LONDON, Nov. 1, 2018 /PRNewswire/ -- Avon Products,
Inc. (NYSE: AVP) today announced its results for the quarter ended
September 30, 2018.
Jan Zijderveld, Avon CEO, said,
"As we said at the recent investor day, it is going to take time
for us to execute this turn-around. While we are not yet satisfied
with the overall quarterly results, I am encouraged by the speed at
which initiatives are being adopted in our markets. We are
beginning to see benefits from recruiting and training initiatives
that have been put in place in countries around the world."
Mr. Zijderveld continued, "At its heart, Avon is the world's largest social selling
company, focused on improving the lives of women. Rebooting
our sales model and returning the 6 million women to the center of
everything we do, making it easier for her to succeed with
Avon, will ensure our long-term success. While we are still in
the beginning stages of our turn-around, we are beginning to see
early results of various initiatives. Through Avon
Opportunity Meetings, we are bringing significantly more people in
our Asia Pacific region, global
training programs are exceeding participation goals and faster
launched, on-trend beauty products are being met with strong
acceptance in the marketplace. We know that in order to make
"Her" successful, we have to move more quickly than we ever have in
the past, make it easier for Her to do business and help
Her improve Her earnings."
Jamie Wilson, Avon CFO, said,
"During the third quarter, we completed the restructuring actions
associated with the cost savings program initiated in 2016, exiting
2018 with run rate savings of $350
million, as targeted. We began implementing programs against
our new cost savings initiative announced last month. The new
initiative focuses on simplifying the business to generate
efficiencies, improve revenue management, and generate interest and
tax savings and is expected to free up approximately $400 million over the next three years to support
underlying growth initiatives. In addition, our focus on revenue
management contributed to our ability to expand gross margin 10
basis points in the quarter."
Highlights for Third Quarter of 2018:
- Total Reportable Segment Revenue in reported currency increased
1% to $1.4 billion.
Adjusted1 Total Reportable Segment Revenue in constant
dollars1 decreased 4% on a like-for-like1
basis
- Gross Margin of 62.2%. Adjusted Gross Margin increased 10 basis
points to 61.3% on a like-for-like basis, favorably impacted by the
net impact of price and mix
- Active Representatives and Ending Representatives, both from
Reportable Segments, declined 5% and 6%, respectively
- Operating Margin increased 690 bps to 13.1%. Adjusted Operating
Margin decreased 280 bps to 3.8% on a like-for-like basis,
reflecting key investments in field, advertising and brochure
- Diluted Earnings Per Share of $0.21. Adjusted Diluted Earnings Per Share of
$0.02 on a like-for-like basis
- Foreign currency unfavorably impacted Diluted Earnings Per
Share by an estimated $0.12 per share
and Adjusted Diluted Earnings Per Share by an estimated
$0.04 per share, driven by the
strength of the U.S. dollar against the currencies of the countries
in which the Company operates
- Structural and operational changes resulted in continued
improvement in the Effective Tax Rate, on track to deliver a 15%
reduction in the annualized Adjusted Effective Tax Rate to 65%
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THREE MONTHS ENDED
SEPTEMBER 30, 2018
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Reported
(GAAP)
|
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Adjusted1 (Non-GAAP)
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Like-for-Like1
|
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Total C$ Reportable
Segment Revenue Growth (vs 3Q17)
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16
|
%
|
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—
|
%
|
|
(4)
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%
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|
Gross
Margin
|
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62.2
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%
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57.1
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%
|
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61.3
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%
|
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Operating
Margin
|
|
13.1
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%
|
|
3.0
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%
|
|
3.8
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%
|
|
Diluted
EPS
|
|
$
|
0.21
|
|
|
$
|
—
|
|
$
|
0.02
|
|
|
Effective Tax
Rate
|
|
37.5
|
%
|
|
9.7
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%
|
|
9.2
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%
|
|
|
|
|
|
|
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Brazil IPI Tax Reversal
In May 2015, an Executive Decree
on certain cosmetics went into effect in Brazil which increased the amount of IPI taxes
that are to be remitted by Avon Brazil to the taxing authority on
the sales of cosmetic products subject to IPI.
As of September 30, 2018, due in part to recent
judicial decisions across the industry and other
developments, the Company has concluded, supported by the
opinion of legal counsel, that the Executive Decree is
unconstitutional.
The Company has therefore classified the risk of loss during
ongoing judicial reviews as reasonably possible but not probable,
and accordingly, released the liability accrued to-date of
$195 million and ceased accruing the
IPI taxes from October 1, 2018.
