

Consolidated



Three-Month Period Six-Month Period
----------------------------- ----------------------------
Favorable Favorable
(Unfavorable) (Unfavorable)
%/Point %/Point
2002 2001 Change 2002 2001 Change
-------- -------- -------- -------- -------- --------
Net sales $1,513.5 $1,457.0 4% $2,885.6 $2,803.4 3%
Total revenue 1,527.2 1,467.2 4% 2,910.8 2,824.2 3%
Marketing, distribution and
administrative expenses 718.8 695.4 (3)% 1,429.6 1,394.1 (3)%
Operating profit 243.1 236.1 3% 397.4 381.9 4%
Interest expense 12.9 18.9 - 26.3 38.6 -
Interest income (4.0) (4.2) - (8.5) (6.2) -
Other (income) expense, net (7.3) 7.3 - (11.4) 8.9 -
Net income 155.0 137.9 12% 251.3 219.6 14%
Diluted earnings per share .64 .57 12% 1.04 .91 14%

Gross margin 63.0% 63.5% (.5) 62.8% 62.9% (.1)
Operating expense ratio 47.1% 47.4% .3 49.1% 49.4% .3
Operating margin 15.9% 16.1% (.2) 13.7% 13.5% .2
Effective tax rate 34.8% 34.9% .1 34.8% 35.0% .2

Units Sold 12% 10%
Active Representatives 10% 9%


Net sales growth was driven by an increase in units and the number of
active Representatives, with dollar increases in all regions except Latin
America, which was negatively impacted by weaker foreign exchange rates
resulting from economic and political uncertainties in the region. Excluding
the impact of foreign currency exchange, consolidated Net sales increased 10%
and 9% in the three and six-month periods, respectively, with increases in all
regions.

Gross margin decreased in both periods due to declines in Europe, Latin
America, and the Pacific, partially offset by an increase in North America.

Marketing, distribution and administrative expenses increased in both
periods due to an increase in selling expenses associated with higher sales as
well as additional investments in consumer-related initiatives such as
brochure enhancements and sampling, partially offset by net savings associated
with Avon's Business Transformation initiatives. Operating expenses decreased
as a percentage of Total revenue in the quarter due to lower expense ratios in
Europe, the Pacific, and Latin America and decreased in the six-month period
due to lower expense ratios in Europe and the Pacific, partially offset by a
higher expense ratio in Latin America. The expense ratio in North America was
flat in both periods.

Interest expense decreased in both periods primarily as a result of lower
interest rates.

Interest income decreased in the second quarter due to lower interest
rates but increased in the six-month period primarily due to higher cash and
cash equivalent balances at the beginning of 2002.




AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(In millions, except share data)



Other (income) expense, net was favorable in both periods, mainly due to
net foreign exchange gains of $9.2 and $16.7 in the three and six-month
periods, respectively, in 2002 (primarily Argentine peso and Venezuelan
bolivar) and net foreign exchange losses of $6.3 and $6.1 in the three and
six-month periods, respectively, in 2001 (mainly Mexican peso and Hungarian
forint). 2002 gains included non-cash foreign exchange gains of $12.9 and
$26.3 in the three and six-month periods, respectively, on U.S. dollar
denominated assets, primarily in Argentina and Venezuela.

The effective tax rate decreased in both periods due to the favorable
impact of repatriation planning and changes in the earnings mix and tax rates
of international subsidiaries.

The favorable variances in net foreign exchange, interest expense and the
effective tax rate realized in the first half of 2002 as compared to the first
half of 2001 are not expected to be repeated in the second half of 2002. This
reflects assumptions that foreign exchange rates will be less volatile in
addition to the fact that Avon will begin to repeat last year's lower interest
rates and a lower tax rate.


