NEW YORK, Nov. 3, 2016 /PRNewswire/ -- Avon Products,
Inc. (NYSE:AVP) today reported third-quarter 2016 results. Total
revenue for Avon Products, Inc. declined 2% to $1.4 billion, but increased 4% in constant
dollars1. Diluted earnings per share from continuing
operations of $0.07 improved
$1.58 per share versus the same
period last year. Adjusted diluted earnings per share from
continuing operations of $0.02
improved $0.13 per share versus the
same period last year. Foreign currency negatively impacted both
Diluted earnings per share and Adjusted diluted earnings per share
by an estimated $0.03 per share,
driven by the strength of the U.S. dollar against the currencies of
the countries in which the Company operates.
"Avon's third-quarter results
reflect broad-based performance improvements resulting in
local currency sales growth across our top markets and significant
operating margin expansion versus the prior year," said
Sheri McCoy, Chief Executive Officer
of Avon Products, Inc. "We have also taken actions to significantly
improve our balance sheet and have accelerated the pace of our 2016
cost savings initiatives. I am pleased with our progress
against the Transformation Plan as we continue to position
Avon to deliver sustained
long-term profitable growth."
Third-Quarter 2016 Income Statement Highlights (compared with
third-quarter 2015)
- Total revenue for Avon Products, Inc. declined 2% to
$1.4 billion, but increased 4% in
constant dollars.
- Total revenue from reportable segments declined 2% to
$1.4 billion, but increased 4% in
constant dollars.
- Active Representatives were relatively unchanged
year-over-year, as increases in South
Latin America and Europe,
Middle East & Africa were 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 1% due to growth in
Europe, Middle East & Africa and South
Latin America, partially offset by declines in Asia Pacific.
- Gross margin was 60.9%, down 20 basis points while
Adjusted gross margin was 60.9%, down 60 basis points. These
year-over-year comparisons were negatively impacted by an
approximate 250 basis point impact from foreign exchange, largely
offset by inflationary and strategic pricing and lower supply
chain costs.
- Operating margin was 8.0% in the quarter, up 480 basis
points while Adjusted operating margin was 7.0%, up 310 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. These benefits were partially offset
by approximately 260 basis points of unfavorable impact of foreign
exchange on operating margin and approximately 270 basis
points of unfavorable impact of foreign exchange on Adjusted
operating margin.
- The effective tax rate from continuing operations in the
quarter was 51.3% and on an Adjusted basis was 72.5%.
- Income from continuing operations, net of tax was
$36 million, or $0.07 per diluted share, compared with a loss of
$668 million, or $1.51 per diluted share, for the third quarter of
2015. Adjusted income from continuing operations, net of tax was
$16 million, or $0.02 per diluted share, compared with a loss of
$48 million, or $0.11 per diluted share, for the third quarter of
2015. Earnings allocated to convertible preferred stock had a
negative $0.01 impact on Diluted
earnings per share and a negative $0.02 impact on Adjusted diluted earnings per
share.
- Loss from discontinued operations, net of tax was
$1 million associated with the
previously separated North America
business, or $0.00 per diluted share,
compared with a loss of $29 million,
or $0.06 per diluted share, for the
third quarter of 2015.
- Foreign currency has impacted the Company's financial
results of continuing operations as shown in the table on the
following page.
Approximate Impact
of Foreign Currency
|
|
|
|
|
|
Third-Quarter
2016
|
|
Year-to-Date
2016
|
|
Estimated
impact
($ in
millions)
|
|
Estimated
impact
on diluted
EPS
|
|
Estimated
impact
($ in
millions)
|
|
Estimated
impact
on diluted
EPS
|
Impact on Reported
(GAAP) results:
|
|
|
|
|
|
|
|
Total
revenue
|
(6) pts
|
|
|
|
|
(12) pts
|
|
|
|
Operating profit -
transaction
|
$
|
(35)
|
|
|
$
|
(0.05)
|
|
|
$
|
(150)
|
|
|
$
|
(0.21)
|
|
Operating profit -
translation
|
(10)
|
|
|
(0.01)
|
|
|
(60)
|
|
|
(0.08)
|
|
Total operating
profit
|
$
|
(45)
|
|
|
$
|
(0.06)
|
|
|
$
|
(210)
|
|
|
$
|
(0.30)
|
|
Operating
margin
|
(260) bps
|
|
|
|
|
(390) bps
|
|
|
|
Revaluation of
working capital
|
$
|
25
|
|
|
$
|
0.04
|
|
|
$
|
33
|
|
|
$
|
0.05
|
|
Diluted
EPS
|
|
|
$
|
(0.03)
|
|
|
|
|
$
|
(0.25)
|
|
|
|
|
|
|
|
|
|
Impact on Adjusted
(Non-GAAP)
results:
|
|
|
|
|
|
|
|
Adjusted operating
profit - transaction
|
$
|
(35)
|
|
|
$
|
(0.05)
|
|
|
$
|
(150)
|
|
|
$
|
(0.21)
|
|
Adjusted operating
profit - translation
|
(10)
|
|
|
(0.01)
|
|
|
(65)
|
|
|
(0.09)
|
|
Total Adjusted
operating profit
|
$
|
(45)
|
|
|
$
|
(0.06)
|
|
|
$
|
(215)
|
|
|
$
|
(0.31)
|
|
Adjusted operating
margin
|
(270) bps
|
|
|
|
|
(390) bps
|
|
|
|
Revaluation of
working capital
|
$
|
25
|
|
|
$
|
0.04
|
|
|
$
|
38
|
|
|
$
|
0.05
|
|
Adjusted diluted
EPS
|
|
|
$
|
(0.03)
|
|
|
|
|
$
|
(0.25)
|
|
|
|
|
|
|
|
|
|
Amounts in the table
above may not necessarily sum because the computations are made
independently.
|
Adjustments to Third-Quarter 2016 GAAP Results to Arrive at
Adjusted Results
During the third quarter of 2016, the following adjustments were
made to GAAP results to arrive at Adjusted results and, in total,
reduced Diluted earnings per share from continuing operations by
$0.05:
- The Company settled claims relating to professional services
that had been provided to the Company prior to 2013 in
connection with a previously disclosed legal matter. The
proceeds, net of legal fees, of approximately $27 million were recognized as a reduction of
selling, general and administrative expenses in the third quarter
of 2016 and were received by the Company in the fourth quarter of
2016.
- The Company recorded costs to implement restructuring within
operating profit of approximately $14
million before tax (approximately $11
million after tax), primarily related to employee-related
costs, as part of the previously announced Transformation
Plan.
