LONDON, Aug. 2, 2018 /PRNewswire/ -- Avon Products,
Inc. (NYSE: AVP) today announced its results for the quarter ended
June 30, 2018.
Jan Zijderveld, Avon CEO said,
"Entering my seventh month at Avon, I am encouraged by improved revenue
growth in 3 of our top 5 markets and the promising trends we are
seeing across the majority of the rest of our business. This is
underpinned by our improving service quality and operational
efficiencies, and in turn reflected in our higher operating margin.
However, we are not yet satisfied with the overall operating
results of the quarter."
Mr. Zijderveld continued, "The senior leadership team and I
continue to focus on immediate corrective priorities, while also
finalizing plans for Avon's
long-term success. We are prioritizing achieving profitable,
sustainable topline growth by focusing on our Representative
experience and satisfaction through enhanced training for 500,000
Representatives in the second half, as well as new sales incentives
programs, better service and improved forecasting. We are becoming
more agile, halving the time to bring on-trend products to market
with over 200 expected to launch in the second half. We will
support our second half global launches with an additional
$30 million of advertising and
marketing spend. And, finally, we are placing digital at the center
of all actions to drive our future progress, enhancing our digital
and e-commerce capabilities through initiatives such as our new
mobile e-brochure, which is locally customizable and distributed
via social media. This is an important first step to build a
digital social selling beauty company."
"Importantly, Avon is rapidly
injecting new talent and capabilities into the business, most
notably a new Chief Digital Officer and three new General Managers
in our top markets, while we continue to institute a performance
culture through increased accountability, agility and speed of
execution," concluded Mr. Zijderveld.
Jamie Wilson, Avon CFO said,
"During the second quarter, we successfully completed the early
redemption of our 2019 bonds to reduce our debt and further
strengthen our balance sheet. We also continued to generate
efficiencies, and will strive to improve on these second quarter
trends in the second half. We are strategically redirecting
investments to support underlying growth initiatives."
Highlights for Second Quarter of 2018:
- Total Reportable Segment Revenue decreased 3% to $1.3 billion, or increased 2% in constant
dollars1, both including a 4% reporting benefit due to
the impact of adopting the new revenue recognition standard
required by generally accepted accounting principles in
the United States ("GAAP")
- The Brazil truckers' strike
reduced Revenue and constant dollar Revenue by
approximately 1%
- Active Representatives and Ending Representatives, both from
Reportable Segments, each declined 4%, or each declined
approximately 3%, excluding the Brazil truckers' strike
- Operating Margin increased 160 bps to 3.9% and Adjusted
Operating Margin increased 60 bps to 5.7%, both including a decline
of approximately 10 bps due to the impact of the new revenue
recognition standard
- Diluted Loss Per Share From Continuing Operations ("Diluted
Loss Per Share") of $0.09 and
Adjusted Diluted Loss Per Share From Continuing Operations
("Adjusted Diluted Loss Per Share") of $0.03, both including a negligible benefit due to
the impact of the new revenue recognition standard
New Revenue Recognition Standard (Accounting Standards Update
2014-09, Revenue from Contracts with Customers codified as
Accounting Standards Codification Topic 606 ("ASC" 606))
As previously disclosed, during the first quarter, the Company
adopted GAAP revenue recognition standard, ASC 606. The Company
adopted the standard as a cumulative-effect adjustment as of
January 1, 2018, therefore,
comparative information for prior periods was not restated. The new
standard has a significant impact on the presentation of sales
incentives and Representative fees and associated costs, primarily
for brochures.
The impact of the change in accounting for revenue recognition
on second-quarter 2018 performance is summarized on pages 16-18 of
this release.
Second-Quarter 2018 Income Statement Review (compared with
second-quarter 2017)
- Total revenue for Avon Products, Inc. decreased 3% to
$1.4 billion, or increased 1% in
constant dollars, both including a benefit of approximately 4% due
to the impact of adopting the new revenue recognition standard and
both including an approximate 1% unfavorable impact from the
Brazil truckers' strike.
- From reportable segments:
-
- Total revenue decreased 3% to $1.3
billion, or increased 2% in constant dollars, both including
a benefit of approximately 4% due to the impact of adopting the new
revenue recognition standard and both including an approximate 1%
unfavorable impact from the Brazil
truckers' strike.
- Active Representatives declined 4% driven by decreases in
South Latin America, primarily
Brazil, Europe, Middle
East & Africa and
North Latin America, or declined
approximately 3% excluding the Brazil truckers' strike.
- Ending Representatives declined 4% with decreases reported in
all segments.
- Average order in constant dollars increased 6%, including a
benefit of approximately 4% due to the impact of adopting the new
revenue recognition standard. Growth in South Latin America, North Latin America and Asia Pacific was offset by a decline in
Europe, Middle East & Africa.
- Gross margin and Adjusted gross margin each decreased
230 basis points to 60.1%, including a decline of approximately 330
basis points due to the impact of adopting the new revenue
recognition standard. Gross margin and Adjusted gross margin were
favorably impacted by non-recurring Brazil net tax recoveries and the net impact
of price/mix, partially offset by higher supply chain costs.
- Operating margin was 3.9% in the quarter, up 160 basis
points, while Adjusted operating margin was 5.7%, up 60 basis
points, both including a decline of approximately 10 basis points
due to the implementation of the new revenue recognition standard.
The Operating margin year-over-year comparison was favorably
impacted by a loss contingency recorded in the prior year related
to a non-U.S. pension plan. Both the Operating margin and Adjusted
operating margin year-over-year comparisons were favorably impacted
by non-recurring Brazil net tax
recoveries.
- The provision for income taxes was $37 million, compared with $34 million for second-quarter 2017. On an
Adjusted basis, the provision for income taxes was $31 million, compared with $34 million for second-quarter 2017.
- Net loss was $37 million,
including a benefit of approximately $2
million due to the impact of the new revenue recognition
standard, compared with a loss of $46
million for second-quarter 2017. Adjusted net loss was
$8 million, including a benefit of
approximately $2 million due to the
impact of the new revenue recognition standard, compared with a
loss of $8 million for second-quarter
2017.
- Diluted loss per share was $0.09, including a negligible benefit due to the
impact of the new revenue recognition standard, compared with a
Diluted loss per share of $0.12 for
second-quarter 2017. Adjusted diluted loss per share was
$0.03, including a negligible benefit
due to the impact of the new revenue recognition standard, compared
with an Adjusted diluted loss per share of $0.03 for second-quarter 2017.
Adjustments to Second-Quarter 2018 GAAP Results to Arrive at
Adjusted Results
During the second quarter of 2018, the following adjustments
were made to GAAP results to arrive at Adjusted results and, in
total, reduced Diluted loss per share by approximately $0.06:
- The Company recorded costs to implement ("CTI") restructuring
within operating profit of approximately $24
million (before and after tax), primarily related to the
Transformation Plan.