The Company considered the release of the liability as a
non-GAAP adjustment, and therefore, adjusted for the IPI tax of
$168 million (which was recorded in
total revenue in the Consolidated Income Statements), the
associated interest of $27 million
(which was recorded in other expense, net in the Consolidated
Income Statements), and the associated tax reserve of $66 million in the Adjusted non-GAAP results
during the three and nine months ended September 30, 2018.
New Revenue Recognition Standard (Accounting Standards
Codification Topic 606 ("ASC" 606))
As previously disclosed, during the first quarter of 2018, the
Company adopted the new GAAP revenue recognition standard, ASC 606.
The Company adopted the standard as a cumulative-effect adjustment
as of January 1, 2018, therefore,
comparative information for prior periods was not restated. The new
standard has a significant impact on the presentation of sales
incentives and Representative fees and associated costs, primarily
for brochures.
The impact of the change in accounting for revenue recognition
on third-quarter and year-to-date 2018 performance is summarized on
pages 18-20 of this release.
Third-Quarter 2018 Income Statement Review (compared with
third-quarter 2017)
- Total revenue for Avon Products, Inc. was relatively
unchanged at $1.4 billion. Excluding
the Brazil IPI tax release, total revenue decreased 11% to
$1.3 billion, or 1% in constant
dollars, both including a benefit of approximately 3% due to the
impact of adopting the new revenue recognition standard.
- From reportable segments:
-
- Total revenue increased 1% to $1.4
billion. Excluding the Brazil IPI tax release, total revenue
decreased 11% to $1.2 billion,
including a benefit of approximately 3% due to the impact of
adopting the new revenue recognition standard, or was relatively
unchanged in constant dollars, including a benefit of approximately
4% due to the impact of adopting the new revenue recognition
standard.
- Active Representatives declined 5% with decreases reported in
all segments.
- Ending Representatives declined 6% with decreases reported in
all segments.
- Average order in constant dollars increased 5%, including a
benefit of approximately 4% due to the impact of adopting the new
revenue recognition standard, driven by increases in South Latin America, North Latin America and Asia Pacific.
- Gross margin increased 100 basis points to 62.2%,
significantly impacted by the Brazil IPI tax release. Adjusted
gross margin decreased 410 basis points to 57.1%. Both Gross margin
and Adjusted gross margin include a decline of approximately 420
basis points due to the impact of adopting the new revenue
recognition standard. Gross margin and Adjusted gross margin were
favorably impacted by the net impact of price/mix, partially offset
by higher supply chain costs.
- Operating margin was 13.1% in the quarter, up 690 basis
points, significantly impacted by the Brazil IPI tax release.
Adjusted operating margin was 3.0%, down 360 basis points. Both
Operating margin and Adjusted operating margin include a decline of
approximately 80 basis points due to the implementation of the new
revenue recognition standard. Both the Operating margin and
Adjusted operating margin year-over-year comparisons were
unfavorably impacted by investments in Representative, sales leader
and field expense, most significantly in Brazil to recover activity levels disrupted by
the national transportation strike in second quarter 2018, higher
advertising to support new product launches, and higher net
brochure cost, primarily in Brazil
due to an increase in brochure volumes.
- The provision for income taxes was $68 million, significantly impacted by the Brazil
IPI tax release, compared with $36
million for third-quarter 2017. On an Adjusted basis, the
provision for income taxes was $1
million, compared with $36
million for third-quarter 2017.
- Net income was $114
million, or $0.21 per diluted
share, compared with $12 million, or
$0.01 per diluted share for
third-quarter 2017. Adjusted net income was $7 million, or $0.00 per diluted share, compared with
$18 million, or $0.03 per diluted share for third-quarter 2017.
Both net income and Adjusted net income include an unfavorable
impact of $0.02 per diluted share due
to the impact of the new revenue recognition standard.
Adjustments to Third-Quarter 2018 GAAP Results to Arrive at
Adjusted Results
During the third quarter of 2018, the following adjustments were
made to GAAP results to arrive at Adjusted results and, in total,
reduced Diluted earnings per share by approximately $0.21:
- The Company released the liability accrued to date related to
Brazil IPI taxes of approximately $195
million before tax ($129
million after tax).
- The Company recorded costs to implement ("CTI") restructuring
within operating profit of approximately $20
million before tax ($18
million after tax), related to both the new cost savings
initiative announced last month and to the Transformation Plan.
- The Company recorded one-time tax reserves of approximately
$4 million associated with its
uncertain tax positions.