- The Company recorded a net gain on extinguishment of debt of
approximately $4 million related to
debt repayments through cash tender offers.
Third-Quarter 2016
Segment Highlights (compared with third-quarter
2015)
|
|
THREE MONTHS ENDED
SEPTEMBER 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SEGMENT
RESULTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
Active
Representatives
|
|
Average
Order
C$
|
|
Units
Sold
|
|
Price/
Mix
C$
|
|
Ending
Representatives
|
|
US$
|
|
|
|
|
C$
|
|
|
|
|
|
Revenue &
Drivers
|
|
|
%
var.
vs
3Q15
|
|
%
var.
vs
3Q15
|
|
%
var.
vs
3Q15
|
|
%
var.
vs
3Q15
|
|
%
var.
vs
3Q15
|
|
%
var.
vs
3Q15
|
|
%
var.
vs
3Q15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe, Middle East
&
Africa
|
$
|
476.4
|
|
|
(4)%
|
|
|
2%
|
|
|
1%
|
|
|
1%
|
|
|
(1)%
|
|
|
3%
|
|
|
5%
|
|
South Latin
America
|
594.8
|
|
|
4
|
|
|
9
|
|
|
2
|
|
|
7
|
|
|
2
|
|
|
7
|
|
|
3
|
|
North Latin
America
|
196.8
|
|
|
(6)
|
|
|
3
|
|
|
—
|
|
|
3
|
|
|
(6)
|
|
|
9
|
|
|
(1)
|
|
Asia
Pacific
|
132.8
|
|
|
(9)
|
|
|
(7)
|
|
|
(12)
|
|
|
5
|
|
|
(8)
|
|
|
1
|
|
|
(7)
|
|
Total from
reportable
segments
|
1,400.8
|
|
|
(2)
|
|
|
4
|
|
|
—
|
|
|
4
|
|
|
(1)
|
|
|
5
|
|
|
1
|
|
Other operating
segments and
business activities
|
8.0
|
|
|
(36)
|
|
|
(5)
|
|
|
(100)
|
|
|
*
|
|
|
(100)
|
|
|
*
|
|
|
(100)
|
|
Total
revenue
|
$
|
1,408.8
|
|
|
(2)%
|
|
|
4%
|
|
|
(2)%
|
|
|
6%
|
|
|
(2)%
|
|
|
6%
|
|
|
(1)%
|
|
Operating
Profit/Margin
|
|
2016
Operating
Profit (Loss)
US$
|
|
2016
Operating
Margin
US$
|
|
Change
in
US$
vs
3Q15
|
|
Change
in
C$
vs
3Q15
|
|
|
|
|
|
|
|
|
|
|
|
Segment
profit/margin
|
|
|
|
|
|
|
|
|
|
Europe, Middle East
& Africa
|
|
$
|
66.2
|
|
|
13.9%
|
|
|
(10) bps
|
|
(60) bps
|
|
South Latin
America
|
|
73.8
|
|
|
12.4
|
|
|
310
|
|
300
|
|
North Latin
America
|
|
24.4
|
|
|
12.4
|
|
|
390
|
|
410
|
|
Asia
Pacific
|
|
12.7
|
|
|
9.6
|
|
|
(100)
|
|
(90)
|
|
Total from
reportable segments
|
|
177.1
|
|
|
12.6
|
|
|
170
|
|
150
|
|
Other operating
segments and business
activities
|
|
(0.8)
|
|
|
|
|
|
|
|
|
Unallocated global
expenses
|
|
(77.5)
|
|
|
|
|
|
|
|
|
CTI restructuring
initiatives
|
|
(14.0)
|
|
|
|
|
|
|
|
|
Legal
settlement
|
|
27.2
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
$
|
112.0
|
|
|
8.0%
|
|
|
480
bps
|
|
480
bps
|
|
|
|
|
|
|
|
|
|
|
|
*Calculation not
meaningful.
|
|
Other operating
segments and business activities include the business results for
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.
|
Third-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 4%, or up 2% in
constant dollars. Constant-dollar revenue was driven by growth in
Active Representatives and average order.
- Russia revenue was down
2%, or up 2% in constant dollars, primarily driven by an increase
in Active Representatives, partially offset by lower average
order.
- U.K. revenue was down 14%, or up 1% in constant dollars,
as higher average order was partially offset by a decrease in
Active Representatives.
- South Latin America
revenue was up 4%, or 9% in constant dollars, due to higher average
order and an increase in Active Representatives. 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 late
2015. Argentina contributed
approximately 5 points to this constant-dollar revenue growth,
primarily due to inflationary pricing.
- Brazil revenue was up
14%, or 6% in constant dollars, driven by increases in Active
Representatives and average order. MVA taxes (discussed above)
negatively impacted Brazil's
constant-dollar revenue growth by an estimated 3 points.
- North Latin America
revenue was down 6%, or up 3% in constant dollars. Constant-dollar
revenue benefited from higher average order.
- Mexico revenue was down
5%, or up 9% in constant dollars, primarily driven by higher
average order and an increase in Active Representatives.
- Asia Pacific revenue
was down 9%, or 7% in constant dollars due to declines in most
markets. The segment's constant-dollar revenue decline was driven
by a decrease in Active Representatives, partially offset by higher
average order.
- Philippines revenue
decreased 2%, or was relatively unchanged in constant dollars as
higher average order was offset by declines in Active
Representatives.
Third-Quarter 2016 Cash Flow Review
- Net cash used by operating activities of continuing
operations was $104 million for
the nine months ended September 30,
2016, compared with $90
million for the same period in 2015. Cash used by operating
activities during 2016 was unfavorably impacted by the timing of
payments, primarily for inventory, increased levels of accounts
receivable, 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 nine months ended September 30,
2016, there was $68 million of
net cash used by investing activities of continuing
operations, compared with net cash provided of $140 million in the same period in 2015. Cash
provided by investing activities of continuing operations in 2015
included net proceeds on the sale of Liz
Earle.
- Net cash provided by financing activities of continuing
operations was $569 million for
the nine months ended September 30,
2016, a $914 million increase
over the prior year, primarily due to:
- net proceeds from Senior Secured Notes issued in the third
quarter of 2016;
- the issuance of Series C Convertible Preferred Stock;
- the suspension of the common stock dividend; and
- the prepayment of 2.375% Notes in the third quarter of 2015;
partially offset by
- payments for the August 2016 cash
tender offers.