- The Company recorded one-time tax reserves of approximately
$6 million associated with its
uncertain tax positions.
THREE MONTHS ENDED
JUNE 30, 2018
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
SEGMENT
RESULTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
Active
Representatives
|
|
Average
Order
C$
|
|
Units
Sold
|
|
Price/
Mix C$
|
|
Ending
Representatives
|
|
US$
|
|
C$
|
|
|
|
|
|
Revenue &
Drivers
|
|
|
% var.
vs 2Q17
|
|
% var.
vs 2Q17
|
|
% var.
vs 2Q17
|
|
% var.
vs 2Q17
|
|
% var. vs
2Q17
|
|
% var. vs
2Q17
|
|
% var.
vs 2Q17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe, Middle East
&
Africa
|
$
|
500.7
|
|
|
1
|
%
|
|
—
|
%
|
|
(3)
|
%
|
|
3
|
%
|
|
(3)
|
%
|
|
3
|
%
|
|
(2)
|
%
|
South Latin
America
|
516.1
|
|
|
(8)
|
%
|
|
3
|
%
|
|
(5)
|
%
|
|
8
|
%
|
|
(6)
|
%
|
|
9
|
%
|
|
(4)
|
%
|
North Latin
America
|
207.3
|
|
|
—
|
%
|
|
3
|
%
|
|
(5)
|
%
|
|
8
|
%
|
|
(6)
|
%
|
|
9
|
%
|
|
(8)
|
%
|
Asia
Pacific
|
113.1
|
|
|
(1)
|
%
|
|
1
|
%
|
|
(1)
|
%
|
|
2
|
%
|
|
—
|
%
|
|
1
|
%
|
|
(4)
|
%
|
Total from
reportable segments
|
1,337.2
|
|
|
(3)
|
%
|
|
2
|
%
|
|
(4)
|
%
|
|
6
|
%
|
|
(4)
|
%
|
|
6
|
%
|
|
(4)
|
%
|
Other operating
segments and
business activities
|
14.7
|
|
|
(32)
|
%
|
|
(32)
|
%
|
|
(70)
|
%
|
|
*
|
|
|
(33)
|
%
|
|
1
|
%
|
|
—
|
%
|
Total
Avon
|
$
|
1,351.9
|
|
|
(3)
|
%
|
|
1
|
%
|
|
(4)
|
%
|
|
5
|
%
|
|
(5)
|
%
|
|
6
|
%
|
|
(4)
|
%
|
Operating
Profit/Margin
|
|
2018 Operating
Profit US$
|
|
2018 Operating
Margin US$
|
|
Change in
US$ vs
2Q17
|
|
Change in
C$ vs
2Q17
|
|
|
|
|
|
|
|
|
|
Segment
profit/margin
|
|
|
|
|
|
|
|
|
Europe, Middle East
& Africa
|
|
$
|
74.4
|
|
|
14.9%
|
|
(140) bps
|
|
(150) bps
|
South Latin
America
|
|
55.2
|
|
|
10.7
|
|
250
|
|
230
|
North Latin
America
|
|
19.0
|
|
|
9.2
|
|
40
|
|
50
|
Asia
Pacific
|
|
7.3
|
|
|
6.5
|
|
(250)
|
|
(200)
|
Total from
reportable segments
|
|
155.9
|
|
|
11.7
|
|
40
|
|
20
|
Other operating
segments and business
activities
|
|
(0.6)
|
|
|
|
|
|
|
|
Unallocated global
expenses
|
|
(78.6)
|
|
|
|
|
|
|
|
CTI restructuring
initiatives
|
|
(23.7)
|
|
|
|
|
|
|
|
Total
Avon
|
|
$
|
53.0
|
|
|
3.9%
|
|
160
bps
|
|
180
bps
|
|
|
|
|
|
|
|
|
|
|
* Calculation not
meaningful
|
Other operating
segments and business activities 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. Other operating segments and business activities also
include the business results for Australia and New Zealand, which
the Company announced it would exit in 2018.
|
Second-Quarter 2018 Segment Review (compared with
second-quarter 2017)
With regards to the discussion below on segment revenue, the
difference between the reported and constant-dollar revenue growth
is the estimated impact of foreign currency translation.
Total Reportable Segment revenue decreased 3% to $1.3 billion, or increased 2% in constant
dollars, both including a benefit of approximately 4% due to the
impact of adopting the new revenue recognition standard. Revenue
and constant-dollar revenue were impacted by declines in Active
Representatives, primarily in Brazil, Russia and Mexico. The Company experienced continued
variability with challenges in key markets, particularly
Brazil, including the impact of
the truckers' strike.
- Europe, Middle East & Africa revenue was up 1%, or relatively
unchanged in constant dollars, both including a benefit of
approximately 3% due to the impact of adopting the new revenue
recognition standard. Revenue and constant-dollar revenue were
impacted by a decrease in Active Representatives.
-
- Russia revenue was down
5%, or up 3% in constant dollars, both including a benefit of
approximately 4% due to the impact of adopting the new revenue
recognition standard. Revenue and constant-dollar revenue were
impacted by a decrease in Active Representatives, partially offset
by higher average order.
- U.K. revenue was down 3%, or 9% in constant dollars,
both including a benefit of approximately 4% due to the impact of
adopting the new revenue recognition standard. Revenue and
constant-dollar revenue were impacted by a decrease in Active
Representatives, partially offset by higher average order.
- South Latin America
revenue was down 8%, or up 3% in constant dollars, both including a
benefit of approximately 5% due to the impact of adopting the new
revenue recognition standard. Revenue and constant-dollar revenue
were impacted by a decrease in Active Representatives, partially
offset by higher average order. Revenue and constant-dollar revenue
were primarily impacted by a decline in Brazil, partially offset by growth in
Argentina, driven by inflationary
pricing.
-
- Brazil revenue was down
13%, or 2% in constant dollars, both including a benefit of
approximately 9% due to the impact of adopting the new revenue
recognition standard. Revenue and constant-dollar revenue were
impacted by a decrease in Active Representatives, as well as lower
average order.
- Brazil suffered an
outsized impact from the trucking strike in the second quarter,
which resulted in lower sales, slower cash collection, higher
inventory levels and loss of Representatives. The Company is taking
corrective actions to re-energize the market including implementing
new Representative training programs, implementing Sales Leader and
Top Seller incentives, and launching relevant product offerings
supported by an increased media investment of $10 million in the second half of 2018.
- North Latin America
revenue was relatively unchanged, or up 3% in constant dollars,
both including a benefit of approximately 5% due to the impact of
adopting the new revenue recognition standard. Revenue and
constant-dollar revenue were impacted by a decrease in Active
Representatives, partially offset by higher average order.
