"We made good progress in the first year of our Transformation
Plan, exceeding our cost savings targets, improving our profit
margin, and significantly strengthening our balance
sheet. However, the financial results for the fourth quarter
were disappointing, largely due to the decline in Active
Representatives and an unexpected increase in bad debt expense,"
said Sheri McCoy, Chief Executive
Officer, Avon Products Inc. "As we move into 2017, we are
taking actions to deliver more consistent performance across our
markets, with Representative engagement remaining a key priority in
our growth plan, while navigating continued challenging global
economic and political headwinds."
During 2016, the following adjustments were made to GAAP results
to arrive at Adjusted results and, in total, increased Diluted
earnings per share from continuing operations by $0.29:
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.
Fourth-Quarter 2016 Income Statement Highlights (compared
with fourth-quarter 2015)
- Total revenue for Avon Products, Inc. declined 2% to
$1.6 billion, but was relatively
unchanged in constant dollars.
- Total revenue from reportable segments declined 2% to
$1.6 billion, but was relatively
unchanged in constant dollars.
- Active Representatives declined 2%, primarily due to decreases
in Asia Pacific and Europe, Middle
East & Africa.
- Average order increased 2% as growth in South Latin America, Asia Pacific and North Latin America was partially offset by a
decline in Europe, Middle East & Africa.
- Ending Representatives were relatively unchanged as growth in
Europe, Middle East & Africa and South
Latin America was offset by a decline in Asia Pacific.
- Gross margin was 60.3%, up 160 basis points while
Adjusted gross margin was 60.3%, up 150 basis points. These
year-over-year comparisons were positively impacted by pricing,
partially offset by an approximate 80 basis point unfavorable
impact from foreign exchange.
- Operating margin was 6.8% in the quarter, up 290 basis
points while Adjusted operating margin was 7.3%, up 130 basis
points. These year-over-year comparisons benefited from the
favorable net impact of price/mix, continued benefits from cost
savings initiatives, as well as lower compensation costs. These
benefits were partially offset by approximately 210 basis points
from higher bad debt expense, primarily in Brazil, and by approximately 100 basis points
of unfavorable impact of foreign exchange.
- The provision for income taxes was $53 million, compared with $22 million for 2015. On an Adjusted basis, the
provision for income taxes was $44
million, compared with $40
million for 2015. The effective tax rate from
continuing operations in the quarter was 122.7% and on an Adjusted
basis was 83.0%.
- Loss from continuing operations, net of tax was
$10 million, or a loss of
$0.03 per diluted share, compared
with a loss of $15 million, or a loss
of $0.04 per diluted share, for the
fourth quarter of 2015. Adjusted income from continuing operations,
net of tax was $9 million, or
$0.01 per diluted share, compared
with income of $1 million, or
$0.00 per diluted share, for the
fourth quarter of 2015. Earnings allocated to convertible preferred
stock had a negative $0.01 impact on
both Diluted earnings per share and Adjusted diluted earnings per
share. The impact of the devaluation in Egypt on working capital balances had a
negative $0.04 impact on both Diluted
earnings per share and 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 $317 million,
or $0.72 per diluted share, for the
fourth quarter of 2015, which included $340
million associated with the estimated loss on the sale of
the North America business.
Adjustments to Fourth-Quarter 2016 GAAP Results to Arrive at
Adjusted Results
During the fourth quarter of 2016, the following adjustments
were made to GAAP results to arrive at Adjusted results and, in
total, increased Diluted earnings per share from continuing
operations by $0.04:
- The Company recorded a non-cash income tax 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.
- The Company recorded costs to implement restructuring within
operating profit of approximately $7
million before and after tax, primarily related to the
previously announced Transformation Plan.
- The Company recorded a net loss on extinguishment of debt of
approximately $3 million related to
debt repayments through make-whole prepayments and open market
repurchases.
THREE MONTHS ENDED
DECEMBER 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SEGMENT
RESULTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
Active
Representatives
|
|
Average Order
C$
|
|
Units
Sold
|
|
Price/
Mix C$
|
|
Ending
Representatives
|
|
US$
|
|
C$
|
|
|
|
|
|
Revenue &
Drivers
|
|
|
% var.
vs 4Q15
|
|
% var.
vs 4Q15
|
|
% var.
vs 4Q15
|
|
% var.
vs 4Q15
|
|
% var.
vs 4Q15
|
|
% var.
vs 4Q15
|
|
% var.
