NEW YORK, April 30, 2013 /PRNewswire/ -- Avon
Products, Inc. (NYSE: AVP) today reported first-quarter 2013
results. "Our first-quarter results reflect continued signs of
stabilization, including early progress in our cost reduction
efforts," said Sheri McCoy, Chief
Executive Officer. "I'm pleased with the performance of our
Latin America and Europe, Middle
East & Africa regions,
particularly in Brazil and
Russia. The teams there are
focused on ensuring that this performance is sustainable. As for
our other markets, there remains work to be done, particularly in
the U.S."
First-Quarter 2013 (compared with first-quarter 2012)
For the first quarter of 2013, total revenue of $2.5 billion decreased 4%, but was relatively
unchanged in constant dollars. Total units decreased 3% and
price/mix increased 3% during the quarter. Active
Representatives(2) increased 1%.
Avon Beauty sales declined 5%, or 1% in constant dollars. On a
reported basis, fragrance grew 1%, while personal care, color and
skincare declined 3%, 6% and 12%, respectively. On a
constant-dollar basis, fragrance increased 6% and personal care was
unchanged, while color and skincare declined 2% and 9%,
respectively.
First-quarter 2013 gross margin was 62.1%. Adjusted gross margin
was 62.5%, 160 basis points higher than the prior-year quarter,
primarily due to lower freight costs, as well as lower material
costs, including the benefits from productivity
initiatives.
Operating profit was $172 million
and operating margin was 6.9% in the quarter. Operating profit was
negatively impacted by $20 million
associated with costs to implement ("CTI") restructuring and
$13 million associated with the
highly inflationary accounting for a 32% devaluation of the
Venezuelan currency. Adjusted operating profit was $206 million and adjusted operating margin was
8.3%, 450 basis points higher than the first quarter of 2012.
The increase was due to gross margin improvement, lower advertising
expenses, primarily in Brazil, and
lower professional fees associated with the Foreign Corrupt
Practices Act ("FCPA") investigation and compliance reviews.
Additionally, operating margin benefited from lower bad debt
expenses, primarily in South
Africa, due to a one-time adjustment in the prior-year
quarter.
During the first-quarter 2013, as part of the Company's
refinancing activities, the Company prepaid the $535 million of outstanding private notes plus a
make-whole premium. Additionally, the Company repaid $380 million of the outstanding term loan
principal. These repayments resulted in a $73 million pre-tax loss on extinguishment of
debt.
In addition to the impact to operating profit, the 32%
Venezuelan currency devaluation resulted in a one-time charge of
$34 million in other expense, net,
associated with monetary net assets and $17
million in income taxes, associated with deferred tax
benefits.
First-quarter 2013's effective tax rate was 146.1%, versus 32.3%
in the first quarter of 2012. The tax rate was unfavorably impacted
by the devaluation of the Venezuelan currency. On an adjusted
basis, the effective tax rate was 33.6%, versus 32.9% in the first
quarter of 2012.
First-quarter 2013 net loss was $13
million, or a loss of $.03 per
share. Adjusted net income was $112
million, or $.26 per
share.
Operating activities used $119
million of cash during the first quarter of 2013 compared
with $33 million in the first quarter
of 2012, unfavorably impacted primarily by the make-whole premium
on the Company's private notes, higher payments for employee
incentive compensation and restructuring, and higher inventory
levels. Partially offsetting these items were higher levels of
accounts payable and lower income tax payments. The overall net
cash provided in the first quarter was $279
million, which compares with the use of $30 million in first-quarter 2012, and this was
primarily due to proceeds related to the issuance of debt,
partially offset by debt repayment and cash used for
operations.
Avon's net debt (total debt
less cash) for the first quarter of 2013 was $2.1 billion, up $160
million from the year-end level.
Adjustments to First-Quarter GAAP Results
During the first quarter of 2013, the following items had a
significant impact on the financial results:
- As a result of the 32% devaluation of Venezuelan currency, the
Company recorded a one-time charge of $34
million in other expense, net and $17
million in income taxes, primarily reflecting the write-down
of monetary net assets and deferred tax benefits, respectively. In
addition, as a result of using the U.S. historic dollar cost basis
of non-monetary assets, such as inventory, first-quarter 2013
operating profit was negatively impacted by approximately
$13 million. These items had a
negative impact of $.15 per
share.
- The Company recorded a loss on extinguishment of debt of
approximately $73 million pre-tax, or
$.11 per share, associated with the
prepayment of the $535 million
outstanding principal of the Company's private notes, including a
make-whole premium, and the repayment of $380 million of the outstanding term loan
principal.
- The Company also recorded CTI restructuring charges, within
operating profit, of $20 million
pre-tax, or $.03 per share.
First-Quarter 2013 Regional Highlights (compared
with first-quarter 2012)
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Latin
America
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$ in
millions
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First-Quarter 2013
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% var.
vs
1Q12
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Total
revenue
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$1,144.4
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-%
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C$
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7%
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Active
Representatives
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4%
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Units
sold
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(2)%
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Operating
profit
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101.4
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100%
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Adjusted
operating profit
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112.8
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103%
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Operating
margin
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8.9%
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450
bps
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Adjusted
operating margin
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9.9%
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510
bps
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- First-quarter constant-dollar revenue growth was primarily due
to an increase in Active Representatives as well as higher average
order.