Transformation Plan
In January 2016, the Company
announced a three-year Transformation Plan, which includes
investing in growth, reducing costs in an effort to continue to
improve cost structure and improving financial resilience.
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 is on track to deliver the targeted $350 million in Transformation Plan savings over
the three years. For 2016, the Company has accelerated certain cost
savings initiatives and is ahead of schedule on realizing the
targeted $70 million of savings, as
well as savings to cover the approximately $20 million in stranded costs that resulted from
the separation of the Company's North
America business. Through the nine months ended September 30, 2016, the Company has already
realized approximately $80 million of
the combined $90 million targeted
savings.
With respect to improving its financial resilience, the Company
targeted to reduce debt by approximately $250 million during 2016. The steps taken through
September 30, 2016, include the
issuance of $500 million of senior
secured notes due August 2022, an
approximate $301 million tender of
near-term public notes, as well as a reduction in the debt of
foreign subsidiaries of approximately $33
million. In addition, during October
2016, the Company repurchased approximately $163 million of debt and issued notices of
prepayment on the remaining public notes due March and July 2018 of approximately $238 million. In total, as a result of these
actions, we will have reduced debt by approximately $235 million in 2016 and will have extended the
Company's maturity profile, with no long-term debt due until
March 2019.
Conference call
Avon will conduct a conference
call at 9:00 a.m. today to discuss
its quarterly results. The dial-in number for the call is (800)
843-2086 in the U.S. or (706) 643-1815 from non-U.S. locations
(conference ID number: 94968002). The call will be webcast live at
www.avoninvestor.com and can be accessed or downloaded from that
site for a period of one year.
About Avon Products, Inc.
Avon is the Company that for
130 years has proudly stood for beauty, innovation, optimism and,
above all, for women. Avon
products include well-recognized and beloved brands such as ANEW,
Avon Color, Avon Care, Skin-So-Soft, and Advance Techniques sold
through nearly 6 million active independent Avon Sales
Representatives. Learn more about Avon and its products at
www.avoncompany.com.
Footnotes
1 "Adjusted" items refer to financial measures that
are derived from measures calculated in accordance with generally
accepted accounting principles in the
United States ("GAAP"), but which have been adjusted to
exclude certain items. Other Adjusted financial measures that the
Company refers to include Constant dollar (C$) 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.
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
|
|
Nine Months
Ended
|
|
Percent
Change
|
|
|
September
30
|
|
|
September
30
|
|
|
|
2016
|
|
2015
|
|
|
|
2016
|
|
2015
|
|
|
Net sales
|
|
$
|
1,367.5
|
|
|
$
|
1,413.3
|
|
|
(3)%
|
|
|
$
|
4,047.0
|
|
|
$
|
4,490.7
|
|
|
(10)%
|
|
Other
revenue
|
|
41.3
|
|
|
22.9
|
|
|
|
|
102.6
|
|
|
62.5
|
|
|
|
Total
revenue
|
|
1,408.8
|
|
|
1,436.2
|
|
|
(2)%
|
|
|
4,149.6
|
|
|
4,553.2
|
|
|
(9)%
|
|
Cost of
sales
|
|
550.9
|
|
|
559.0
|
|
|
|
|
1,634.7
|
|
|
1,781.7
|
|
|
|
Selling, general and
administrative expenses
|
|
745.9
|
|
|
831.9
|
|
|
|
|
2,300.0
|
|
|
2,669.4
|
|
|
|
Operating
profit
|
|
112.0
|
|
|
45.3
|
|
|
*
|
|
|
214.9
|
|
|
102.1
|
|
|
*
|
|
Interest
expense
|
|
34.4
|
|
|
29.6
|
|
|
|
|
100.3
|
|
|
88.2
|
|
|
|
(Gain) loss on
extinguishment of debt
|
|
(3.9)
|
|
|
5.5
|
|
|
|
|
(3.9)
|
|
|
5.5
|
|
|
|
Interest
income
|
|
(3.5)
|
|
|
(3.6)
|
|
|
|
|
(12.8)
|
|
|
(9.7)
|
|
|
|
Other expense,
net
|
|
10.4
|
|
|
29.0
|
|
|
|
|
142.9
|
|
|
47.5
|
|
|
|
Gain on sale of
business
|
|
—
|
|
|
(46.2)
|
|
|
|
|
—
|
|
|
(44.9)
|
|
|
|
Total other
expenses
|
|
37.4
|
|
|
14.3
|
|
|
|
|
226.5
|
|
|
86.6
|
|
|
|
Income (loss) from
continuing operations, before taxes
|
|
74.6
|
|
|
31.0
|
|
|
*
|
|
|
(11.6)
|
|
|
15.5
|
|
|
*
|
|
Income
taxes
|
|
(38.3)
|
|
|
(699.0)
|
|
|
|
|
(72.1)
|
|
|
(797.2)
|
|
|
|
Income (loss) from
continuing operations, net of tax
|
|
36.3
|
|
|
(668.0)
|
|
|
*
|
|
|
(83.7)
|
|
|
(781.7)
|
|
|
89%
|
|
Loss from
discontinued operations, net of tax
|
|
(0.7)
|
|
|
(29.0)
|
|
|
|
|
(12.9)
|
|
|
(32.0)
|
|
|
|
Net income
(loss)
|
|
35.6
|
|
|
(697.0)
|
|
|
|
|
(96.6)
|
|
|
(813.7)
|
|
|
|
Net loss (income)
attributable to noncontrolling interests
|
|
0.4
|
|
|
—
|
|
|
|
|
(0.3)
|
|
|
(1.8)
|
|
|
|
Net income (loss)
attributable to Avon
|
|
$
|
36.0
|
|
|
$
|
(697.0)
|
|
|
*
|
|
|
$
|
(96.9)
|
|
|
$
|
(815.5)
|
|
|
88%
|
|
Earnings (loss) per
share:(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS from
continuing operations
|
|
$
|
0.07
|
|
|
$
|
(1.51)
|
|
|
*
|
|
|
$
|
(0.22)
|
|
|
$
|
(1.77)
|
|
|
88%
|
|
Basic EPS from
discontinued operations
|
|
—
|
|
|
(0.06)
|
|
|
|
|
(0.03)
|
|
|
(0.07)
|
|
|
|
Basic EPS
attributable to Avon
|
|
$
|
0.07
|
|
|
$
|
(1.58)
|
|
|
*
|
|
|
$
|
(0.25)
|
|
|
$
|
(1.84)
|
|
|
86%
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS from
continuing operations
|
|
$
|
0.07
|
|
|
$
|
(1.51)
|
|
|
*
|
|
|
$
|
(0.22)
|
|
|
$
|
(1.77)
|
|
|
88%
|
|
Diluted EPS from
discontinued operations
|
|
—
|
|
|
(0.06)
|
|
|
|
|
(0.03)
|
|
|
(0.07)
|
|
|
|
Diluted EPS
attributable to Avon
|
|
$
|
0.07
|
|
|
$
|
(1.58)
|
|
|
*
|
|
|
$
|
(0.25)
|
|
|
$
|
(1.84)
|
|
|
86%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
437.4
|
|
|
435.4
|
|
|
|
|
436.7
|
|
|
435.1
|
|
|
|
Diluted
|
|
437.4
|
|
|
435.4
|
|
|
|
|
436.7
|
|
|
435.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* 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 earnings (loss) allocable to common
shares used in the basic and diluted earnings (loss) per share
calculation was $29.4 and ($685.9) for the three months ended
September 30, 2016 and 2015, respectively. Net loss allocable to
common shares used in the basic and diluted loss per share
calculation was ($108.4) and ($802.7) for the nine months ended
September 30, 2016 and 2015, respectively.
