NEW YORK, Aug. 2, 2016 /PRNewswire/ -- Avon Products,
Inc. (NYSE: AVP) today reported second-quarter 2016 results. Total
revenue for Avon Products, Inc. declined 8% to $1.4 billion, but increased 4% in constant
dollars1 and increased 5% in constant dollars when
excluding the impact of the sale of Liz
Earle2. In addition, Diluted earnings per share
from continuing operations increased $0.01 per share versus the same period last year,
including a negative currency impact of approximately $0.10 per share, driven by the strength of the
U.S. dollar against the currencies of the countries in which the
Company operates. Adjusted diluted earnings per share from
continuing operations decreased $0.02
per share versus the same period last year and included a negative
currency impact of approximately $0.10 per share, driven by the strength of the
U.S. dollar against the currencies of the countries in which the
Company operates.
"Our second quarter results came in slightly above our
expectations, driven by operating performance that was
better than anticipated. We also saw some
modest easing in foreign currency pressure.
Importantly, our performance improvements were broad-base with
nine of our top 10 markets growing in local currency," said
Sheri McCoy, Chief Executive Officer
of Avon Products, Inc. "We continue to make steady progress on a
number of fronts: improving pricing discipline; driving additional
cost out of the business; and, continuing to build our brand and
enhance the Representative experience."
As a reminder, in the first quarter the Company announced
several reporting and disclosure changes. A summary of these
changes, including the changes to segment reporting and the
deconsolidation of Venezuela, is
included in the Reporting and Disclosures section later in this
release. The Company has also included a subtotal of
Total from reportable segments, which the Company
believes is a clearer reflection of the ongoing business.
Second-Quarter 2016 Income Statement Review (compared with
second-quarter 2015)
- Total revenue for Avon Products, Inc. declined 8% to
$1.4 billion, but increased 4% in
constant dollars and increased 5% in constant dollars when
excluding the impact of the sale of Liz
Earle2.
- Total revenue from reportable segments declined 7% to
$1.4 billion, but increased 5% in
constant dollars.
- Active Representatives were up 1% year-over-year, as increases
in Europe, Middle East & Africa and North
Latin America were partially offset by declines in
Asia Pacific.
- Average order increased 4% due to growth in all reportable
segments as the Company continues to benefit from pricing.
- Ending Representatives improved 2% due to growth in
Europe, Middle East & Africa and South
Latin America, partially offset by declines in Asia Pacific.
- Gross margin was 60.6%, down 40 basis points while
Adjusted gross margin was 60.6%, down 70 basis points. These
year-over-year comparisons were negatively impacted by an
approximate 290 basis point impact from foreign exchange, partially
offset by pricing actions, favorable mix and lower supply chain
costs.
- Operating margin was 6.6% in the quarter, up 90 basis
points while Adjusted operating margin was 7.3%, up 100 basis
points. These year-over-year comparisons benefited from the
favorable net impact of price/mix, as well as continued benefits
from cost savings initiatives, partially offset by approximately
350 basis points of unfavorable impact of foreign exchange.
- The effective tax rate from continuing operations in the
quarter was 50.2% and on an Adjusted basis was 54.0%.
- Income from continuing operations, net of tax was
$36 million, or $0.07 per diluted share, compared with
$29 million, or $0.06 per diluted share, for the second quarter
of 2015. Adjusted income from continuing operations, net of tax was
$37 million, or $0.07 per diluted share, compared with
$39 million, or $0.09 per diluted share, for the second quarter
of 2015. Within the diluted earnings per share calculation,
earnings allocated to convertible preferred stock was $5.9 million and this had a negative $0.01 impact on both Diluted earnings per share
and Adjusted diluted earnings per share.
- Loss from discontinued operations, net of tax was
$3 million associated with the
previously separated North America
business, or a loss of $0.01 per
diluted share, compared with income of $1
million, or $0.00 per diluted
share, for the second quarter of 2015.
- Foreign currency has impacted the Company's financial
results of continuing operations as shown in the table on the
following page.
Approximate Impact
of Foreign Currency
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Second-Quarter
2016
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First-Half
2016
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Estimated
impact
($ in millions)
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Estimated
impact
on diluted EPS
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Estimated
impact
($ in millions)
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Estimated
impact
on diluted EPS
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Impact on Reported
(GAAP) results:
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Total
revenue
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(12) pts
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(15) pts
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Operating profit -
transaction
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$
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(45)
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$
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(0.06)
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$
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(115)
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$
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(0.17)
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Operating profit -
translation
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(25)
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(0.04)
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(50)
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(0.07)
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Total operating
profit
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(70)
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(0.10)
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(165)
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(0.24)
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Operating
margin
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(350) bps
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(460) bps
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Revaluation of
working capital
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$
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3
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$
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—
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$
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8
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$
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0.01
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Diluted
EPS
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$
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(0.10)
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$
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(0.23)
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Impact on Adjusted
(Non-GAAP)
results:
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Adjusted operating
profit - transaction
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$
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(45)
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$
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(0.06)
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$
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(115)
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$
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(0.17)
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Adjusted operating
profit - translation
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(25)
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(0.04)
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(55)
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(0.08)
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Total Adjusted
operating profit
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$
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(70)
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$
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(0.10)
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$
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(170)
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$
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(0.25)
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Adjusted operating
margin
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(350) bps
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(450) bps
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Revaluation of
working capital
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$
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3
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$
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—
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$
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13
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$
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0.02
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Adjusted diluted
EPS
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$
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(0.10)
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$
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(0.23)
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Adjustments to Second-Quarter 2016 GAAP Results to Arrive at
Adjusted Results
During the second quarter of 2016, the following adjustments
were made to GAAP results to arrive at Adjusted results:
- The Company recorded costs to implement restructuring within
operating profit of approximately $9
million before tax, primarily related to contract
terminations and employee-related costs as part of the previously
announced Transformation Plan.
- The Company recorded an income tax benefit of approximately
$7 million, which was recognized
primarily as a result of the release of a valuation allowance
associated with Russia.
Second-Quarter
2016 Segment Highlights (compared with second-quarter
2015)
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THREE MONTHS ENDED
JUNE 30, 2016
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SEGMENT
RESULTS
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($ in
millions)
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Revenue
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Active
Representatives
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Average
Order
C$
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|
Units
Sold
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|
Price/
Mix C$
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|
Ending
Representatives
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US
$
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|
C$
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Revenue &
Drivers
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% var.
vs 2Q15
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% var.
vs 2Q15
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% var.
vs 2Q15
|
|
% var.
vs 2Q15
|
|
% var.
vs 2Q15
|
|
% var.
vs 2Q15
|
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% var.
vs 2Q15
|
|
|
|
|
|
|
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Europe, Middle East
&
Africa
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$
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520.9
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(2)%
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7%
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4%
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3%
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2%
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5%
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6%
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South Latin
America
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535.7
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(12)
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5
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—
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5
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(2)
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7
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1
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North Latin
America
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224.4
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(5)
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6
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4
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2
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(6)
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12
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—
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Asia
Pacific
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141.9
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(10)
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(5)
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(8)
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3
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(4)
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(1)
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(4)
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Total from
reportable
segments
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1,422.9
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(7)
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5
|
|
1
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4
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(2)
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7
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|
2
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Other operating
segments and
business activities
|
11.4
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(66)
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(61)
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(100)
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*
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(100)
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*
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(100)
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Total
revenue
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$
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1,434.3
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(8)%
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4%
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(2)%
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6%
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(3)%
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7%
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(1)%
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Operating
Profit/Margin
|
|
2016 Operating
Profit US$
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2016
Operating
Margin US$
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|
Change in
US$ vs
2Q15
|
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Change in
C$ vs
2Q15
|
|
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Segment
profit/margin
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Europe, Middle East
& Africa
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$
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83.4
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16.0%
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220 bps
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250 bps
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South Latin
America
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61.0
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11.4
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—
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10
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North Latin
America
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32.1
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14.3
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90
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110
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Asia
Pacific
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14.8
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10.4
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—
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30
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Total from
reportable segments
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191.3
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13.4
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100
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130
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Other operating
segments and business
activities
|
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0.7
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6.1
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*
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*
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Unallocated global
expenses
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|
(87.5)
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—
|
|
*
|
|
*
|
|
CTI restructuring
initiatives
|
|
(9.4)
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*
|
|
*
|
|
*
|
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Operating
profit
|
|
$
|
95.1
|
|
6.6%
|
|
90
bps
|
|
160
bps
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|
|
|
|
|
|
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* Calculation not
meaningful
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Other operating
segments and business activities include the business results for
Liz Earle, which was sold in July 2015, and Venezuela, which was
deconsolidated effective March 31, 2016. Other operating segments
and business activities also include revenue from the sale of
products to New Avon LLC since the separation of the Company's
North America business into New Avon LLC on March 1, 2016 and
ongoing royalties from the licensing of the Company's name and
products.
