LONDON, Feb. 15, 2018 /PRNewswire/ -- Avon Products, Inc.
(NYSE: AVP), a globally recognized leader in direct selling of
beauty and related products, today announced its results for the
fourth quarter and fiscal year ended December 31, 2017.
Highlights for Fourth Quarter of 2017:
- Total Revenue was relatively unchanged at $1.6 billion; Declined 2% in constant
dollars1
- Active Representatives and Ending Representatives declined 2%
and were relatively unchanged, respectively
- Operating Margin increased 150 bps to 8.3%;
Adjusted1 Operating Margin increased 250 bps to
9.8%
- Diluted Earnings Per Share From Continuing Operations of
$0.17; Adjusted Diluted Earnings Per
Share From Continuing Operations of $0.12
Jan Zijderveld, Avon CEO, said,
"I am excited to be joining such a special business at this
important chapter in the company's history. Very few brands have
Avon's brand recognition, extensive global reach and operate in
attractive beauty channel categories. In a world where trust in
companies is becoming a scarce commodity, our Representatives'
relationships with their consumers has never been more relevant or
compelling."
Jamie Wilson, Avon CFO, remarked,
"Our top line remains under pressure as we continue to operate in
challenging macro and competitive conditions, particularly in
our largest markets. We delivered improving operating margins in
the fourth quarter supported by continued benefit from our ongoing
cost savings initiatives. Importantly, we continued to strengthen
our cash position, enhancing the financial flexibility necessary to
fund priority investments."
Zijderveld went on to say, "With the support of the Board
of Directors, and the reality of our current performance, I am
taking a fresh look, diving deeply into our business, starting with
spending time in our key markets to gain a full picture of the
operating climate as a basis to improve performance. I am committed
to accelerating the pace of change and to positioning Avon for success."
Fiscal 2017 overview:
- Total Revenue was relatively unchanged at $5.7 billion; Declined 2% in constant
dollars
- Avon realized more than
$250 million of cost savings,
exceeding its target of $230 million
for 2017
- Active Representatives and Ending Representatives declined 3%
and were relatively unchanged, respectively
- Operating Margin decreased 80 bps to 4.8%; Adjusted Operating
Margin decreased 30 bps to 6.2%
- Diluted Loss Per Share From Continuing Operations of
$0.00; Adjusted Diluted Earnings Per
Share From Continuing Operations of $0.06
- Foreign currency favorably impacted both Diluted Loss Per Share
and Adjusted Diluted Earnings Per Share by an estimated
$0.07 per share, driven by the
strength of the currencies of the countries in which the Company
operates against the U.S. dollar
Fourth-Quarter 2017 Income Statement Review (compared with
fourth-quarter 2016)
- Total revenue for Avon Products, Inc. was relatively
unchanged at $1.6 billion and
declined 2% in constant dollars.
- From reportable segments:
-
- Total revenue was relatively unchanged at $1.6 billion and declined 2% in constant
dollars.
- Active Representatives declined 2% primarily due to decreases
in South Latin America and
North Latin America.
- Average order was relatively unchanged primarily due to growth
in South Latin America that was
offset by a decline in Europe,
Middle East & Africa.
- Ending Representatives was relatively unchanged primarily due
to growth in Europe, Middle East & Africa that was offset by a decline in
South Latin America.
- Gross margin was 61.0%, up 70 basis points and Adjusted
gross margin was 61.1%, up 80 basis points, primarily due to the
favorable net impact of price/mix.
- Operating margin was 8.3% in the quarter, up 150 basis
points, while Adjusted operating margin was 9.8%, up 250 basis
points. The operating margin comparison was unfavorably impacted by
higher costs to implement ("CTI") restructuring in the current
year. Both the operating margin and Adjusted operating margin
year-over-year comparisons were favorably impacted by lower bad
debt expense, primarily in Brazil,
and lower fixed expenses, including the benefit of cost reductions
associated with the Transformation Plan. These factors were
partially offset by higher Representative, sales leader and field
expense to drive Representative activity.
- The provision for income taxes was $1 million, compared with $53 million for 2016. The difference is primarily
driven by tax benefits associated with the enactment of the Tax
Cuts and Jobs Act in the U.S., net valuation allowances released in
several markets in Europe,
Middle East & Africa, and a favorable court decision in
Brazil. On an Adjusted basis, the
provision for income taxes was $51
million, compared with $44
million for 2016.
- Income from continuing operations, net of tax was
$90 million, or $0.17 per diluted share, compared with a loss of
$10 million, or a loss of
$0.03 per diluted share, for 2016.
Adjusted income from continuing operations, net of tax was
$65 million, or $0.12 per diluted share, compared with
$9 million, or $0.01 per diluted share, for 2016. Earnings
allocated to convertible preferred stock had a negative
$0.04 impact on Diluted earnings per
share and a negative $0.03 impact on
Adjusted diluted earnings per share in the fourth quarter of 2017,
compared with a negative $0.01 impact
on both Diluted earnings per share and Adjusted diluted earnings
per share in the fourth quarter of 2016.
- Loss from discontinued operations, net of tax in the
fourth quarter of the prior year of $1
million, or $0.00 per diluted
share, was associated with the previously separated North America business. There were no amounts
recorded in discontinued operations in the fourth quarter of
2017.
Adjustments to Fourth-Quarter 2017 GAAP Results to Arrive at
Adjusted Results
During the fourth quarter of 2017, 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 approximately $0.05:
- The Company recorded CTI restructuring within operating profit
of approximately $24 million before
and after tax, primarily related to the Transformation Plan, due
primarily to contract terminations and the impact of the Company's
decision to exit its Australia and
New Zealand markets. Following a
review and determination that there is no path to long-term
profitability in these markets, the Company chose to close these
operations.
- The Company recorded a $50
million net income tax benefit that included an approximate
$30 million net benefit recognized as
a result of the enactment of the Tax Cuts and Jobs Act in the U.S.,
a release of valuation allowances of $26
million associated with a number of markets in Europe, Middle
East & Africa, and an
approximate $10 million benefit as a
result of a favorable court decision in Brazil, partially offset by a charge of
approximately $16 million associated
with valuation allowances to adjust deferred tax assets in
Mexico.