Segment Review

North America
Three-Month Period Six-Month Period
---------------------------- ----------------------------
%/Point %/Point
2002 2001 Change 2002 2001 Change
-------- -------- -------- -------- -------- --------
Net sales $577.7 $545.2 6% $1,128.9 $1,062.7 6%
Operating profit 116.0 107.4 8% 208.2 192.1 8%
Operating margin 19.8% 19.5% .3 18.2% 17.9% .3

Units Sold 7% 6%
Active Representatives 2% 2%


Net sales increased in both periods due to growth in units and the number
of active Representatives. The U.S business, which represents approximately
90% of the North American segment, reported a sales increase of 6% and 7% in
the three and six-month periods, respectively, resulting from an increase in
units and the number of active Representatives. These increases were driven by
the expansion of the Sales Leadership program and the success of the Health and
Wellness product line, as well as new product launches, including Rare Pearls,
Peony Soft Musk, Anew Biologie, Skin-So-Soft Bug Guard Plus and the relaunch of
the Naturals line of bath products.

Operating profit and operating margin increased in North America primarily
due to improvements in the U.S. (U.S. operating margin improved 1.0 point in
the second quarter and 0.9 in the six-month period), partially offset by
operating losses associated with the U.S. Retail business.
* The U.S. operating margin improvement was primarily attributable to the
sales increase discussed above, expense savings associated with Business
Transformation projects and gross margin expansion, mainly due to lower
freight costs, partially offset by higher bonus accruals resulting from a
decision to accrue for 2002 bonuses on an all-cash basis
(rather than on the basis of a portion in cash and a portion in stock
options) and incremental spending on brochure enhancements.



AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(In millions, except share data)

Latin America



Three-Month Period Six-Month Period
------------------------------ ------------------------------
%/Point Change %/Point Change
-------------- --------------
Local Local
2002 2001 US$ Currency 2002 2001 US$ Currency
------ ------ ------ ------ ------ ------ ------ ------
Net sales $452.4 $494.2 (8)% 10% $852.2 $923.5 (8)% 8%
Operating profit 102.8 115.1 (11)% 2% 168.3 193.3 (13)% (2)%
Operating margin 22.7% 23.3% (.6) (.6) 19.7 20.9 (1.2) (1.2)

Units Sold 11% 9%
Active Representatives 8% 8%



Net sales decreased in both periods resulting from declines in Argentina
and Venezuela, partially offset by growth in Mexico and Brazil. Net sales in
Latin America were significantly impacted by weaker foreign exchange rates.
Net sales in local currency increased in both periods with increases in most
markets in the region due to an increase in units and active Representatives.

*Argentina's U.S. dollar sales were negatively impacted by the devaluation of
the Argentine peso. Argentina's net sales in local currency increased 1% in
the quarter, reflecting 13% growth in active Representatives, partially
offset by price discounting. Net sales in local currency decreased 6% in
the six-month period due to the country's unstable economic situation.
Local management has taken numerous actions to counter the challenges
presented by this current crisis. While it is difficult to predict the
impact that the economic situation will have on future results, management
currently expects U.S. dollar sales and profit for Avon Argentina in 2002 to
be significantly lower than in 2001.
* Venezuela's U.S. dollar sales were negatively impacted by devaluation of the
bolivar resulting from political turmoil in that country. Excluding the
impact of exchange, net sales in Venezuela benefited in both periods from
new product launches and consumer promotions.
* Mexico's net sales benefited from new product launches in non-CFT product
lines.
* Brazil's performance reflects increases in units and active Representatives,
due to the continued expansion of the Sales Leadership program, as well as
successful product launches.

The decrease in operating profit resulted from declines in Argentina and
Venezuela, due to the impact of foreign exchange as well as the economic
situation in these countries, and the countries of Central America, partially
offset by an increase in Brazil. The decrease in operating margin resulted
from declines in Mexico and Argentina, partially offset by improvements in
Brazil and Venezuela.
* In Mexico, operating margin was negatively impacted by an unfavorable mix
of products sold, accelerated depreciation associated with Avon's Business
Transformation initiative to transition to a new distribution facility in
Celaya, and higher Representative-based taxes.
* In Argentina, operating margin decreased primarily due to lower sales,
price discounting and an increase in the cost of imported supplies
resulting from the devaluation of the Argentine peso.
* In Brazil, operating margin improved as a result of an increase in sales,
expense management and supply chain savings associated with Avon's
Business Transformation initiatives, partially offset by incremental
consumer-related investments such as sampling.
* In Venezuela, while operating profit decreased due to the impact of
foreign exchange, operating margin increased mainly due to gross margin
expansion driven by a favorable mix of products sold.


AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(In millions, except share data)


* In Central America, operating margin declined as a result of price
discounting intended to increase sales that had been hurt by weak economic
conditions. Operating margin also declined due to additional bad debt
expense and incremental incentive accruals in 2002.

During July, the Brazilian real came under strong pressure as a result of
economic and political uncertainty. While a recently announced International
Monetary Fund package of $30 billion has stabilized the currency to some
degree, if the real weakens significantly in the future, Avon's U.S. dollar
results could be adversely affected.


Pacific




Three-Month Period Six-Month Period
------------------------------- ------------------------------
%/Point Change %/Point Change
--------------- ----------------
Local Local
2002 2001 US$ Currency 2002 2001 US$ Currency
------ ------ ------ ------ ------ ------ ------ --------
Net sales $204.5 $184.4 11% 11% $385.5 $366.3 5% 8%
Operating profit 33.7 28.5 18% 18% 56.2 49.2 14% 17%
Operating margin 16.2% 15.2% 1.0 1.0 14.3% 13.2% 1.1 1.1

Units Sold 8% 6%
Active Representatives 9% 7%



Net sales in U.S. dollars increased for both periods as a result of growth
in most major markets in the region, excluding Japan, which was negatively
impacted by foreign exchange. Net sales in local currency increased in all
major markets, driven primarily by increases in units and active
Representatives.
* Japan's second quarter net sales increased slightly but declined in the
six-month period. Foreign exchange and a weak economic environment negatively
impacted Japan's net sales.
* In the Philippines, net sales increased, driven by the Health and Wellness
line, which was launched in the fourth quarter 2001, and additional sales
incentives. These increases were realized despite softness in consumer
spending and price discounting.
* China's sales growth is primarily attributable to an increase in the number
of newly opened Avon beauty boutiques and new product launches.

The increase in operating profit was primarily due to increases in China
and Japan. The increase in operating margin was primarily due to improvements
in China and Japan, partially offset by a decline in the Philippines.
* China's operating margin improvement resulted primarily from an increase in
sales and profits, partially offset by incremental advertising expenses.
* Japan's operating margin was positively impacted by gross margin expansion,
due to a favorable mix of products sold, and expense management.
* The Philippines' operating profit increased in the three-month period mainly
due to increased sales but decreased in the six-month period as the increase
in sales was more than offset by a decline in operating margin. Operating
margin decreased in both periods as a result of an unfavorable mix of
products sold, an increase in sales incentives, higher bad debt expense and
incremental spending on advertising and brochure enhancements.


AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(In millions, except share data)


Europe





Three-Month Period Six-Month Period
----------------------------- ------------------------------
%/Point Change %/Point Change
------------- --------------
Local Local
2002 2001 US$ Currency 2002 2001 US$ Currency
------ ------ ------ ------ ------ ------ ------ ------
Net sales $278.9 $233.2 20% 18% $519.0 $452.7 15% 16%
Operating profit 51.3 42.3 21% 21% 83.2 69.2 20% 21%
Operating margin 18.3% 18.1% .2 .2 16.0% 15.3% .7 .7

Units Sold 24% 21%
Active Representatives 22% 18%



Net sales increased in U.S. dollars and local currency driven by an
increase in units and the number of active Representatives. The sales
increase in both periods reflects sales growth of over 40% in the markets in
Central and Eastern Europe, particularly Russia where sales nearly doubled,
and growth in the United Kingdom, partially offset by sales declines in other
Western European markets.
* In Russia, units doubled in both periods as a result of investments in
pricing and advertising. There was also a significant increase in active
Representatives due to enhanced training programs.
* In the United Kingdom, units increased as a result of increased spending
for consumer-related initiatives and new product launches.
* In Western Europe, excluding the United Kingdom, sales decreased primarily
due to sales declines in Italy, resulting from a decrease in active
Representatives and reductions in consumer spending, and in France due to
continued declines in active Representatives and units sold.