|
AVON PRODUCTS,
INC. CONSOLIDATED BALANCE
SHEETS (Unaudited) (In millions)
|
|
|
|
September
30
|
|
December
31
|
|
|
2016
|
|
2015
|
Assets
|
|
|
|
|
Current
Assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
901.7
|
|
|
$
|
686.9
|
|
Accounts receivable,
net
|
|
505.2
|
|
|
443.0
|
|
Inventories
|
|
706.4
|
|
|
624.0
|
|
Prepaid expenses and
other
|
|
323.5
|
|
|
296.1
|
|
Current assets of
discontinued operations
|
|
4.7
|
|
|
291.1
|
|
Total current
assets
|
|
2,441.5
|
|
|
2,341.1
|
|
Property, plant and
equipment, at cost
|
|
1,529.4
|
|
|
1,495.7
|
|
Less accumulated
depreciation
|
|
(782.7)
|
|
|
(728.8)
|
|
Property, plant and
equipment, net
|
|
746.7
|
|
|
766.9
|
|
Goodwill
|
|
98.1
|
|
|
92.3
|
|
Other
assets
|
|
619.2
|
|
|
490.0
|
|
Noncurrent assets of
discontinued operations
|
|
—
|
|
|
180.1
|
|
Total
assets
|
|
$
|
3,905.5
|
|
|
$
|
3,870.4
|
|
Liabilities and
Shareholders' Deficit
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
Debt maturing within
one year
|
|
$
|
111.3
|
|
|
$
|
55.2
|
|
Accounts
payable
|
|
760.1
|
|
|
774.2
|
|
Accrued
compensation
|
|
156.0
|
|
|
157.6
|
|
Other accrued
liabilities
|
|
399.7
|
|
|
419.6
|
|
Sales and taxes other
than income
|
|
144.0
|
|
|
174.9
|
|
Income
taxes
|
|
4.4
|
|
|
23.9
|
|
Payable to
discontinued operations
|
|
—
|
|
|
100.0
|
|
Current liabilities
of discontinued operations
|
|
12.9
|
|
|
489.7
|
|
Total current
liabilities
|
|
1,588.4
|
|
|
2,195.1
|
|
Long-term
debt
|
|
2,226.8
|
|
|
2,150.5
|
|
Employee benefit
plans
|
|
162.5
|
|
|
177.5
|
|
Long-term income
taxes
|
|
77.1
|
|
|
65.1
|
|
Other
liabilities
|
|
187.1
|
|
|
78.4
|
|
Noncurrent
liabilities of discontinued operations
|
|
—
|
|
|
260.2
|
|
Total
liabilities
|
|
4,241.9
|
|
|
4,926.8
|
|
|
|
|
|
|
|
|
|
|
|
Series C convertible
preferred stock
|
|
439.1
|
|
|
—
|
|
|
|
|
|
|
Shareholders'
Deficit
|
|
|
|
|
Common
stock
|
|
188.7
|
|
|
187.9
|
|
Additional paid-in
capital
|
|
2,272.2
|
|
|
2,254.0
|
|
Retained
earnings
|
|
2,338.5
|
|
|
2,448.1
|
|
Accumulated other
comprehensive loss
|
|
(989.0)
|
|
|
(1,366.2)
|
|
Treasury stock, at
cost
|
|
(4,599.4)
|
|
|
(4,594.1)
|
|
Total Avon
shareholders' deficit
|
|
(789.0)
|
|
|
(1,070.3)
|
|
Noncontrolling
interests
|
|
13.5
|
|
|
13.9
|
|
Total shareholders'
deficit
|
|
(775.5)
|
|
|
(1,056.4)
|
|
Total liabilities,
series C convertible preferred stock and shareholders'
deficit
|
|
$
|
3,905.5
|
|
|
$
|
3,870.4
|
|
|
|
|
|
|
AVON PRODUCTS,
INC. CONSOLIDATED STATEMENTS OF CASH
FLOWS (Unaudited) (In millions)
|
|
|
|
Nine Months
Ended
|
|
|
September
30
|
|
|
2016
|
|
2015
|
Cash Flows from
Operating Activities
|
|
|
|
|
Net loss
|
|
$
|
(96.6)
|
|
|
$
|
(813.7)
|
|
Loss from
discontinued operations, net of tax
|
|
12.9
|
|
|
32.0
|
|
Loss from continuing
operations, net of tax
|
|
$
|
(83.7)
|
|
|
$
|
(781.7)
|
|
Adjustments to
reconcile net loss to net cash used by operating
activities:
|
|
|
|
|
Depreciation
|
|
62.5
|
|
|
72.0
|
|
Amortization
|
|
22.4
|
|
|
25.0
|
|
Provision for
doubtful accounts
|
|
114.6
|
|
|
105.9
|
|
Provision for
obsolescence
|
|
26.6
|
|
|
35.2
|
|
Share-based
compensation
|
|
23.1
|
|
|
28.9
|
|
Foreign exchange
(gains) losses
|
|
(0.3)
|
|
|
27.5
|
|
Deferred income
taxes
|
|
(16.3)
|
|
|
667.1
|
|
Charge for Venezuelan
monetary assets and liabilities
|
|
—
|
|
|
(4.2)
|
|
Charge for Venezuelan
non-monetary assets
|
|
—
|
|
|
101.7
|
|
Loss on
deconsolidation of Venezuela
|
|
120.5
|
|
|
—
|
|
Pre-tax gain on sale
of business
|
|
—
|
|
|
(44.9)
|
|
Other
|
|
3.0
|
|
|
10.2
|
|
Changes in assets and
liabilities:
|
|
|
|
|
Accounts
receivable
|
|
(167.1)
|
|
|
(117.4)
|
|
Inventories
|
|
(109.5)
|
|
|
(153.5)
|
|
Prepaid expenses and
other
|
|
(16.8)
|
|
|
1.2
|
|
Accounts payable and
accrued liabilities
|
|
(41.7)
|
|
|
(34.5)
|
|
Income and other
taxes
|
|
(15.3)
|
|
|
18.8
|
|
Noncurrent assets and
liabilities
|
|
(26.3)
|
|
|
(47.2)
|
|
Net cash used by
operating activities of continuing operations
|
|
(104.3)
|
|
|
(89.9)
|
|
Cash Flows from
Investing Activities
|
|
|
|
|
Capital
expenditures
|
|
(68.2)
|
|
|
(58.4)
|
|
Disposal of
assets
|
|
3.3
|
|
|
5.7
|
|
Net proceeds from
sale of business
|
|
—
|
|
|
208.3
|
|
Purchases of
investments
|
|
—
|
|
|
(25.0)
|
|
Net proceeds from