THREE MONTHS ENDED
DECEMBER 31, 2017
|
|
SEGMENT
RESULTS
|
($ in
millions)
|
|
|
|
Revenue
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Active
|
|
Order
|
|
Units
|
|
Price/
|
|
Ending
|
|
US$
|
|
C$
|
|
Representatives
|
|
C$
|
|
Sold
|
|
Mix
C$
|
|
Representatives
|
Revenue &
Drivers
|
|
|
% var.
vs 4Q16
|
|
% var.
vs 4Q16
|
|
% var.
vs 4Q16
|
|
% var. vs
4Q16
|
|
% var.
vs 4Q16
|
|
% var. vs
4Q16
|
|
% var.
vs 4Q16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe, Middle East
&
Africa
|
$
|
641.6
|
|
3
|
%
|
|
(2)
|
%
|
|
1
|
%
|
|
(3)
|
%
|
|
—
|
%
|
|
(2)
|
%
|
|
3
|
%
|
South Latin
America
|
|
575.4
|
|
(2)
|
|
|
(1)
|
|
|
(4)
|
|
|
3
|
|
|
—
|
|
|
(1)
|
|
|
(3)
|
|
North Latin
America
|
|
204.8
|
|
—
|
|
|
(2)
|
|
|
(3)
|
|
|
1
|
|
|
(4)
|
|
|
2
|
|
|
(2)
|
|
Asia
Pacific
|
|
139.3
|
|
(3)
|
|
|
(2)
|
|
|
(1)
|
|
|
(1)
|
|
|
(1)
|
|
|
(1)
|
|
|
(1)
|
|
Total from
reportable
segments
|
|
1,561.1
|
|
—
|
|
|
(2)
|
|
|
(2)
|
|
|
—
|
|
|
(1)
|
|
|
(1)
|
|
|
—
|
|
Other operating
segments and
business activities
|
|
7.7
|
|
(32)
|
|
|
(32)
|
|
|
(100)
|
|
|
*
|
|
|
*
|
|
|
*
|
|
|
—
|
|
Total
Avon
|
$
|
1,568.8
|
|
—
|
%
|
|
(2)
|
%
|
|
(2)
|
%
|
|
—
|
%
|
|
(1)
|
%
|
|
(1)
|
%
|
|
—
|
%
|
|
|
|
|
Operating
Profit/Margin
|
|
2017 Operating
Profit US$
|
|
2017 Operating
Margin US$
|
|
Change in
US$ vs
4Q16
|
|
Change
in
C$ vs
4Q16
|
|
|
|
|
Segment
profit/margin
|
|
|
Europe, Middle East
& Africa
|
|
$
|
108.1
|
|
16.8
|
%
|
|
(120) bps
|
|
(140) bps
|
|
South Latin
America
|
|
|
69.3
|
|
12.0
|
|
|
480
|
|
490
|
|
North Latin
America
|
|
|
25.8
|
|
12.6
|
|
|
(180)
|
|
(190)
|
|
Asia
Pacific
|
|
|
13.6
|
|
9.8
|
|
|
(240)
|
|
(200)
|
|
Total from
reportable segments
|
|
|
216.8
|
|
13.9
|
|
|
100
|
|
80
|
|
Other operating
segments and business
activities
|
|
|
1.3
|
|
|
|
|
|
|
|
|
Unallocated global
expenses
|
|
|
(64.4)
|
|
|
|
|
|
|
|
|
CTI restructuring
initiatives
|
|
|
(23.7)
|
|
|
|
|
|
|
|
|
Total
Avon
|
|
$
|
130.0
|
|
8.3
|
%
|
|
150
bps
|
|
130
bps
|
|
|
|
*Calculation not
meaningful.
|
|
Other operating
segments and business activities include revenue from the sale of
products to New Avon LLC since the separation of the Company's
North America business into New Avon LLC on March 1, 2016 and
ongoing royalties from the licensing of the Company's name and
products. Other operating segments and business activities also
include the business results for Thailand, which the Company exited
in 2016.
|
Fourth-Quarter 2017 Segment Review (compared with
fourth-quarter 2016)
With regards to the discussion below on segment revenue, the
difference between the reported and constant-dollar revenue growth
is the estimated impact of foreign currency translation.
Total Reportable Segment revenue was relatively unchanged, or
down 2% in constant dollars, driven by declines in Active
Representatives, primarily in Brazil. The Company saw constant-dollar
revenue growth in 9 of its top 15 markets while experiencing
continued variability and challenges to sales momentum including an
intense competitive environment.
- Europe, Middle East & Africa revenue was up 3%, or down 2% in
constant dollars, driven by lower average order, partially offset
by an increase in Active Representatives. The constant-dollar
revenue decline was primarily driven by Russia and the U.K., partially offset by
growth in Turkey with mixed results in the rest of the
segment.
-
- Russia revenue was down
2%, or 9% in constant dollars, due to lower average order.
- U.K. revenue was down 6%, or 12% in constant dollars,
due to a decrease in Active Representatives.
- South Latin America
revenue was down 2%, or 1% in constant dollars, driven by a
decrease in Active Representatives, partially offset by higher
average order. Constant-dollar revenue was primarily impacted by a
decline in Brazil, partially
offset by growth in Argentina,
driven by inflationary pricing.
-
- Brazil revenue was down
8%, or 9% in constant dollars, driven by a decrease in Active
Representatives and lower average order.
- North Latin America
revenue was relatively unchanged, or down 2% in constant dollars,
driven by a decrease in Active Representatives which includes the
impact of the September 2017
earthquake in Mexico, partially
offset by higher average order.
-
- Mexico revenue was up
2%, or down 3% in constant dollars, primarily due to a decrease in
Active Representatives which includes the impact of the
September 2017 earthquake and lower
average order.
- Asia Pacific revenue
was down 3%, or 2% in constant dollars, primarily due to lower
average order and a decrease in Active Representatives.
Constant-dollar revenue growth in the
Philippines was offset by declines in most other markets in
the segment.
-
- Philippines revenue was
up 1%, or 4% in constant dollars, driven by an increase in Active
Representatives.
Full-Year 2017 Income Statement Review (compared with
full-year 2016)
- Total revenue for Avon Products, Inc. was relatively
unchanged at $5.7 billion and
declined 2% in constant dollars.
- From reportable segments:
-
- Total revenue was relatively unchanged at $5.7 billion and declined 2% in constant
dollars.
- Active Representatives declined 3% due to decreases across all
segments, most significantly in South
Latin America and Europe,
Middle East & Africa.
- Average order increased 1% primarily due to growth in
South Latin America, that was
partially offset by a decline in Europe, Middle
East & Africa.
- Ending Representatives was relatively unchanged primarily due
to growth in Europe, Middle East & Africa that was offset by a decline in
South Latin America.
- Gross margin and Adjusted gross margin each increased
100 basis points to 61.5%, primarily due to the favorable net
impact of price/mix.
- Operating margin was 4.8%, down 80 basis points, while
Adjusted operating margin was 6.2%, down 30 basis points. The
operating margin comparison was unfavorably impacted by proceeds
recognized in 2016 as a result of a legal settlement and a loss
contingency recorded in 2017 related to a non-U.S. pension plan,
partially offset by lower CTI restructuring in the current year.
Both the operating margin and Adjusted operating margin
year-over-year comparisons were negatively impacted by higher bad
debt expense, primarily in Brazil,
higher Representative, sales leader and field expense and the
inflationary impact on costs outpacing revenue growth. This was
partially offset by the favorable net impact of mix and pricing and
the benefit of cost reductions associated with the Transformation
Plan.
- The provision for income taxes was $101 million, compared with $125 million for 2016. On an Adjusted basis, the
provision for income taxes was $152
million, compared with $166
million for 2016.
- Income from continuing operations, net of tax was
$20 million, or a loss of
$0.00 per diluted share, compared
with a loss of $93 million, or a loss
of $0.25 per diluted share, for 2016.
Adjusted income from continuing operations, net of tax was
$47 million, or $0.06 per diluted share, compared with
$35 million, or $0.04 per diluted share, for 2016. Earnings
allocated to convertible preferred stock had a negative
$0.05 impact on both Diluted loss per
share and Adjusted diluted earnings per share in 2017, compared
with a negative $0.04 impact on both
Diluted earnings per share and Adjusted diluted earnings per share
in 2016.