vs 4Q15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe, Middle East
& Africa
|
$
|
620.5
|
|
|
(7)%
|
|
(3)%
|
|
(2)%
|
|
(1)%
|
|
(8)%
|
|
5%
|
|
3%
|
South Latin
America
|
589.0
|
|
|
9
|
|
6
|
|
(1)
|
|
7
|
|
(8)
|
|
14
|
|
1
|
North Latin
America
|
204.1
|
|
|
(10)
|
|
1
|
|
—
|
|
1
|
|
(9)
|
|
10
|
|
(1)
|
Asia
Pacific
|
144.5
|
|
|
(9)
|
|
(6)
|
|
(9)
|
|
3
|
|
(5)
|
|
(1)
|
|
(11)
|
Total from
reportable
segments
|
1,558.1
|
|
|
(2)
|
|
—
|
|
(2)
|
|
2
|
|
(8)
|
|
8
|
|
—
|
Other operating
segments
and business activities
|
10.0
|
|
|
(25)
|
|
19
|
|
(100)
|
|
*
|
|
(100)
|
|
*
|
|
(100)
|
Total
revenue
|
$
|
1,568.1
|
|
|
(2)%
|
|
—%
|
|
(3)%
|
|
3%
|
|
(8)%
|
|
8%
|
|
(2)%
|
Operating
Profit/Margin
|
|
2016 Operating
Profit US$
|
|
2016 Operating
Margin US$
|
|
Change in US$ vs
4Q15
|
|
Change in C$ vs
4Q15
|
|
|
|
|
|
|
|
|
|
Segment
profit/margin
|
|
|
|
|
|
|
|
|
Europe, Middle East
& Africa
|
|
$
|
111.6
|
|
|
18.0
|
%
|
|
240 bps
|
|
170 bps
|
South Latin
America
|
|
42.6
|
|
|
7.2
|
|
|
(190)
|
|
(120)
|
North Latin
America
|
|
29.4
|
|
|
14.4
|
|
|
150
|
|
190
|
Asia
Pacific
|
|
17.7
|
|
|
12.2
|
|
|
310
|
|
330
|
Total from
reportable segments
|
|
201.3
|
|
|
12.9
|
|
|
50
|
|
80
|
Other operating
segments and
business activities
|
|
1.9
|
|
|
|
|
|
|
|
Unallocated global
expenses
|
|
(89.0)
|
|
|
|
|
|
|
|
CTI restructuring
initiatives
|
|
(7.2)
|
|
|
|
|
|
|
|
Operating
profit
|
|
$
|
107.0
|
|
|
6.8
|
%
|
|
290
bps
|
|
330
bps
|
|
|
|
|
|
|
|
|
|
*Calculation not
meaningful.
|
|
Other operating
segments and business activities include the business results for
Venezuela, through its deconsolidation, which was 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.
|
Fourth-Quarter 2016 Segment Highlights (compared with
fourth-quarter 2015)
Fourth-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 7%, or 3% in
constant dollars. Constant-dollar revenue was impacted by
declines in Active Representatives and average order.
- Russia revenue was up
2%, or down 3% in constant dollars, driven by declines in average
order and Active Representatives.
- U.K. revenue was down 20%, or 3% in constant dollars,
due to a decline in Active Representatives.
- South Latin America
revenue was up 9%, or 6% in constant dollars, driven primarily by
higher average order, partially offset by a decrease in Active
Representatives. Argentina
contributed approximately 3 points to this constant-dollar revenue
growth, primarily due to inflationary pricing.
- Brazil revenue was up
27%, or 7% in constant dollars, primarily driven by higher average
order.
- North Latin America
revenue was down 10%, or up 1% in constant dollars. Constant-dollar
revenue primarily benefited from higher average order.
- Mexico revenue was down
14%, or up 2% in constant dollars, primarily driven by higher
average order, partially offset by a decline in Active
Representatives.
- Asia Pacific revenue
was down 9%, and down 6% in constant dollars. Modest
constant-dollar growth in the
Philippines was not enough to offset declines in other
markets. The segment's constant-dollar revenue decline was driven
by a decrease in Active Representatives, partially offset by higher
average order.
- Philippines revenue was
down 3%, or up 1% in constant dollars, as higher average order was
partially offset by a decline in Active Representatives.
Transformation Plan
The Company made good progress in 2016, the first year of its
three-year Transformation Plan, exceeding cost targets and
significantly strengthening the balance sheet. 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 Transformation
Plan began in January 2016 and
includes three pillars: investing in growth, reducing costs in an
effort to continue to improve cost structure and improving
financial resilience.