- Brazil revenue was down 2%, or
up 11% in constant dollars, primarily driven by increases in both
average order and Active Representatives. Brazil's revenue included an approximate two
point benefit, which had an approximate one point benefit to the
region's revenue growth, from the initial realization of a
government incentive that was recognized in the first quarter of
2013, associated with activity in prior years.
- Mexico revenue was up 6%, or
3% in constant dollars, primarily driven by an increase in Active
Representatives, partially offset by the negative impact of the
timing of the Easter holiday.
- Venezuela revenue was down
15%, or up 3% in constant dollars, as average order benefited from
the year-over-year inflationary impact on pricing. This growth was
substantially offset by a decrease in Active Representatives, which
was driven by continued economic and political instability.
- The increase in Adjusted operating margin was primarily due to
lower advertising, primarily in Brazil, the favorable impact of revenue
leverage, and lower net brochure costs, partially offset by
increased incentives and field compensation.
Europe,
Middle East & Africa
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$ in
millions
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First-Quarter 2013
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% var.
vs
1Q12
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Total
revenue
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$733.1
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1%
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C$
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3%
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Active
Representatives
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4%
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Units
sold
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4%
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Operating
profit
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111.4
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97%
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Adjusted
operating profit
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120.7
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98%
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Operating
margin
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15.2%
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740
bps
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Adjusted
operating margin
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16.5%
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810
bps
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- First-quarter constant-dollar revenue growth was primarily due
to an increase in Active Representatives.
- Russia revenue was up 3%, or
up 4% in constant dollars, primarily due to an increase in Active
Representatives, partially offset by lower average order.
- U.K. revenue was down 9%, or down 8% in constant dollars,
primarily due to a decrease in Active Representatives.
- Turkey revenue was down 2%,
both in reported and constant dollars, as lower average order was
partially offset by an increase in Active Representatives.
- South Africa revenue was down
11%, or up 2% in constant dollars, primarily due to higher average
order, partially offset by a decrease in Active
Representatives.
- Adjusted operating margin increased, primarily due to higher
gross margin largely due to lower material and overhead costs,
including the benefits from productivity initiatives. Adjusted
operating margin was also favorably impacted by lower bad debt
expense, primarily in South
Africa, and lower net brochure costs.
North
America
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$ in
millions
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First-Quarter 2013
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% var.
vs
1Q12
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Total
revenue
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$406.2
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(15)%
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C$
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(15)%
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Active
Representatives
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(13)%
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Units
sold
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(13)%
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Operating
loss
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(11.2)
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*
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Adjusted
operating loss
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(5.4)
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*
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Operating
margin
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(2.8)%
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(360)
bps
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Adjusted
operating margin
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(1.3)%
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(300)
bps
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*
Calculation not meaningful
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- First-quarter North America
revenue declined 15%, primarily due to a decrease in Active
Representatives and, to a lesser extent, lower average order.
- The North America Avon business revenue declined 15%, as it
continues to be challenged by disruption in the field due to
redistricting in the U.S., as well as other operational
challenges.
- North America Silpada revenue declined 21%.
- The decline in Adjusted operating margin was primarily due to
revenue deleverage on fixed expenses, partially offset by lower
expenses resulting from our cost-savings initiatives. Adjusted
operating margin was also negatively impacted by lower gross margin
in the Silpada business, primarily due to a Representative cash
incentive program, which reduced revenue, and higher obsolescence
costs.
Asia
Pacific
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$ in
millions
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First-Quarter 2013
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% var.
vs
1Q12
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Total
revenue
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$200.0
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(10)%
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C$
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(12)%
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Active
Representatives(2)*
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(4)%
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Units
sold
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(11)%
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Operating
profit
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11.1
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(28)%
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Adjusted
operating profit
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15.9
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(1)%
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Operating
margin
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5.6%
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(130)
bps
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Adjusted
operating margin
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8.0%
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70
bps
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*
Excludes China
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- First-quarter constant-dollar revenue decreased due to lower
average order and a decrease in Active Representatives.
- Revenue in China declined 30%,
or 31% in constant dollars, primarily due to declines in unit sales
and the transition to a retail incentive model.
- Revenue in the Philippines was
down 1%, or 6% in constant dollars, as the market
has experienced operational challenges, including weaker
service levels.
- The region's adjusted operating margin increase was primarily
driven by benefits from restructuring savings and lower incentive
compensation, as well as lower selling expenses, primarily in
China, due to the transition to a
retail compensation model in that market. Partially offsetting
these items was lower gross margin, caused primarily by product
mix.
Global
Expenses
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$ in
millions
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First-Quarter 2013
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% var.
vs
1Q12
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Total
global expenses
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$140.7
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(15)%
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Allocated
to segments
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(100.1)
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(9)%
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Net global
expenses
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40.6
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(26)%
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Adjusted
net global expenses
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38.3
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(9)%
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- Adjusted net global expenses decreased, compared with the
prior-year period, primarily due to lower professional fees
associated with the FCPA investigation and compliance reviews.
Avon will conduct a conference
call at 9:00 A.M. today to discuss
the 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: 34621200). 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. Please refer to the Form 10-Q for
additional information on Avon's
results for the quarter.