- Loss from discontinued operations, net of tax in the
prior year of $14 million, or
$0.03 per diluted share, was
associated with the previously separated North America business. There were no amounts
recorded in discontinued operations for 2017.
Adjustments to Full-Year 2017 GAAP Results to Arrive at
Adjusted Results
During 2017, the following adjustments were made to GAAP results
to arrive at Adjusted results and, in total, improved Diluted loss
per share from continuing operations by approximately $0.06:
- The Company recorded CTI restructuring within operating profit
of approximately $60 million before
tax (approximately $59 million after
tax), primarily related to the Transformation Plan.
- The Company recorded an approximate $18
million charge for a loss contingency related to a non-U.S.
pension plan, for which an amendment to the plan that occurred in a
prior year may not have been appropriately implemented.
- The Company recorded a $50
million net income tax benefit that included an approximate
$30 million net benefit recognized as
a result of the enactment of the Tax Cuts and Jobs Act in the U.S.,
a release of valuation allowances of $26
million associated with a number of markets in Europe, Middle
East & Africa, and an
approximate $10 million benefit as a
result of a favorable court decision in Brazil, partially offset by a charge of
approximately $16 million associated
with valuation allowances to adjust deferred tax assets in
Mexico.
TWELVE MONTHS ENDED
DECEMBER 31, 2017
|
|
SEGMENT
RESULTS
|
|
|
|
|
|
|
|
|
|
|
|
($ in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
Active
|
|
Order
|
|
Units
|
|
Price/
|
|
Ending
|
|
US$
|
|
C$
|
|
Representatives
|
|
C$
|
|
Sold
|
|
Mix
C$
|
|
Representatives
|
Revenue &
Drivers
|
|
|
% var.
vs FY16
|
|
% var.
vs FY16
|
|
% var.
vs FY16
|
|
% var.
vs FY16
|
|
% var.
vs FY16
|
|
% var.
vs FY16
|
|
% var.
vs FY16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe, Middle East
&
Africa
|
$
|
2,126.5
|
|
(1)
|
%
|
|
(4)
|
%
|
|
(2)
|
%
|
|
(2)
|
%
|
|
(7)
|
%
|
|
3
|
%
|
|
3
|
%
|
South Latin
America
|
2,222.4
|
|
4
|
|
|
—
|
|
|
(4)
|
|
|
4
|
|
|
(3)
|
|
|
3
|
|
|
(3)
|
|
North Latin
America
|
811.8
|
|
(2)
|
|
|
(1)
|
|
|
(1)
|
|
|
—
|
|
|
(3)
|
|
|
2
|
|
|
(2)
|
|
Asia
Pacific
|
518.3
|
|
(6)
|
|
|
(3)
|
|
|
(4)
|
|
|
1
|
|
|
(1)
|
|
|
(2)
|
|
|
(1)
|
|
Total from
reportable
segments
|
5,679.0
|
|
—
|
|
|
(2)
|
|
|
(3)
|
|
|
1
|
|
|
(4)
|
|
|
2
|
|
|
—
|
|
Other operating
segments and
business activities
|
36.6
|
|
(32)
|
|
|
(19)
|
|
|
(100)
|
|
|
*
|
|
|
*
|
|
|
*
|
|
|
—
|
|
Total
Avon
|
$
|
5,715.6
|
|
—
|
%
|
|
(2)
|
%
|
|
(3)
|
%
|
|
1
|
%
|
|
(4)
|
%
|
|
2
|
%
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Profit/Margin
|
|
2017 Operating
Profit US$
|
|
2017 Operating
Margin US$
|
|
Change in
US$ vs
FY16
|
|
Change in
C$ vs
FY16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
profit/margin
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe, Middle East
& Africa
|
|
$
|
330.6
|
|
15.5
|
%
|
|
10 bps
|
|
(20) bps
|
|
|
South Latin
America
|
|
194.1
|
|
8.7
|
|
|
(60)
|
|
(40)
|
|
|
North Latin
America
|
|
81.8
|
|
10.1
|
|
|
(370)
|
|
(350)
|
|
|
Asia
Pacific
|
|
47.7
|
|
9.2
|
|
|
(180)
|
|
(130)
|
|
|
Total from
reportable segments
|
|
654.2
|
|
11.5
|
|
|
(100)
|
|
(90)
|
|
|
Other operating
segments and business
activities
|
|
5.2
|
|
|
|
|
|
|
|
|
Unallocated global
expenses
|
|
(307.7)
|
|
|
|
|
|
|
|
|
CTI restructuring
initiatives
|
|
(60.2)
|
|
|
|
|
|
|
|
|
Loss
Contingency
|
|
(18.2)
|
|
|
|
|
|
|
|
|
Total
Avon
|
|
$
|
273.3
|
|
4.8
|
%
|
|
(80)
bps
|
|
(90)
bps
|
|
|
|
|
|
*Calculation not
meaningful.
|
|
Other operating
segments and business activities include revenue from the sale of
products to New Avon LLC since the separation of the Company's
North America business into New Avon LLC on March 1, 2016 and
ongoing royalties from the licensing of the Company's name and
products. Other operating segments and business activities also
include the business results for Thailand, which the Company exited
in 2016, as well as the business results for Venezuela, which was
deconsolidated effective March 31, 2016.
|
Full-Year 2017 Segment Review (compared with full-year
2016)
With regards to the discussion below on segment revenue, the
difference between the reported and constant-dollar revenue growth
is the estimated impact of foreign currency translation.
Total Reportable Segment revenue was relatively unchanged, or
down 2% in constant dollars, primarily due to a decrease in Active
Representatives. Results continued to be impacted by challenging
macro and competitive conditions in some of the Company's
largest markets. However, the Company did see second half
performance improve versus the first half of the year and saw
constant-dollar revenue growth in many of its top 15 markets.
- Europe, Middle East & Africa revenue was down 1%, or 4% in
constant dollars, driven by a decrease in Active Representatives
and lower average order. The constant-dollar revenue decline was
primarily driven by Russia and the
U.K., partially offset by growth in South Africa with mixed results in the
rest of the segment.
-
- Russia revenue was up
5%, or down 8% in constant dollars, primarily due to lower average
order along with a decrease in Active Representatives.
- U.K. revenue was down 14%, or 11% in constant dollars,
primarily due to a decrease in Active Representatives.
- South Latin America
revenue was up 4%, or relatively unchanged in constant dollars, as
higher average order was offset by a decrease in Active
Representatives. Constant-dollar revenue was primarily impacted by
a decline in Brazil, partially
offset by growth in Argentina,
driven by inflationary pricing.
-
- Brazil revenue was up
4%, or down 4% in constant dollars, primarily due to a decrease in
Active Representatives, partially offset by higher average
order.
- North Latin America
revenue was down 2%, or 1% in constant dollars, due to a decrease
in Active Representatives which includes the impact of the
September 2017 earthquake in
Mexico.
-
- Mexico revenue was down
4%, or 2% in constant dollars, primarily due to a decrease in
Active Representatives which includes the impact of the
September 2017 earthquake.