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Second-Quarter 2016 Reportable Segment Highlights
With regards to the discussion below on segment revenue growth,
the difference between the reported and constant-dollar revenue
growth is the estimated impact of foreign currency translation.
- Europe, Middle East & Africa revenue was down 2%, or up 7% in
constant dollars. Constant-dollar revenue was driven by an increase
in Active Representatives as well as higher average order.
- Russia revenue was down
7%, or up 15% in constant dollars, primarily driven by an increase
in Active Representatives and higher average order.
- U.K. revenue was down 7%, or was relatively unchanged in
constant dollars, as a decrease in Active Representatives was
offset by higher average order.
- South Latin America
revenue was down 12%, or up 5% in constant dollars primarily due to
higher average order. Constant-dollar revenue was negatively
impacted by an estimated 2 points due to MVA taxes in Brazil, which are additional VAT-like state
taxes that went into effect in various jurisdictions in
Brazil in the latter part of 2015.
The Industrial Production Tax ("IPI") in Brazil, levied by the Brazilian government on
cosmetics, which began in May 2015, had an estimated 1 point
unfavorable impact on this constant-dollar revenue growth.
Argentina contributed
approximately 3 points to this constant-dollar revenue growth.
- Brazil revenue was down
10%, or up 2% in constant dollars, primarily due to higher average
order, which was partially offset by a slight decline in Active
Representatives. MVA taxes (discussed above) negatively impacted
Brazil's constant-dollar revenue
growth by an estimated 4 points. Constant-dollar revenue growth was
also negatively impacted by an estimated 2 points due to IPI taxes
(discussed above).
- North Latin America
revenue was down 5%, or up 6% in constant dollars. Constant-dollar
revenue benefited from an increase in Active Representatives and
higher average order.
- Mexico revenue was down
8%, or up 7% in constant dollars, primarily driven by higher
average order and an increase in Active Representatives.
- Asia Pacific revenue
was down 10%, or 5% in constant dollars as growth in the Philippines was not enough to offset
declines in other markets. The region's constant-dollar revenue
decline was driven by a decrease in Active Representatives,
partially offset by higher average order.
- Philippines revenue was
up 1% and up 6% in constant dollars driven by higher average order,
partially offset by declines in Active Representatives.
Second-Quarter 2016 Cash Flow Review
- Net cash used by operating activities of continuing
operations was $130 million for
the six months ended June 30, 2016,
compared with $107 million for the
same period in 2015. Cash used by operating activities during 2016
was unfavorably impacted by lower cash-related earnings (including
the unfavorable impact of foreign currency), and a contribution to
the U.S. pension plan. When comparing the year-over-year use of
cash from operations, the comparison benefits from the $67 million payment made during the first quarter
of 2015 to the U.S. Securities and Exchange Commission in
connection with the FCPA settlement in 2015, which did not recur in
2016.
- For the six months ended June 30,
2016, there was $44 million of
net cash used by investing activities of continuing
operations, a $4 million decrease
from the prior year.
- Net cash provided by financing activities of continuing
operations was $413 million for
the six months ended June 30, 2016, a
$472 million increase over the prior
year, primarily due to the proceeds from the issuance of Series C
Convertible Preferred Stock and the suspension of the common stock
dividend.
Transformation Plan
In January 2016, the Company
announced a three-year Transformation Plan, which includes cost
reductions in an effort to continue to improve its cost structure
and to enable the Company to reinvest in growth. As a result of
this plan, the Company expects pre-tax annualized cost savings of
approximately $350 million after
three years, with an estimated $200
million from supply chain reductions and an estimated
$150 million from other cost
reductions. These pre-tax cost savings are expected to be achieved
through restructuring actions as well as other cost-savings
strategies that will not result in restructuring charges. The
Company plans to reinvest a portion of these cost savings in growth
initiatives, including media, social selling and information
technology systems that will help the Company modernize its
business. The Transformation Plan was initiated in order to enable
the Company to achieve its long-term goal of a targeted low
double-digit operating margin and mid single-digit constant-dollar
revenue growth.
The Company has identified the targeted $70 million of savings to be realized in 2016
with $50 million in savings from
changes to the Company's operating model and $20 million of savings within supply chain and
sourcing. The Company has identified additional
savings, within supply chain and sourcing, to offset stranded
costs resulting from the separation of the Company's North America business of approximately
$20 million.
Reporting and Disclosure Changes
As announced in the first quarter 2016 release, the Company has
changed the following reporting and disclosure items in 2016:
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1.
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The Company
deconsolidated its Venezuela business as of March 31, 2016 due to
the continued lack of exchangeability of the Venezuelan currency
and its impact on the Company's ability to exercise sufficient
control over the operations of the business in Venezuela. For
reporting purposes, this means that the operating results (revenue
and expenses) of Venezuela are included in the first quarter of
2016 and all periods prior, but Venezuela's financial results are
not included in subsequent periods beginning with the second
quarter of 2016. The associated net assets of Venezuela were
written off as of March 31, 2016. As discussed further below, the
operating results of Venezuela are not included in a reportable
segment and instead are presented in Other operating segments and
business activities;
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2.
|
The Company has
changed its segment reporting:
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a.
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To align with the
revised operating model, the Company has changed its reportable
segments to now be: Europe, Middle East & Africa; South Latin
America; North Latin America; and Asia Pacific;
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b.
|
Avon is including the
items below in Other operating segments and business
activities:
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i.
|
Venezuela operating
results, which have been deconsolidated as of March 31,
2016;
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ii.
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The historical
results of the Liz Earle business, which was sold in
July 2015;
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iii.
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Royalties for the use
of the Company's name and products in various countries;
and
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iv.
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Product sales to the
recently separated North America business.
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The Company believes
these segment changes, as well as the inclusion of totals of
reportable segments, provide a clearer comparison of its core
operating results;
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c.
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Avon has changed the
methodology of allocating global expenses to the segments. Segment
profit excludes any allocation of global expenses other than global
marketing expenses. The Company has allocated global marketing
expenses to the reportable segments to ensure comparability between
periods; and
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d.
|
Avon has changed the
measure of profit disclosed for segments and refers to it as
Segment profit and Segment margin, which is similar to what the
Company previously used in its segment reporting as Adjusted
operating profit and Adjusted operating margin, which will simplify
the disclosure of segment profit.
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3.
|
The Company has begun
disclosing the Change in Ending Representatives, which the Company
believes can be a useful indicator of potential revenue
performance; and
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4.
|
In the Form 10-Q
filed for the quarter ended June 30, 2016, the Company has included
a discussion of the Series C Convertible Preferred Stock that was
issued to an affiliate of Cerberus Capital Management for $435
million during the first quarter of 2016.
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a.
|
The Series C
Convertible Preferred Stock has cumulative dividends that accrue
daily and are payable at a rate of 1.25% per quarter. These
dividends are not presented on the Consolidated Statements of
Operations; however, these preferred dividends and shares are
considered when determining earnings per share through a series of
calculations.