Avon, the company for women, is
a leading global beauty company, with nearly $11 billion in annual revenue. As one of the
world's largest direct sellers, Avon is sold through more than 6 million
active independent Avon Sales Representatives. Avon products are available in over 100
countries, and the product line includes color cosmetics, skincare,
fragrance, fashion and home products, featuring such
well-recognized brand names as Avon Color, ANEW, Skin-So-Soft,
Advance Techniques, and mark. Learn more about Avon and its products at
www.avoncompany.com.
Footnotes
(1) "Adjusted" items refer to financial results
presented in accordance with U.S. GAAP that have been adjusted to
exclude certain costs as described below, under "Non-GAAP Financial
Measures."
(2) In the first quarter of 2013, we
renamed our "Growth in Active Representatives" performance metric
to be referred to as "Change in Active Representatives." In
addition, we revised the definition of this metric to exclude
China. As previously disclosed,
our business in China is
predominantly retail, and as a result, we do not believe including
China within the Change in Active
Representatives calculation provides for a relevant indicator of
underlying business trends. There were no changes to the underlying
calculation other than the exclusion of China.
Non-GAAP Financial Measures
To supplement our financial results presented in accordance with
generally accepted accounting principles in the United States ("GAAP"), we disclose
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.
We refer to these adjusted financial measures as Constant $ or
constant-dollar items, which are Non-GAAP financial measures. We
believe these measures provide investors an additional perspective
on trends. To exclude the impact of changes due to the translation
of foreign currencies into U.S. dollars, we calculate current year
results and prior year results at a constant exchange rate.
Currency impact is determined as the difference between actual
growth rates and constant currency growth rates.
We also present gross margin, selling, general and
administrative expenses as a percentage of revenue, net global
expenses, operating profit, operating margin, net income and loss,
and effective tax rate on a Non-GAAP basis. The discussion of our
segments presents operating profit and operating margin on a
Non-GAAP basis. We have provided a quantitative reconciliation of
the difference between the Non-GAAP financial measure and the
financial measure calculated and reported in accordance with GAAP.
The Company uses the Non-GAAP financial measures to evaluate its
operating performance and believes that it is meaningful for
investors to be made aware of, on a period-to-period basis, the
impacts of 1) CTI restructuring initiatives, 2) costs and charges
related to Venezuela being
designated as a highly inflationary economy and the subsequent
devaluation of its currency in February
2013 ("Venezuelan special items") and 3) costs and charges
related to the extinguishment of debt ("Loss on extinguishment of
debt"). 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 Venezuelan special items include the impact on the Statement
of Income caused by the devaluation of the Venezuelan currency on
monetary assets and liabilities, such as cash, receivables and
payables; deferred tax assets and liabilities; and non-monetary
assets, such as inventory and prepaid expenses. For non-monetary
assets, the Venezuelan special items include the earnings impact
caused by the difference between the historical cost of the assets
at the previous official exchange rate of 4.30 and the revised
official exchange rate of 6.30. The Loss on extinguishment of debt
includes the impact on the Statement of Income caused by the
make-whole premium and the write-off of debt issuance costs
associated with the prepayment of our Private Notes, as well as the
write-off of debt issuance costs associated with the early
repayment of $380 million of the
outstanding principal amount of the term loan agreement.
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.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR"
STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
Statements in this release that are not historical facts or
information may be forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Words such as
"estimate," "forecast," "plan," "believe," "may," "expect,"
"anticipate," "intend," "potential," "can," "could," "will,"
"would," and similar expressions, or the negative of those
expressions, may identify forward-looking statements. They include,
among other things, statements regarding our anticipated or
expected results, future financial performance, various strategies
and initiatives (including our stabilization strategies, cost
savings initiative, multi-year restructuring programs and other
initiatives and related actions), liquidity, cash flow and uses of
cash, our ability to service our debt obligations or obtain
additional financing, costs and cost savings, competitive
advantages, impairments, the impact of currency devaluations and
other laws and regulations, government investigations, internal
investigations and compliance reviews, results of litigation,
contingencies, taxes and tax rates, potential acquisitions or
divestitures, hedging and risk management strategies, pension,
postretirement and incentive compensation plans, supply chain and
the legal status of our Representatives. Such forward-looking
statements are based on management's reasonable current
assumptions, expectations, plans and forecasts regarding the
Company's current or future results and future business and
economic conditions more generally. Such forward-looking statements
involve risks, uncertainties and other factors, which may cause the
actual results, levels of activity, performance or achievement of
Avon to be materially different
from any future results expressed or implied by such
forward-looking statements, and there can be no assurance that
actual results will not differ materially from management's
expectations. Such factors include, among others, the
following:
- our ability to improve our financial and operational
performance and execute fully our global business strategy,
including our ability to implement the key initiatives of, and
realize the projected benefits (in the amounts and time schedules
we expect) from, our stabilization strategies, cost savings
initiative, multi-year restructuring programs and other
initiatives, product mix and pricing strategies, enterprise
resource planning, customer service initiatives, sales and
operation planning process, outsourcing strategies, Internet