- Asia Pacific revenue
was down 6%, or 3% in constant dollars, primarily due to a decrease
in Active Representatives, partially offset by higher average
order. Constant-dollar revenue growth in the Philippines was offset by declines in most
other markets in the segment.
-
- Philippines revenue was
down 2%, or up 3% in constant dollars, driven by higher average
order and an increase in Active Representatives.
Full-Year 2017 Cash Flow Review (compared with full-year
2016)
- Net cash provided by operating activities of continuing
operations was $271 million for
the twelve months ended December 31,
2017, compared with $128
million in the same period in 2016. The $143 million increase was primarily due to
improvements in working capital. The year-over-year comparison was
unfavorably impacted by net proceeds received in 2016 related to
settling claims related to professional services. This was
partially offset by Industrial Production Tax ("IPI") payments made
in Brazil in 2016 that did not
recur in 2017 (based on an injunction received in May 2016 that no longer required the Company to
make cash deposits related to IPI taxes).
- Net cash used by investing activities of continuing
operations was $70 million for
the twelve months ended December 31,
2017, compared with $83
million in the same period in 2016. The year-over-year
improvement was primarily due to a $22
million cash distribution received from New Avon LLC in the
third quarter of 2017, partially offset by lower asset
disposals.
- Net cash provided by financing activities of continuing
operations was $0 million for the
twelve months ended December 31,
2017, compared with $137
million in the same period in 2016. The $137 million decrease was primarily due to the
net proceeds of debt issued in the third quarter of 2016 and the
net proceeds related to the issuance of series C preferred stock
received in 2016, partially offset by the repayment of certain debt
in 2016.
Foundational Initiatives
The Company continues to make progress in a number of key areas.
Transformation will require the Company to continue to execute in a
coordinated way against each of these foundational initiatives:
- Deliver a Seamless, Competitive Representative Experience -
invest to upgrade systems and drive mobile connectivity in its
markets to make doing business easier for our Representatives;
- Insightful Data & Analytics - improve the Company's ability
to support the Representative and help her run her business more
effectively through deeper insight and analytics into
Representative behavior and needs;
- Rigorous Performance Management - the new executive team is a
key enabler to driving a performance-based culture for ownership of
results and is working well together, taking action to enforce
accountability and beginning to identify ways to drive the right
behavior; and
- Relentless Focus on Execution Capabilities - focus on
developing a service mindset and using pilot programs that cover
service from end to end to enable the implementation of changes,
with minimal disruption.
The Company realized more than $250
million of cost savings under the Company's Transformation
Plan that was initiated in 2016, exceeding its cost savings target
of $230 million for 2017, which
includes both run-rate savings from 2016, along with in-year
savings from current year initiatives. These savings have mostly
been offset by the impact of inflation.
The Company believes it has the capacity to achieve its
long-term goals of mid single-digit constant-dollar revenue growth
and low double-digit operating margin. However, the Company
recognizes it will take time. While competitive pressure will
continue, 2018 is shaping up to be a year of executing on
significant operational improvements. The Company is taking a fresh
look, diving deeply into our business as a basis to accelerate
improved performance.
Conference call
Avon will conduct a conference
call at 9:00 a.m. Eastern Time today
to discuss its quarterly and full-year results. The dial-in number
for the call is (800) 843-2086 in the U.S. or (706) 643-1815 from
non-U.S. locations (conference ID number: 7054628). The call and
related slide presentation will be webcast live at
www.avoninvestor.com and can be accessed or downloaded from
that site for a period of one year.
About Avon Products, Inc.
Avon is the Company that for
130 years has proudly stood for beauty, innovation, optimism and,
above all, for women. Avon
products include well-recognized and beloved brands such as ANEW,
Avon Color, Avon Care, Skin-So-Soft, and Advance Techniques sold
through approximately 6 million active independent Avon Sales
Representatives. Learn more about Avon and its products at
www.avoncompany.com.
Footnotes
1 "Adjusted" items refer to financial measures that
are derived from measures calculated in accordance with generally
accepted accounting principles in the
United States ("GAAP"), but which have been adjusted to
exclude certain items. Other Adjusted financial measures that the
Company refers to include constant dollar ("C$") 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, the Company's Transformation Plan, including planned
executive leadership changes, planned changes to mobile
connectivity, data analytics, and service measures, and the impact
of foreign currency, taxes and tax rates amongst others. 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 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.
There can be no assurance that actual results will not differ
materially from management's expectations. Therefore, you should