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b.
|
If a loss is reported
in a period, the preferred dividends increase the loss allocated to
common shareholders. The preferred shares do not impact the number
of shares used in the basic or diluted EPS calculation as doing so
would be antidilutive to the loss per share.
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c.
|
If income is reported
for the period, the following two calculations are performed and
the calculation with the lower result is presented:
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i.
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Reported income is
reduced by the larger of the preferred dividends accrued in the
period or the percentage of earnings allocable to the preferred
stock as if they had been converted to common stock, and the
resulting amount is divided by the basic or diluted weighted shares
outstanding; or
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ii.
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The amount of shares
that would be issued if the preferred shares had been converted are
added to the weighted average basic or diluted shares outstanding
and this total is divided into the reported income.
|
Conference call
Avon will conduct a conference
call at 9:30 a.m. today to discuss
its quarterly results. The dial-in number for the call is (800)
843-2086 in the U.S. or (706) 643-1815 from non-U.S. locations
(conference ID number: 43940164). The call will be webcast live at
www.avoninvestor.com and can be accessed or downloaded from
that site for a period of one year.
About Avon Products, Inc.
Avon is the Company that for
130 years has proudly stood for beauty, innovation, optimism and,
above all, for women. Avon
products include well-recognized and beloved brands such as ANEW,
Avon Color, Avon Care, Skin-So-Soft, and Advance Techniques sold
through nearly 6 million active independent Avon Sales
Representatives. Learn more about Avon and its products at
www.avoncompany.com.
Footnotes
1 "Adjusted" items refer to financial measures that
are derived from measures calculated in accordance with generally
accepted accounting principles in the
United States ("GAAP"), but which have been adjusted to
exclude certain items. Other Adjusted financial measures that the
Company refers to include Constant dollar (C$) items. All of these
adjusted items are Non-GAAP financial measures as described below
under "Non-GAAP Financial Measures." These Non-GAAP measures should
not be considered in isolation, or as a substitute for, or superior
to, financial measures calculated in accordance with GAAP.
Please refer to the Company's "Non-GAAP Financial Measures"
description at the end of this release and the reconciliations the
Company provides of these Non-GAAP financial measures to their
comparable GAAP measures.
2 To supplement the Company's financial results
presented in accordance with GAAP and the Non-GAAP Financial
Measures discussed above, the Company has included an additional
analysis, "Non-GAAP Impact of the Sale of Liz Earle Affecting
Year-Over-Year Comparisons," which presents the change in a
Non-GAAP financial measure, constant-dollar revenue, excluding the
impact of the sale of Liz Earle,
which impacts the comparability of the Company's results.
Specifically, this analysis represents lower constant-dollar
revenue in the three and six months ended June 30, 2016 as compared to the three and six
months ended June 30, 2015 as a
result of the sale of Liz Earle in
July 2015. The Company believes this
additional analysis helps investors to better understand the
underlying business results. This additional adjustment to the
Non-GAAP financial measures is itself a Non-GAAP financial measure
and should not be considered in isolation, or as a substitute for,
or superior to, financial measures calculated in accordance with
GAAP. Please refer to the reconciliation on page 19 in the
schedules of this release that the Company provides of this
Non-GAAP financial measure to other, related Non-GAAP Financial
Measures and then to their comparable GAAP measures.
Forward-Looking Statements
Statements in this release that are not historical facts may be
forward-looking statements that involve risks and uncertainties
that could cause actual results to differ materially. These risks
and uncertainties are detailed from time to time in reports filed
by Avon Products, Inc. with the U.S. Securities and Exchange
Commission, including Forms 8-K, 10-Q, and 10-K. Some
forward-looking statements in this release include and concern the
Company's outlook and expected results, cost reduction actions and
savings, and the impact of foreign currency, taxes and tax rates.
These 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. These risks and uncertainties include, but are not
limited to, the Company's ability to improve its financial and
operational performance, its ability to achieve the anticipated
benefits of the strategic partnership with Cerberus, the impact of
a continued decline in the Company's business results, the
possibility of business disruption, competitive uncertainties, and
general economic and business conditions in its markets, including
fluctuations in foreign currency exchange rates. Any
forward-looking statements speak only as of the date they are made.
The Company does not undertake to update any such forward-looking
statements.
AVON PRODUCTS,
INC.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(Unaudited)
|
(In millions,
except per share data)
|
|
|
|
Three Months
Ended
|
|
Percent Change
|
|
Six Months
Ended
|
|
Percent Change
|
|
|
June
30
|
|
|
June
30
|
|
|
|
2016
|
|
2015
|
|
|
|
2016
|
|
2015
|
|
|
Net sales
|
|
$
|
1,399.5
|
|
|
$
|
1,544.5
|
|
|
(9)%
|
|
$
|
2,679.5
|
|
|
$
|
3,077.4
|
|
|
(13)%
|
Other
revenue
|
|
34.8
|
|
|
20.4
|
|
|
|
|
61.3
|
|
|
39.6
|
|
|
|
Total
revenue
|
|
1,434.3
|
|
|
1,564.9
|
|
|
(8)%
|
|
2,740.8
|
|
|
3,117.0
|
|
|
(12)%
|
Cost of
sales
|
|
565.0
|
|
|
611.0
|
|
|
|
|
1,083.8
|
|
|
1,222.7
|
|
|
|
Selling, general and
administrative expenses
|
|
774.2
|
|
|
864.2
|
|
|
|
|
1,554.1
|
|
|
1,837.5
|
|
|
|
Operating
profit
|
|
95.1
|
|
|
89.7
|
|
|
6%
|
|
102.9
|
|
|
56.8
|
|
|
81%
|
Interest
expense
|
|
33.2
|
|
|
30.5
|
|
|
|
|
65.9
|
|
|
58.6
|
|
|
|
Interest
income
|
|
(5.3)
|
|
|
(3.1)
|
|
|
|
|
(9.3)
|
|
|
(6.1)
|
|
|
|
Other (income)
expense, net
|
|
(4.7)
|
|
|
1.1
|
|
|
|
|
132.5
|
|
|
19.8
|
|
|
|
Total other
expenses
|
|
23.2
|
|
|
28.5
|
|
|
|
|
189.1
|
|
|
72.3
|
|
|
|
Income (loss) from
continuing operations, before taxes
|
|
71.9
|
|
|
61.2
|
|
|
17%
|
|
(86.2)
|
|
|
(15.5)
|
|
|
*
|
Income
taxes
|
|
(36.1)
|
|
|
(32.3)
|
|
|
|
|
(33.8)
|
|
|
(98.2)
|
|
|
|
Income (loss) from
continuing operations, net of tax
|
|
35.8
|
|
|
28.9
|
|
|
24%
|
|
(120.0)
|
|
|
(113.7)
|
|
|
(6)%
|
(Loss) income from
discontinued operations, net of tax
|
|
(2.6)
|
|
|
0.8
|
|
|
|
|
(12.2)
|
|
|
(3.0)
|
|
|
|
Net income
(loss)
|
|
33.2
|
|
|
29.7
|
|
|
|
|
(132.2)
|
|
|
(116.7)
|
|
|
|
Net income
attributable to noncontrolling interests
|
|
(0.2)
|
|
|
(0.9)
|
|
|
|
|
(0.7)
|
|
|
(1.8)
|
|
|
|
Net income (loss)
attributable to Avon
|
|
$
|
33.0
|
|
|
$
|
28.8
|
|
|
15%
|
|
$
|
(132.9)
|
|
|
$
|
(118.5)
|
|
|
(12)%
|
Earnings (loss) per
share:(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS from
continuing operations
|
|
$
|
0.07
|
|
|
$
|
0.06
|
|
|
17%
|
|
$
|
(0.29)
|
|
|
$
|
(0.26)
|
|
|
(12)%
|
Basic EPS from
discontinued operations
|
|
(0.01)
|
|
|
—
|
|
|
|
|
(0.03)
|
|
|
(0.01)
|
|
|
|
Basic EPS
attributable to Avon
|
|
$
|
0.06
|
|
|
$
|
0.07
|
|
|
(14)%
|
|
$
|
(0.32)
|
|
|
$
|
(0.27)
|
|
|
(19)%
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS from
continuing operations
|
|
$
|
0.07
|
|
|
$
|
0.06
|
|
|
17%
|
|
$
|
(0.29)
|
|
|
$
|
(0.26)
|
|
|
(12)%
|
Diluted EPS from
discontinued operations
|
|
(0.01)
|
|
|
—
|
|
|
|
|
(0.03)
|
|
|
(0.01)
|
|
|
|
Diluted EPS
attributable to Avon
|
|
$
|
0.06
|
|
|
$
|
0.07
|
|
|
(14)%
|
|
$
|
(0.32)
|
|
|
$
|
(0.27)
|
|
|
(19)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
436.9
|
|
|
435.2
|
|
|
|
|
436.4
|
|
|
435.0
|
|
|
|
Diluted
|
|
436.9
|
|
|
435.2
|
|
|
|
|
436.4
|
|
|
435.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Calculation not
meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Under the
two-class method, earnings (loss) per share is calculated using net
income (loss) allocable to common shares, which is derived by
reducing net income (loss) by the earnings (loss) allocable to
participating securities and earnings allocated to convertible
preferred stock. Net income (loss) allocable to common shares used
in the basic and diluted loss per share calculation was $26.7 and
$28.7 for the three months ended June 30, 2016 and 2015,
respectively. Net loss allocable to common shares used in the basic
and diluted loss per share calculation was ($138.4) and ($116.2)
for the six months ended June 30, 2016 and 2015,
respectively.