Invest in Growth
Over the three years that began in 2016, the Company expects to
invest $350 million into the business
with an estimated $150 million in
media and social selling and $200
million related to the service model evolution and
information technology, primarily capital expenditures, which will
be aimed at improving the overall Representative experience. The
Company expects to incrementally invest, over time, in media,
shifting media spend more to digital, with the focus of the
spending in its top 10 markets.
Improve Cost Structure
The Company believes it is on track to deliver the targeted
$350 million in savings related to
Transformation Plan over the three-year plan period, 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.
For 2016, the Company accelerated certain cost savings
initiatives and came in ahead of 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.
The Company realized an estimated $120
million of savings in 2016.
Improve Financial Resilience
With respect to improving its financial resilience, the Company
targeted to reduce debt by approximately $250 million during 2016. The Company exceeded
this target, reducing debt by approximately $260 million and extending its maturity profile
with no long-term debt due until March
2019, thereby strengthening the balance sheet.
Conference call
Avon will conduct a conference
call at 9:00 a.m. Eastern Time today
to discuss the full-year and quarterly results. The dial-in number
for the call is (800) 843-2086 in the U.S. or (706) 643-1815 from
non-U.S. locations (conference ID number: 54208828). The call will
be webcast live at www.avoninvestor.com and can be accessed or
downloaded from that site for a period of one year.
About Avon Products, Inc.
Avon is the Company that for
130 years has proudly stood for beauty, innovation, optimism and,
above all, for women. Avon
products include well-recognized and beloved brands such as ANEW,
Avon Color, Avon Care, Skin-So-Soft, and Advance Techniques sold
through approximately 6 million active independent Avon Sales
Representatives. Learn more about Avon and its products at
www.avoncompany.com.
Footnotes
1 "Adjusted" items refer to financial measures that
are derived from measures calculated in accordance with generally
accepted accounting principles in the
United States ("GAAP"), but which have been adjusted to
exclude certain items. Other Adjusted financial measures that the
Company refers to include Constant dollar ("C$") 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, 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. 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
Change
|
|
Twelve Months
Ended
|
|
Percent
Change
|
|
|
December
31
|
|
|
December
31
|
|
|
|
2016
|
|
2015
|
|
|
|
2016
|
|
2015
|
|
|
Net sales
|
|
$
|
1,531.8
|
|
|
$
|
1,585.8
|
|
|
(3)%
|
|
$
|
5,578.8
|
|
|
$
|
6,076.5
|
|
|
(8)%
|
Other
revenue
|
|
36.3
|
|
|
21.5
|
|
|
|
|
138.9
|
|
|
84.0
|
|
|
|
Total
revenue
|
|
1,568.1
|
|
|
1,607.3
|
|
|
(2)%
|
|
5,717.7
|
|
|
6,160.5
|
|
|
(7)%
|
Cost of
sales
|
|
622.3
|
|
|
663.7
|
|
|
|
|
2,257.0
|
|
|
2,445.4
|
|
|
|
Selling, general and
administrative expenses
|
|
838.8
|
|
|
873.8
|
|
|
|
|
3,138.8
|
|
|
3,543.2
|
|
|
|
Impairment of
goodwill
|
|
—
|
|
|
6.9
|
|
|
|
|
—
|
|
|
6.9
|
|
|
|
Operating
profit
|
|
107.0
|
|
|
62.9
|
|
|
70%
|
|
321.9
|
|
|
165.0
|