not rely on any of these forward-looking statements as predictors
of future events. 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
|
|
Twelve Months
Ended
|
|
Percent
|
|
|
December
31
|
|
Change
|
|
December
31
|
|
Change
|
|
|
2017
|
|
2016
|
|
|
|
|
2017
|
|
2016
|
|
|
Net sales
|
|
$
|
1,535.3
|
|
$
|
1,531.8
|
|
—
|
%
|
|
$
|
5,565.1
|
|
$
|
5,578.8
|
|
—
|
%
|
Other
revenue
|
|
33.5
|
|
36.3
|
|
|
|
150.5
|
|
138.9
|
|
|
Total
revenue
|
|
1,568.8
|
|
1,568.1
|
|
—
|
%
|
|
5,715.6
|
|
5,717.7
|
|
—
|
%
|
Cost of
sales
|
|
611.2
|
|
622.3
|
|
|
|
2,203.3
|
|
2,257.0
|
|
|
Selling, general and
administrative expenses
|
|
827.6
|
|
838.8
|
|
|
|
3,239.0
|
|
3,138.8
|
|
|
Operating
profit
|
|
130.0
|
|
107.0
|
|
21
|
%
|
|
273.3
|
|
321.9
|
|
(15)
|
%
|
Interest
expense
|
|
34.8
|
|
36.3
|
|
|
|
140.8
|
|
136.6
|
|
|
Loss (gain) on
extinguishment of debt
|
|
—
|
|
2.8
|
|
|
|
—
|
|
(1.1)
|
|
|
Interest
income
|
|
(3.6)
|
|
(3.0)
|
|
|
|
(14.8)
|
|
(15.8)
|
|
|
Other expense,
net
|
|
7.2
|
|
28.1
|
|
|
|
26.6
|
|
171.0
|
|
|
Total other
expenses
|
|
38.4
|
|
64.2
|
|
|
|
152.6
|
|
290.7
|
|
|
Income from
continuing operations, before taxes
|
|
91.6
|
|
42.8
|
|
*
|
|
120.7
|
|
31.2
|
|
*
|
Income
taxes
|
|
(1.2)
|
|
(52.5)
|
|
|
|
(100.7)
|
|
(124.6)
|
|
|
Income (loss) from
continuing operations, net of tax
|
|
90.4
|
|
(9.7)
|
|
*
|
|
20.0
|
|
(93.4)
|
|
*
|
Loss from
discontinued operations, net of tax
|
|
—
|
|
(1.1)
|
|
|
|
—
|
|
(14.0)
|
|
|
Net income
(loss)
|
|
90.4
|
|
(10.8)
|
|
|
|
20.0
|
|
(107.4)
|
|
|
Net loss (income)
attributable to noncontrolling interests
|
|
1.1
|
|
0.1
|
|
|
|
2.0
|
|
(0.2)
|
|
|
Net income (loss)
attributable to Avon
|
|
$
|
91.5
|
|
$
|
(10.7)
|
|
*
|
|
$
|
22.0
|
|
$
|
(107.6)
|
|
*
|
Earnings (loss) per
share:(1)
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS from
continuing operations
|
|
$
|
0.17
|
|
$
|
(0.03)
|
|
*
|
|
$
|
(0.00)
|
|
$
|
(0.25)
|
|
100
|
%
|
Basic EPS from
discontinued operations
|
|
—
|
|
|
(0.00)
|
|
|
|
—
|
|
(0.03)
|
Basic EPS
attributable to Avon
|
|
$
|
0.17
|
|
$
|
(0.04)
|
|
*
|
|
$
|
(0.00)
|
|
$
|
(0.29)
|
|
100
|
%
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS from
continuing operations
|
|
$
|
0.17
|
|
$
|
(0.03)
|
|
*
|
|
$
|
(0.00)
|
|
$
|
(0.25)
|
|
100
|
%
|
Diluted EPS from
discontinued operations
|
|
—
|
|
|
(0.00)
|
|
|
|
|
—
|
|
(0.03)
|
|
Diluted EPS
attributable to Avon
|
|
$
|
0.17
|
|
$
|
(0.04)
|
|
*
|
|
$
|
(0.00)
|
|
$
|
(0.29)
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
440.2
|
|
437.6
|
|
|
|
439.7
|
|
437.0
|
|
|
Diluted
|
|
440.2
|
|
437.7
|
|
|
|
439.7
|
|
437.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Calculation not
meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Under the
two-class method, earnings (loss) per share is calculated using net
income (loss) allocable to common shares, which is derived by
reducing net income (loss) by the earnings (loss) allocable to
participating securities and earnings allocated to convertible
preferred stock. Net income (loss) allocable to common shares used
in the basic and diluted earnings (loss) per share calculation was
$75.4 and ($16.2) for the three months ended December 31, 2017 and
2016, respectively. Net loss allocable to common shares used in the
basic and diluted loss per share calculation was ($1.4) and
($124.6) for the twelve months ended December 31, 2017 and 2016,
respectively.
|
AVON PRODUCTS,
INC.
CONSOLIDATED
BALANCE SHEETS
(Unaudited)
(In
millions)
|
|
|
|
December
31,
|
|
December
31,
|
|
|
2017
|
|
2016
|
Assets
|
Current
Assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
881.5
|
|
$
|
654.4
|
Accounts receivable,
net
|
|
457.2
|
|
458.9
|
Inventories
|
|
598.2
|
|
586.4
|
Prepaid expenses and
other
|
|
296.4
|
|
291.3
|
Current assets of
discontinued operations
|
|
—
|
|
1.3
|
Total current
assets
|
|
2,233.3
|
|
1,992.3
|
Property, plant and
equipment, at cost
|
|
1,481.9
|
|
1,424.1
|
Less accumulated
depreciation
|
|
(779.2)
|
|
(712.8)
|
Property, plant and
equipment, net
|
|
702.7
|
|
711.3
|
Goodwill
|
|
95.7
|
|
93.6
|
Other
assets
|
|
666.2
|
|
621.7
|
Total
assets
|
|
$
|
3,697.9
|
|
$
|
3,418.9
|
Liabilities,
Series C Convertible Preferred Stock and Shareholders'
Deficit
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
Debt maturing within
one year
|
|
$
|
25.7
|
|
$
|
18.1
|
Accounts
payable
|
|
832.2
|
|
768.1
|
Accrued
compensation
|
|
130.3
|
|
129.2
|
Other accrued
liabilities
|
|
405.6
|
|
401.9
|
Sales taxes and taxes
other than income
|
|
153.0
|
|
147.0
|
Income
taxes
|
|
12.8
|
|
10.7
|
Current liabilities
of discontinued operations
|
|
—
|
|
10.7
|
Total current
liabilities
|
|
1,559.6
|
|
1,485.7
|
Long-term
debt
|
|
1,872.2
|
|
1,875.8
|
Employee benefit
plans
|
|
150.6
|
|
164.5
|
Long-term income
taxes
|
|
84.9
|
|
78.6
|
Long-term sales taxes
and taxes other than income
|
|
193.1
|
|
124.5
|
Other
liabilities
|
|
84.4
|
|
81.3
|
Total
liabilities
|
|
3,944.8
|
|
3,810.4
|
|
|
|
|
|
Series C convertible
preferred stock
|
|
467.8
|
|
444.7
|
|
|
|
|
|
Shareholders'
Deficit
|
|
|
|
|
Common
stock
|
|
189.7
|
|
188.8
|
Additional paid-in
capital
|
|
2,291.2
|
|
2,273.9
|
Retained
earnings
|
|
2,320.3
|
|
2,322.2
|
Accumulated other
comprehensive loss
|
|
(926.2)
|
|
(1,033.2)
|
Treasury stock, at
cost
|
|
(4,600.0)
|
|
(4,599.7)
|
Total Avon
shareholders' deficit
|
|
(725.0)
|
|
(848.0)
|
Noncontrolling
interests
|
|
10.3
|
|
11.8
|
Total shareholders'
deficit
|
|
(714.7)
|
|
(836.2)
|
Total liabilities,
series C convertible preferred stock and shareholders'