|
AVON PRODUCTS,
INC.
|
CONSOLIDATED
BALANCE SHEETS
|
(Unaudited)
|
(In
millions)
|
|
|
|
June
30
|
|
December
31
|
|
|
2016
|
|
2015
|
Assets
|
|
|
|
|
Current
Assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
741.5
|
|
|
$
|
686.9
|
|
Accounts receivable,
net
|
|
466.2
|
|
|
443.0
|
|
Inventories
|
|
665.5
|
|
|
624.0
|
|
Prepaid expenses and
other
|
|
314.0
|
|
|
296.1
|
|
Current assets of
discontinued operations
|
|
7.0
|
|
|
291.1
|
|
Total current
assets
|
|
2,194.2
|
|
|
2,341.1
|
|
Property, plant and
equipment, at cost
|
|
1,507.6
|
|
|
1,495.7
|
|
Less accumulated
depreciation
|
|
(764.3)
|
|
|
(728.8)
|
|
Property, plant and
equipment, net
|
|
743.3
|
|
|
766.9
|
|
Goodwill
|
|
96.1
|
|
|
92.3
|
|
Other
assets
|
|
604.5
|
|
|
490.0
|
|
Noncurrent assets of
discontinued operations
|
|
—
|
|
|
180.1
|
|
Total
assets
|
|
$
|
3,638.1
|
|
|
$
|
3,870.4
|
|
Liabilities and
Shareholders' Deficit
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
Debt maturing within
one year
|
|
$
|
48.8
|
|
|
$
|
55.2
|
|
Accounts
payable
|
|
723.7
|
|
|
774.2
|
|
Accrued
compensation
|
|
138.8
|
|
|
157.6
|
|
Other accrued
liabilities
|
|
417.9
|
|
|
419.6
|
|
Sales and taxes other
than income
|
|
144.3
|
|
|
174.9
|
|
Income
taxes
|
|
6.6
|
|
|
23.9
|
|
Payable to
discontinued operations
|
|
—
|
|
|
100.0
|
|
Current liabilities
of discontinued operations
|
|
12.0
|
|
|
489.7
|
|
Total current
liabilities
|
|
1,492.1
|
|
|
2,195.1
|
|
Long-term
debt
|
|
2,139.6
|
|
|
2,150.5
|
|
Employee benefit
plans
|
|
164.9
|
|
|
177.5
|
|
Long-term income
taxes
|
|
76.7
|
|
|
65.1
|
|
Other
liabilities
|
|
162.1
|
|
|
78.4
|
|
Noncurrent
liabilities of discontinued operations
|
|
—
|
|
|
260.2
|
|
Total
liabilities
|
|
4,035.4
|
|
|
4,926.8
|
|
|
|
|
|
|
|
|
|
|
|
Series C convertible
preferred stock
|
|
433.6
|
|
|
—
|
|
|
|
|
|
|
Shareholders'
Deficit
|
|
|
|
|
Common
stock
|
|
188.5
|
|
|
187.9
|
|
Additional paid-in
capital
|
|
2,266.1
|
|
|
2,254.0
|
|
Retained
earnings
|
|
2,308.0
|
|
|
2,448.1
|
|
Accumulated other
comprehensive loss
|
|
(1,009.8)
|
|
|
(1,366.2)
|
|
Treasury stock, at
cost
|
|
(4,597.8)
|
|
|
(4,594.1)
|
|
Total Avon
shareholders' deficit
|
|
(845.0)
|
|
|
(1,070.3)
|
|
Noncontrolling
interests
|
|
14.1
|
|
|
13.9
|
|
Total shareholders'
deficit
|
|
(830.9)
|
|
|
(1,056.4)
|
|
Total liabilities,
series C convertible preferred stock and shareholders'
deficit
|
|
$
|
3,638.1
|
|
|
$
|
3,870.4
|
|
|
|
|
|
|
AVON PRODUCTS,
INC.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(Unaudited)
|
(In
millions)
|
|
|
|
Six Months
Ended
|
|
|
June
30
|
|
|
2016
|
|
2015
|
Cash Flows from
Operating Activities
|
|
|
|
|
Net loss
|
|
$
|
(132.2)
|
|
|
$
|
(116.7)
|
|
Loss from
discontinued operations, net of tax
|
|
12.2
|
|
|
3.0
|
|
Loss from continuing
operations, net of tax
|
|
$
|
(120.0)
|
|
|
$
|
(113.7)
|
|
Adjustments to
reconcile net loss to net cash used by operating
activities:
|
|
|
|
|
Depreciation
|
|
41.7
|
|
|
49.7
|
|
Amortization
|
|
14.7
|
|
|
17.4
|
|
Provision for
doubtful accounts
|
|
73.8
|
|
|
68.1
|
|
Provision for
obsolescence
|
|
18.5
|
|
|
22.7
|
|
Share-based
compensation
|
|
16.0
|
|
|
11.9
|
|
Foreign exchange
losses
|
|
—
|
|
|
6.1
|
|
Deferred income
taxes
|
|
(15.0)
|
|
|
29.2
|
|
Charge for Venezuelan
monetary assets and liabilities
|
|
—
|
|
|
(4.2)
|
|
Charge for Venezuelan
non-monetary assets
|
|
—
|
|
|
101.7
|
|
Loss on
deconsolidation of Venezuela
|
|
120.5
|
|
|
—
|
|
Other
|
|
1.7
|
|
|
3.7
|
|
Changes in assets and
liabilities:
|
|
|
|
|
Accounts
receivable
|
|
(90.4)
|
|
|
(80.1)
|
|
Inventories
|
|
(69.6)
|
|
|
(70.5)
|
|
Prepaid expenses and
other
|
|
2.3
|
|
|
(51.4)
|
|
Accounts payable and
accrued liabilities
|
|
(65.5)
|
|
|
(42.8)
|
|
Income and other
taxes
|
|
(24.2)
|
|
|
(25.5)
|
|
Noncurrent assets and
liabilities
|
|
(34.7)
|
|
|
(29.2)
|
|
Net cash used by
operating activities of continuing operations
|
|
(130.2)
|
|
|
(106.9)
|
|
Cash Flows from
Investing Activities
|
|
|
|
|
Capital
expenditures
|
|
(42.7)
|
|
|
(40.4)
|
|
Disposal of
assets
|
|
1.9
|
|
|
4.3
|
|
Purchases of
investments
|
|
—
|
|
|
(11.9)
|
|
Proceeds from sale of
investments
|
|
—
|
|
|
0.6
|
|
Reduction of cash due
to Venezuela deconsolidation
|
|
(4.5)
|
|
|
—
|
|
Other investing
activities
|
|
1.6
|
|
|
—
|
|
Net cash used by
investing activities of continuing operations
|
|
(43.7)
|
|
|
(47.4)
|
|
Cash Flows from
Financing Activities
|
|
|
|
|
Cash
dividends
|
|
—
|
|
|
(53.6)
|
|
Debt, net (maturities