platform and technology strategies, information technology and
related system enhancements and cash management, tax, foreign
currency hedging and risk management strategies, and any plans to
invest these projected benefits ahead of future growth;
- the possibility of business disruption in connection with our
stabilization strategies, cost savings initiative, multi-year
restructuring programs or other initiatives;
- our ability to improve our business in North America, including enhancing our
Leadership model;
- our ability to improve working capital and effectively manage
doubtful accounts and inventory and implement initiatives to reduce
inventory levels, including the potential impact on cash flows and
obsolescence;
- our ability to reverse declines in Active Representatives, to
implement our Leadership program globally, to generate
Representative activity, to increase the number of consumers served
per Representative and their engagement online, to enhance the
Representative and consumer experience and increase Representative
productivity through field activation programs and technology tools
and enablers, execution of Service Model Transformation and other
investments in the direct-selling channel, and to compete with
other direct-selling organizations to recruit, retain and service
Representatives and to continue to innovate the direct-selling
model;
- our ability to reverse declining margins and net income;
- general economic and business conditions in our markets,
including social, economic and political uncertainties in the
international markets in our portfolio;
- our ability to achieve profitable growth, particularly in our
largest markets, such as Brazil
and the United States ("U.S."),
and developing and emerging markets, such as Mexico and Russia, and our ability to realize sustainable
growth from our investments in our brand and the direct-selling
channel;
- the effect of economic factors, including inflation and
fluctuations in interest rates and currency exchange rates, as well
as the designation of Venezuela as
a highly inflationary economy and the devaluation of its currency,
foreign exchange restrictions and the potential effect of such
factors on our business, results of operations and financial
condition;
- any developments in or consequences of investigations and
compliance reviews, and any litigation related thereto, including
the ongoing investigations and compliance reviews of FCPA and
related U.S. and foreign law matters in China and additional countries, as well as any
disruption or adverse consequences resulting from such
investigations, reviews, related actions or litigation;
- a general economic downturn, a recession globally or in one or
more of our geographic regions, or sudden disruption in business
conditions, and the ability of our broad-based geographic portfolio
to withstand an economic downturn, recession, cost inflation,
commodity cost pressures, economic or political instability,
competitive or other market pressures or conditions;
- the effect of political, legal, tax and regulatory risks
imposed on us in the U.S. and abroad, our operations or our
Representatives, including foreign exchange or other restrictions,
adoption, interpretation and enforcement of foreign laws, including
in non-U.S. jurisdictions such as Brazil, Russia, Venezuela and Argentina, and any changes thereto, as well as
reviews and investigations by government regulators that have
occurred or may occur from time to time, including, for example,
local regulatory scrutiny in China;
- the impact of changes in tax rates on the value of our deferred
tax assets and declining earnings on our ability to realize foreign
tax credits in the U.S.;
- our access to cash, short-term financing, and ability to secure
financing or financing at attractive rates;
- any changes to our credit ratings and the impact of such
changes on our financing costs, rates, terms, debt service
obligations and access to lending sources;
- the impact of any significant restructuring charges or
significant legal or regulatory settlements on our ability to
comply with certain covenants in our debt instruments;
- our ability to attract and retain key personnel;
- competitive uncertainties in our markets, including competition
from companies in the cosmetics, fragrances, skincare and
toiletries industry, some of which are larger than we are and have
greater resources;
- the impact of the typically seasonal nature of our business,
adverse effect of rising energy, commodity and raw material prices,
changes in market trends, purchasing habits of our consumers and
changes in consumer preferences, particularly given the global
nature of our business and the conduct of our business in primarily
one channel;
- other sudden disruption in business operations beyond our
control as a result of events such as acts of terrorism or war,
natural disasters, pandemic situations, large-scale power outages
and similar events;
- key information technology systems, process or site outages and
disruptions;
- the risk of product or ingredient shortages resulting from our
concentration of sourcing in fewer suppliers;
- the impact of possible pension funding obligations, increased
pension expense and any changes in pension regulations or
interpretations thereof on our cash flow and results of
operations;
- our ability to successfully identify new business opportunities
and strategic alternatives and identify and analyze acquisition
candidates, secure financing on favorable terms and negotiate and
consummate acquisitions, as well as to successfully integrate or
manage any acquired business;
- the challenges to our businesses, such as Silpada and
China, including the effects of
rising costs, macro-economic pressures, competition, any potential
outcome of the review of strategic alternatives for Silpada, and
the impact of declines in expected future cash flows and growth
rates, and a change in the discount rate used to determine the fair
value of expected future cash flows, which have impacted, and may
continue to impact, the estimated fair value of the recorded
goodwill and intangible assets;
- disruption in our supply chain or manufacturing and
distribution operations;
- the quality, safety and efficacy of our products;
- the success of our research and development activities;
- our ability to protect our intellectual property rights;
and
- the risk of an adverse outcome in any material pending and
future litigations or with respect to the legal status of
Representatives.
Additional information identifying such factors is contained in
Item 1A of our 2012 Form 10-K, as amended. We undertake no
obligation to update any such forward-looking statements.