deficit
|
|
$
|
3,697.9
|
|
$
|
3,418.9
|
|
AVON PRODUCTS,
INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In
millions)
|
|
|
|
Twelve Months
Ended
|
|
|
December
31
|
|
|
2017
|
|
2016
|
Cash Flows from
Operating Activities
|
|
|
|
|
Net income
(loss)
|
|
$
|
20.0
|
|
|
$
|
(107.4)
|
|
Loss from
discontinued operations, net of tax
|
|
—
|
|
|
14.0
|
|
Income (loss) from
continuing operations, net of tax
|
|
$
|
20.0
|
|
|
$
|
(93.4)
|
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
|
Depreciation
|
|
84.3
|
|
|
83.3
|
|
Amortization
|
|
29.7
|
|
|
30.6
|
|
Provision for
doubtful accounts
|
|
221.9
|
|
|
190.5
|
|
Provision for
obsolescence
|
|
36.7
|
|
|
36.5
|
|
Share-based
compensation
|
|
24.2
|
|
|
24.0
|
|
Foreign exchange
losses
|
|
18.1
|
|
|
6.1
|
|
Deferred income
taxes
|
|
(30.2)
|
|
|
(8.5)
|
|
Loss on
deconsolidation of Venezuela
|
|
—
|
|
|
120.5
|
|
Other
|
|
39.6
|
|
|
(3.3)
|
|
Changes in assets and
liabilities:
|
|
|
|
|
Accounts
receivable
|
|
(214.6)
|
|
|
(216.6)
|
|
Inventories
|
|
(19.2)
|
|
|
(28.6)
|
|
Prepaid expenses and
other
|
|
14.8
|
|
|
16.8
|
|
Accounts payable and
accrued liabilities
|
|
12.3
|
|
|
(17.6)
|
|
Income and other
taxes
|
|
4.1
|
|
|
(4.7)
|
|
Noncurrent assets and
liabilities
|
|
29.5
|
|
|
(7.6)
|
|
Net cash provided
by operating activities of continuing operations
|
|
271.2
|
|
|
128.0
|
|
Cash Flows from
Investing Activities
|
|
|
|
|
Capital
expenditures
|
|
(97.3)
|
|
|
(93.0)
|
|
Disposal of
assets
|
|
5.9
|
|
|
13.3
|
|
Distribution from New
Avon LLC
|
|
22.0
|
|
|
—
|
|
Reduction of cash due
to Venezuela deconsolidation
|
|
—
|
|
|
(4.5)
|
|
Other investing
activities
|
|
(0.2)
|
|
|
1.5
|
|
Net cash used by
investing activities of continuing operations
|
|
(69.6)
|
|
|
(82.7)
|
|
Cash Flows from
Financing Activities
|
|
|
|
|
Debt, net (maturities
of three months or less)
|
|
10.3
|
|
|
(36.4)
|
|
Proceeds from
debt
|
|
—
|
|
|
508.7
|
|
Repayment of
debt
|
|
(2.9)
|
|
|
(733.0)
|
|
Repurchase of common
stock
|
|
(7.2)
|
|
|
(5.6)
|
|
Net proceeds from the
sale of series C convertible preferred stock
|
|
—
|
|
|
426.3
|
|
Other financing
activities
|
|
(0.2)
|
|
|
(23.0)
|
|
Net cash provided
by financing activities of continuing operations
|
|
—
|
|
|
137.0
|
|
Cash Flows from
Discontinued Operations
|
|
|
|
|
Net cash used by
operating activities of discontinued operations
|
|
(8.6)
|
|
|
(67.6)
|
|
Net cash used by
investing activities of discontinued operations
|
|
—
|
|
|
(94.6)
|
|
Net cash used by
discontinued operations
|
|
(8.6)
|
|
|
(162.2)
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
34.1
|
|
|
(50.4)
|
|
Net increase
(decrease) in cash and cash equivalents
|
|
227.1
|
|
|
(30.3)
|
|
Cash and cash
equivalents at beginning of year(1)
|
|
654.4
|
|
|
684.7
|
|
Cash and cash
equivalents at end of year
|
|
$
|
881.5
|
|
|
$
|
654.4
|
|
|
(1) Includes cash and cash
equivalents of discontinued operations of $(2.2) at the beginning
of the year in 2016.
|
AVON PRODUCTS,
INC.
SUPPLEMENTAL
SCHEDULE
(Unaudited)
(In
millions)
|
|
CATEGORY SALES
FROM REPORTABLE SEGMENTS (US$)
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
Three Months
Ended
December 31
|
|
US$
|
|
C$
|
|
|
2017
|
|
2016
|
|
% var. vs
4Q16
|
|
% var. vs
4Q16
|
Beauty:
|
|
|
|
|
|
|
|
|
Skincare
|
|
$
|
438.3
|
|
|
$
|
429.4
|
|
|
2%
|
|
(1)%
|
Fragrance
|
|
452.7
|
|
|
447.6
|
|
|
1
|
|
(1)
|
Color
|
|
253.3
|
|
|
252.6
|
|
|
—
|
|
(2)
|
Total
Beauty
|
|
1,144.3
|
|
|
1,129.6
|
|
|
1
|
|
(1)
|
Fashion &
Home:
|
|
|
|
|
|
|
|
|
Fashion
(jewelry/watches/apparel/footwear/accessories/children's)
|
|
229.4
|
|
|
234.2
|
|
|
(2)
|
|
(4)
|
Home (gift & decorative products/housewares/entertainment & leisure/
children's/nutrition)
|
|
161.6
|
|
|
166.8
|
|
|
(3)
|
|
(4)
|
Total Fashion &
Home
|
|
391.0
|
|
|
401.0
|
|
|
(2)
|
|
(4)
|
Net sales from
reportable segments
|
|
1,535.3
|
|
|
1,530.6
|
|
|
—
|
|
(2)
|
Other revenue from
reportable segments
|
|
25.8
|
|
|
26.2
|
|
|
(2)
|
|
(4)
|
Total revenue from
reportable segments
|
|
1,561.1
|
|
|
1,556.8
|
|
|
—
|
|
(2)
|
Total revenue from
Other operating segments and business activities
|
|
7.7
|
|
|
11.3
|
|
|
(32)
|
|
(32)
|
Total
revenue
|
|
$
|
1,568.8
|
|
|
$
|
1,568.1
|
|
|
—
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CATEGORY SALES
FROM REPORTABLE SEGMENTS (US$)
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
Twelve Months
Ended
December 31
|
|
US$
|
|
C$
|
|
|
2017
|
|
2016
|
|
% var. vs
FY16
|
|
% var. vs
FY16
|
Beauty:
|
|
|
|
|
|
|
|
|
Skincare
|
|
$
|
1,620.3
|
|
|
$
|
1,605.3
|
|
|
1%
|
|
(2)%
|
Fragrance
|
|
1,554.0
|
|
|
1,512.8
|
|
|
3
|
|
1
|
Color
|
|
977.6
|
|
|
996.3
|
|
|
(2)
|
|
(4)
|
Total
Beauty
|
|
4,151.9
|
|
|
4,114.4
|
|
|
1
|
|
(1)
|
Fashion &
Home:
|
|
|
|
|
|
|
|
|
Fashion
(jewelry/watches/apparel/footwear/accessories/children's)
|
|
821.2
|
|
|
849.2
|
|
|
(3)
|
|
(5)
|
Home (gift & decorative products/housewares/entertainment & leisure/
children's/nutrition)
|
|
591.9
|
|
|
595.4
|
|
|
(1)
|
|
(2)
|
Total Fashion &
Home
|
|
1,413.1
|
|
|
1,444.6
|
|
|
(2)
|
|
(3)
|
Net sales from
reportable segments
|
|
5,565.0
|
|
|
5,559.0
|
|
|
—
|
|
(2)
|
Other revenue from
reportable segments
|
|
114.0
|
|
|
104.7
|
|
|
9
|
|
7
|
Total revenue from
reportable segments
|
|
5,679.0
|
|
|
5,663.7
|
|
|
—
|
|
(2)
|
Total revenue from
Other operating segments and business activities
|
|
36.6
|
|
|
54.0
|
|
|
(32)
|
|
(19)
|
Total
revenue
|
|
$
|
5,715.6
|
|
|
$
|
5,717.7
|
|
|
—
|
|
(2)
|
|
|
|
|
|
|
|
|
|
AVON PRODUCTS,
INC.