of three months or less)
|
|
(11.6)
|
|
|
(0.3)
|
|
Proceeds from
debt
|
|
8.8
|
|
|
7.6
|
|
Repayment of
debt
|
|
(6.2)
|
|
|
(4.4)
|
|
Repurchase of common
stock
|
|
(3.7)
|
|
|
(2.5)
|
|
Net proceeds from the
sale of series C convertible preferred stock
|
|
426.3
|
|
|
—
|
|
Other financing
activities
|
|
(1.0)
|
|
|
(5.8)
|
|
Net cash provided
(used) by financing activities of continuing
operations
|
|
412.6
|
|
|
(59.0)
|
|
Cash Flows from
Discontinued Operations
|
|
|
|
|
Net cash used by
operating activities of discontinued operations
|
|
(65.9)
|
|
|
(3.0)
|
|
Net cash used by
investing activities of discontinued operations
|
|
(96.7)
|
|
|
(1.7)
|
|
Net cash used by
financing activities of discontinued operations
|
|
—
|
|
|
(10.1)
|
|
Net cash used by
discontinued operations
|
|
(162.6)
|
|
|
(14.8)
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
(19.3)
|
|
|
(29.4)
|
|
Net increase
(decrease) in cash and cash equivalents
|
|
56.8
|
|
|
(257.5)
|
|
Cash and cash
equivalents at beginning of year(1)
|
|
684.7
|
|
|
960.5
|
|
Cash and cash
equivalents at end of period(2)
|
|
$
|
741.5
|
|
|
$
|
703.0
|
|
|
|
|
|
|
(1)
|
Includes cash and
cash equivalents of discontinued operations of $(2.2) and $24.1 at
the beginning of the year in 2016 and 2015.
|
|
|
(2)
|
Includes cash and
cash equivalents of discontinued operations of $1.0 and cash and
cash equivalents held for sale of $6.1 at June 30, 2015.
|
AVON PRODUCTS,
INC.
|
SUPPLEMENTAL
SCHEDULE
|
SEGMENT
PERFORMANCE METRICS
|
(Unaudited)
|
(In
millions)
|
|
THREE MONTHS ENDED
JUNE 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SEGMENT
RESULTS
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
Revenue
|
|
Active
|
|
Order
|
|
Units
|
|
Price/
|
|
Ending
|
|
US
$
|
|
C$
|
|
Representatives
|
|
C$
|
|
Sold
|
|
Mix
C$
|
|
Representatives
|
Revenue &
Drivers
|
|
|
% var.
vs 2Q15
|
|
% var.
vs 2Q15
|
|
% var.
vs 2Q15
|
|
% var.
vs 2Q15
|
|
% var.
vs 2Q15
|
|
% var.
vs 2Q15
|
|
% var.
vs 2Q15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe, Middle East
&
Africa
|
$
|
520.9
|
|
|
(2)%
|
|
7%
|
|
4%
|
|
3%
|
|
2%
|
|
5%
|
|
6%
|
South Latin
America
|
535.7
|
|
|
(12)
|
|
5
|
|
—
|
|
5
|
|
(2)
|
|
7
|
|
1
|
North Latin
America
|
224.4
|
|
|
(5)
|
|
6
|
|
4
|
|
2
|
|
(6)
|
|
12
|
|
—
|
Asia
Pacific
|
141.9
|
|
|
(10)
|
|
(5)
|
|
(8)
|
|
3
|
|
(4)
|
|
(1)
|
|
(4)
|
Total from
reportable
segments
|
1,422.9
|
|
|
(7)
|
|
5
|
|
1
|
|
4
|
|
(2)
|
|
7
|
|
2
|
Other operating
segments and
business activities
|
11.4
|
|
|
(66)
|
|
(61)
|
|
(100)
|
|
*
|
|
(100)
|
|
*
|
|
(100)
|
Total
revenue
|
$
|
1,434.3
|
|
|
(8)%
|
|
4%
|
|
(2)%
|
|
6%
|
|
(3)%
|
|
7%
|
|
(1)%
|
Operating
Profit/Margin
|
|
2016 Operating
Profit US$
|
|
2016
Operating
Margin US$
|
|
Change in
US$ vs
2Q15
|
|
Change in
C$ vs
2Q15
|
|
|
|
|
|
|
|
|
|
|
|
Segment
profit/margin
|
|
|
|
|
|
|
|
|
|
Europe, Middle East
& Africa
|
|
$
|
83.4
|
|
|
16.0%
|
|
220 bps
|
|
250 bps
|
|
South Latin
America
|
|
61.0
|
|
|
11.4
|
|
—
|
|
10
|
|
North Latin
America
|
|
32.1
|
|
|
14.3
|
|
90
|
|
110
|
|
Asia
Pacific
|
|
14.8
|
|
|
10.4
|
|
—
|
|
30
|
|
Total from
reportable segments
|
|
191.3
|
|
|
13.4
|
|
100
|
|
130
|
|
Other operating
segments and business
activities
|
|
0.7
|
|
|
6.1
|
|
*
|
|
*
|
|
Unallocated global
expenses
|
|
(87.5)
|
|
|
—
|
|
*
|
|
*
|
|
CTI restructuring
initiatives
|
|
(9.4)
|
|
|
*
|
|
*
|
|
*
|
|
Operating
profit
|
|
$
|
95.1
|
|
|
6.6%
|
|
90
bps
|
|
160
bps
|
|
|
|
|
|
|
|
|
|
|
|
*Calculation not
meaningful
|
|
Other operating
segments and business activities include the business results for
Liz Earle, which was sold in July 2015, and Venezuela, which was
deconsolidated effective March 31, 2016. Other operating segments
and business activities also include revenue from the sale of
products to New Avon LLC since the separation of the Company's
North America business into New Avon LLC on March 1, 2016 and
ongoing royalties from the licensing of the Company's name and
products.
|
AVON PRODUCTS,
INC.
|
SUPPLEMENTAL
SCHEDULE
|
SEGMENT
PERFORMANCE METRICS
|
(Unaudited)
|
(In
millions)
|
|
SIX MONTHS ENDED JUNE
30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SEGMENT
RESULTS
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
Revenue
|
|
Active
|
|
Order
|
|
Units
|
|
Price/
|
|
Ending
|
|
US
$
|
|
C$
|
|
Representatives
|
|
C$
|
|
Sold
|
|
Mix
C$
|
|
Representatives
|
Revenue &
Drivers
|
|
|
% var.
vs 1H15
|
|
% var.
vs 1H15
|
|
% var.
vs 1H15
|
|
% var.
vs 1H15
|
|
% var.
vs 1H15
|
|
% var.
vs 1H15
|
|
% var.
