topNavIncludeMedia

Press Releases

Avon Reports Second-Quarter 2016 Results

-- Second-Quarter Revenue declined 8% to $1.4 Billion; Increased 5% in Constant Dollars(1) excluding the divestiture of Liz Earle(2)

-- Second-Quarter Active Representative and Ending Representatives, both from Reportable Segments, increased 1% and 2%, respectively

-- Second-Quarter Operating Profit and Adjusted(1) Operating Profit increased 6% to $95 Million and $105 Million, respectively

-- Second-Quarter Operating Margin increased 90 bps to 6.6%; Adjusted(1) Operating Margin increased 100 bps to 7.3%

-- Second-Quarter Diluted Earnings Per Share From Continuing Operations and Adjusted(1) Diluted Earnings Per Share From Continuing Operations of $0.07

Aug 2, 2016

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






Second-Quarter 2016


First-Half 2016


Estimated impact
($ in millions)


Estimated impact
on diluted EPS


Estimated impact 
($ in millions)


Estimated impact
on diluted EPS

Impact on Reported (GAAP) results:








Total revenue

(12) pts





(15) pts




Operating profit - transaction

$

(45)



$

(0.06)



$

(115)



$

(0.17)


Operating profit - translation

(25)



(0.04)



(50)



(0.07)


      Total operating profit

(70)



(0.10)



(165)



(0.24)


Operating margin

(350) bps





(460) bps




Revaluation of working capital

$

3



$



$

8



$

0.01


Diluted EPS



$

(0.10)





$

(0.23)










Impact on Adjusted (Non-GAAP)
   results:








Adjusted operating profit - transaction

$

(45)



$

(0.06)



$

(115)



$

(0.17)


Adjusted operating profit - translation

(25)



(0.04)



(55)



(0.08)


      Total Adjusted operating profit

$

(70)



$

(0.10)



$

(170)



$

(0.25)


Adjusted operating margin

(350) bps





(450) bps




Revaluation of working capital

$

3



$



$

13



$

0.02


Adjusted diluted EPS



$

(0.10)





$

(0.23)










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)


THREE MONTHS ENDED JUNE 30, 2016

















SEGMENT RESULTS
















($ in millions)

















Revenue


Active
Representatives


Average
Order
C$


Units
Sold


Price/
Mix C$


Ending
Representatives


US $


C$






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.

 

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:


1.

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;


2.

The Company has changed its segment reporting:




a.

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;




b.

Avon is including the items below in Other operating segments and business activities: 






i.

Venezuela operating results, which have been deconsolidated as of March 31, 2016;






ii.

The historical results of the Liz Earle business, which was sold in July 2015;






iii.

Royalties for the use of the Company's name and products in various countries; and






iv.

Product sales to the recently separated North America business.





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;




c.

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




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.


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


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.




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.




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.




c.

If income is reported for the period, the following two calculations are performed and the calculation with the lower result is presented:






i.

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






ii.

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.

SOURCE Avon Products, Inc.

For further information: INVESTORS: Avon Investor Relations, Gina Grant, (212) 282-5320; MEDIA: Brunswick Group, Claudia Gray, (212) 333-3810; ICR, Inc., Allison Malkin/Caitlin Morahan, (203) 682-8200

 
Fact Sheet

Avon Fact Sheet
Downloadable PDF (136 KB)

Annual Report

2016 Annual Report
Downloadable PDF (18.5 MB)

 

 

Avon Key Facts

Downloadable PDF (685 KB)

Avon Timeline

Avon Timeline
Downloadable PDF(131 KB)

 

For in-depth corporate archives, please visit Avon's online digital archive collection at the Hagley Museum. Click here to launch the site.

2007
2006
2005
2004
2003
2002
2001
2000
bottomNavIncludeGeneric