|
|
95%
|
Interest
expense
|
|
36.3
|
|
|
32.3
|
|
|
|
|
136.6
|
|
|
120.5
|
|
|
|
Loss (gain) on
extinguishment of debt
|
|
2.8
|
|
|
—
|
|
|
|
|
(1.1)
|
|
|
5.5
|
|
|
|
Interest
income
|
|
(3.0)
|
|
|
(2.8)
|
|
|
|
|
(15.8)
|
|
|
(12.5)
|
|
|
|
Other expense,
net
|
|
28.1
|
|
|
26.2
|
|
|
|
|
171.0
|
|
|
73.7
|
|
|
|
Gain on sale of
business
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
(44.9)
|
|
|
|
Total other
expenses
|
|
64.2
|
|
|
55.7
|
|
|
|
|
290.7
|
|
|
142.3
|
|
|
|
Income from
continuing operations, before taxes
|
|
42.8
|
|
|
7.2
|
|
|
*
|
|
31.2
|
|
|
22.7
|
|
|
37%
|
Income
taxes
|
|
(52.5)
|
|
|
(22.0)
|
|
|
|
|
(124.6)
|
|
|
(819.2)
|
|
|
|
Loss from continuing
operations, net of tax
|
|
(9.7)
|
|
|
(14.8)
|
|
|
34%
|
|
(93.4)
|
|
|
(796.5)
|
|
|
88%
|
Loss from
discontinued operations, net of tax
|
|
(1.1)
|
|
|
(317.1)
|
|
|
|
|
(14.0)
|
|
|
(349.1)
|
|
|
|
Net loss
|
|
(10.8)
|
|
|
(331.9)
|
|
|
|
|
(107.4)
|
|
|
(1,145.6)
|
|
|
|
Net loss (income)
attributable to noncontrolling interests
|
|
0.1
|
|
|
(1.5)
|
|
|
|
|
(0.2)
|
|
|
(3.3)
|
|
|
|
Net loss attributable
to Avon
|
|
$
|
(10.7)
|
|
|
$
|
(333.4)
|
|
|
97%
|
|
$
|
(107.6)
|
|
|
$
|
(1,148.9)
|
|
|
91%
|
Loss per
share:(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS from
continuing operations
|
|
$
|
(0.03)
|
|
|
$
|
(0.04)
|
|
|
14%
|
|
$
|
(0.25)
|
|
|
$
|
(1.81)
|
|
|
86%
|
Basic EPS from
discontinued operations
|
|
—
|
|
|
(0.72)
|
|
|
|
|
(0.03)
|
|
|
(0.79)
|
|
|
|
Basic EPS
attributable to Avon
|
|
$
|
(0.04)
|
|
|
$
|
(0.76)
|
|
|
95%
|
|
$
|
(0.29)
|
|
|
$
|
(2.60)
|
|
|
89%
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS from
continuing operations
|
|
$
|
(0.03)
|
|
|
$
|
(0.04)
|
|
|
14%
|
|
$
|
(0.25)
|
|
|
$
|
(1.81)
|
|
|
86%
|
Diluted EPS from
discontinued operations
|
|
—
|
|
|
(0.72)
|
|
|
|
|
(0.03)
|
|
|
(0.79)
|
|
|
|
Diluted EPS
attributable to Avon
|
|
$
|
(0.04)
|
|
|
$
|
(0.76)
|
|
|
95%
|
|
$
|
(0.29)
|
|
|
$
|
(2.60)
|
|
|
89%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
437.6
|
|
|
435.4
|
|
|
|
|
437.0
|
|
|
435.2
|
|
|
|
Diluted
|
|
437.7
|
|
|
435.4
|
|
|
|
|
437.0
|
|
|
435.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Calculation not
meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Under the
two-class method, loss per share is calculated using net loss
allocable to common shares, which is derived by reducing net loss
by the loss allocable to participating securities and earnings
allocated to convertible preferred stock. Net loss allocable to
common shares used in the basic and diluted loss per share
calculation was ($16.2) and ($329.8) for the three months ended
December 31, 2016 and 2015, respectively. Net loss allocable to
common shares used in the basic and diluted loss per share
calculation was ($124.6) and ($1,133.2) for the twelve months ended
December 31, 2016 and 2015, respectively.
|
AVON PRODUCTS,
INC.
CONSOLIDATED
BALANCE SHEETS
(Unaudited)
(In
millions)
|
|
|
|
December
31
|
|
December
31
|
|
|
2016
|
|
2015
|
Assets
|
|
|
|
|
Current
Assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
654.4
|
|
|
$
|
686.9
|
|
Accounts receivable,
net
|
|
458.9
|
|
|
443.0
|
|
Inventories
|
|
586.4
|
|
|
624.0
|
|
Prepaid expenses and
other
|
|
291.3
|
|
|
296.1
|
|
Current assets of
discontinued operations
|
|
1.3
|
|
|
291.1
|
|
Total current