-
- Mexico revenue was up
2%, or up 6% in constant dollars, both including a benefit of
approximately 6% due to the impact of adopting the new revenue
recognition standard. Revenue and constant-dollar revenue were
impacted by higher average order, offset by a decrease in Active
Representatives.
- Asia Pacific revenue
was down 1%, or up 1% in constant dollars, both including a benefit
of approximately 1% due to the impact of adopting the new revenue
recognition standard. Revenue and constant-dollar revenue were
impacted by higher average order, offset by a decrease in Active
Representatives.
-
- Philippines revenue was
down 3%, or up 2% in constant dollars, both including a benefit of
approximately 2% due to the impact of adopting the new revenue
recognition standard. Revenue and constant-dollar revenue were
impacted by an increase in Active Representatives, offset by lower
average order.
Second-Quarter 2018 Cash Flow Review (compared with
second-quarter 2017)
- Net cash used by operating activities of continuing
operations was $107 million for
the six months ended June 30, 2018,
compared with net cash provided by operating activities of
continuing operations of $11 million
in the same period in 2017. The approximate $118 million increased use of net cash from
continuing operating activities was primarily due to higher
inventory purchases, the timing of payments, the costs associated
with the prepayment of the Company's 6.5% Notes in the second
quarter of 2018, and a $10 million
contribution to the U.S. pension plan, partially offset by lower
net receivables.
- Net cash used by investing activities of continuing
operations was $50 million for
the six months ended June 30, 2018,
compared with $40 million in the same
period in 2017. The approximate $10
million increased use of net cash from continuing investing
activities was primarily due to higher capital expenditures.
- Net cash used by financing activities of continuing
operations was $252 million for
the six months ended June 30, 2018,
compared with $13 million in the same
period in 2017. The approximate $239
million increased use of net cash from continuing financing
activities was primarily due to the prepayment of the Company's
6.5% Notes in the second quarter of 2018.
Conference call
Avon will conduct a conference
call at 9:00 a.m. Eastern Time today
to discuss its quarterly results. The dial-in number for the call
is (800) 843-2086 in the U.S. or +1 (706) 643-1815 from non-U.S.
locations (conference ID number: 1961989). The call and related
slide presentation will be webcast live at www.avoninvestor.com and
can be accessed or downloaded from that site for a period of one
year. Please note that the Company intends to file its Form 10-Q on
August 3, 2018.
About Avon Products, Inc.
Avon is the Company that for
130 years has proudly stood for beauty, innovation, optimism and,
above all, for women. Avon
products include well-recognized and beloved brands such as ANEW,
Avon Color, Avon Care, Skin-So-Soft, and Advance Techniques sold
through approximately 6 million active independent Avon Sales
Representatives. Learn more about Avon and its products at
www.avoncompany.com.
Footnotes
1 "Adjusted" items refer to financial measures that
are derived from measures calculated in accordance with GAAP, but
which have been adjusted to exclude certain items. "Like-for-like"
refers to comparable year-over-year figures that exclude the impact
of the adoption of ASC 606. Other Adjusted financial measures that
the Company refers to include constant dollar ("C$") 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.
Forward-Looking Statements
This press release contains "forward-looking statements" that
are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995, including statements
relating to the Company's growth and long-term success, improved
representative engagement and service, efforts to implement new
digital strategies and advertising spend. Because
forward-looking statements inherently involve risks and
uncertainties, actual future results may differ materially from
those expressed or implied by such forward-looking
statements. These risks and uncertainties include, but are
not limited to, the possibility of business disruption, competitive
uncertainties, and general economic and business conditions in
Avon's markets as well as the
other risks detailed in Avon's
filings with the Securities and Exchange Commission. Avon undertakes no obligation to update any
statements in this press release for changes that happen after the
date of this release.
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
|
|
|
|
2018
|
|
2017
|
|
|
|
2018
|
|
2017
|
|
|
Net sales
|
|
$
|
1,268.8
|
|
|
$
|
1,353.5
|
|
|
(6)
|
%
|
|
$
|
2,578.4
|
|
|
$
|
2,651.6
|
|
|
(3)
|
%
|
Other
revenue
|
|
83.1
|
|
|
42.4
|
|
|
|
|
167.0
|
|
|
77.4
|
|
|
|
Total
revenue
|
|
1,351.9
|
|
|
1,395.9
|
|
|
(3)
|
%
|
|
2,745.4
|
|
|
2,729.0
|
|
|
1
|
%
|
Cost of
sales
|
|
539.7
|
|
|
525.0
|
|
|
|
|
1,119.4
|
|
|
1,042.1
|
|
|
|
Selling, general and
administrative expenses
|
|
759.2
|
|
|
838.2
|
|
|
|
|
1,528.1
|
|
|
1,624.4
|
|
|
|
Operating
profit
|
|
53.0
|
|
|
32.7
|
|
|
62
|
%
|
|
97.9
|
|
|
62.5
|
|
|
57
|
%
|
Interest
expense
|
|
34.5
|
|
|
36.1
|
|
|
|
|
70.7
|
|
|
71.2
|
|
|
|
Loss on
extinguishment of debt
|
|
2.9
|
|
|
—
|
|
|
|
|
2.9
|
|
|
—
|
|
|
|
Interest
income
|
|
(3.5)
|
|
|
(3.1)
|
|
|
|
|
(7.7)
|
|
|
(7.8)
|
|
|
|
Other expense,
net
|
|
19.4
|
|
|
11.9
|
|
|
|
|
21.9
|
|
|
18.0
|
|
|
|
Total other
expenses
|
|
53.3
|
|
|
44.9
|
|
|
|
|
87.8
|
|
|
81.4
|
|
|
|
(Loss) Income, before
income taxes
|
|
(0.3)
|
|
|
(12.2)
|
|
|
*
|
|
10.1
|
|
|
(18.9)
|
|
|
*
|
Income
taxes
|
|
(36.7)
|
|
|
(33.6)
|
|
|
|
|
(68.2)
|
|
|
(63.4)
|
|
|
|
Loss from continuing
operations, net of tax
|
|
(37.0)
|
|
|
(45.8)
|
|
|
*
|
|
(58.1)
|
|
|
(82.3)
|
|
|
29
|
%
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
|
Net loss
|
|
(37.0)
|
|
|
(45.8)
|
|
|
19
|
%
|
|
(58.1)
|
|
|
(82.3)
|
|
|
29
|
%
|
Net loss attributable
to noncontrolling interests
|
|
0.9
|
|
|
0.3
|
|
|
|
|
1.7
|
|
|
0.3
|
|
|
|
Net loss attributable
to Avon
|
|
$
|
(36.1)
|
|
|
$
|
(45.5)
|
|
|
21
|
%
|
|
$
|
(56.4)
|
|
|
$
|
(82.0)
|
|
|
31
|
%
|
Loss per
share:(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS from
continuing operations
|
|
$
|
(0.09)
|
|
|
$
|
(0.12)
|
|
|
25
|
%
|
|
$
|
(0.15)
|
|
|
$
|
(0.21)
|
|
|
29
|
%
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS from
continuing operations
|
|
$
|
(0.09)
|
|
|
$
|
(0.12)
|
|
|
25
|
%
|
|
$
|
(0.15)
|
|
|
$
|
(0.21)
|
|
|
29
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
442.2
|
|
|
439.9
|
|
|
|
|
441.5
|
|
|
439.3
|
|
|
|
Diluted
|
|
442.2
|
|
|
439.9
|
|
|
|
|
441.5
|
|
|
439.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Calculation not
meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Under the
two-class method, loss per share is calculated using net loss
allocable to common shares, which is derived by reducing net loss
by the loss allocable to participating securities and earnings
allocated to convertible preferred stock. Net loss allocable to
common shares used in the basic and diluted loss per share
calculation was ($41.7) and ($50.6) for the three months ended June
30, 2018 and 2017, respectively. Net loss allocable to common
shares used in the basic and diluted loss per share calculation was
($67.8) and ($92.4) for the six months ended June 30, 2018 and
2017, respectively.