vs 1H15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe, Middle East
&
Africa
|
$
|
1,041.3
|
|
|
(2)%
|
|
9%
|
|
6%
|
|
3%
|
|
5%
|
|
4%
|
|
6%
|
South Latin
America
|
962.1
|
|
|
(20)
|
|
2
|
|
(2)
|
|
4
|
|
(7)
|
|
9
|
|
1
|
North Latin
America
|
429.1
|
|
|
(8)
|
|
4
|
|
—
|
|
4
|
|
(5)
|
|
9
|
|
—
|
Asia
Pacific
|
278.6
|
|
|
(14)
|
|
(7)
|
|
(9)
|
|
2
|
|
(6)
|
|
(1)
|
|
(4)
|
Total from
reportable
segments
|
2,711.1
|
|
|
(11)
|
|
4
|
|
—
|
|
4
|
|
(3)
|
|
7
|
|
2
|
Other operating
segments and
business activities
|
29.7
|
|
|
(57)
|
|
(52)
|
|
(75)
|
|
*
|
|
(84)
|
|
*
|
|
(100)
|
Total
revenue
|
$
|
2,740.8
|
|
|
(12)%
|
|
3%
|
|
(2)%
|
|
5%
|
|
(4)%
|
|
7%
|
|
(1)%
|
Operating
Profit/Margin
|
|
2016 Operating
Profit US$
|
|
2016
Operating
Margin US$
|
|
Change in
US$ vs
1H15
|
|
Change in
C$ vs
1H15
|
|
|
|
|
|
|
|
|
|
|
|
Segment
profit/margin
|
|
|
|
|
|
|
|
|
|
Europe, Middle East
& Africa
|
|
$
|
152.1
|
|
|
14.6%
|
|
170 bps
|
|
220 bps
|
|
South Latin
America
|
|
84.1
|
|
|
8.7
|
|
(270)
|
|
(270)
|
|
North Latin
America
|
|
60.6
|
|
|
14.1
|
|
120
|
|
140
|
|
Asia
Pacific
|
|
29.5
|
|
|
10.6
|
|
(140)
|
|
(100)
|
|
Total from
reportable segments
|
|
326.3
|
|
|
12.0
|
|
(20)
|
|
10
|
|
Other operating
segments and business
activities
|
|
4.9
|
|
|
16.5
|
|
*
|
|
*
|
|
Unallocated global
expenses
|
|
(172.1)
|
|
|
—
|
|
*
|
|
*
|
|
CTI restructuring
initiatives
|
|
(56.2)
|
|
|
*
|
|
*
|
|
*
|
|
Operating
profit
|
|
$
|
102.9
|
|
|
3.8%
|
|
200
bps
|
|
(50)
bps
|
|
|
|
|
|
|
|
|
|
|
|
*Calculation not
meaningful
|
|
Other operating
segments and business activities include the business results for
Liz Earle, which was sold in July 2015, and Venezuela, which was
deconsolidated effective March 31, 2016. Other operating segments
and business activities also include revenue from the sale of
products to New Avon LLC since the separation of the Company's
North America business into New Avon LLC on March 1, 2016 and
ongoing royalties from the licensing of the Company's name and
products.
|
AVON PRODUCTS,
INC.
|
SUPPLEMENTAL
SCHEDULE
|
(Unaudited)
|
(In
millions)
|
|
CATEGORY SALES
FROM REPORTABLE SEGMENTS (US$)
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
Three Months Ended
June 30
|
|
US$
|
|
C$
|
|
|
2016
|
|
2015
|
|
% var. vs
2Q15
|
|
% var. vs
2Q15
|
Beauty:
|
|
|
|
|
|
|
|
|
Skincare
|
|
$
|
417.6
|
|
|
$
|
451.2
|
|
|
(7)%
|
|
4%
|
Fragrance
|
|
361.4
|
|
|
394.9
|
|
|
(8)
|
|
5
|
Color
|
|
254.3
|
|
|
270.6
|
|
|
(6)
|
|
6
|
Total
Beauty
|
|
1,033.3
|
|
|
1,116.7
|
|
|
(7)
|
|
5
|
Fashion &
Home:
|
|
|
|
|
|
|
|
|
Fashion
(jewelry/watches/apparel/footwear/accessories/children's)
|
|
217.0
|
|
|
225.6
|
|
|
(4)
|
|
6
|
Home (gift & decorative products/housewares/entertainment & leisure/
children's/nutrition)
|
|
149.2
|
|
|
169.4
|
|
|
(12)
|
|
3
|
Total Fashion &
Home
|
|
366.2
|
|
|
395.0
|
|
|
(7)
|
|
5
|
Net sales from
reportable segments
|
|
1,399.5
|
|
|
1,511.7
|
|
|
(7)
|
|
5
|
Net sales from Other
operating segments and business activities
|
|
—
|
|
|
32.8
|
|
|
(100)
|
|
(100)
|
Net sales
|
|
1,399.5
|
|
|
1,544.5
|
|
|
(9)
|
|
2
|
Other
revenue
|
|
34.8
|
|
|
20.4
|
|
|
71
|
|
96
|
Total
revenue
|
|
$
|
1,434.3
|
|
|
$
|
1,564.9
|
|
|
(8)
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CATEGORY SALES
FROM REPORTABLE SEGMENTS (US$)
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
Six Months Ended
June 30
|
|
US$
|
|
C$
|
|
|
2016
|
|
2015
|
|
% var. vs
1H15
|
|
% var. vs
1H15
|
Beauty:
|
|
|
|
|
|
|
|
|
Skincare
|
|
$
|
780.2
|
|
|
$
|
896.9
|
|
|
(13)%
|
|
1%
|
Fragrance
|
|
693.2
|
|
|
782.3
|
|
|
(11)
|
|
4
|
Color
|
|
500.3
|
|
|
560.5
|
|
|
(11)
|
|
4
|
Total
Beauty
|
|
1,973.7
|
|
|
2,239.7
|
|
|
(12)
|
|
3
|
Fashion &
Home:
|
|
|
|
|
|
|
|
|
Fashion
(jewelry/watches/apparel/footwear/accessories/children's)
|
|
413.7
|
|
|
439.4
|
|
|
(6)
|
|
7
|
Home (gift & decorative products/housewares/entertainment & leisure/
children's/nutrition)
|
|
278.5
|
|
|
330.3
|
|
|
(16)
|
|
2
|
Total Fashion &
Home
|
|
692.2
|
|
|
769.7
|
|
|
(10)
|
|
5
|
Net sales from
reportable segments
|
|
2,665.9
|
|
|
3,009.4
|
|
|
(11)
|
|
3
|
Net sales from Other
operating segments and business activities
|
|
13.6
|
|
|
68.0
|
|
|
(80)
|
|
(83)
|
Net sales
|
|
2,679.5
|
|
|
3,077.4
|
|
|
(13)
|
|
2
|
Other
revenue
|
|
61.3
|
|
|
39.6
|
|
|
55
|
|
81
|
Total
revenue
|
|
$
|
2,740.8
|
|
|
$
|
3,117.0
|
|
|
(12)
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other revenue
includes sales of products to New Avon LLC since the separation of
the Company's North America business into New Avon LLC on March 1,
2016 of $9.8 and $13.5 for the three and six months ended June 30,
2016, respectively.
|
AVON PRODUCTS,
INC.
|
SUPPLEMENTAL
SCHEDULE
|
NON-GAAP FINANCIAL
MEASURES
|
(Unaudited)
|
(In millions,
except per share data)
|
|
This supplemental
schedule provides adjusted Non-GAAP financial information and a
quantitative reconciliation of the difference between the Non-GAAP
financial measure and the financial measure calculated and reported
in accordance with GAAP.