assets
|
|
1,992.3
|
|
|
2,341.1
|
|
Property, plant and
equipment, at cost
|
|
1,424.1
|
|
|
1,495.7
|
|
Less accumulated
depreciation
|
|
(712.8)
|
|
|
(728.8)
|
|
Property, plant and
equipment, net
|
|
711.3
|
|
|
766.9
|
|
Goodwill
|
|
93.6
|
|
|
92.3
|
|
Other
assets
|
|
621.7
|
|
|
490.0
|
|
Noncurrent assets of
discontinued operations
|
|
—
|
|
|
180.1
|
|
Total
assets
|
|
$
|
3,418.9
|
|
|
$
|
3,870.4
|
|
Liabilities and
Shareholders' Deficit
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
Debt maturing within
one year
|
|
$
|
18.1
|
|
|
$
|
55.2
|
|
Accounts
payable
|
|
768.1
|
|
|
774.2
|
|
Accrued
compensation
|
|
129.2
|
|
|
157.6
|
|
Other accrued
liabilities
|
|
401.9
|
|
|
419.6
|
|
Sales and taxes other
than income
|
|
147.0
|
|
|
174.9
|
|
Income
taxes
|
|
10.7
|
|
|
23.9
|
|
Payable to
discontinued operations
|
|
—
|
|
|
100.0
|
|
Current liabilities
of discontinued operations
|
|
10.7
|
|
|
489.7
|
|
Total current
liabilities
|
|
1,485.7
|
|
|
2,195.1
|
|
Long-term
debt
|
|
1,875.8
|
|
|
2,150.5
|
|
Employee benefit
plans
|
|
164.5
|
|
|
177.5
|
|
Long-term income
taxes
|
|
78.6
|
|
|
65.1
|
|
Other
liabilities
|
|
205.8
|
|
|
78.4
|
|
Noncurrent
liabilities of discontinued operations
|
|
—
|
|
|
260.2
|
|
Total
liabilities
|
|
3,810.4
|
|
|
4,926.8
|
|
|
|
|
|
|
Series C convertible
preferred stock
|
|
444.7
|
|
|
—
|
|
|
|
|
|
|
Shareholders'
Deficit
|
|
|
|
|
Common
stock
|
|
188.8
|
|
|
187.9
|
|
Additional paid-in
capital
|
|
2,273.9
|
|
|
2,254.0
|
|
Retained
earnings
|
|
2,322.2
|
|
|
2,448.1
|
|
Accumulated other
comprehensive loss
|
|
(1,033.2)
|
|
|
(1,366.2)
|
|
Treasury stock, at
cost
|
|
(4,599.7)
|
|
|
(4,594.1)
|
|
Total Avon
shareholders' deficit
|
|
(848.0)
|
|
|
(1,070.3)
|
|
Noncontrolling
interests
|
|
11.8
|
|
|
13.9
|
|
Total shareholders'
deficit
|
|
(836.2)
|
|
|
(1,056.4)
|
|
Total liabilities,
series C convertible preferred stock and shareholders'
deficit
|
|
$
|
3,418.9
|
|
|
$
|
3,870.4
|
|
|
|
|
|
|
AVON PRODUCTS,
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
(In
millions)
|
|
|
|
Twelve Months
Ended
|
|
|
December
31
|
|
|
2016
|
|
2015
|
Cash Flows from
Operating Activities
|
|
|
|
|
Net loss
|
|
$
|
(107.4)
|
|
|
$
|
(1,145.6)
|
|
Loss from
discontinued operations, net of tax
|
|
14.0
|
|
|
349.1
|
|
Loss from continuing
operations, net of tax
|
|
$
|
(93.4)
|
|
|
$
|
(796.5)
|
|
Adjustments to
reconcile net loss to net cash provided by operating
activities:
|
|
|
|
|
Depreciation
|
|
83.3
|
|
|
94.0
|
|
Amortization
|
|
30.6
|
|
|
32.1
|
|
Provision for
doubtful accounts
|
|
190.5
|
|
|
144.1
|
|
Provision for
obsolescence
|
|
36.5
|
|
|
45.4
|
|
Share-based
compensation
|
|
24.0
|
|
|
51.2
|
|
Foreign exchange
losses
|
|
6.1
|
|
|
44.3
|
|
Deferred income
taxes
|
|
(8.5)
|
|
|
644.6
|
|
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)
|
|
Impairment of
goodwill
|
|
—
|
|
|
6.9
|
|
Other
|
|
(3.3)
|
|
|
11.6
|
|
Changes in assets and
liabilities:
|
|
|
|
|
Accounts
receivable
|
|
(216.6)
|
|
|
(184.7)
|
|
Inventories
|
|
(28.6)
|
|
|
(106.6)
|
|
Prepaid expenses and
other
|
|
16.8
|
|
|
8.7
|
|
Accounts payable and
accrued liabilities
|
|
(17.6)
|
|
|
80.4
|
|
Income and other
taxes
|
|
(4.7)
|
|
|
50.7
|
|
Noncurrent assets and
liabilities
|
|
(7.6)
|
|
|
(87.4)
|
|
Net cash provided
by operating activities of continuing operations