|
AVON PRODUCTS,
INC.
|
CONSOLIDATED
BALANCE SHEETS
|
(Unaudited)
|
(In
millions)
|
|
|
|
June
30,
|
|
December
31,
|
|
|
2018
|
|
2017
|
Assets
|
|
|
|
|
Current
Assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
443.9
|
|
|
$
|
881.5
|
|
Accounts receivable,
net
|
|
386.4
|
|
|
457.2
|
|
Inventories
|
|
662.2
|
|
|
598.2
|
|
Prepaid expenses and
other
|
|
290.9
|
|
|
296.4
|
|
Total current
assets
|
|
1,783.4
|
|
|
2,233.3
|
|
Property, plant and
equipment, at cost
|
|
1,402.9
|
|
|
1,481.9
|
|
Less accumulated
depreciation
|
|
(768.7)
|
|
|
(779.2)
|
|
Property, plant and
equipment, net
|
|
634.2
|
|
|
702.7
|
|
Goodwill
|
|
94.9
|
|
|
95.7
|
|
Other
assets
|
|
573.9
|
|
|
666.2
|
|
Total
assets
|
|
$
|
3,086.4
|
|
|
$
|
3,697.9
|
|
Liabilities,
Series C Convertible Preferred Stock and Shareholders'
Deficit
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
Debt maturing within
one year
|
|
$
|
12.0
|
|
|
$
|
25.7
|
|
Accounts
payable
|
|
729.5
|
|
|
832.2
|
|
Accrued
compensation
|
|
109.2
|
|
|
130.3
|
|
Other accrued
liabilities
|
|
400.9
|
|
|
405.6
|
|
Sales taxes and taxes
other than income
|
|
123.4
|
|
|
153.0
|
|
Income
taxes
|
|
8.6
|
|
|
12.8
|
|
Total current
liabilities
|
|
1,383.6
|
|
|
1,559.6
|
|
Long-term
debt
|
|
1,630.3
|
|
|
1,872.2
|
|
Employee benefit
plans
|
|
134.2
|
|
|
150.6
|
|
Long-term income
taxes
|
|
97.6
|
|
|
84.9
|
|
Long-term sales taxes
and taxes other than income
|
|
191.1
|
|
|
193.1
|
|
Other
liabilities
|
|
80.3
|
|
|
84.4
|
|
Total
liabilities
|
|
3,517.1
|
|
|
3,944.8
|
|
|
|
|
|
|
Series C convertible
preferred stock
|
|
479.8
|
|
|
467.8
|
|
|
|
|
|
|
Shareholders'
Deficit
|
|
|
|
|
Common
stock
|
|
190.3
|
|
|
189.7
|
|
Additional paid-in
capital
|
|
2,297.5
|
|
|
2,291.2
|
|
Retained
earnings
|
|
2,210.0
|
|
|
2,320.3
|
|
Accumulated other
comprehensive loss
|
|
(1,014.4)
|
|
|
(926.2)
|
|
Treasury stock, at
cost
|
|
(4,602.3)
|
|
|
(4,600.0)
|
|
Total Avon
shareholders' deficit
|
|
(918.9)
|
|
|
(725.0)
|
|
Noncontrolling
interests
|
|
8.4
|
|
|
10.3
|
|
Total shareholders'
deficit
|
|
(910.5)
|
|
|
(714.7)
|
|
Total liabilities,
series C convertible preferred stock and shareholders'
deficit
|
|
$
|
3,086.4
|
|
|
$
|
3,697.9
|
|
|
|
|
|
|
AVON PRODUCTS,
INC.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(Unaudited)
|
(In
millions)
|
|
|
|
Six Months
Ended
|
|
|
June
30
|
|
|
2018
|
|
2017
|
Cash Flows from
Operating Activities
|
|
|
|
|
Net loss
|
|
$
|
(58.1)
|
|
|
$
|
(82.3)
|
|
Adjustments to
reconcile net loss to net cash (used) provided by operating
activities:
|
|
|
|
|
Depreciation
|
|
41.6
|
|
|
41.7
|
|
Amortization
|
|
13.8
|
|
|
15.0
|
|
Provision for
doubtful accounts
|
|
86.2
|
|
|
113.0
|
|
Provision for
obsolescence
|
|
13.3
|
|
|
16.5
|
|
Share-based
compensation
|
|
7.5
|
|
|
16.2
|
|
Foreign exchange
losses
|
|
13.5
|
|
|
8.5
|
|
Deferred income
taxes
|
|
(0.2)
|
|
|
12.0
|
|
Other
|
|
3.2
|
|
|
16.1
|
|
Changes in assets and
liabilities:
|
|
|
|
|
Accounts
receivable
|
|
(50.0)
|
|
|
(92.0)
|
|
Inventories
|
|
(99.7)
|
|
|
(36.1)
|
|
Prepaid expenses and
other
|
|
1.7
|
|
|
14.2
|
|
Accounts payable and
accrued liabilities
|
|
(76.6)
|
|
|
(53.2)
|
|
Income and other
taxes
|
|
(0.3)
|
|
|
(5.0)
|
|
Noncurrent assets and
liabilities
|
|
(2.6)
|
|
|
26.6
|
|
Net cash (used)
provided by operating activities of continuing
operations
|
|
(106.7)
|
|
|
11.2
|
|
Cash Flows from
Investing Activities
|
|
|
|
|
Capital
expenditures
|
|
(48.0)
|
|
|
(43.0)
|
|
Disposal of
assets
|
|
1.4
|
|
|
2.7
|
|
Other investing
activities
|
|
(3.3)
|
|
|
(0.1)
|
|
Net cash used by
investing activities of continuing operations
|
|
(49.9)
|
|
|
(40.4)
|
|
Cash Flows from
Financing Activities
|
|
|
|
|
Debt, net (maturities
of three months or less)
|
|
(10.4)
|
|
|
(4.4)
|
|
Repayment of
debt
|
|
(238.6)
|
|
|
(2.0)
|
|
Repurchase of common
stock
|
|
(3.2)
|
|
|
(6.4)
|
|
Other financing
activities
|
|
(0.1)
|
|
|
(0.2)
|
|
Net cash used by
financing activities of continuing operations
|
|
(252.3)
|
|
|
(13.0)
|
|
Cash Flows from
Discontinued Operations
|
|
|
|
|
Net cash used by
operating activities of discontinued operations
|
|
—
|
|
|
(6.4)
|
|
Net cash used by
discontinued operations
|
|
—
|
|
|
(6.4)
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
(28.7)
|
|
|
28.0
|
|
Net decrease in cash
and cash equivalents
|
|
(437.6)
|
|
|
(20.6)
|
|
Cash and cash
equivalents at beginning of year
|
|
881.5
|
|
|
654.4
|
|
Cash and cash
equivalents at end of period
|
|
$
|
443.9
|
|
|
$
|
633.8
|
|
AVON PRODUCTS,
INC.