sale of investments
|
|
—
|
|
|
9.0
|
|
Reduction of cash due
to Venezuela deconsolidation
|
|
(4.5)
|
|
|
—
|
|
Other investing
activities
|
|
1.6
|
|
|
—
|
|
Net cash (used)
provided by investing activities of continuing
operations
|
|
(67.8)
|
|
|
139.6
|
|
Cash Flows from
Financing Activities
|
|
|
|
|
Cash
dividends
|
|
—
|
|
|
(80.7)
|
|
Debt, net (maturities
of three months or less)
|
|
(31.4)
|
|
|
(4.6)
|
|
Proceeds from
debt
|
|
508.7
|
|
|
7.6
|
|
Repayment of
debt
|
|
(311.9)
|
|
|
(258.7)
|
|
Repurchase of common
stock
|
|
(5.3)
|
|
|
(3.0)
|
|
Net proceeds from the
sale of series C convertible preferred stock
|
|
426.3
|
|
|
—
|
|
Other financing
activities
|
|
(17.2)
|
|
|
(5.9)
|
|
Net cash provided
(used) by financing activities of continuing
operations
|
|
569.2
|
|
|
(345.3)
|
|
Cash Flows from
Discontinued Operations
|
|
|
|
|
Net cash used by
operating activities of discontinued operations
|
|
(67.6)
|
|
|
(6.8)
|
|
Net cash used by
investing activities of discontinued operations
|
|
(94.6)
|
|
|
(3.4)
|
|
Net cash used by
financing activities of discontinued operations
|
|
—
|
|
|
(12.6)
|
|
Net cash used by
discontinued operations
|
|
(162.2)
|
|
|
(22.8)
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
(17.9)
|
|
|
(54.7)
|
|
Net increase
(decrease) in cash and cash equivalents
|
|
217.0
|
|
|
(373.1)
|
|
Cash and cash
equivalents at beginning of year(1)
|
|
684.7
|
|
|
960.5
|
|
Cash and cash
equivalents at end of period(2)
|
|
$
|
901.7
|
|
|
$
|
587.4
|
|
|
(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
respectively.
|
|
(2) Includes cash and cash
equivalents of discontinued operations of $1.1 at September 30,
2015.
|
AVON PRODUCTS,
INC. SUPPLEMENTAL SCHEDULE SEGMENT PERFORMANCE
METRICS (Unaudited) (In
millions)
|
|
THREE MONTHS ENDED
SEPTEMBER 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SEGMENT
RESULTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
Active
Representatives
|
|
Average
Order
C$
|
|
Units
Sold
|
|
Price/
Mix
C$
|
|
Ending
Representatives
|
|
US$
|
|
C$
|
|
|
|
|
|
Revenue &
Drivers
|
|
|
%
var.
vs
3Q15
|
|
%
var.
vs
3Q15
|
|
%
var.
vs
3Q15
|
|
%
var.
vs
3Q15
|
|
%
var.
vs
3Q15
|
|
%
var.
vs
3Q15
|
|
%
var.
vs
3Q15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe, Middle East
&
Africa
|
$
|
476.4
|
|
|
(4)%
|
|
2%
|
|
1%
|
|
1%
|
|
(1)%
|
|
3%
|
|
5%
|
South Latin
America
|
594.8
|
|
|
4
|
|
9
|
|
2
|
|
7
|
|
2
|
|
7
|
|
3
|
North Latin
America
|
196.8
|
|
|
(6)
|
|
3
|
|
—
|
|
3
|
|
(6)
|
|
9
|
|
(1)
|
Asia
Pacific
|
132.8
|
|
|
(9)
|
|
(7)
|
|
(12)
|
|
5
|
|
(8)
|
|
1
|
|
(7)
|
Total from
reportable segments
|
1,400.8
|
|
|
(2)
|
|
4
|
|
—
|
|
4
|
|
(1)
|
|
5
|
|
1
|
Other operating
segments and
business activities
|
8.0
|
|
|
(36)
|
|
(5)
|
|
(100)
|
|
*
|
|
(100)
|
|
*
|
|
(100)
|
Total
revenue
|
$
|
1,408.8
|
|
|
(2)%
|
|
4%
|
|
(2)%
|
|
6%
|
|
(2)%
|
|
6%
|
|
(1)%
|
Operating
Profit/Margin
|
|
2016
Operating
Profit (Loss)
US$
|
|
2016
Operating
Margin
US$
|
|
Change
in
US$
vs
3Q15
|
|
Change
in
C$
vs
3Q15
|
|
|
|
|
|
|
|
|
|
|
|
Segment
profit/margin
|
|
|
|
|
|
|
|
|
|
Europe, Middle East
& Africa
|
|
$
|
66.2
|
|
|
13.9%
|
|
|
(10) bps
|
|
(60) bps
|
|
South Latin
America
|
|
73.8
|
|
|
12.4
|
|
|
310
|
|
300
|
|
North Latin
America
|
|
24.4
|
|
|
12.4
|
|
|
390
|
|
410
|
|
Asia
Pacific
|
|
12.7
|
|
|
9.6
|
|
|
(100)
|
|
(90)
|
|
Total from
reportable segments
|
|
177.1
|
|
|
12.6
|
|
|
170
|
|
150
|
|
Other operating
segments and business
activities
|
|
(0.8)
|
|
|
|
|
|
|
|
|
Unallocated global
expenses
|
|
(77.5)
|
|
|
|
|
|
|
|
|
CTI restructuring
initiatives
|
|
(14.0)
|
|
|
|
|
|
|
|
|
Legal
settlement
|
|
27.2
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
$
|
112.0
|
|
|
8.0%
|
|
|
480
bps
|
|
480
bps
|
|
|
|
|
|
|
|
|
|
|
|
*Calculation not
meaningful
|
|
Other operating
segments and business activities include the business results for
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)
|
|
NINE MONTHS ENDED
SEPTEMBER 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SEGMENT
RESULTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
Active
Representatives
|
|
Average
Order
C$
|
|
Units
Sold
|
|
Price/
Mix C$
|
|
Ending
Representatives
|
|
US
$
|
|
C$
|
|
|
|
|
|
Revenue &
Drivers
|
|
|
% var.
