AVP Avon Products Inc

LONDON, May 2, 2019 /PRNewswire/ -- Avon Products, Inc. (NYSE: AVP) today announced its results for the quarter ended March 31, 2019.

Jan Zijderveld, Avon CEO, said, "We are pleased with the progress that we have made in the first quarter. We delivered constant-dollar revenue improvements in three of our four geographical segments, adjusted operating margin expansion of 50 basis points and free cash flow¹ in line with seasonal trends, as we continue to make progress deploying our Open Up Avon strategies."

Mr. Zijderveld continued, "In the first quarter, our journey to Open Up Avon progressed, offering More Value, More Access and Improved Productivity for our millions of Representatives and customers. Our relentless focus on revenue growth management, including less discounting and more targeted and effective incentives and promotion management led to a 6% improvement in Average Orders and drove overall price/mix up 8% across our portfolio. Asia Pacific showed strong growth, as evidenced by expanded customer access and strong e-Commerce sales. Our ongoing focus on training contributed to continued improvement in Representative productivity. We are further reducing our costs, driving efficiencies and simplifying our business."

Mr. Zijderveld underscored, "Empowering women around the world to more productively and effectively build successful social selling businesses and generate relevant earnings remains core to our strategy and the key driver of our future growth."

Gustavo Arnal, Avon CFO, said, "I am excited to join Avon at such a pivotal time in its transformation journey. I look forward to helping Jan and the management team continue to drive the Open Up Avon strategy and build on the steps already taken to create a simpler, leaner and more agile business. The Company made good progress in the first quarter. I will work with senior leaders to sharpen the key focus areas to accelerate shareholder value creation."

Highlights for First-Quarter 2019:

• Total Reportable Segment Revenue decreased 14% in reported currency and 3% in constant dollars. Increases in Asia Pacific, South Latin America and North Latin America were offset by a decline in Europe, Middle East & Africa. Price/mix increased 8% with increases reported in all segments.
• Gross Margin of 56.4%. Adjusted Gross Margin decreased 160 basis points to 56.8%, unfavorably impacted primarily by foreign exchange, partially offset by the favorable net impact of price and mix.
• Operating Margin of (0.3)%. Adjusted Operating Margin increased 50 basis points to 4.5%, driven by cost savings initiatives that more than offset the change in Gross Margin.
• Diluted Loss Per Share of $0.09. Adjusted Diluted Earnings Per Share of $0.03, compared with Adjusted Diluted Loss Per Share of $0.02 for first-quarter 2018.
• Average order in constant dollars from Reportable Segments increased 6%, driven by increases in all segments.
• Active Representatives and Ending Representatives, both from Reportable Segments, each declined 9%, with decreases reported in all segments but largely driven by declines in Brazil and Russia.
• Foreign currency unfavorably impacted Diluted Loss Per Share by an estimated $0.01 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.

Adjustments to First-Quarter 2019 GAAP Results to Arrive at Adjusted Results

During the first quarter of 2019, the following adjustments were made to GAAP results to arrive at Adjusted results and, in total, increased Diluted earnings per share by approximately $0.12:

• The Company recorded costs to implement ("CTI") restructuring within operating profit of approximately $54 million. Partially offsetting these costs was a gain on the sale of the China manufacturing facility of approximately $10 million for a net adjustment to income from continuing operations of approximately $43 million before tax (approximately $40 million after tax), primarily related to the Open Up Avon initiative. The costs recorded within operating profit were primarily related to headcount reductions and professional services.
  
  
• The Company recorded a transaction fee of approximately $4 million before and after tax.

First-Quarter 2019 Segment and Top Market Review (compared with first-quarter 2018)

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 in 2018 also included the business results for Australia and New Zealand, which the Company exited in 2018.

For a reconciliation of the difference between Reported (GAAP) and Adjusted (Non-GAAP), see "Supplemental Schedule - Non-GAAP Financial Measures" later in this release.

First-Quarter 2019 Cash Flow Review (compared with first-quarter 2018)

Subsequent Event

Sale of New Avon

In April 2019, the Company signed an agreement with LG Household & Health Care Ltd. to sell its 19.9% ownership interest in New Avon, a privately-held company that is majority-owned and managed by an affiliate of Cerberus.

LG Household & Health Care Ltd. will acquire all of the interests of New Avon for $125.0 in cash, of which Avon will receive $24.9 in cash for its 19.9% share. The closing is expected to occur on September 30, 2019.