|
SUPPLEMENTAL
SCHEDULE
|
(Unaudited)
|
(In
millions)
|
|
CATEGORY SALES
FROM REPORTABLE
SEGMENTS (US$)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
Reported
|
|
Excluding the
impact
of adopting ASC 606
|
|
|
Three Months
Ended
June 30
|
|
US$
|
|
C$
|
|
US$
|
|
C$
|
|
|
2018
|
|
2017
|
|
% var.
vs 2Q17
|
|
% var.
vs 2Q17
|
|
% var.
vs
2Q17
|
|
% var.
vs
2Q17
|
Beauty:
|
|
|
|
|
|
|
|
|
|
|
|
|
Skincare
|
|
$
|
372.4
|
|
|
$
|
396.3
|
|
|
(6)%
|
|
(2)%
|
|
(7)%
|
|
(3)%
|
Fragrance
|
|
347.8
|
|
|
366.7
|
|
|
(5)
|
|
—
|
|
(6)
|
|
(1)
|
Color
|
|
212.4
|
|
|
234.1
|
|
|
(9)
|
|
(5)
|
|
(10)
|
|
(6)
|
Total
Beauty
|
|
932.6
|
|
|
997.1
|
|
|
(6)
|
|
(2)
|
|
(7)
|
|
(3)
|
Fashion &
Home:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fashion
(jewelry/watches/apparel/
footwear/accessories/children's)
|
|
185.9
|
|
|
200.8
|
|
|
(7)
|
|
(5)
|
|
(8)
|
|
(6)
|
Home (gift & decorative products/housewares/
entertainment & leisure/children's/nutrition)
|
|
144.3
|
|
|
145.5
|
|
|
(1)
|
|
7
|
|
(1)
|
|
6
|
Total Fashion &
Home
|
|
330.2
|
|
|
346.3
|
|
|
(5)
|
|
—
|
|
(5)
|
|
(1)
|
Net sales from
reportable segments
|
|
1,262.8
|
|
|
1,343.4
|
|
|
(6)
|
|
(2)
|
|
(7)
|
|
(2)
|
Other revenue from
reportable segments
|
|
74.4
|
|
|
31.0
|
|
|
*
|
|
*
|
|
*
|
|
*
|
Total revenue from
reportable segments
|
|
1,337.2
|
|
|
1,374.4
|
|
|
(3)
|
|
2
|
|
(7)
|
|
(2)
|
Total revenue from
Other operating segments and
business activities
|
|
14.7
|
|
|
21.5
|
|
|
(32)
|
|
(32)
|
|
(32)
|
|
(32)
|
Total
revenue
|
|
$
|
1,351.9
|
|
|
$
|
1,395.9
|
|
|
(3)
|
|
1
|
|
(7)
|
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Calculation not
meaningful
|
AVON PRODUCTS,
INC.
|
SUPPLEMENTAL
SCHEDULE
|
(Unaudited)
|
(In
millions)
|
|
CATEGORY SALES
FROM REPORTABLE
SEGMENTS (US$)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
Reported
|
|
Excluding the
impact
of adopting ASC 606
|
|
|
Six Months
Ended
June 30
|
|
US$
|
|
C$
|
|
US$
|
|
C$
|
|
|
2018
|
|
2017
|
|
% var.
vs 1H17
|
|
% var.
vs 1H17
|
|
% var.
vs 1H17
|
|
% var.
vs 1H17
|
Beauty:
|
|
|
|
|
|
|
|
|
|
|
|
|
Skincare
|
|
$
|
761.5
|
|
|
$
|
778.0
|
|
|
(2)%
|
|
(2)%
|
|
(3)%
|
|
(3)%
|
Fragrance
|
|
701.8
|
|
|
708.7
|
|
|
(1)
|
|
1
|
|
(2)
|
|
(1)
|
Color
|
|
448.1
|
|
|
473.3
|
|
|
(5)
|
|
(5)
|
|
(6)
|
|
(6)
|
Total
Beauty
|
|
1,911.4
|
|
|
1,960.0
|
|
|
(2)
|
|
(2)
|
|
(4)
|
|
(3)
|
Fashion &
Home:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fashion
(jewelry/watches/apparel/
footwear/accessories/children's)
|
|
374.5
|
|
|
392.7
|
|
|
(5)
|
|
(5)
|
|
(6)
|
|
(7)
|
Home (gift & decorative products/housewares/
entertainment & leisure/children's/nutrition)
|
|
273.7
|
|
|
278.6
|
|
|
(2)
|
|
2
|
|
(3)
|
|
1
|
Total Fashion &
Home
|
|
648.2
|
|
|
671.3
|
|
|
(3)
|
|
(2)
|
|
(5)
|
|
(4)
|
Net sales from
reportable segments
|
|
2,559.6
|
|
|
2,631.3
|
|
|
(3)
|
|
(2)
|
|
(4)
|
|
(3)
|
Other revenue from
reportable segments
|
|
150.1
|
|
|
56.4
|
|
|
*
|
|
*
|
|
*
|
|
*
|
Total revenue from
reportable segments
|
|
2,709.7
|
|
|
2,687.7
|
|
|
1
|
|
2
|
|
(4)
|
|
(3)
|
Total revenue from
Other operating segments and
business activities
|
|
35.7
|
|
|
41.3
|
|
|
(14)
|
|
(15)
|
|
(17)
|
|
(18)
|
Total
revenue
|
|
$
|
2,745.4
|
|
|
$
|
2,729.0
|
|
|
1
|
|
2
|
|
(4)
|
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Calculation not
meaningful
|
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 most directly comparable financial
measure calculated and reported in accordance with GAAP.