vs 9M15
|
|
% var.
vs 9M15
|
|
% var.
vs 9M15
|
|
% var.
vs 9M15
|
|
% var.
vs 9M15
|
|
% var.
vs 9M15
|
|
% var.
vs 9M15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe, Middle East
&
Africa
|
$
|
1,517.7
|
|
|
(3)%
|
|
7%
|
|
4%
|
|
3%
|
|
3%
|
|
4%
|
|
5%
|
South Latin
America
|
1,556.9
|
|
|
(12)
|
|
4
|
|
(1)
|
|
5
|
|
(4)
|
|
8
|
|
3
|
North Latin
America
|
625.9
|
|
|
(7)
|
|
4
|
|
—
|
|
4
|
|
(5)
|
|
9
|
|
(1)
|
Asia
Pacific
|
411.4
|
|
|
(12)
|
|
(7)
|
|
(10)
|
|
3
|
|
(7)
|
|
—
|
|
(7)
|
Total from
reportable
segments
|
4,111.9
|
|
|
(8)
|
|
4
|
|
—
|
|
4
|
|
(2)
|
|
6
|
|
1
|
Other
operating segments
and
business activities
|
37.7
|
|
|
(54)
|
|
(46)
|
|
(82)
|
|
*
|
|
(87)
|
|
*
|
|
(100)
|
Total
revenue
|
$
|
4,149.6
|
|
|
(9)%
|
|
3%
|
|
(2)%
|
|
5%
|
|
(3)%
|
|
6%
|
|
(1)%
|
Operating
Profit/Margin
|
|
2016
Operating
Profit
US$
|
|
2016
Operating
Margin
US$
|
|
Change
in
US$
vs
9M15
|
|
Change
in
C$
vs
9M15
|
|
|
|
|
|
|
|
|
|
|
|
Segment
profit/margin
|
|
|
|
|
|
|
|
|
|
Europe, Middle East
& Africa
|
|
$
|
218.3
|
|
|
14.4%
|
|
|
120 bps
|
|
130 bps
|
|
South Latin
America
|
|
157.9
|
|
|
10.1
|
|
|
(60)
|
|
(60)
|
|
North Latin
America
|
|
85.0
|
|
|
13.6
|
|
|
200
|
|
230
|
|
Asia
Pacific
|
|
42.2
|
|
|
10.3
|
|
|
(130)
|
|
(100)
|
|
Total from
reportable segments
|
|
503.4
|
|
|
12.2
|
|
|
40
|
|
60
|
|
Other operating
segments and business
activities
|
|
4.1
|
|
|
|
|
|
|
|
|
Unallocated global
expenses
|
|
(249.6)
|
|
|
|
|
|
|
|
|
CTI restructuring
initiatives
|
|
(70.2)
|
|
|
|
|
|
|
|
|
Legal
settlement
|
|
27.2
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
$
|
214.9
|
|
|
5.2%
|
|
|
300
bps
|
|
130
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$)
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
Three Months
Ended
September
30
|
|
US$
|
|
C$
|
|
|
2016
|
|
2015
|
|
% var.
vs
3Q15
|
|
% var.
vs
3Q15
|
Beauty:
|
|
|
|
|
|
|
|
|
Skincare
|
|
$
|
397.3
|
|
|
$
|
405.4
|
|
|
(2)%
|
|
2%
|
Fragrance
|
|
373.6
|
|
|
379.1
|
|
|
(1)
|
|
5
|
Color
|
|
244.0
|
|
|
249.1
|
|
|
(2)
|
|
3
|
Total
Beauty
|
|
1,014.9
|
|
|
1,033.6
|
|
|
(2)
|
|
3
|
Fashion &
Home:
|
|
|
|
|
|
|
|
|
Fashion
(jewelry/watches/apparel/footwear/accessories/children's)
|
|
202.2
|
|
|
214.8
|
|
|
(6)
|
|
(1)
|
Home (gift & decorative products/housewares/entertainment &
leisure/children's/nutrition)
|
|
150.4
|
|
|
152.7
|
|
|
(2)
|
|
7
|
Total Fashion &
Home
|
|
352.6
|
|
|
367.5
|
|
|
(4)
|
|
2
|
Net sales from
reportable segments
|
|
1,367.5
|
|
|
1,401.1
|
|
|
(2)
|
|
3
|
Other revenue from
reportable segments
|
|
33.3
|
|
|
22.7
|
|
|
47
|
|
47
|
Total revenue from
reportable segments
|
|
1,400.8
|
|
|
1,423.8
|
|
|
(2)
|
|
4
|
Total
revenue from Other operating segments and business
activities
|
|
8.0
|
|
|
12.4
|
|
|
(35)
|
|
(5)
|
Total revenue
|
|
$
|
1,408.8
|
|
|
$
|
1,436.2
|
|
|
(2)
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CATEGORY SALES
FROM REPORTABLE SEGMENTS (US$)
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
Nine Months
Ended
September
30
|
|
US$
|
|
C$
|
|
|
2016
|
|
2015
|
|
% var.
vs
9M15
|
|
% var.