Conference call

Avon will conduct a conference call at 9:00 a.m. Eastern Time today to discuss its quarterly results. The dial-in number for the call is (877) 407-0789 in North America or (201) 689-8562 from international locations. The call and related slide presentation will be webcast live at investor.avonworldwide.com and can be accessed or downloaded from that site for a period of one year. A telephonic playback of the call will also be available from 12:00 p.m. Eastern Time, May 2, 2019 through May 16, 2019. North American listeners may dial (844) 512-2921 and international listeners may dial (412) 317-6671; the passcode is 13689507. Please note that the Company intends to file its Form 10-Q on May 3, 2019.

About Avon Products, Inc.

For 130 years Avon has stood for women: providing innovative, quality beauty products which are primarily sold to women, through women. Millions of independent Representatives across the world sell iconic Avon brands such as Avon Color and ANEW through their social networks, building their own beauty businesses on a full- or part-time basis. Avon supports women's empowerment, entrepreneurship and well-being and has donated over $1 billion to women's causes through Avon and the Avon Foundation. Learn more about Avon and its products at www.avonworldwide.com. #Stand4Her

Footnotes

¹ "Adjusted" items refer to financial measures that are derived from measures calculated in accordance with GAAP, but which have been adjusted to exclude certain items. Other Adjusted financial measures that the Company refers to include constant dollar ("C$") items and Free Cash Flow which the Company defines as net cash used by operating activities of continuing operations plus net cash provided (used) by investing activities of continuing operations. All of these adjusted items are Non-GAAP financial measures as described below under "Non-GAAP Financial Measures." These Non-GAAP measures should not be considered in isolation, or as a substitute for, or superior to, financial measures calculated in accordance with GAAP.  Please refer to the Company's "Non-GAAP Financial Measures" description at the end of this release and the reconciliations the Company provides of these Non-GAAP financial measures to their comparable GAAP measures.

Forward-Looking Statements

This press release contains "forward-looking statements" that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements relating to the Company's growth and long-term success, and improved representative engagement and service. Because forward-looking statements inherently involve risks and uncertainties, actual future results may differ materially from those expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, the possibility of business disruption, competitive uncertainties, and general economic and business conditions in Avon's markets as well as the other risks detailed in Avon's Annual Report on Form 10-K for the year ended December 31, 2018, and Avon's other filings with the Securities and Exchange Commission. Avon undertakes no obligation to update any statements in this press release for changes that happen after the date of this release.

Non-GAAP Financial Measures

To supplement the Company's financial results presented in accordance with GAAP, the Company discloses operating results that have been adjusted to exclude the impact of changes due to the translation of foreign currencies into U.S. dollars, including changes in: revenue, Adjusted revenue, operating profit (loss), Adjusted operating profit, operating margin, Adjusted operating margin and diluted earnings (loss) per share. 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 revenue, cost of sales, gross margin, selling, general and administrative expenses, selling, general and administrative expenses as a percentage of revenue, operating profit (loss), operating margin, income (loss) before taxes, income taxes, net income (loss), diluted earnings (loss) per share and effective tax rate on a Non-GAAP basis. The Company refers to these Non-GAAP financial measures as "Adjusted." The Company also presents free cash flow as an additional financial measure for liquidity. The Company has provided quantitative reconciliations of the Non-GAAP financial measures to the most directly comparable financial measures calculated and reported in accordance with GAAP. See "Supplemental Schedule -  Non-GAAP Financial Measures" within this release for these quantitative reconciliations.

The Company uses Non-GAAP financial measures to evaluate its operating performance. These Non-GAAP measures should not be considered in isolation, or as a substitute for, or superior to, financial measures calculated in accordance with GAAP. The Company believes investors find the Non-GAAP information helpful in understanding the ongoing performance of operations separate from items that may have a disproportionate positive or negative impact on the Company's financial results in any particular period. The Company believes that it is meaningful for investors to be made aware of the impacts of: 1) CTI restructuring initiatives; 2) transaction fees and 3) one-time tax items that are not associated with recurring, normal operations ("Special tax items").

The Special tax items include the impact on the provision for income taxes in the Consolidated Statements of Operations during 2018 due to one-time tax reserves of approximately $9 million associated with the Company's uncertain tax positions.

View original content:http://www.prnewswire.com/news-releases/avon-reports-first-quarter-2019-results-300842437.html

SOURCE Avon Products, Inc.