|
|
|
|
THREE MONTHS ENDED
JUNE 30, 2018
|
|
|
Reported
(GAAP)
|
|
CTI
restructuring
initiatives
|
|
Special tax
items
|
|
Adjusted
(Non-GAAP)
|
Total
revenue
|
|
$
|
1,351.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,351.9
|
|
Cost of
sales
|
|
539.7
|
|
|
0.5
|
|
|
—
|
|
|
539.2
|
|
Selling, general and
administrative expenses
|
|
759.2
|
|
|
23.2
|
|
|
—
|
|
|
736.0
|
|
Operating
profit
|
|
53.0
|
|
|
23.7
|
|
|
—
|
|
|
76.7
|
|
(Loss) Income before
income taxes
|
|
(0.3)
|
|
|
23.7
|
|
|
—
|
|
|
23.4
|
|
Income
taxes
|
|
(36.7)
|
|
|
—
|
|
|
5.5
|
|
|
(31.2)
|
|
Net loss
|
|
$
|
(37.0)
|
|
|
$
|
23.7
|
|
|
$
|
5.5
|
|
|
$
|
(7.8)
|
|
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
|
$
|
(0.09)
|
|
|
|
|
|
|
$
|
(0.03)
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
60.1
|
%
|
|
—
|
|
|
—
|
|
|
60.1
|
%
|
SG&A as a % of
revenues
|
|
56.2
|
%
|
|
(1.8)
|
|
|
—
|
|
|
54.4
|
%
|
Operating
margin
|
|
3.9
|
%
|
|
1.8
|
|
|
—
|
|
|
5.7
|
%
|
Effective tax
rate
|
|
*
|
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
*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 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 most directly comparable financial
measure calculated and reported in accordance with GAAP.
|
|
|
|
SIX MONTHS ENDED
JUNE 30, 2018
|
|
|
Reported
(GAAP)
|
|
CTI
restructuring
initiatives
|
|
Special tax
items
|
|
Adjusted
(Non-GAAP)
|
Total
revenue
|
|
$
|
2,745.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,745.4
|
|
Cost of
sales
|
|
1,119.4
|
|
|
1.1
|
|
|
—
|
|
|
1,118.3
|
|
Selling, general and
administrative expenses
|
|
1,528.1
|
|
|
33.5
|
|
|
—
|
|
|
1,494.6
|
|
Operating
profit
|
|
97.9
|
|
|
34.6
|
|
|
—
|
|
|
132.5
|
|
Income before income
taxes
|
|
10.1
|
|
|
34.6
|
|
|
—
|
|
|
44.7
|
|
Income
taxes
|
|
(68.2)
|
|
|
(2.1)
|
|
|
14.7
|
|
|
(55.6)
|
|
Net loss
|
|
$
|
(58.1)
|
|
|
$
|
32.5
|
|
|
$
|
14.7
|
|
|
$
|
(10.9)
|
|
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
|
$
|
(0.15)
|
|
|
|
|
|
|
$
|
(0.05)
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
59.2
|
%
|
|
—
|
|
|
—
|
|
|
59.3
|
%
|
SG&A as a % of
revenues
|
|
55.7
|
%
|
|
(1.2)
|
|
|
—
|
|
|
54.4
|
%
|
Operating
margin
|
|
3.6
|
%
|
|
1.2
|
|
|
—
|
|
|
4.8
|
%
|
Effective tax
rate
|
|
*
|
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
*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 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, 2017
|
|
|
Reported
(GAAP)
|
|
CTI
restructuring
initiatives
|
|
Loss
contingency
|
|
Adjusted
(Non-GAAP)
|
Total
revenue
|
|
$
|
1,395.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,395.9
|
|
Cost of
sales
|
|
525.0
|
|
|
—
|
|
|
—
|
|
|
525.0
|
|
Selling, general and
administrative expenses
|
|
838.2
|
|
|
20.3
|
|
|
18.2
|
|
|
799.7
|
|
Operating
profit
|
|
32.7
|
|
|
20.3
|
|
|
18.2
|
|
|
71.2
|
|
(Loss) Income before
income taxes
|
|
(12.2)
|
|
|
20.3
|
|
|
18.2
|
|
|
26.3
|
|
Income
taxes
|
|
(33.6)
|
|
|
(0.8)
|
|
|
—
|
|
|
(34.4)
|
|
Net loss
|
|
$
|
(45.8)
|
|
|
$
|
19.5
|
|
|
$
|
18.2
|
|
|
$
|
(8.1)
|
|
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
|
$
|
(0.12)
|
|
|
|
|
|
|
$
|
(0.03)
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
62.4
|
%
|
|
—
|
|
|
—
|
|
|
62.4
|
%
|
SG&A as a % of
revenues
|
|
60.1
|
%
|
|
(1.5)
|
|
|
(1.3)
|
|
|
57.3
|
%
|
Operating
margin
|
|
2.3
|
%
|
|
1.5
|
|
|
1.3
|
|
|
5.1
|
%
|
Effective tax
rate
|
|
*
|
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
*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 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, 2017
|
|
|
Reported
(GAAP)
|
|
CTI
restructuring
initiatives
|
|
Loss
contingency
|
|
Adjusted
(Non-GAAP)
|
Total
revenue
|
|
$
|
2,729.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,729.0
|
|
Cost of
sales
|
|
1,042.1
|
|
|
(0.1)
|
|
|
—
|
|
|
1,042.2
|
|
Selling, general and
administrative expenses
|
|
1,624.4
|
|
|
30.4
|
|
|
18.2
|
|
|
1,575.8
|
|
Operating
profit
|
|
62.5
|
|
|
30.3
|
|
|
18.2
|
|
|
111.0
|
|
(Loss) income before
income taxes
|
|
(18.9)
|
|
|
30.3
|
|
|
18.2
|
|
|
29.6
|
|
Income
taxes
|
|
(63.4)
|
|
|
(1.8)
|
|
|
—
|
|
|
(65.2)
|
|
Net loss
|
|
$
|
(82.3)
|
|
|
$
|
28.5
|
|
|
$
|
18.2
|
|
|
$
|
(35.6)
|
|
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
|
$
|
(0.21)
|
|
|
|
|
|
|
$
|
(0.11)
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
61.8
|
%
|
|
—
|
|
|
—
|
|
|
61.8
|
%
|
SG&A as a % of
revenues
|
|
59.5
|
%
|
|
(1.1)
|
|
|
(0.7)
|
|
|
57.7
|
%
|
Operating
margin
|
|
2.3
|
%
|
|
1.1
|
|
|
0.7
|
|
|
4.1
|
%
|
Effective tax
rate
|
|
*
|
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
*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 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
|
(Unaudited)
|
(In millions,
except per share data)
|
|
Approximate Impact
of Foreign Currency
|
|
|
|
|
|
Second-Quarter
2018
|
|
Half Year
2018
|
|
Estimated
impact
($ in millions)
|
|
Estimated
impact
on diluted EPS
|
|
Estimated
impact
($ in millions)
|
|
Estimated
impact
on diluted EPS
|
Year-on-Year
impact on Reported
(GAAP) results:
|
|
|
|
|
|
|
|
Total
revenue
|
(4) pts
|
|
|
|
|
(1) pt
|
|
|
|
Operating profit -
transaction
|
$
|
(5)
|
|
|
$
|