|
|
128.0
|
|
|
91.4
|
|
Cash Flows from
Investing Activities
|
|
|
|
|
Capital
expenditures
|
|
(93.0)
|
|
|
(92.4)
|
|
Disposal of
assets
|
|
13.3
|
|
|
8.2
|
|
Net proceeds from
sale of business
|
|
—
|
|
|
208.3
|
|
Purchases of
investments
|
|
—
|
|
|
(35.3)
|
|
Net proceeds from
sale of investments
|
|
—
|
|
|
53.7
|
|
Reduction of cash due
to Venezuela deconsolidation
|
|
(4.5)
|
|
|
—
|
|
Other investing
activities
|
|
1.5
|
|
|
—
|
|
Net cash (used)
provided by investing activities of continuing
operations
|
|
(82.7)
|
|
|
142.5
|
|
Cash Flows from
Financing Activities
|
|
|
|
|
Cash
dividends
|
|
—
|
|
|
(108.8)
|
|
Debt, net (maturities
of three months or less)
|
|
(36.4)
|
|
|
(59.1)
|
|
Proceeds from
debt
|
|
508.7
|
|
|
7.6
|
|
Repayment of
debt
|
|
(733.0)
|
|
|
(261.2)
|
|
Repurchase of common
stock
|
|
(5.6)
|
|
|
(3.1)
|
|
Net proceeds from the
sale of Series C convertible preferred stock
|
|
426.3
|
|
|
—
|
|
Other financing
activities
|
|
(23.0)
|
|
|
(5.9)
|
|
Net cash provided
(used) by financing activities of continuing
operations
|
|
137.0
|
|
|
(430.5)
|
|
Cash Flows from
Discontinued Operations
|
|
|
|
|
Net cash (used)
provided by operating activities of discontinued
operations
|
|
(67.6)
|
|
|
20.7
|
|
Net cash used by
investing activities of discontinued operations
|
|
(94.6)
|
|
|
(4.2)
|
|
Net cash used by
financing activities of discontinued operations
|
|
—
|
|
|
(15.0)
|
|
Net cash (used)
provided by discontinued operations
|
|
(162.2)
|
|
|
1.5
|
|
Effect of exchange
rate changes on cash and equivalents
|
|
(50.4)
|
|
|
(80.7)
|
|
Net decrease in cash
and equivalents
|
|
(30.3)
|
|
|
(275.8)
|
|
Cash and equivalents
at beginning of year(1)
|
|
684.7
|
|
|
960.5
|
|
Cash and equivalents
at end of year(2)
|
|
$
|
654.4
|
|
|
$
|
684.7
|
|
(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 $(2.2) at the end of
the year in 2015.
|
AVON PRODUCTS,
INC.
SUPPLEMENTAL
SCHEDULE
(Unaudited)
(In
millions)
|
|
CATEGORY SALES
FROM REPORTABLE SEGMENTS (US$)
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
Three Months
Ended December 31
|
|
US$
|
|
C$
|
|
|
2016
|
|
2015
|
|
% var. vs
4Q15
|
|
% var. vs
4Q15
|
Beauty:
|
|
|
|
|
|
|
|
|
Skincare
|
|
$
|
429.8
|
|
|
$
|
431.7
|
|
|
—%
|
|
—%
|
Fragrance
|
|
447.9
|
|
|
454.7
|
|
|
(1)
|
|
1
|
Color
|
|
252.8
|
|
|
260.2
|
|
|
(3)
|
|
(2)
|
Total
Beauty
|
|
1,130.5
|
|
|
1,146.6
|
|
|
(1)
|
|
—
|
Fashion &
Home:
|
|
|
|
|
|
|
|
|
Fashion
(jewelry/watches/apparel/footwear/accessories/children's)
|
|
234.5
|
|
|
250.0
|
|
|
(6)
|
|
(2)
|
Home (gift & decorative products/housewares/entertainment &
leisure/children's/nutrition)
|
|
166.9
|
|
|
176.4
|
|
|
(5)
|
|
(1)
|
Total Fashion &
Home
|
|
401.4
|
|
|
426.4
|
|
|
(6)
|
|
(2)
|
Net sales from
reportable segments
|
|
1,531.9
|
|
|
1,573.0
|
|
|
(3)
|
|
—
|
Other revenue from
reportable segments
|
|
26.2
|
|
|
20.9
|
|
|
25
|
|
27
|
Total revenue from
reportable segments
|
|
1,558.1
|
|
|
1,593.9
|
|
|
(2)
|
|
—
|
Total revenue from
Other operating segments and business activities
|
|
10.0
|
|
|
13.4
|
|
|
(25)
|
|
20
|
Total
revenue
|
|
$
|
1,568.1
|
|
|
$
|
1,607.3
|
|
|
(2)
|
|
—
|
|
|
|
|
|
|
|
|
|
CATEGORY SALES
FROM REPORTABLE SEGMENTS (US$)
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
Twelve Months
Ended December 31
|
|
US$
|
|
C$
|
|
|
2016
|
|
2015
|
|
% var.