SUPPLEMENTAL
SCHEDULE
NON-GAAP FINANCIAL
MEASURES
(Unaudited)
(In millions,
except per share data)
|
|
This supplemental
schedule provides adjusted Non-GAAP financial information and a
quantitative reconciliation of the difference between the Non-GAAP
financial measure and the most directly comparable financial
measure calculated and reported in accordance with GAAP.
|
|
|
|
THREE MONTHS ENDED
DECEMBER 31, 2017
|
|
|
Reported
(GAAP)
|
|
CTI
restructuring
initiatives
|
|
Special tax
items
|
|
Adjusted
(Non-GAAP)
|
Total
revenue
|
|
$
|
1,568.8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,568.8
|
|
Cost of
sales
|
|
611.2
|
|
|
0.7
|
|
|
—
|
|
|
610.5
|
|
Selling, general and
administrative expenses
|
|
827.6
|
|
|
23.0
|
|
|
—
|
|
|
804.6
|
|
Operating
profit
|
|
130.0
|
|
|
23.7
|
|
|
—
|
|
|
153.7
|
|
Income from
continuing operations, before taxes
|
|
91.6
|
|
|
23.7
|
|
|
—
|
|
|
115.3
|
|
Income
taxes
|
|
(1.2)
|
|
|
0.2
|
|
|
(49.8)
|
|
|
(50.8)
|
|
Income from
continuing operations, net of tax
|
|
$
|
90.4
|
|
|
$
|
23.9
|
|
|
$
|
(49.8)
|
|
|
$
|
64.5
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS from
continuing operations
|
|
$
|
0.17
|
|
|
|
|
|
|
$
|
0.12
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
61.0
|
%
|
|
—
|
|
|
—
|
|
|
61.1
|
%
|
SG&A as a % of
revenues
|
|
52.8
|
%
|
|
(1.5)
|
|
|
—
|
|
|
51.3
|
%
|
Operating
margin
|
|
8.3
|
%
|
|
1.5
|
|
|
—
|
|
|
9.8
|
%
|
Effective tax
rate
|
|
1.3
|
%
|
|
|
|
|
|
44.1
|
%
|
|
|
|
|
|
|
|
|
|
|
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 most directly comparable financial
measure calculated and reported in accordance with GAAP.
|
|
|
|
TWELVE MONTHS
ENDED DECEMBER 31, 2017
|
|
|
Reported
(GAAP)
|
|
CTI
restructuring
initiatives
|
|
Loss
contingency
|
|
Special tax
items
|
|
Adjusted
(Non-GAAP)
|
Total
revenue
|
|
$
|
5,715.6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,715.6
|
|
Cost of
sales
|
|
2,203.3
|
|
|
0.6
|
|
|
—
|
|
|
—
|
|
|
2,202.7
|
|
Selling, general and
administrative expenses
|
|
3,239.0
|
|
|
59.6
|
|
|
18.2
|
|
|
—
|
|
|
3,161.2
|
|
Operating
profit
|
|
273.3
|
|
|
60.2
|
|
|
18.2
|
|
|
—
|
|
|
351.7
|
|
Income from
continuing operations, before taxes
|
|
120.7
|
|
|
60.2
|
|
|
18.2
|
|
|
—
|
|
|
199.1
|
|
Income
taxes
|
|
(100.7)
|
|
|
(1.7)
|
|
|
—
|
|
|
(49.8)
|
|
|
(152.2)
|
|
Income from
continuing operations, net of tax
|
|
$
|
20.0
|
|
|
$
|
58.5
|
|
|
$
|
18.2
|
|
|
$
|
(49.8)
|
|
|
$
|
46.9
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS from
continuing operations
|
|
$
|
(0.00)
|
|
|
|
|
|
|
|
|
$
|
0.06
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
61.5
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
61.5
|
%
|
SG&A as a % of
revenues
|
|
56.7
|
%
|
|
(1.0)
|
|
|
(0.3)
|
|
|
—
|
|
|
55.3
|
%
|
Operating
margin
|
|
4.8
|
%
|
|
1.1
|
|
|
0.3
|
|
|
—
|
|
|
6.2
|
%
|
Effective tax
rate
|
|
83.4
|
%
|
|
|
|
|
|
|
|
76.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
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 most directly comparable financial
measure calculated and reported in accordance with GAAP.
|
|
|
|
THREE MONTHS ENDED
DECEMBER 31, 2016
|
|
|
Reported
(GAAP)
|
|
CTI
restructuring
initiatives
|
|
Other
items
|
|
Special
tax
items
|
|
Adjusted
(Non-GAAP)
|
Total
revenue
|
|
$
|
1,568.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,568.1
|
|
Cost of
sales
|
|
622.3
|
|
|
0.3
|
|
|
—
|
|
|
—
|
|
|
622.0
|
|
Selling, general and
administrative expenses
|
|
838.8
|
|
|
6.9
|
|
|
—
|
|
|
—
|
|
|
831.9
|
|
Operating
profit
|
|
107.0
|
|
|
7.2
|
|
|
—
|
|
|
—
|
|
|
114.2
|
|
Income from
continuing operations, before taxes
|
|
42.8
|
|
|
7.2
|
|
|
2.8
|
|
|
—
|
|
|
52.8
|
|
Income
taxes
|
|
(52.5)
|
|
|
0.1
|
|
|
—
|
|
|
8.6
|
|
|
(43.8)
|
|
(Loss) income from
continuing operations, net of tax
|
|
$
|
(9.7)
|
|
|
$
|
7.3
|
|
|
$
|
2.8
|
|
|
$
|
8.6
|
|
|
$
|
9.0
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS from
continuing operations
|
|
$
|
(0.03)
|
|
|
|
|
|
|
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
60.3
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
60.3
|
%
|
SG&A as a % of
revenues
|
|
53.5
|
%
|
|
(0.4)
|
|
|
—
|
|
|
—
|
|
|
53.1
|
%
|
Operating
margin
|
|
6.8
|
%
|
|
0.5
|
|
|
—
|
|
|
—
|
|
|
7.3
|
%
|
Effective tax
rate
|
|
*
|
|
|
|
|
|
|
|
|
83.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
* 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 most directly comparable financial
measure calculated and reported in accordance with GAAP.