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SEGMENT
RESULTS
|
|
|
|
|
|
|
|
|
|
|
|
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($ in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
Active
Representatives
|
|
Average Order
C$
|
|
Units
Sold
|
|
Price/
Mix C$
|
|
Ending
Representatives
|
|
US$
|
|
US$
|
|
C$
|
|
|
|
|
|
Revenue &
Drivers
|
Reported
(GAAP)
|
|
% var.
vs
3Q17
|
|
Adjusted
(non-
GAAP)
|
|
% var.
vs
3Q17
|
|
% var.
vs
3Q17
|
|
% var. vs
3Q17
|
|
% var. vs
3Q17
|
|
% var.
vs
3Q17
|
|
% var. vs
3Q17
|
|
% var. vs
3Q17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe,
Middle
East & Africa
|
$
|
442.9
|
|
|
(8)%
|
|
$
|
442.9
|
|
|
(8)%
|
|
(3)%
|
|
(4)%
|
|
1%
|
|
(7)%
|
|
4%
|
|
(5)%
|
South Latin
America
|
645.4
|
|
|
9
|
|
477.0
|
|
|
(19)
|
|
—
|
|
(7)
|
|
7
|
|
(10)
|
|
10
|
|
(7)
|
North Latin
America
|
207.0
|
|
|
—
|
|
207.0
|
|
|
—
|
|
5
|
|
(3)
|
|
8
|
|
4
|
|
1
|
|
(9)
|
Asia
Pacific
|
120.5
|
|
|
2
|
|
120.5
|
|
|
2
|
|
6
|
|
(2)
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|
8
|
|
6
|
|
—
|
|
(2)
|
Total
from
reportable
segments
|
1,415.8
|
|
|
1
|
|
1,247.4
|
|
|
(11)
|
|
—
|
|
(5)
|
|
5
|
|
(6)
|
|
6
|
|
(6)
|
Other
operating
segments and
business
activities
|
8.4
|
|
|
(60)
|
|
8.4
|
|
|
(60)
|
|
(60)
|
|
*
|
|
*
|
|
*
|
|
*
|
|
*
|
Total
Avon
|
$
|
1,424.2
|
|
|
—%
|
|
$
|
1,255.8
|
|
|
(11)%
|
|
(1)%
|
|
(5)%
|
|
4%
|
|
(6)%
|
|
5%
|
|
(6)%
|
Operating
Profit/Margin
|
|
2018
Operating
Profit
US$
|
|
2018
Operating
Margin
US$
|
|
2018
Adjusted Operating Profit US$
|
|
2018
Adjusted Operating Margin US$
|
|
Change
in US$
vs 3Q17
|
|
Change
in C$ vs
3Q17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
profit/margin
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe, Middle East
& Africa
|
|
$
|
46.1
|
|
|
10.4%
|
|
$
|
46.1
|
|
|
10.4%
|
|
(370) bps
|
|
(370) bps
|
South Latin
America
|
|
194.1
|
|
|
30.1
|
|
25.7
|
|
|
5.4
|
|
(590)
|
|
(510)
|
North Latin
America
|
|
14.3
|
|
|
6.9
|
|
14.3
|
|
|
6.9
|
|
(160)
|
|
(190)
|
Asia
Pacific
|
|
9.6
|
|
|
8.0
|
|
9.6
|
|
|
8.0
|
|
(360)
|
|
(330)
|
Total from
reportable segments
|
|
264.1
|
|
|
18.7
|
|
95.7
|
|
|
7.7
|
|
(420)
|
|
(400)
|
Other operating
segments and
business activities
|
|
1.1
|
|
|
|
|
1.1
|
|
|
|
|
|
|
|
Unallocated global
expenses
|
|
(58.5)
|
|
|
|
|
(58.5)
|
|
|
|
|
|
|
|
CTI restructuring
initiatives
|
|
(19.8)
|
|
|
|
|
|
|
|
|
|
|
|
Total
Avon
|
|
$
|
186.9
|
|
|
13.1%
|
|
$
|
38.3
|
|
|
3.0%
|
|
(360)
bps
|
|
(290)
bps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Calculation not
meaningful
|
The Brazil IPI tax release of $168.4 is excluded from Adjusted Revenue and
Adjusted Operating Profit, and CTI restructuring initiatives of
$19.8 is excluded from Adjusted
Operating Profit.
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 Australia and New
Zealand, which the Company exited in 2018.