AVON
PRODUCTS, INC.
|
CONSOLIDATED STATEMENTS OF INCOME
|
(Unaudited)
|
(In
millions, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
Percent
|
|
|
|
March
31
|
|
Change
|
|
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
2,432.0
|
|
$
|
2,532.8
|
|
(4)%
|
|
Other
revenue
|
|
51.7
|
|
|
42.6
|
|
|
|
Total
revenue
|
|
2,483.7
|
|
|
2,575.4
|
|
(4)%
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
|
941.6
|
|
|
1,009.8
|
|
|
|
Selling,
general and administrative expenses
|
|
1,370.0
|
|
|
1,494.1
|
|
|
|
Operating
profit
|
|
172.1
|
|
|
71.5
|
|
141%
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
29.4
|
|
|
24.6
|
|
|
|
Loss on
extinguishment of debt
|
|
73.0
|
|
|
-
|
|
|
|
Interest
income
|
|
(2.0)
|
|
|
(3.9)
|
|
|
|
Other
expense, net
|
|
44.4
|
|
|
10.0
|
|
|
|
Total
other expenses
|
|
144.8
|
|
|
30.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before taxes
|
|
27.3
|
|
|
40.8
|
|
(33)%
|
|
Income
taxes
|
|
(39.9)
|
|
|
(13.2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) income
|
|
(12.6)
|
|
|
27.6
|
|
|
|
Net income
attributable to noncontrolling
interests
|
|
(1.1)
|
|
|
(1.1)
|
|
|
|
Net
(loss) income attributable to Avon
|
$
|
(13.7)
|
|
$
|
26.5
|
|
(152)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)
Earnings per share:(1)
|
|
|
|
|
|
|
|
|
Basic
EPS
|
$
|
(0.03)
|
|
$
|
0.06
|
|
(150)%
|
|
Diluted
EPS
|
$
|
(0.03)
|
|
$
|
0.06
|
|
(150)%
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares
outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
432.5
|
|
|
431.3
|
|
|
|
Diluted
|
|
|
432.5
|
|
|
432.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Under the
two-class method, (loss) earnings per share is calculated using net
(loss) earnings allocable to
common
shares, which is derived by reducing net (loss) earnings by the
(loss) earnings allocable to participating
securities. Net (loss) earnings allocable to common
shares used in the basic and diluted (loss) earnings per
share
calculation were ($13.6) and 25.7 for the three
months ended March 31, 2013 and 2012, respectively.
|
AVON
PRODUCTS, INC.
|
CONSOLIDATED BALANCE SHEETS
|
(Unaudited)
|
(In
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31
|
|
December 31
|
|
|
|
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents
|
|
|
$
|
1,488.4
|
|
$
|
1,209.6
|
Accounts
receivable, net
|
|
|
|
742.9
|
|
|
751.9
|
Inventories
|
|
|
|
|
1,214.2
|
|
|
1,135.4
|
Prepaid
expenses and other
|
|
|
|
787.1
|
|
|
832.0
|
Total
current assets
|
|
|
|
4,232.6
|
|
|
3,928.9
|
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, at cost
|
|
|
2,618.0
|
|
|
2,711.8
|
Less
accumulated depreciation
|
|
|
|
(1,116.9)
|
|
|
(1,161.6)
|
Property,
plant and equipment, net
|
|
|
1,501.1
|
|
|
1,550.2
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
361.2
|
|
|
374.9
|
Other
intangible assets, net
|
|
|
|
115.8
|
|
|
120.3
|
Other
assets
|
|
|
|
|
1,363.0
|
|
|
1,408.2
|
Total
assets
|
|
|
|
$
|
7,573.7
|
|
$
|
7,382.5
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders'
Equity
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
Debt
maturing within one year
|
|
|
$
|
949.4
|
|
$
|
572.0
|
Accounts
payable
|
|
|
|
|
890.3
|
|
|
920.0
|
Accrued
compensation
|
|
|
|
222.3
|
|
|
266.6
|
Other
accrued liabilities
|
|
|
|
585.7
|
|
|
661.0
|
Sales and
taxes other than income
|
|
|
215.9
|
|
|
211.4
|
Income
taxes
|
|
|
|
|
43.8
|
|
|
73.6
|
Total
current liabilities
|
|
|
|
2,907.4
|
|
|
2,704.6
|
Long-term
debt
|
|
|
|
|
2,685.5
|
|
|
2,623.9
|
Employee
benefit plans
|
|
|
|
616.0
|
|
|
637.6
|
Long-term
income taxes
|
|
|
|
51.9
|
|
|
52.0
|
Other
liabilities
|
|
|
|
|
117.9
|
|
|
131.1
|
Total
liabilities
|
|
|
|
$
|
6,378.7
|
|
$
|
6,149.2
|
|
|
|
|
|
|
|
|
|
|
Shareholders' Equity
|
|
|
|
|
|
|
|
Common
stock
|
|
|
|
$
|
189.3
|
|
$
|
188.3
|
Additional
paid-in-capital
|
|
|
|
2,138.3
|
|
|
2,119.6
|
Retained
earnings
|
|
|
|
|
4,318.1
|
|
|
4,357.8
|
Accumulated other comprehensive loss
|
|
|
(889.2)
|
|
|
(876.7)
|
Treasury
stock, at cost
|
|
|
|
(4,578.6)
|
|
|
(4,571.9)
|
Total Avon
shareholders' equity
|
|
|
1,177.9
|
|
|
1,217.1
|
Noncontrolling interests
|
|
|
|
17.1
|
|
|
16.2
|
Total
shareholders' equity
|
|
|
$
|
1,195.0
|
|
$
|
1,233.3
|
Total
liabilities and shareholders' equity
|
|
$
|
7,573.7
|
|
$
|
7,382.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVON
PRODUCTS, INC.