|
|
|
|
TWELVE MONTHS
ENDED DECEMBER 31, 2016
|
|
|
Reported
(GAAP)
|
|
CTI
restructuring
initiatives
|
|
Legal
settlement
|
|
Venezuelan
special
items
|
|
Other
items
|
|
Special
tax items
|
|
Adjusted
(Non-GAAP)
|
Total
revenue
|
|
$
|
5,717.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,717.7
|
|
Cost of
sales
|
|
2,257.0
|
|
|
0.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,256.4
|
|
Selling, general and
administrative
expenses
|
|
3,138.8
|
|
|
76.8
|
|
|
(27.2)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,089.2
|
|
Operating
profit
|
|
321.9
|
|
|
77.4
|
|
|
(27.2)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
372.1
|
|
Income from
continuing operations,
before taxes
|
|
31.2
|
|
|
77.4
|
|
|
(27.2)
|
|
|
120.5
|
|
|
(1.1)
|
|
|
—
|
|
|
200.8
|
|
Income
taxes
|
|
(124.6)
|
|
|
(13.5)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(27.8)
|
|
|
(165.9)
|
|
(Loss) income from
continuing
operations, net of tax
|
|
$
|
(93.4)
|
|
|
$
|
63.9
|
|
|
$
|
(27.2)
|
|
|
$
|
120.5
|
|
|
$
|
(1.1)
|
|
|
$
|
(27.8)
|
|
|
$
|
34.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS from
continuing
operations
|
|
$
|
(0.25)
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
60.5
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
60.5
|
%
|
SG&A as a % of
revenues
|
|
54.9
|
%
|
|
(1.3)
|
|
|
0.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
54.0
|
%
|
Operating
margin
|
|
5.6
|
%
|
|
1.4
|
|
|
(0.5)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6.5
|
%
|
Effective tax
rate
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
82.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*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
(Unaudited)
(In millions,
except per share data)
|
|
|
Approximate Impact
of Foreign Currency
|
|
|
|
|
|
|
Fourth-Quarter
2017
|
|
Full-Year
2017
|
|
|
Estimated
impact
($ in millions)
|
|
Estimated
impact
on diluted EPS
|
|
Estimated
impact
($ in millions)
|
|
Estimated
impact
on diluted EPS
|
Year-on-Year
impact on Reported
(GAAP) results:
|
|
|
|
|
|
|
|
Total
revenue
|
2 pts
|
|
|
|
|
2 pts
|
|
|
|
Operating profit -
transaction
|
$
|
(10)
|
|
|
$
|
(0.01)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Operating profit -
translation
|
5
|
|
|
0.01
|
|
|
20
|
|
|
0.03
|
|
Total operating
profit
|
$
|
(5)
|
|
|
$
|
(0.00)
|
|
|
$
|
20
|
|
|
$
|
0.03
|
|
Operating
margin
|
(30
bps)
|
|
|
|
|
30
bps
|
|
|
|
Revaluation of
working capital
|
$
|
19
|
|
|
$
|
0.03
|
|
|
$
|
28
|
|
|
$
|
0.04
|
|
Diluted
EPS
|
|
|
$
|
0.02
|
|
|
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
Year-on-Year
impact on Adjusted (Non-
GAAP) results:
|
|
|
|
|
|
|
|
Adjusted operating
profit - transaction
|
$
|
(10)
|
|
|
$
|
(0.01)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Adjusted operating
profit - translation
|
5
|
|
|
0.01
|
|
|
20
|
|
|
0.03
|
|
Total Adjusted
operating profit
|
$
|
(5)
|
|
|
$
|
(0.00)
|
|
|
$
|
20
|
|
|
$
|
0.03
|
|
Adjusted operating
margin
|
(30
bps)
|
|
|
|
|
20
bps
|
|
|
|
Revaluation of
working capital
|
$
|
19
|
|
|
$
|
0.03
|
|
|
$
|
28
|
|
|
$
|
0.04
|
|
Adjusted diluted
EPS
|
|
|
$
|
0.02
|
|
|
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
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 dollar items, which are
Non-GAAP financial measures. The Company believes these measures
provide investors an additional perspective on trends and
underlying business results. To exclude the impact of changes due
to the translation of foreign currencies into U.S. dollars, the
Company calculates current-year results and prior-year results at
constant exchange rates, which are updated on an annual basis as
part of the Company's budgeting process. Foreign currency impact is
determined as the difference between actual growth rates and
constant-dollar growth rates.
The Company also presents cost of sales, gross margin, selling,
general and administrative expenses, selling, general and
administrative expenses as a percentage of revenue, operating
profit, operating margin, income (loss) 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 quantitative reconciliations
of the Non-GAAP financial measures to the most directly comparable
financial measures calculated and reported in accordance with GAAP.
See "Supplemental Schedules - Non-GAAP Financial Measures"
within this release for these quantitative reconciliations.
In addition, the Company defines free cash flow as net cash
provided by operating activities of continuing operations less
capital expenditures.
The Company uses Non-GAAP financial measures to evaluate its
operating performance. These Non-GAAP measures should not be
considered in isolation, or as a substitute for, or superior
to, financial measures calculated in accordance with GAAP. The
Company believes investors find the Non-GAAP information helpful in
understanding the ongoing performance of operations separate from
items that may have a disproportionate positive or negative impact
on the Company's financial results in any particular period. The
Company believes that it is meaningful for investors to be made
aware of the impacts of: 1) costs to implement ("CTI")
restructuring initiatives; 2) a charge for a loss contingency
related to a non-U.S. pension plan ("Loss contingency"); 3) the net
proceeds recognized as a result of settling claims relating to
professional services ("Legal settlement"); 4) charges related to
the deconsolidation of the Company's Venezuela operations as of March 31, 2016 ("Venezuelan special items"); 5) a
net gain related to the extinguishment of debt ("Gain on
extinguishment of debt"); and 6) the net income tax benefit as a
result of the enactment of the Tax Cuts and Jobs Act in the U.S., a
release of valuation allowances associated with a number of markets
in Europe, Middle East & Africa, and a benefit as a result of a
favorable court decision in Brazil, partially offset by a charge
associated with valuation allowances to adjust deferred tax assets
in Mexico, which were recognized
in 2017, income tax benefits realized in the first quarter of 2016
as a result of tax planning strategies and in the second quarter of
2016 primarily due to the release of a valuation allowance
associated with Russia and the
adjustments associated with our deferred tax assets recorded in
2016 ("Special tax items").
The Loss contingency includes the impact on the Consolidated
Statements of Operations during the second quarter of 2017 caused
by a charge of approximately $18
million for a loss contingency related to a non-U.S.
pension plan, for which an amendment to the plan that occurred in a
prior year may not have been appropriately implemented.
The Legal settlement includes the impact on the Consolidated
Statements of Operations during the third quarter of 2016
associated with the net proceeds of approximately $27 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 during the first quarter of
2016 caused by the deconsolidation of the Company's Venezuelan
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
accumulated other comprehensive loss associated with foreign
currency changes before Venezuela
was accounted for as a highly inflationary economy.
The Other items includes the impact on the Consolidated
Statements of Operations during the third quarter of 2016 due to a
net gain on extinguishment of debt caused by the cash tender offers
in August 2016, the debt repurchases
in October and December 2016, and the
prepayment of the remaining principal amount of the Company's 4.20%
Notes due July 15, 2018 and 5.75%
Notes due March 1, 2018 in
November 2016.
The Special tax items include the impact on the provision for
income taxes in the Consolidated Statements of Operations during
2017 due to an approximate $30
million net benefit recognized as a result of the enactment
of the Tax Cuts and Jobs Act in the U.S., a release of valuation
allowances of approximately $26
million associated with a number of markets in Europe, Middle
East & Africa, and an
approximate $10 million benefit as a
result of a favorable court decision in Brazil, partially offset by a charge of
approximately $16 million associated
with valuation allowances to adjust deferred tax assets in
Mexico. Special tax items also
include the impact on the provision for income taxes in the
Consolidated Statements of Operations during the fourth quarter of
2016 due to the charge of approximately $9
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. Special tax items also include the
impact on the provision for income taxes in the Consolidated
Statements of Operations during the second quarter of 2016
primarily due to the release of a valuation allowance associated
with Russia of approximately
$7 million. Special tax items also
include the impact on the provision for income taxes in the
Consolidated Statements of Operations during the first quarter of
2016 due to an income tax benefit of approximately $29 million recognized as the result of the
implementation of foreign tax planning strategies.
View original
content:http://www.prnewswire.com/news-releases/avon-reports-fourth-quarter-and-full-year-2017-results-300599156.html
SOURCE Avon Products, Inc.