|
|
|
|
THREE MONTHS ENDED
JUNE 30, 2016
|
|
|
Reported
(GAAP)
|
|
CTI
restructuring
initiatives
|
|
Special tax
items
|
|
Adjusted
(Non-GAAP)
|
Total
revenue
|
|
$
|
1,434.3
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,434.3
|
Cost of
sales
|
|
565.0
|
|
0.3
|
|
—
|
|
564.7
|
Selling, general and
administrative expenses
|
|
774.2
|
|
9.1
|
|
—
|
|
765.1
|
Operating
profit
|
|
95.1
|
|
9.4
|
|
—
|
|
104.5
|
Income from
continuing operations, before taxes
|
|
71.9
|
|
9.4
|
|
—
|
|
81.3
|
Income
taxes
|
|
(36.1)
|
|
(0.7)
|
|
(7.1)
|
|
(43.9)
|
Income from
continuing operations, net of tax
|
|
$
|
35.8
|
|
$
|
8.7
|
|
$
|
(7.1)
|
|
$
|
37.4
|
|
|
|
|
|
|
|
|
|
Diluted EPS from
continuing operations
|
|
$
|
0.07
|
|
|
|
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
60.6%
|
|
—
|
|
—
|
|
60.6%
|
SG&A as a % of
revenues
|
|
54.0%
|
|
(0.6)
|
|
—
|
|
53.3%
|
Operating
margin
|
|
6.6%
|
|
0.6
|
|
—
|
|
7.3%
|
Effective tax
rate
|
|
50.2%
|
|
|
|
|
|
54.0%
|
|
|
|
|
|
|
|
|
|
|
Amounts in the table
above may not necessarily sum because the computations are made
independently.
|
|
Note: The diluted EPS
impact for each Non-GAAP item on the table above is not provided
due to the participation rights of the Series C convertible
preferred stock. The Reported and Adjusted diluted EPS from
continuing operations are calculated independently and factor in
the participation rights of the Series C convertible preferred
stock, and, therefore, would cause the amounts not to sum to
Adjusted diluted EPS from continuing operations.
|
AVON PRODUCTS,
INC.
|
SUPPLEMENTAL
SCHEDULE
|
NON-GAAP FINANCIAL
MEASURES
|
(Unaudited)
|
(In millions,
except per share data)
|
|
This supplemental
schedule provides adjusted Non-GAAP financial information and a
quantitative reconciliation of the difference between the Non-GAAP
financial measure and the financial measure calculated and reported
in accordance with GAAP.
|
|
|
|
SIX MONTHS ENDED
JUNE 30, 2016
|
|
|
Reported (GAAP)
|
|
CTI restructuring initiatives
|
|
Venezuelan
special items
|
|
Special tax
items
|
|
Adjusted (Non-GAAP)
|
Total
revenue
|
|
$
|
2,740.8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,740.8
|
|
Cost of
sales
|
|
1,083.8
|
|
|
0.3
|
|
|
—
|
|
|
—
|
|
|
1,083.5
|
|
Selling, general and
administrative expenses
|
|
1,554.1
|
|
|
55.9
|
|
|
—
|
|
|
—
|
|
|
1,498.2
|
|
Operating
profit
|
|
102.9
|
|
|
56.2
|
|
|
—
|
|
|
—
|
|
|
159.1
|
|
(Loss) income from
continuing operations, before taxes
|
|
(86.2)
|
|
|
56.2
|
|
|
120.5
|
|
|
—
|
|
|
90.5
|
|
Income
taxes
|
|
(33.8)
|
|
|
(10.2)
|
|
|
—
|
|
|
(36.4)
|
|
|
(80.4)
|
|
(Loss) income from
continuing operations, net of tax
|
|
$
|
(120.0)
|
|
|
$
|
46.0
|
|
|
$
|
120.5
|
|
|
$
|
(36.4)
|
|
|
$
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS from
continuing operations
|
|
$
|
(0.29)
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
60.5%
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
60.5%
|
|
SG&A as a % of
revenues
|
|
56.7%
|
|
|
(2.0)
|
|
|
—
|
|
|
—
|
|
|
54.7%
|
|
Operating
margin
|
|
3.8%
|
|
|
2.0
|
|
|
—
|
|
|
—
|
|
|
5.8%
|
|
Effective tax
rate
|
|
*
|
|
|
|
|
|
|
|
|
88.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Calculation not
meaningful
|
|
Amounts in the table
above may not necessarily sum because the computations are made
independently.
|
|
Note: The diluted EPS
impact for each Non-GAAP item on the table above is not provided
due to the participation rights of the Series C convertible
preferred stock. The Reported and Adjusted diluted EPS from
continuing operations are calculated independently and factor in
the participation rights of the Series C convertible preferred
stock, and, therefore, would cause the amounts not to sum to
Adjusted diluted EPS from continuing operations.
|
AVON PRODUCTS,
INC.
|
SUPPLEMENTAL
SCHEDULE
|
NON-GAAP FINANCIAL
MEASURES
|
(Unaudited)
|
(In millions,
except per share data)
|
|
This supplemental
schedule provides adjusted Non-GAAP financial information and a
quantitative reconciliation of the difference between the Non-GAAP
financial measure and the financial measure calculated and reported
in accordance with GAAP.
|
|
|
|
THREE MONTHS ENDED
JUNE 30, 2015
|
|
|
Reported (GAAP)
|
|
CTI restructuring initiatives
|
|
Venezuelan
special items
|
|
Other
items
|
|
Special tax
items
|
|
Adjusted (Non-GAAP)
|
Total
revenue
|
|
$
|
1,564.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,564.9
|
|
Cost of
sales
|
|
611.0
|
|
|
—
|
|
|
5.7
|
|
|
—
|
|
|
—
|
|
|
605.3
|
|
Selling, general and
administrative expenses
|
|
864.2
|
|
|
2.9
|
|
|
0.5
|
|
|
—
|
|
|
—
|
|
|
860.8
|
|
Operating
profit
|
|
89.7
|
|
|
2.9
|
|
|
6.2
|
|
|
—
|
|
|
—
|
|
|
98.8
|
|
Income from
continuing operations, before taxes
|
|
61.2
|
|
|
2.9
|
|
|
6.2
|
|
|
3.8
|
|
|
—
|
|
|
74.1
|
|
Income
taxes
|
|
(32.3)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3.2)
|
|
|
(35.5)
|
|
Income from
continuing operations, net of tax
|
|
$
|
28.9
|
|
|
$
|
2.9
|
|
|
$
|
6.2
|
|
|
$
|
3.8
|
|
|
$
|
(3.2)
|
|
|
$
|
38.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS from
continuing operations
|
|
$
|
0.06
|
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
|
$
|
(0.01)
|
|
|
$
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
61.0%
|
|
|
—
|
|
|
0.4
|
|
|
—
|
|
|
—
|
|
|
61.3%
|
|
SG&A as a % of
revenues
|
|
55.2%
|
|
|
(0.2)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
55.0%
|
|
Operating
margin
|
|
5.7%
|
|
|
0.2
|
|
|
0.4
|
|
|
—
|
|
|
—
|
|
|
6.3%
|
|
Effective tax
rate
|
|
52.8%
|
|
|
|
|
|
|
|
|
|
|
47.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts in the table
above may not necessarily sum because the computations are made
independently.
|
AVON PRODUCTS,
INC.
|
SUPPLEMENTAL
SCHEDULE
|
NON-GAAP FINANCIAL
MEASURES
|
(Unaudited)
|
(In millions,
except per share data)
|
|
This supplemental
schedule provides adjusted Non-GAAP financial information and a
quantitative reconciliation of the difference between the Non-GAAP
financial measure and the financial measure calculated and reported
in accordance with GAAP.