(0.01)
|
|
|
$
|
(10)
|
|
|
$
|
(0.01)
|
|
Operating profit -
translation
|
(5)
|
|
|
(0.01)
|
|
|
—
|
|
|
—
|
|
Total operating
profit
|
$
|
(10)
|
|
|
$
|
(0.02)
|
|
|
$
|
(10)
|
|
|
$
|
(0.01)
|
|
Operating
margin
|
(60) bps
|
|
|
|
|
(40)
bps
|
|
|
|
Revaluation of
working capital
|
$
|
(15)
|
|
|
$
|
(0.03)
|
|
|
$
|
(15)
|
|
|
$
|
(0.03)
|
|
Diluted
EPS
|
|
|
$
|
(0.05)
|
|
|
|
|
$
|
(0.04)
|
|
|
|
|
|
|
|
|
|
Year-on-Year
impact on Adjusted (Non-
GAAP) results:
|
|
|
|
|
|
|
|
Adjusted operating
profit - transaction
|
$
|
(5)
|
|
|
$
|
(0.01)
|
|
|
$
|
(10)
|
|
|
$
|
(0.01)
|
|
Adjusted operating
profit - translation
|
(5)
|
|
|
(0.01)
|
|
|
—
|
|
|
—
|
|
Total Adjusted
operating profit
|
$
|
(10)
|
|
|
$
|
(0.02)
|
|
|
$
|
(10)
|
|
|
$
|
(0.01)
|
|
Adjusted operating
margin
|
(50) bps
|
|
|
|
|
(30)
bps
|
|
|
|
Revaluation of
working capital
|
$
|
(15)
|
|
|
$
|
(0.03)
|
|
|
$
|
(15)
|
|
|
$
|
(0.03)
|
|
Adjusted diluted
EPS
|
|
|
$
|
(0.05)
|
|
|
|
|
$
|
(0.04)
|
|
|
|
|
|
|
|
|
|
Amounts in the table
above may not necessarily sum because the computations are made
independently.
|
|
|
|
|
AVON
PRODUCTS, INC.
SUPPLEMENTAL
SCHEDULE
(Unaudited)
(In millions)
The Company adopted ASC 606, as a cumulative-effect adjustment
to retained earnings, as of January 1,
2018. Comparative information for prior periods has not been
restated. Therefore, this supplemental schedule provides balances
without the adoption of ASC 606 to enhance comparability to the
prior year. We applied the transition guidance to all
outstanding contracts at January 1,
2018.
We recorded a cumulative-effect adjustment upon adoption of the
new revenue recognition standard as of January 1, 2018 comprised of the following:
- a reduction to retained earnings of $52.7 before taxes ($41.1 after tax), with a corresponding impact to
deferred income taxes of $11.6;
- a reduction to prepaid expenses and other of $54.9;
- an increase to inventories of $39.3; and
- an increase to other accrued liabilities of $37.1 due to the net impact of the establishment
of a contract liability of $91.8 for
deferred revenue where our performance obligations are not yet
satisfied, which is partially offset by a reduction in the sales
incentive accrual of $54.7.
The impact of the change in accounting standard on
second-quarter 2018 performance is:
|
Impact of change in
revenue recognition standard
|
Line items
impacted within the Consolidated
Statements of Operations
|
Per
consolidated
financial statements
|
|
Adjustments
|
|
Balances excluding
the
impact of adopting
ASC 606
|
Revenue
|
|
|
|
|
|
Net sales
|
$
|
1,268.8
|
|
|
$
|
(7.6)
|
|
(1)
|
$
|
1,261.2
|
|
Other
revenue
|
83.1
|
|
|
(50.5)
|
|
(2)
|
32.6
|
|
Total
revenue
|
1,351.9
|
|
|
(58.1)
|
|
|
1,293.8
|
|
|
|
|
|
|
|
Costs and
expenses
|
|
|
|
|
|
Cost of
sales
|
539.7
|
|
|
(65.6)
|
|
(3)
|
474.1
|
|
Selling, general and
administrative expenses
|
759.2
|
|
|
9.5
|
|
(4)
|
768.7
|
|
Operating
profit
|
53.0
|
|
|
(2.0)
|
|
|
51.0
|
|
(Loss) before
income taxes
|
(0.3)
|
|
|
(2.0)
|
|
|
(2.3)
|
|
Income
taxes
|
(36.7)
|
|
|
(0.1)
|
|
|
(36.8)
|
|
Net
loss
|
(37.0)
|
|
|
(2.1)
|
|
|
(39.1)
|
|
Net loss
attributable to Avon
|
(36.1)
|
|
|
(2.1)
|
|
|
(38.2)
|
|
|
|
(1) Primarily relates
to net impact of the timing of recognition of sales
incentives.
|
(2) Relates to
Representative fees (primarily brochure fees, late payment fees and
certain other fees), which were reclassified from SG&A.
Brochure fees were also impacted by the timing of
recognition.
|
(3) Primarily relates
to the cost of sales incentives and the cost of brochures paid for
by Representatives, both of which were reclassified from SG&A
and were also impacted by the timing of recognition.
|
(4) Relates to the
cost of sales incentives, which were reclassified to cost of sales
and were also impacted by the timing of recognition. This was
partially offset by Representative fees, which were reclassified to
other revenue.
|
The impact of the change in accounting standard on the first and
second-quarter 2018 performance is:
|
Impact of change in
revenue recognition standard
|
Line items
impacted within the Consolidated
Statements of Operations
|
Per
consolidated
financial statements
|
|
Adjustments
|
|
Balances excluding
the
impact of adopting
ASC 606
|
Revenue
|
|
|
|
|
|
Net sales
|
$
|
2,578.4
|
|
|
$
|
(33.1)
|
|
(1)
|
$
|
2,545.3
|
|
Other
revenue
|
167.0
|
|
|
(105.3)
|
|
(2)
|
61.7
|
|
Total
revenue
|
2,745.4
|
|
|
(138.4)
|
|
|
2,607.0
|
|
|
|
|
|
|
|
Costs and
expenses
|
|
|
|
|
|
Cost of
sales
|
1,119.4
|
|
|
(138.6)
|
|
(3)
|
980.8
|
|
Selling, general and
administrative expenses
|
1,528.1
|
|
|
21.3
|
|
(4)
|
1,549.4
|
|
Operating
profit
|
97.9
|
|
|
(21.1)
|
|
|
76.8
|
|
Income (loss)
before income taxes
|
10.1
|
|
|
(21.1)
|
|
|
(11.0)
|
|
Income
taxes
|
(68.2)
|
|
|
3.7
|
|
|
(64.5)
|
|
Net
loss
|
(58.1)
|
|
|
(17.4)
|
|
|
(75.5)
|
|
Net loss
attributable to Avon
|
(56.4)
|
|
|
(17.4)
|
|
|
(73.8)
|
|
|
(1) Primarily relates
to net impact of the timing of recognition of sales
incentives.
|
(2) Relates to
Representative fees (primarily brochure fees, late payment fees and
certain other fees), which were reclassified from SG&A.