|
CONSOLIDATED STATEMENTS OF CASH
FLOWS
|
(Unaudited)
|
(In
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
|
|
|
|
March
31
|
|
|
|
|
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Operating Activities
|
|
|
|
|
|
|
|
Net (loss)
income
|
|
|
|
$
|
(12.6)
|
|
$
|
27.6
|
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
57.0
|
|
|
60.5
|
Provision for doubtful accounts
|
|
|
|
52.0
|
|
|
74.0
|
Provision for obsolescence
|
|
|
|
|
29.6
|
|
|
28.3
|
Share-based compensation
|
|
|
|
|
11.8
|
|
|
10.7
|
Deferred income taxes
|
|
|
|
|
(2.8)
|
|
|
(26.2)
|
Charge for Venezuelan monetary assets and
liabilities
|
|
|
34.1
|
|
|
-
|
Other
|
|
|
|
|
|
|
21.6
|
|
|
13.4
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in
assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
|
|
(62.9)
|
|
|
(44.0)
|
Inventories
|
|
|
|
|
|
(111.3)
|
|
|
(80.1)
|
Prepaid expenses and other
|
|
|
|
|
(0.5)
|
|
|
37.2
|
Accounts payable and accrued liabilities
|
|
|
|
(98.8)
|
|
|
(60.7)
|
Income and other taxes
|
|
|
|
|
(15.3)
|
|
|
(46.6)
|
Noncurrent assets and liabilities
|
|
|
|
(20.8)
|
|
|
(27.1)
|
Net
cash used by operating activities
|
|
|
|
(118.9)
|
|
|
(33.0)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Investing Activities
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
|
|
|
(43.5)
|
|
|
(45.7)
|
Disposal
of assets
|
|
|
|
|
|
9.3
|
|
|
4.5
|
Purchases
of investments
|
|
|
|
|
(4.2)
|
|
|
(0.1)
|
Proceeds
from sale of investments
|
|
|
|
|
2.5
|
|
|
-
|
Net
cash used by investing activities
|
|
|
|
(35.9)
|
|
|
(41.3)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Financing Activities
|
|
|
|
|
|
|
|
Cash
dividends
|
|
|
|
|
|
(26.2)
|
|
|
(100.0)
|
Debt, net
(maturities of three months or less)
|
|
|
|
118.7
|
|
|
50.2
|
Proceeds
from debt
|
|
|
|
|
|
1,485.3
|
|
|
66.4
|
Repayment
of debt
|
|
|
|
|
|
(1,173.3)
|
|
|
(41.1)
|
Interest
rate swap termination
|
|
|
|
|
88.1
|
|
|
43.6
|
Proceeds
from exercise of stock options
|
|
|
|
9.5
|
|
|
4.2
|
Excess tax
benefit realized from share-based compensation
|
|
|
(0.1)
|
|
|
(2.2)
|
Repurchase
of common stock
|
|
|
|
|
(6.8)
|
|
|
(7.4)
|
Net
cash provided by financing activities
|
|
|
|
495.2
|
|
|
13.7
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of
exchange rate changes on cash and equivalents
|
|
|
(61.6)
|
|
|
30.7
|
Net
increase (decrease) in cash and equivalents
|
|
|
278.8
|
|
|
(29.9)
|
Cash and
equivalents at beginning of year
|
|
|
$
|
1,209.6
|
|
$
|
1,245.1
|
Cash and
equivalents at end of period
|
|
|
$
|
1,488.4
|
|
$
|
1,215.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVON
PRODUCTS, INC.
|
|
|
SUPPLEMENTAL SCHEDULE
|
|
|
(Unaudited)
|
|
|
(In
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE
MONTHS ENDED 3/31/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REGIONAL RESULTS
|
|
|
|
$ in
Millions
|
Total
Revenue US$
|
|
C$
|
|
Units
Sold
|
|
Price/Mix C$
|
|
Active
Reps
(1)
|
|
Average
Order
C$
|
|
|
|
|
|
|
% var.
vs
1Q12
|
|
% var.
vs
1Q12
|
|
% var.
vs
1Q12
|
|
% var.
vs
1Q12
|
|
% var.
vs
1Q12
|
|
% var.
vs
1Q12
|
|
|
Latin
America
|
$
|
1,144.4
|
-%
|
|
7%
|
|
(2)%
|
|
9%
|
|
4%
|
|
3%
|
|
|
Europe,
Middle East & Africa
|
|
733.1
|
1
|
|
3
|
|
4
|
|
(1)
|
|
4
|
|
(1)
|
|
|
North
America
|
|
406.2
|
(15)
|
|
(15)
|
|
(13)
|
|
(2)
|
|
(13)
|
|
(2)
|
|
|
Asia
Pacific (1)
|
|
200.0
|
(10)
|
|
(12)
|
|
(11)
|
|
(1)
|
|
(4)
|
|
(8)
|
|
|
Total from
operations
|
|
2,483.7
|
(4)
|
|
-
|
|
(3)
|
|
3
|
|
1
|
|
(1)
|
|
|
Global and
other
|
|
-
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
Total
|
$
|
2,483.7
|
(4)%
|
|
-%
|
|
(3)%
|
|
3%
|
|
1%
|
|
(1)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
GAAP
Operating
Profit (Loss)
US$
|
% var.