|
|
|
|
SIX MONTHS ENDED
JUNE 30, 2015
|
|
|
Reported (GAAP)
|
|
CTI restructuring initiatives
|
|
Venezuelan
special
items
|
|
Other
items
|
|
Special
tax items
|
|
Adjusted (Non-GAAP)
|
Total
revenue
|
|
$
|
3,117.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,117.0
|
|
Cost of
sales
|
|
1,222.7
|
|
|
—
|
|
|
20.9
|
|
|
—
|
|
|
—
|
|
|
1,201.8
|
|
Selling, general and
administrative expenses
|
|
1,837.5
|
|
|
30.1
|
|
|
91.7
|
|
|
—
|
|
|
—
|
|
|
1,715.7
|
|
Operating
profit
|
|
56.8
|
|
|
30.1
|
|
|
112.6
|
|
|
—
|
|
|
—
|
|
|
199.5
|
|
(Loss) income from
continuing operations, before taxes
|
|
(15.5)
|
|
|
30.1
|
|
|
108.4
|
|
|
3.8
|
|
|
—
|
|
|
126.8
|
|
Income
taxes
|
|
(98.2)
|
|
|
(3.5)
|
|
|
0.8
|
|
|
—
|
|
|
28.1
|
|
|
(72.8)
|
|
(Loss) income from
continuing operations, net of tax
|
|
$
|
(113.7)
|
|
|
$
|
26.6
|
|
|
$
|
109.2
|
|
|
$
|
3.8
|
|
|
$
|
28.1
|
|
|
$
|
54.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS from
continuing operations
|
|
$
|
(0.26)
|
|
|
$
|
0.06
|
|
|
$
|
0.25
|
|
|
$
|
0.01
|
|
|
$
|
0.07
|
|
|
$
|
0.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
60.8%
|
|
|
—
|
|
|
0.7
|
|
|
—
|
|
|
—
|
|
|
61.4%
|
|
SG&A as a % of
revenues
|
|
58.9%
|
|
|
(1.0)
|
|
|
(2.9)
|
|
|
—
|
|
|
—
|
|
|
55.0%
|
|
Operating
margin
|
|
1.8%
|
|
|
1.0
|
|
|
3.6
|
|
|
—
|
|
|
—
|
|
|
6.4%
|
|
Effective tax
rate
|
|
*
|
|
|
|
|
|
|
|
|
|
|
57.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Calculation not
meaningful
|
|
Amounts in the table
above may not necessarily sum because the computations are made
independently.
|
AVON PRODUCTS,
INC.
|
SUPPLEMENTAL
SCHEDULE
|
NON-GAAP IMPACT OF
SALE OF LIZ EARLE ITEMS AFFECTING YEAR-OVER-YEAR
COMPARISONS
|
(Unaudited)
|
|
This supplemental
schedule provides adjusted Non-GAAP financial information and a
quantitative reconciliation of the difference between the Non-GAAP
financial measures shown, other related Non-GAAP financial measures
we present elsewhere and the financial measures calculated and
reported in accordance with GAAP.
|
|
THREE MONTHS ENDED
JUNE 30, 2016
|
|
|
Revenue %
change
|
|
Year-over-Year
impact of
foreign currency
|
|
C$ revenue
%
change
|
|
Year-over-Year
C$ impact of
Liz Earle
|
|
C$ revenue %
change, excluding
impact of Liz Earle
|
|
|
|
|
|
|
|
|
|
|
|
Total Avon
|
|
(8)%
|
|
12 pts
|
|
4%
|
|
1 pt
|
|
5%
|
|
|
|
|
|
|
|
|
|
|
|
|
SIX MONTHS ENDED
JUNE 30, 2016
|
|
|
Revenue %
change
|
|
Year-over-Year
impact of
foreign currency
|
|
C$ revenue %
change
|
|
Year-over-Year
C$ impact of
Liz Earle
|
|
C$ revenue %
change, excluding
impact of Liz Earle
|
|
|
|
|
|
|
|
|
|
|
|
Total Avon
|
|
(12)%
|
|
15 pts
|
|
3%
|
|
1 pt
|
|
4%
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Financial Measures
To supplement the Company's financial results presented in
accordance with generally accepted accounting principles in
the United States ("GAAP"), the
Company discloses operating results that have been adjusted to
exclude the impact of changes due to the translation of foreign
currencies into U.S. dollars, including changes in: revenue,
operating profit, Adjusted operating profit, operating margin and
Adjusted operating margin. The Company also refers to these
adjusted financial measures as Constant $ items, which are Non-GAAP
financial measures. The Company believes these measures provide
investors an additional perspective on trends and underlying
business results. To exclude the impact of changes due to the
translation of foreign currencies into U.S. dollars, the Company
calculates current-year results and prior-year results at a
constant exchange rate, which is updated on an annual basis as part
of the Company's budgeting process. Foreign currency impact is
determined as the difference between actual growth rates and
constant-currency growth rates.
The Company also presents cost of sales, gross margin, selling,
general and administrative expenses, selling, general and
administrative expenses as a percentage of revenue, operating
profit, operating margin, income (loss) from continuing operations,
before taxes, income taxes, income (loss) from continuing
operations, net of tax, diluted earnings (loss) per share from
continuing operations and effective tax rate on a Non-GAAP
basis. The Company refers to these Non-GAAP financial measures as
"Adjusted." The Company has provided a quantitative reconciliation
of the difference between the Non-GAAP financial measures and the
financial measures calculated and reported in accordance with
GAAP.
The Company uses the Non-GAAP financial measures to
evaluate its operating performance. These Non-GAAP measures should
not be considered in isolation, or as a substitute for, or
superior to, financial measures calculated in accordance with GAAP.
The Company believes investors find the Non-GAAP information
helpful in understanding the ongoing performance of operations
separate from items that may have a disproportionate positive or
negative impact on the Company's financial results in any
particular period. The Company believes that it is meaningful for
investors to be made aware of the impacts of 1) CTI restructuring
initiatives, 2) charges related to the deconsolidation of the
Company's Venezuela operations as
of March 31, 2016 and the devaluation
of Venezuelan currency in February
2015, combined with being designated as a highly
inflationary economy ("Venezuelan special items"), and 3) an income
tax benefit realized in the first quarter of 2016 as a result of
tax planning strategies, an income tax benefit in the second
quarter of 2016 primarily due to the release of a valuation
allowance associated with Russia
and the non-cash income tax adjustments associated with the
Company's deferred tax assets recorded in 2015 ("Special tax
items").
The Venezuelan special items include the impact on the
Consolidated Statements of Operations in 2016 caused by the
deconsolidation of the Company's Venezuela operations for which the Company
recorded a loss of approximately $120
million in other expense, net. The loss was comprised of
approximately $39 million in net
assets of the Venezuelan business and approximately $81 million in accumulated foreign currency
translation adjustments within AOCI associated with foreign
currency changes before Venezuela
was accounted for as a highly inflationary economy. The Venezuelan
special items include the impact on the Consolidated Statements of
Operations in 2015 caused by the devaluation of Venezuelan currency
on monetary assets and liabilities, such as cash, receivables and
payables; deferred tax assets and liabilities; and non-monetary
assets, such as inventories. For non-monetary assets, the
Venezuelan special items include the earnings impact caused by the
difference between the historical U.S. dollar cost of the assets at
the previous exchange rate and the revised exchange rate. In 2015,
the Venezuelan special items also include adjustments of
approximately $11 million, to reflect
certain non-monetary assets at their net realizable value. In 2015,
the Venezuelan special items also include an impairment charge of
approximately $90 million to reflect
the write-down of the long-lived assets to their estimated fair
value. In 2015, the devaluation was caused as a result of moving
from the SICAD II exchange rate of approximately 50 to the SIMADI
exchange rate of approximately 170.
The Special tax items include the impact during 2016 on income
taxes in the Consolidated Statements of Operations primarily due to
the release of a valuation allowance associated with Russia in the second quarter of 2016 of
approximately $7 million. The Special
tax items also include the impact during 2016 on income taxes in
the Consolidated Statements of Operations due to an income tax
benefit of approximately $29 million
recognized in the first quarter of 2016 as the result of the
implementation of foreign tax planning strategies. The Special tax
items also include the impact during 2015 on the provision for
income taxes in the Consolidated Statements of Operations due to a
non-cash income tax charge of approximately $31 million and a benefit of approximately
$3 million associated with valuation
allowances in the first and second quarters of 2015, respectively,
to adjust the Company's U.S. deferred tax assets to an amount that
was "more likely than not" to be realized. The additional valuation
allowance was due to the strengthening of the U.S. dollar against
currencies of some of the Company's key markets and its associated
effect on the Company's tax planning strategies, and the partial
release of the valuation allowance was due to the weakening of the
U.S. dollar against currencies of some of the Company's key
markets.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/avon-reports-second-quarter-2016-results-300307551.html
SOURCE Avon Products, Inc.