vs
FY15
|
|
% var. vs
FY15
|
Beauty:
|
|
|
|
|
|
|
|
|
Skincare
|
|
$
|
1,607.3
|
|
|
$
|
1,734.0
|
|
|
(7)%
|
|
1%
|
Fragrance
|
|
1,514.7
|
|
|
1,616.1
|
|
|
(6)
|
|
4
|
Color
|
|
997.1
|
|
|
1,069.8
|
|
|
(7)
|
|
2
|
Total
Beauty
|
|
4,119.1
|
|
|
4,419.9
|
|
|
(7)
|
|
2
|
Fashion &
Home:
|
|
|
|
|
|
|
|
|
Fashion
(jewelry/watches/apparel/footwear/accessories/children's)
|
|
850.4
|
|
|
904.2
|
|
|
(6)
|
|
2
|
Home (gift & decorative products/housewares/entertainment &
leisure/children's/nutrition)
|
|
595.8
|
|
|
659.4
|
|
|
(10)
|
|
2
|
Total Fashion &
Home
|
|
1,446.2
|
|
|
1,563.6
|
|
|
(8)
|
|
2
|
Net sales from
reportable segments
|
|
5,565.3
|
|
|
5,983.5
|
|
|
(7)
|
|
2
|
Other revenue from
reportable segments
|
|
104.7
|
|
|
82.3
|
|
|
27
|
|
37
|
Total revenue from
reportable segments
|
|
5,670.0
|
|
|
6,065.8
|
|
|
(7)
|
|
3
|
Total revenue from
Other operating segments and business activities
|
|
47.7
|
|
|
94.7
|
|
|
(50)
|
|
(38)
|
Total
revenue
|
|
$
|
5,717.7
|
|
|
$
|
6,160.5
|
|
|
(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 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 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
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
DECEMBER 31, 2015
|
|
|
Reported
(GAAP)
|
|
CTI
restructuring
initiatives
|
|
Venezuelan special
items
|
|
Pension settlement
charge
|
|
Asset impairment and
other charges
|
|
Other
items
|
|
Special tax
items
|
|
Adjusted
(Non-GAAP)
|
Total
revenue
|
|
$
|
1,607.3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,607.3
|
|
Cost of
sales
|
|
663.7
|
|
|
—
|
|
|
1.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
661.8
|
|
Selling, general
and
administrative expenses
|
|
873.8
|
|
|
20.9
|
|
|
—
|
|
|
1.1
|
|
|
—
|
|
|
3.1
|
|
|
—
|
|
|
848.7
|
|
Impairment of
goodwill
|
|
6.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Operating
profit
|
|
62.9
|
|
|
20.9
|
|
|
1.9
|
|
|
1.1
|
|
|
6.9
|
|
|
3.1
|
|
|
—
|
|
|
96.8
|
|
Income from
continuing
operations, before taxes
|
|
7.2
|
|
|
20.9
|
|
|
1.9
|
|
|
1.1
|
|
|
6.9
|
|
|
3.1
|
|
|
—
|
|
|
41.1
|
|
Income
taxes
|
|
(22.0)
|
|
|
0.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(18.7)
|
|
|
(40.4)
|
|
(Loss) income from
continuing
operations, net of tax
|
|
$
|
(14.8)
|
|
|
$
|
21.2
|
|
|
$
|
1.9
|
|
|
$
|
1.1
|
|
|
$
|
6.9
|
|
|
$
|
3.1
|
|
|
$
|
(18.7)
|
|
|
$
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS from
continuing
operations
|
|
$
|
(0.04)
|
|
|
$
|
0.05
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.01
|
|
|
$
|
—
|
|
|
$
|
(0.04)
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
58.7
|
%
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
58.8
|
%
|
SG&A as a % of
revenues
|
|
54.4
|
%
|
|
(1.3)
|
|
|
—
|
|
|
(0.1)
|
|
|
—
|
|
|
(0.2)
|
|
|
—
|
|
|
52.8
|
%
|
Operating
margin
|
|
3.9
|
%
|
|
1.3
|
|
|
0.1
|
|
|
0.1
|
|
|
0.4
|
|
|
0.2
|
|
|
—
|
|
|
6.0
|
%
|
Effective tax
rate
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
98.3
|
%
|
*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.