vs
9M15
|
Beauty:
|
|
|
|
|
|
|
|
|
Skincare
|
|
$
|
1,177.5
|
|
|
$
|
1,302.3
|
|
|
(10)%
|
|
1%
|
Fragrance
|
|
1,066.8
|
|
|
1,161.4
|
|
|
(8)
|
|
5
|
Color
|
|
744.3
|
|
|
809.6
|
|
|
(8)
|
|
4
|
Total
Beauty
|
|
2,988.6
|
|
|
3,273.3
|
|
|
(9)
|
|
3
|
Fashion &
Home:
|
|
|
|
|
|
|
|
|
Fashion
(jewelry/watches/apparel/footwear/accessories/children's)
|
|
615.9
|
|
|
654.2
|
|
|
(6)
|
|
4
|
Home (gift & decorative products/housewares/entertainment &
leisure/children's/nutrition)
|
|
428.9
|
|
|
483.0
|
|
|
(11)
|
|
3
|
Total Fashion &
Home
|
|
1,044.8
|
|
|
1,137.2
|
|
|
(8)
|
|
4
|
Net sales from
reportable segments
|
|
4,033.4
|
|
|
4,410.5
|
|
|
(9)
|
|
3
|
Other revenue from
reportable segments
|
|
78.5
|
|
|
61.4
|
|
|
28
|
|
40
|
Total revenue from
reportable segments
|
|
4,111.9
|
|
|
4,471.9
|
|
|
(8)
|
|
4
|
Total
revenue from Other operating segments and business
activities
|
|
37.7
|
|
|
81.3
|
|
|
(54)
|
|
(46)
|
Total
revenue
|
|
$
|
4,149.6
|
|
|
$
|
4,553.2
|
|
|
(9)
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
SEPTEMBER 30, 2016
|
|
|
Reported
(GAAP)
|
|
CTI
restructuring
initiatives
|
|
Legal
settlement
|
|
Other
items
|
|
Adjusted
(Non-GAAP)
|
Total
revenue
|
|
$
|
1,408.8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,408.8
|
|
Cost of
sales
|
|
550.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
550.9
|
|
Selling, general and
administrative expenses
|
|
745.9
|
|
|
14.0
|
|
|
(27.2)
|
|
|
—
|
|
|
759.1
|
|
Operating
profit
|
|
112.0
|
|
|
14.0
|
|
|
(27.2)
|
|
|
—
|
|
|
98.8
|
|
Income from
continuing operations, before taxes
|
|
74.6
|
|
|
14.0
|
|
|
(27.2)
|
|
|
(3.9)
|
|
|
57.5
|
|
Income
taxes
|
|
(38.3)
|
|
|
(3.4)
|
|
|
—
|
|
|
—
|
|
|
(41.7)
|
|
Income from
continuing operations, net of tax
|
|
$
|
36.3
|
|
|
$
|
10.6
|
|
|
$
|
(27.2)
|
|
|
$
|
(3.9)
|
|
|
$
|
15.8
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS from
continuing operations
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
60.9%
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
60.9%
|
|
SG&A as a % of
revenues
|
|
52.9%
|
|
|
(1.0)
|
|
|
1.9
|
|
|
—
|
|
|
53.9%
|
|
Operating
margin
|
|
8.0%
|
|
|
1.0
|
|
|
(1.9)
|
|
|
—
|
|
|
7.0%
|
|
Effective tax
rate
|
|
51.3%
|
|
|
|
|
|
|
|
|
72.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
|
|
|
NINE MONTHS ENDED
SEPTEMBER 30, 2016
|
|
|
Reported
(GAAP)
|
|
CTI
restructuring
initiatives
|
|
Legal
settlement
|
|
Venezuelan special
items
|
|
Other
items
|
|
Special
tax
items
|
|
Adjusted
(Non-GAAP)
|
Total
revenue
|
|
$
|
4,149.6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,149.6
|
|
Cost of
sales
|
|
1,634.7
|
|
|
0.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,634.4
|
|
Selling, general and
administrative
expenses
|
|
2,300.0
|
|
|
69.9
|
|
|
(27.2)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,257.3
|
|
Operating
profit
|
|
214.9
|
|
|
70.2
|
|
|
(27.2)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
257.9
|
|
(Loss) income from
continuing
operations, before taxes
|
|
(11.6)
|
|
|
70.2
|
|
|
(27.2)
|
|
|
120.5
|
|
|
(3.9)
|
|
|
—
|
|
|
148.0
|
|
Income
taxes
|
|
(72.1)
|
|
|
(13.6)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(36.4)
|
|
|
(122.1)
|
|
(Loss) income from
continuing
operations, net of tax
|
|
$
|
(83.7)
|
|
|
$
|
56.6
|
|
|
$
|
(27.2)
|
|
|
$
|
120.5
|
|
|
$
|
(3.9)
|
|
|
$
|
(36.4)
|
|
|
$
|
25.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS from
continuing operations
|
|
$
|
(0.22)
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
60.6%
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
60.6%
|
|
SG&A as a % of
revenues
|
|
55.4%
|
|
|
(1.7)
|
|
|
0.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
54.4%
|
|
Operating
margin
|
|
5.2%
|
|
|
1.7
|
|
|
(0.7)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6.2%
|
|
Effective tax
rate
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
82.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*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
SEPTEMBER 30, 2015
|
|
|
Reported
(GAAP)
|
|
CTI
restructuring
initiatives
|
|
Venezuelan special
items
|
|
Pension settlement
charge
|
|
Other
items
|
|
Special tax
items
|
|
Adjusted
(Non-GAAP)
|
Total
revenue
|
|
$
|
1,436.2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,436.2
|
|
Cost of
sales
|
|
559.0
|
|
|
—
|
|
|
5.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
553.3
|
|
Selling, general and
administrative
expenses
|
|
831.9
|
|
|
(1.9)
|
|
|
—
|
|
|
6.2
|
|
|
—
|
|
|
—
|
|
|
827.6
|
|
Operating
profit
|
|
45.3
|
|
|
(1.9)
|
|
|
5.7
|
|
|
6.2
|
|
|
—
|
|
|
—
|
|
|
55.3
|
|
Income from
continuing operations, before
taxes
|
|
31.0
|
|
|
(1.9)
|
|
|
5.7
|
|
|
6.2
|
|
|
(40.7)
|
|
|
—
|
|
|
0.3
|
|
Income
taxes
|
|
(699.0)
|
|
|
0.8
|
|
|
—
|
|
|
—
|
|
|
(6.7)
|
|
|
657.0
|
|
|
(47.9)
|
|
Loss from continuing
operations, net of
tax
|
|
$
|
(668.0)
|
|
|
$
|
(1.1)
|
|
|
$
|
5.7
|
|
|
$
|
6.2
|
|
|
$
|
(47.4)
|
|
|
$
|
657.0
|
|
|
$
|
(47.6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS from
continuing operations
|
|
$
|
(1.51)
|
|
|
$
|
—
|
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
|
$
|
(0.11)
|
|
|
$
|
1.49
|
|
|
$
|
(0.11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
61.1%
|
|
|
—
|
|
|
0.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
61.5%
|
|
SG&A as a % of
revenues
|
|
57.9%
|
|
|
0.1
|
|
|
—
|
|
|
(0.4)
|
|
|
—
|
|
|
—
|
|
|
57.6%
|
|
Operating
margin
|
|
3.2%
|
|
|
(0.1)
|
|
|
0.4
|
|
|
0.4
|
|
|
—
|
|
|
—
|
|
|
3.9%
|
|
Effective tax
rate
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*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 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.