vs
1Q12
|
|
2013
GAAP
Operating Margin US$
|
|
2013
Adjusted
Operating
Profit US$ (2)
|
|
2012
Adjusted
Operating
Profit US$ (2)
|
|
2013
Adjusted
Operating Margin (2)
|
|
2012
Adjusted
Operating Margin (2)
|
|
|
Latin
America
|
$
|
101.4
|
100%
|
|
8.9%
|
|
$
|
112.8
|
|
$
|
55.5
|
|
9.9%
|
|
4.8%
|
|
|
Europe,
Middle East & Africa
|
|
111.4
|
97
|
|
15.2
|
|
|
120.7
|
|
|
61.1
|
|
16.5
|
|
8.4
|
|
|
North
America
|
|
(11.2)
|
*
|
|
(2.8)
|
|
|
(5.4)
|
|
|
8.2
|
|
(1.3)
|
|
1.7
|
|
|
Asia
Pacific
|
|
11.1
|
(28)
|
|
5.6
|
|
|
15.9
|
|
|
16.1
|
|
8.0
|
|
7.3
|
|
|
Total from
operations
|
|
212.7
|
68
|
|
8.6
|
|
|
244.0
|
|
|
140.9
|
|
9.8
|
|
5.5
|
|
|
Global and
other
|
|
(40.6)
|
26
|
|
-
|
|
|
(38.3)
|
|
|
(42.1)
|
|
-
|
|
-
|
|
|
Total
|
$
|
172.1
|
141%
|
|
6.9%
|
|
$
|
205.7
|
|
$
|
98.8
|
|
8.3%
|
|
3.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CATEGORY SALES (US$)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US$
|
|
C$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% var.
vs
1Q12
|
|
% var.
vs
1Q12
|
|
|
Beauty
(color cosmetics/fragrances/skincare/personal care)
|
|
|
|
|
|
$
|
1,768.2
|
|
(5)%
|
|
(1)%
|
|
|
Fashion
(jewelry/watches/apparel/footwear/accessories/children's)
|
|
|
|
|
|
429.8
|
|
(4)
|
|
(3)
|
|
|
Home (gift
& decorative products/housewares/entertainment &
leisure/children's/nutrition)
|
|
|
234.0
|
|
4
|
|
8
|
|
|
Net
sales
|
|
|
|
|
|
|
|
|
|
$
|
2,432.0
|
|
(4)%
|
|
-%
|
|
|
Other
revenue
|
|
|
|
|
|
|
|
|
|
|
51.7
|
|
21
|
|
20
|
|
|
Total
revenue
|
|
|
|
|
|
|
|
|
|
$
|
2,483.7
|
|
(4)%
|
|
-%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beauty
Category:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fragrance
|
|
|
|
|
|
|
|
|
|
|
|
|
1%
|
|
6%
|
|
|
|
Color
|
|
|
|
|
|
|
|
|
|
|
|
|
(6)
|
|
(2)
|
|
|
|
Skincare
|
|
|
|
|
|
|
|
|
|
|
|
|
(12)
|
|
(9)
|
|
|
|
Personal
care
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Calculation not
meaningful
|
|
(1)
|
In the
first quarter of 2013, we revised the definition of Active
Representatives to exclude China. As previously disclosed, our
business in China
is predominantly retail,
and as a result, we do not believe including China within the
Change in Active Representatives calculation
provides
for a relevant indicator of
underlying business trends. There were no changes to the underlying
calculation other than the exclusion of China.
|
|
(2)
|
For a
further discussion on our Non-GAAP ("Adjusted") financial
measures, please refer to our discussion of Non-GAAP financial
measures in this release and
reconciliations of our Non-GAAP financial measures to the related
GAAP financial measure in the following supplemental
schedules.
|
AVON
PRODUCTS, INC.
|
|
SUPPLEMENTAL SCHEDULE
|
|
NON-GAAP FINANCIAL MEASURES
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ in
Millions (except per share data)
|
|
THREE
MONTHS ENDED 3/31/13
|
|
|
|
|
|
|
|
CTI
|
|
|
|
|
Loss
on
|
|
|
|
|
|
|
|
Reported
|
|
restructuring
|
|
Venezuelan
|
|
extinguishment
|
|
Adjusted
|
|
|
|
|
(GAAP)
|
|
initiatives
|
|
special
items
|
|
of
debt
|
|
(Non-GAAP)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
|
|
$
|
941.6
|
|
$
|
(0.6)
|
|
$
|
9.9
|
|
$
|
-
|
|
$
|
932.3
|
|
Selling,
general and administrative expenses
|
|
1,370.0
|
|
|
20.9
|
|
|
3.3
|
|
|
-
|
|
|
1,345.8
|
|
Operating
profit
|
|
|
|
172.1
|
|
|
20.3
|
|
|
13.3
|
|
|
-
|
|
|
205.7
|
|
Income
before taxes
|
|
|
|
27.3
|
|
|
20.3
|
|
|
47.3
|
|
|
73.0
|
|
|
167.9
|
|
Income
taxes
|
|
|
|
(39.9)
|
|
|
(6.4)
|
|
|
16.6
|
|
|
(26.8)
|
|
|
(56.5)
|
|
Net (loss)