Third-Quarter 2018 Segment Review (compared with
third-quarter 2017)
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 increased 1% to $1.4 billion. Excluding the Brazil IPI tax
release, Total Reportable Segment revenue decreased 11% to
$1.2 billion, including a benefit of
approximately 3% due to the impact of adopting the new revenue
recognition standard, or was relatively unchanged in constant
dollars, including a benefit of approximately 4% due to the impact
of adopting the new revenue recognition standard. Revenue and
constant-dollar revenue were impacted by declines in Active
Representatives, primarily in Brazil and Russia. The Company experienced continued
variability with challenges in key markets, particularly
Brazil.
- Europe, Middle East & Africa revenue was down 8%, or 3% in
constant dollars, both including a benefit of approximately 2% due
to the impact of adopting the new revenue recognition standard.
Revenue and constant-dollar revenue were impacted by a decrease in
Active Representatives and lower average order.
-
- Russia revenue was down
16%, or 7% in constant dollars, both including a benefit of
approximately 2% due to the impact of adopting the new revenue
recognition standard. Revenue and constant-dollar revenue were
impacted by a decrease in Active Representatives.
- U.K. revenue and constant-dollar revenue were down 5%,
both including a benefit of approximately 5% due to the impact of
adopting the new revenue recognition standard. Revenue and
constant-dollar revenue were impacted by a decrease in Active
Representatives, partially offset by higher average order.
- South Latin America
revenue was up 9%, significantly impacted by an IPI tax reversal in
Brazil. Excluding the IPI reversal
in Brazil, South Latin America revenue was down 19%, or
relatively unchanged in constant dollars, both including a benefit
of approximately 5% due to the impact of adopting the new revenue
recognition standard. Revenue and constant-dollar revenue were
impacted by a decrease in Active Representatives, partially offset
by higher average order. Revenue and constant-dollar revenue were
primarily impacted by a decline in Brazil, partially offset by growth in
Argentina, driven by inflationary
pricing.
-
- Brazil revenue was up
27%, significantly impacted by the IPI tax reversal. Excluding the
IPI reversal, Brazil revenue was
down 23%, or 5% in constant dollars, both including a benefit of
approximately 7% due to the impact of adopting the new revenue
recognition standard. Revenue and constant-dollar revenue were
impacted by a decrease in Active Representatives, as well as lower
average order.
- North Latin America
revenue was relatively unchanged, or up 5% in constant dollars,
both including a benefit of approximately 3% due to the impact of
adopting the new revenue recognition standard. Revenue and
constant-dollar revenue were impacted by higher average order,
partially offset by a decrease in Active Representatives.
-
- Mexico revenue was up
3%, or 10% in constant dollars, both including a benefit of
approximately 3% due to the impact of adopting the new revenue
recognition standard. Revenue and constant-dollar revenue were
impacted by higher average order, partially offset by a decrease in
Active Representatives.
- Asia Pacific revenue
was up 2%, or 6% in constant dollars, both including a benefit of
approximately 2% due to the impact of adopting the new revenue
recognition standard. Revenue and constant-dollar revenue were
impacted by higher average order, partially offset by a decrease in
Active Representatives.
-
- Philippines revenue was
up 1%, or 7% in constant dollars, both including a benefit of
approximately 3% due to the impact of adopting the new revenue
recognition standard. Revenue and constant-dollar revenue were
impacted by higher average order, partially offset by a decrease in
Active Representatives.
Third-Quarter 2018 Cash Flow Review (compared with
third-quarter 2017)
- Net cash provided by operating activities of continuing
operations was $32 million for
the three months ended September 30,
2018. This reduced net cash used by operating activities of
continuing operations to $68 million
for the nine months ended September 30,
2018, compared with net cash provided by operating
activities of continuing operations of $35
million in the same period in 2017. The approximate
$103 million increased use of net
cash from continuing operating activities was primarily due to
higher inventory purchases, lower cash-related earnings, and a
timing difference of approximately $34
million related to refundable indirect taxes, partially
offset by the judicial deposit receipt of approximately
$68 million related to Brazil IPI
taxes and lower net receivables.
- Net cash used by investing activities of continuing
operations was $72 million for
the nine months ended September 30,
2018, compared with $42
million in the same period in 2017. The approximate
$30 million increased use of net cash
from continuing investing activities was primarily due to a
$22 million cash distribution
received from New Avon LLC in the third quarter of 2017 and higher
capital expenditures in 2018.
- Net cash used by financing activities of continuing
operations was $255 million for
the nine months ended September 30,
2018, compared with $10
million in the same period in 2017. The approximate
$245 million increased use of net
cash from continuing financing activities was primarily due to the
prepayment of the Company's 6.5% Notes in the second quarter of
2018.