|
|
|
|
TWELVE MONTHS
ENDED DECEMBER 31, 2015
|
|
|
Reported
(GAAP)
|
|
CTI
restructuring
initiatives
|
|
Venezuelan special
items
|
|
Pension settlement
charge
|
|
Asset impairment and
other charges
|
|
Other
items
|
|
Special tax
items
|
|
Adjusted
(Non-GAAP)
|
Total
revenue
|
|
$
|
6,160.5
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,160.5
|
|
Cost of
sales
|
|
2,445.4
|
|
|
—
|
|
|
28.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,416.9
|
|
Selling, general
and
administrative expenses
|
|
3,543.2
|
|
|
49.1
|
|
|
91.7
|
|
|
7.3
|
|
|
—
|
|
|
3.1
|
|
|
—
|
|
|
3,392.0
|
|
Impairment of
goodwill
|
|
6.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Operating
profit
|
|
165.0
|
|
|
49.1
|
|
|
120.2
|
|
|
7.3
|
|
|
6.9
|
|
|
3.1
|
|
|
—
|
|
|
351.6
|
|
Income from
continuing
operations, before taxes
|
|
22.7
|
|
|
49.1
|
|
|
116.0
|
|
|
7.3
|
|
|
6.9
|
|
|
(33.8)
|
|
|
—
|
|
|
168.2
|
|
Income
taxes
|
|
(819.2)
|
|
|
(2.4)
|
|
|
0.8
|
|
|
—
|
|
|
—
|
|
|
(6.7)
|
|
|
666.4
|
|
|
(161.1)
|
|
(Loss) income from
continuing
operations, net of tax
|
|
$
|
(796.5)
|
|
|
$
|
46.7
|
|
|
$
|
116.8
|
|
|
$
|
7.3
|
|
|
$
|
6.9
|
|
|
$
|
(40.5)
|
|
|
$
|
666.4
|
|
|
$
|
7.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS from
continuing
operations
|
|
$
|
(1.81)
|
|
|
$
|
0.11
|
|
|
$
|
0.26
|
|
|
$
|
0.02
|
|
|
$
|
0.02
|
|
|
$
|
(0.09)
|
|
|
$
|
1.51
|
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
60.3
|
%
|
|
—
|
|
|
0.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
60.8
|
%
|
SG&A as a % of
revenues
|
|
57.5
|
%
|
|
(0.8)
|
|
|
(1.5)
|
|
|
(0.1)
|
|
|
—
|
|
|
(0.1)
|
|
|
—
|
|
|
55.1
|
%
|
Operating
margin
|
|
2.7
|
%
|
|
0.8
|
|
|
2.0
|
|
|
0.1
|
|
|
0.1
|
|
|
0.1
|
|
|
—
|
|
|
5.7
|
%
|
Effective tax
rate
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95.8
|
%
|
*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 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 difference between the Non-GAAP financial measures and the
financial measures calculated and reported in accordance with GAAP.
See "Supplemental Schedules - Non-GAAP Financial Measures"
within this release for these quantitative reconciliations.
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) the
goodwill impairment charge related to the Egypt business ("Asset impairment and other
charges"); 6) various other items associated with the sale of
Liz Earle, the separation of the
North America business and
debt-related charges ("Other items"); and 7) income tax benefits
realized in 2016 and 2015 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 2016 and 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 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 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.
The Pension settlement charge includes the impact on the
Consolidated Statements of Operations in the third and fourth
quarters 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 Asset impairment and other charges include the impact on the
Consolidated Statements of Operations caused by the goodwill
impairment charge related to the Egypt business in the fourth quarter of
2015.
The Other items include the impact during 2016 on the
Consolidated Statements of Operations due to a net gain on
extinguishment of debt associated with 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 and the Company's 5.75% Notes in November 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, the Other items include the impact on
the Consolidated Statements of Operations in the fourth quarter of
2015 caused by transaction-related costs of $3.1 million associated with the planned
separation of the North America
business that were included in continuing operations. 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 fourth
quarter of 2016 on the provision for income taxes in the
Consolidated Statements of Operations due to the non-cash income
tax 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. The Special tax items also 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 and the
fourth quarter of 2015 on the provision for income taxes in the
Consolidated Statements of Operations due to income tax benefits of
approximately $29 million and
approximately $19 million,
respectively, 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 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
$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.
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visit:http://www.prnewswire.com/news-releases/avon-reports-fourth-quarter-and-full-year-2016-results-300408518.html
SOURCE Avon Products, Inc.