|
|
|
|
NINE MONTHS ENDED
SEPTEMBER 30, 2015
|
|
|
Reported
(GAAP)
|
|
CTI
restructuring
initiatives
|
|
Venezuelan special
items
|
|
Pension settlement
charge
|
|
Other
items
|
|
Special tax
items
|
|
Adjusted
(Non-GAAP)
|
Total
revenue
|
|
$
|
4,553.2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,553.2
|
|
Cost of
sales
|
|
1,781.7
|
|
|
—
|
|
|
26.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,755.1
|
|
Selling, general and
administrative
expenses
|
|
2,669.4
|
|
|
28.2
|
|
|
91.7
|
|
|
6.2
|
|
|
—
|
|
|
—
|
|
|
2,543.3
|
|
Operating
profit
|
|
102.1
|
|
|
28.2
|
|
|
118.3
|
|
|
6.2
|
|
|
—
|
|
|
—
|
|
|
254.8
|
|
Income from
continuing operations, before
taxes
|
|
15.5
|
|
|
28.2
|
|
|
114.1
|
|
|
6.2
|
|
|
(36.9)
|
|
|
—
|
|
|
127.1
|
|
Income
taxes
|
|
(797.2)
|
|
|
(2.7)
|
|
|
0.8
|
|
|
—
|
|
|
(6.7)
|
|
|
685.1
|
|
|
(120.7)
|
|
(Loss) income from
continuing operations,
net of tax
|
|
$
|
(781.7)
|
|
|
$
|
25.5
|
|
|
$
|
114.9
|
|
|
$
|
6.2
|
|
|
$
|
(43.6)
|
|
|
$
|
685.1
|
|
|
$
|
6.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS from
continuing operations
|
|
$
|
(1.77)
|
|
|
$
|
0.06
|
|
|
$
|
0.26
|
|
|
$
|
0.02
|
|
|
$
|
(0.10)
|
|
|
$
|
1.55
|
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
60.9%
|
|
|
—
|
|
|
0.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
61.5%
|
|
SG&A as a % of
revenues
|
|
58.6%
|
|
|
(0.6)
|
|
|
(2.0)
|
|
|
(0.1)
|
|
|
—
|
|
|
—
|
|
|
55.9%
|
|
Operating
margin
|
|
2.2%
|
|
|
0.6
|
|
|
2.6
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
5.6%
|
|
Effective tax
rate
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Calculation not
meaningful
|
|
Amounts in the table
above may not necessarily sum because the computations are made
independently.
|
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) the net proceeds recognized as a result of settling
claims relating to professional services ("Legal settlement"), 3)
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"), 4) the settlement charges associated
with the U.S. pension plan ("Pension settlement charge"), 5)
various other items associated with the sale of Liz Earle and debt-related charges ("Other
items"), and 6) 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 Legal settlement includes the impact on the Consolidated
Statements of Operations in the third quarter of 2016 associated
with the net proceeds of $27.2
million recognized as a result of settling claims relating
to professional services that had been provided to the Company
prior to 2013 in connection with a previously disclosed legal
matter.
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 Pension settlement charge includes the impact on the
Consolidated Statements of Operations in the third quarter of 2015
associated with the payments made to former employees who were
vested and participated in the U.S. defined benefit pension plan.
Such payments fully settled the Company's pension plan obligation
to those participants who elected to receive such payment.
The Other items include the impact during 2016 on the
Consolidated Statements of Operations due to the gain on
extinguishment of debt caused by the deferred gain associated with
interest-rate swap agreement terminations, partially offset by the
early tender premium paid, the deferred loss associated with
treasury lock agreements, deal costs and the write-off of debt
issuance costs and discounts associated with the cash tender offers
in August 2016. The Other items also
include the impact during 2015 on the Consolidated Statements of
Operations due to the gain on the sale of Liz Earle. In addition, Other items in 2015
include the impact on the Consolidated Statements of Operations of
the loss on extinguishment of debt caused by the make-whole premium
and the write-off of debt issuance costs and discounts associated
with the prepayment of the Company's 2.375% Notes. The Other items,
in 2015, also include the impact on other expense, net in the
Consolidated Statements of Operations of $2.5 million associated with the write-off of
issuance costs related to the Company's previous $1 billion revolving credit facility.
The Special tax items include the impact during the second
quarter of 2016 on the provision for income taxes in the
Consolidated Statements of Operations primarily due to the release
of a valuation allowance associated with Russia of approximately $7 million. The Special tax items also include
the impact during the first quarter of 2016 on the provision for
income taxes in the Consolidated Statements of Operations due to an
income tax benefit of approximately $29
million recognized as the result of the implementation of
foreign tax planning strategies. The Special tax items also include
the impact during the first and second quarters of 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,
respectively, associated with valuation allowances 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. The
Special tax items also include the impact during the third quarter
of 2015 on the provision for income taxes in the Consolidated
Statements of Operations due to a non-cash income tax charge of
approximately $642 million as a
result of establishing a valuation allowance for the full amount of
the Company's U.S. deferred tax assets due to the impact of the
continued 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. Additionally, the Special tax
items includes the impact during the third quarter of 2015 on the
provision for income taxes in the Consolidated Statements of
Operations due to a non-cash income tax charge of approximately
$15 million associated with valuation
allowances, to adjust certain non-U.S. deferred tax assets to an
amount that is "more likely than not" to be realized. The non-U.S.
valuation allowance included an adjustment associated with
Russia, which was primarily the
result of lower earnings, which were significantly impacted by
foreign exchange losses on working capital balances.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/avon-reports-third-quarter-2016-results-300356511.html
SOURCE Avon Products, Inc.