income
|
|
|
$
|
(12.6)
|
|
$
|
13.9
|
|
$
|
64.0
|
|
$
|
46.2
|
|
$
|
111.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
|
(0.03)
|
|
|
0.03
|
|
|
0.15
|
|
|
0.11
|
|
|
0.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
62.1%
|
|
|
-
|
|
|
0.4
|
|
|
-
|
|
|
62.5%
|
|
SG&A
as a % of revenues
|
|
|
55.2%
|
|
|
(0.8)
|
|
|
(0.1)
|
|
|
-
|
|
|
54.2%
|
|
Operating
margin
|
|
6.9%
|
|
|
0.8
|
|
|
0.5
|
|
|
-
|
|
|
8.3%
|
|
Effective
tax rate
|
|
|
|
146.1%
|
|
|
(0.3)
|
|
|
(115.0)
|
|
|
2.7
|
|
|
33.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SEGMENT
OPERATING PROFIT (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Latin
America
|
$
|
101.4
|
|
$
|
(1.8)
|
|
$
|
13.3
|
|
|
|
|
$
|
112.8
|
|
Europe,
Middle East & Africa
|
|
|
111.4
|
|
|
9.2
|
|
|
-
|
|
|
|
|
|
120.7
|
|
North
America
|
|
(11.2)
|
|
|
5.8
|
|
|
-
|
|
|
|
|
|
(5.4)
|
|
Asia
Pacific
|
|
11.1
|
|
|
4.8
|
|
|
-
|
|
|
|
|
|
15.9
|
|
Global and
other
|
|
(40.6)
|
|
|
2.3
|
|
|
-
|
|
|
|
|
|
(38.3)
|
|
Total
|
|
|
$
|
172.1
|
|
$
|
20.3
|
|
$
|
13.3
|
|
|
|
|
$
|
205.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SEGMENT
OPERATING MARGIN
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Latin
America
|
|
8.9%
|
|
|
(0.2)
|
|
|
1.2
|
|
|
|
|
|
9.9%
|
|
Europe,
Middle East & Africa
|
|
|
15.2%
|
|
|
1.3
|
|
|
-
|
|
|
|
|
|
16.5%
|
|
North
America
|
|
(2.8)%
|
|
|
1.4
|
|
|
-
|
|
|
|
|
|
(1.3)%
|
|
Asia
Pacific
|
|
5.6%
|
|
|
2.4
|
|
|
-
|
|
|
|
|
|
8.0%
|
|
Global and
other
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
-
|
|
Total
|
|
|
|
6.9%
|
|
|
0.8
|
|
|
0.5
|
|
|
|
|
|
8.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ in
Millions (except per share data)
|
|
THREE
MONTHS ENDED 3/31/12
|
|
|
|
|
|
|
CTI
|
|
|
|
|
|
|
Reported
|
|
restructuring
|
|
Adjusted
|
|
|
|
|
(GAAP)
|
|
initiatives
|
|
(Non-GAAP)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
|
|
$
|
1,009.8
|
|
$
|
2.7
|
|
$
|
1,007.1
|
|
Selling,
general and administrative expenses
|
|
1,494.1
|
|
|
24.6
|
|
|
1,469.5
|
|
Operating
profit
|
|
|
|
71.5
|
|
|
27.3
|
|
|
98.8
|
|
Income
before taxes
|
|
|
|
40.8
|
|
|
27.3
|
|
|
68.1
|
|
Income
taxes
|
|
|
|
(13.2)
|
|
|
(9.2)
|
|
|
(22.4)
|
|
Net
income
|
|
|
$
|
27.6
|
|
$
|
18.1
|
|
$
|
45.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
|
0.06
|
|
|
0.04
|
|
|
0.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
60.8%
|
|
|
0.1
|
|
|
60.9%
|
|
SG&A
as a % of revenues
|
|
|
58.0%
|
|
|
(1.0)
|
|
|
57.1%
|
|
Operating
margin
|
|
2.8%
|
|
|
1.1
|
|
|
3.8%
|
|
Effective
tax rate
|
|
|
|
32.3%
|
|
|
0.6
|
|
|
32.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SEGMENT
OPERATING PROFIT
|
|
|
|
|
|
|
|
|
|
|
Latin
America
|
$
|
50.8
|
|
$
|
4.7
|
|
$
|
55.5
|
|
Europe,
Middle East & Africa
|
|
|
56.5
|
|
|
4.6
|
|
|
61.1
|
|
North
America
|
|
3.8
|
|
|
4.4
|
|
|
8.2
|
|
Asia
Pacific
|
|
15.4
|
|
|
0.7
|
|
|
16.1
|
|
Global and
other
|
|
(55.0)
|
|
|
12.9
|
|
|
(42.1)
|
|
Total
|
|
|
$
|
71.5
|
|
$
|
27.3
|
|
$
|
98.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SEGMENT
OPERATING MARGIN
|
|
|
|
|
|
|
|
|
|
|
Latin
America
|
|
4.4%
|
|
|
0.4
|
|
|
4.8%
|
|
Europe,
Middle East & Africa
|
|
|
7.8%
|
|
|
0.6
|
|
|
8.4%
|
|
North
America
|
|
0.8%
|
|
|
0.9
|
|
|
1.7%
|
|
Asia
Pacific
|
|
6.9%
|
|
|
0.3
|
|
|
7.3%
|
|
Global and
other
|
|
-
|
|
|
-
|
|
|
-
|
|
Total
|
|
|
|
2.8%
|
|
|
1.1
|
|
|
3.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts in
the table above may not necessarily sum because the computations
are made independently.
|
|
SOURCE Avon Products, Inc.