The increase in operating profit was primarily due to increases in Central
and Eastern Europe, partially offset by declines in the markets of Western
Europe excluding the United Kingdom. The increase in operating margin was
primarily due to improvements in Central and Eastern Europe, most
significantly in Russia, partially offset by a decline in the United Kingdom
as well as other Western European markets.
* In Russia, operating margin improved primarily due to significant sales
growth and expense management, partially offset by price discounting as
well as changes to field incentives.
* In the United Kingdom, operating margin was negatively impacted by
unfavorable product mix and expenses associated with the closing of a
manufacturing facility.
* In Western Europe, excluding the United Kingdom, operating margin declined
primarily due to decreases in Italy, resulting from lower sales and an
unfavorable mix of products sold, and France due to continued sales
softness.


Global Expenses

Global expenses increased 6% in the three-month period primarily due to
investment in Avon's Teen strategy, higher research and development costs and
higher bonus accruals resulting from a decision to accrue for
2002 employee bonuses on an all-cash basis (rather than on a basis of a
portion in cash and a portion in stock options), partially offset by savings
associated with Avon's Business Transformation initiatives. Global expenses
decreased 3% in the six-month period primarily due to savings associated with
Avon's Business Transformation initiatives and lower departmental expenses.



AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(In millions, except share data)

LIQUIDITY AND CAPITAL RESOURCES

Avon's principal sources of funds historically have been cash flows from
operations, commercial paper, borrowings under uncommitted lines of credit and
long-term borrowings.

Cash Flows

Net cash provided by operating activities in 2002 was $86.5 unfavorable
to 2001 principally reflecting the receipt of an income tax refund of $95.2 in
2001, a tax payment of $20.0 in 2002 deferred from 2001 as a result of
legislation enacted due to the September 11, 2001 terrorist attacks, and to a
lesser extent, other cash outlays in 2002 for severance payments, partially
offset by reduced inventory levels.

Excluding changes in debt, cash and cash equivalents decreased $67.6 in
the first six months of 2002, compared to a decrease of $17.0 in the first six
months of 2001. The higher use of cash in 2002 resulted primarily from lower
cash provided by operating activities, discussed above, the purchase of
company owned life insurance policies of $10.0 and higher repurchases of
common stock, partially offset by an increase in cash received from the
exercise of stock options and lower capital expenditures. Avon purchased
approximately 2.1 million shares of Avon common stock for $109.5 during the
first six months of 2002, compared with $101.1 spent for the repurchase of
approximately 2.6 million shares during the first six months of 2001. At June
30, 2002, 27,094 shares repurchased for $1.4 were not settled until July 2002.

the assets associated with the Company's
benefit plans experienced negative investment returns, which were mostly due
to unfavorable returns on equity securities (equity securities represent 75%
of plan assets in the U.S.). As a result, the Company expects to make a
voluntary cash contribution to its U.S. qualified pension plan of $50.0-75.0
in the third quarter of 2002. Depending on the performance of Avon's
investments for the remainder of 2002, Avon may make additional contributions
to its U.S. qualified pension plan or record a charge to Other comprehensive
loss (see Note 6) or both.

In addition, these unfavorable investment returns are expected to
increase pension costs in 2003. Based on current assumptions for 2003, the
Company does not anticipate this incremental expense would affect its ability
to meet its growth targets. However, these assumptions are subject to
revision if financial market conditions change.

Capital Resources

Total debt at June 30, 2002 increased $17.4 to $1,342.5 from $1,325.1 at
December 31, 2001 and increased $57.9 from $1,284.6 at June 30, 2001. These
increases were principally due to adjustments to reflect the fair value of
outstanding interest rate swaps, amortization of the discount on Avon's
outstanding convertible notes and translation of Avon's Japanese yen
denominated notes payable.

At June 30, 2002, there were no borrowings under a $600.00 revolving
credit and competitive advance facility (the "credit facility"). This credit
facility is also used to support Avon's commercial paper facility, under which
no amounts were outstanding at June 30, 2002.

At June 30, 2002, there was $6.4 outstanding under uncommitted lines of
credit.

Management currently believes that cash from operations and available
financing alternatives are adequate to meet anticipated requirements for
working capital, dividends, capital expenditures, the stock repurchase program
and other cash needs.

AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(In millions, except share data)


Financial Instruments and Risk Management Strategies

Interest Rate Risk

In April 2002, Avon terminated an interest rate swap contract with a
notional amount of $50.0. At inception, the swap was designated as a hedge of
a portion of Avon's $100.0, 6.25% Bonds due 2018 and accordingly both the
interest rate swap and underlying debt were adjusted to reflect their fair
values at termination. Effective with the termination of the swap, the fair
value adjustment to the underlying debt of $1.6 is being amortized over the
remaining term.

Foreign Currency Risk

At June 30, 2002, Avon held foreign currency forward and option contracts
to buy and sell foreign currencies, including cross-currency contracts to sell
one foreign currency for another, with notional amounts in U.S. dollars as
follows:
Buy Sell
------ ------
Australian dollar $ 1.1 $ 15.9
Brazilian real - 10.0
British pound 34.2 14.5
Canadian dollar - 36.3
Czech koruna - 8.1
Euro 73.6 44.2
Hungarian forint - 14.5
Japanese yen 7.8 24.8
Mexican peso - 26.0
Polish zloty 10.3 5.5
Taiwanese dollar - 5.0
Other currencies - 4.4
------ ------
Total $127.0 $209.2
====== ======

At June 30, 2002, certain Avon subsidiaries held U.S. dollar denominated
assets, primarily to minimize foreign-currency risk and provide liquidity,
most significantly in Argentina ($16.1), Venezuela ($12.0), Mexico ($23.0) and
Poland ($10.0).



AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(In millions, except share data)


CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" STATEMENT UNDER THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Certain statements in this report which are not historical facts or
information are forward-looking statements within the meaning of the Private
Securities Litigation 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 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 economic
and political uncertainties in Latin America; the Company's ability to
implement its business strategy 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
profitability targets; the impact of substantial currency fluctuations in the
Company's principal foreign markets and the success of the Company's foreign
currency hedging and risk management strategies; the impact of possible
pension funding obligations on the Company's cash flow and results of
operations; and the effect of legal and regulatory proceedings and
restrictions imposed on the Company or its operations by foreign governments.
Additional information indentifying such important factors is contained in the
Company's Form 10-K/A report for the year ended December 31, 2001, filed with
the SEC. The Company undertakes no obligation to update any such forward-
looking statements.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes in market risk from the information
provided in Item 7A, Quantitative and Qualitative Disclosures About Market
Risk, of the Company's 2001 Form 10-K/A.











AVON PRODUCTS, INC.

PART II. OTHER INFORMATION


Item 1. Legal Proceedings

See Notes 5 and 10 of the Notes to Consolidated Financial Statements.

Item 4. Submission of Matters to a Vote of Security Holders.

(a) At the annual meeting of shareholders of Avon, held on May 2, 2002, the
matters described under (c) below were voted upon.

(c) Annual meeting votes:
Against Broker
For or Withheld Abstain Non-Votes
--------- ----------- --------- ---------
(1) To elect the following
Directors to three-year terms
expiring in 2005:

Brenda C. Barnes 211,231,943 2,376,262 - -
Fred Hassan 210,139,859 3,468,346 - -
Ann S. Moore 211,247,242 2,360,963 - -
Lawrence A. Weinbach 210,110,985 3,497,220 - -

To elect W. Don Cornwell
to a one-year term
expiring in 2003 211,199,471 2,408,734 - -

(2) To ratify the
appointment of
PricewaterhouseCoopers LLP
as Avon's independent
accountants for 2002 205,150,787 7,653,861 803,559 -

(3) To consider and vote
on a Shareholder proposal
regarding the composition
of the Audit Committee 26,145,569 165,516,480 3,239,792 18,706,366

(4) To consider and vote
on a Shareholder proposal to
preclude Avon's independent
accountants from providing
non-audit services 23,978,602 168,368,856 2,554,383 18,706,366


Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits

99.1 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K
There were no reports on Form 8-K in the second quarter of 2002.




SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.




AVON PRODUCTS, INC.
-------------------
(Registrant)


Date: August 13, 2002 By /s/ Janice Marolda
-------------------------------
Janice Marolda
Vice President,
Controller
Principal Accounting Officer

Signed both on behalf of the
registrant and as principal
accounting officer.




23