Brochure fees were also impacted by the timing of
recognition.
|
(3) Primarily relates
to the cost of sales incentives and the cost of brochures paid for
by Representatives, both of which were reclassified from SG&A
and were also impacted by the timing of recognition.
|
(4) Relates to the
cost of sales incentives, which were reclassified to cost of sales
and were also impacted by the timing of recognition. This was
partially offset by Representative fees, which were reclassified to
other revenue.
|
|
Impact of change in
revenue recognition standard
|
Line items
impacted within the Consolidated
Balance Sheets
|
Per consolidated
financial statements
|
|
Adjustments
|
|
Balances excluding
the
impact of adopting
ASC 606
|
Assets
|
|
|
|
|
|
Accounts receivable,
net
|
$
|
386.4
|
|
|
$
|
(6.2)
|
|
(1)
|
$
|
380.2
|
|
Inventories
|
662.2
|
|
|
(40.9)
|
|
(2)
|
621.3
|
|
Prepaid expenses and
other
|
290.9
|
|
|
47.1
|
|
(2)
|
338.0
|
|
Other
assets
|
573.9
|
|
|
(10.9)
|
|
(3)
|
563.0
|
|
Total
assets
|
3,086.4
|
|
|
(10.9)
|
|
|
3,075.5
|
|
Liabilities,
Series C Convertible Preferred Stock
and Shareholders' Deficit
|
|
|
|
|
|
Other accrued
liabilities
|
400.9
|
|
|
(28.2)
|
|
(4)
|
372.7
|
|
Income
taxes
|
8.6
|
|
|
(3.7)
|
|
|
4.9
|
|
Total current
liabilities
|
1,383.6
|
|
|
(31.9)
|
|
|
1,351.7
|
|
Other
liabilities
|
80.3
|
|
|
(1.4)
|
|
|
78.9
|
|
Total
liabilities
|
3,517.1
|
|
|
(33.3)
|
|
|
3,483.8
|
|
|
|
|
|
|
|
|
Retained
earnings
|
2,210.0
|
|
|
23.7
|
|
(5)
|
2,233.7
|
|
Accumulated other
comprehensive loss
|
(1,014.4)
|
|
|
(1.3)
|
|
|
(1,015.7)
|
|
Total Avon
shareholders' deficit
|
(918.9)
|
|
|
22.4
|
|
|
(896.5)
|
|
Total
shareholders' deficit
|
(910.5)
|
|
|
22.4
|
|
|
(888.1)
|
|
Total liabilities,
series C convertible preferred
stock and shareholders' deficit
|
3,086.4
|
|
|
(10.9)
|
|
|
3,075.5
|
|
|
(1) Relates to sales
returns, which were reclassified from a reduction of accounts
receivable to a refund liability (within other accrued liabilities)
and a returns asset (within prepaid expenses and other).
|
(2) Primarily relates
to sales incentives and brochures, both of which were reclassified
from prepaid expenses and other to inventories, and were also
impacted by the timing of recognition. In addition, prepaid
expenses and other was impacted by the timing of recognition of
brochures, as well as the reclassification of sales returns
(described above).
|
(3) Relates to
deferred tax assets associated with the cumulative-effect
adjustment.
|
(4) Primarily relates
to the contract liability for sales incentives, which is partially
offset by the lower accrual for sales incentives. In addition,
other accrued liabilities was impacted by the reclassification of
sales returns (described above).
|
(5) Relates to the
$41.1 cumulative-effect adjustment upon adoption of ASC 606,
partially offset by the $17.4 net loss adjustment.
|
|
Impact of change in
revenue recognition standard
|
Line items
impacted within the Consolidated
Statements of Cash Flows
|
Per consolidated
financial statements
|
|
Adjustments
|
|
Balances excluding
the
impact of adopting
ASC 606
|
Net loss
|
$
|
(58.1)
|
|
|
$
|
(17.4)
|
|
|
$
|
(75.5)
|
|
Other
|
3.2
|
|
|
1.7
|
|
|
4.9
|
|
Changes in assets and
liabilities:
|
|
|
|
|
|
|
Accounts
receivable
|
(50.0)
|
|
|
(2.4)
|
|
|
(52.4)
|
|
Inventories
|
(99.7)
|
|
|
1.6
|
|
|
(98.1)
|
|
Prepaid expenses and
other
|
1.7
|
|
|
4.6
|
|
|
6.3
|
|
Accounts payable and
accrued liabilities
|
(76.6)
|
|
|
20.3
|
|
|
(56.3)
|
|
Income and other
taxes
|
(.3)
|
|
|
(3.7)
|
|
|
(4.0)
|
|
Noncurrent assets and
liabilities
|
(2.6)
|
|
|
(4.7)
|
|
|
(7.3)
|
|
Non-GAAP Financial Measures
To supplement the Company's financial results presented in
accordance with 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 dollar
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 constant exchange rates, which are 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-dollar 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) before taxes, income taxes,
net income (loss), diluted earnings (loss) per share and effective
tax rate on a Non-GAAP basis. The Company refers to these Non-GAAP
financial measures as "Adjusted." The Company has provided
quantitative reconciliations of the Non-GAAP financial measures to
the most directly comparable financial measures calculated and
reported in accordance with GAAP. See "Supplemental Schedule
- Non-GAAP Financial Measures" within this release for these
quantitative reconciliations.
The Company uses 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; and 2)
one-time tax reserves associated with the Company's uncertain tax
positions ("Special tax items"); and 3) a charge for a loss
contingency related to a non-US pension plan ("Loss
contingency").
The Special tax items include the impact during the first and
second quarters of 2018 on the provision for income taxes in the
Consolidated Statements of Operations due to one-time tax reserves
of approximately $9.2 million and
$5.5 million, respectively,
associated with the Company's uncertain tax positions. There was no
Special tax impact in 2017.
View original
content:http://www.prnewswire.com/news-releases/avon-reports-second-quarter-2018-results-300690773.html
SOURCE Avon Products, Inc.