Conference call
Avon will conduct a conference
call at 9:00 a.m. Eastern Time today
to discuss its quarterly results. The dial-in number for the call
is (800) 843-2086 in the U.S. or +1 (706) 643-1815 from non-U.S.
locations (conference ID number: 7398514). The call and related
slide presentation will be webcast live at www.avoninvestor.com and
can be accessed or downloaded from that site for a period of one
year. Please note that the Company intends to file its Form 10-Q on
November 2, 2018.
About Avon Products, Inc.
Avon is the Company that for
130 years has proudly stood for beauty, innovation, optimism and,
above all, for women. Avon
products include well-recognized and beloved brands such as ANEW,
Avon Color, Avon Care, Skin-So-Soft, and Advance Techniques sold
through approximately 6 million active independent Avon Sales
Representatives. Learn more about Avon and its products at
www.avoncompany.com.
Footnotes
1 "Adjusted" items refer to financial measures that
are derived from measures calculated in accordance with GAAP, but
which have been adjusted to exclude certain items. "Like-for-like"
refers to comparable year-over-year figures that exclude the impact
of the adoption of ASC 606. Other Adjusted financial measures that
the Company refers to include constant dollar ("C$") 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
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 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.
AVON PRODUCTS,
INC.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(Unaudited)
|
(In millions,
except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Percent
Change
|
|
Nine Months
Ended
|
|
Percent
Change
|
|
|
September
30
|
|
|
|
September
30
|
|
|
|
|
2018
|
|
2017
|
|
|
|
2018
|
|
2017
|
|
|
Net sales
|
|
$
|
1,346.3
|
|
|
$
|
1,378.2
|
|
|
(2)%
|
|
$
|
3,924.7
|
|
|
$
|
4,029.8
|
|
|
(3)%
|
Other
revenue
|
|
77.9
|
|
|
39.6
|
|
|
|
|
244.9
|
|
|
117.0
|
|
|
|
Total
revenue
|
|
1,424.2
|
|
|
1,417.8
|
|
|
—%
|
|
4,169.6
|
|
|
4,146.8
|
|
|
1%
|
Cost of
sales
|
|
538.4
|
|
|
550.0
|
|
|
|
|
1,657.8
|
|
|
1,592.1
|
|
|
|
Selling, general and
administrative expenses
|
|
698.9
|
|
|
780.5
|
|
|
|
|
2,227.0
|
|
|
2,404.9
|
|
|
|
Operating
profit
|
|
186.9
|
|
|
87.3
|
|
|
*
|
|
284.8
|
|
|
149.8
|
|
|
90%
|
Interest
expense
|
|
31.3
|
|
|
34.8
|
|
|
|
|
102.0
|
|
|
106.0
|
|
|
|
Loss on
extinguishment of debt
|
|
—
|
|
|
—
|
|
|
|
|
2.9
|
|
|
—
|
|
|
|
Interest
income
|
|
(4.3)
|
|
|
(3.4)
|
|
|
|
|
(12.0)
|
|
|
(11.2)
|
|
|
|
Other (income)
expense, net
|
|
(22.2)
|
|
|
7.9
|
|
|
|
|
(0.3)
|
|
|
25.9
|
|
|
|
Total other
expenses
|
|
4.8
|
|
|
39.3
|
|
|
|
|
92.6
|
|
|
120.7
|
|
|
|
Income, before income
taxes
|
|
182.1
|
|
|
48.0
|
|
|
*
|
|
192.2
|
|
|
29.1
|
|
|
*
|
Income
taxes
|
|
(68.3)
|
|
|
(36.1)
|
|
|
|
|
(136.5)
|
|
|
(99.5)
|
|
|
|
Net income
(loss)
|
|
113.8
|
|
|
11.9
|
|
|
*
|
|
55.7
|
|
|
(70.4)
|
|
|
*
|
Net loss attributable
to noncontrolling interests
|
|
0.7
|
|
|
0.6
|
|
|
|
|
2.4
|
|
|
0.9
|
|
|
|
Net income (loss)
attributable to Avon
|
|
114.5
|
|
|
12.5
|
|
|
*
|
|
58.1
|
|
|
(69.5)
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss)
per share1
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.21
|
|
|
$
|
0.01
|
|
|
*
|
|
$
|
0.09
|
|
|
$
|
(0.20)
|
|
|
*
|
Diluted
|
|
$
|
0.21
|
|
|
$
|
0.01
|
|
|
*
|
|
$
|
0.09
|
|
|
$
|
(0.20)
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
442.3
|
|
|
440.0
|
|
|
|
|
441.8
|
|
|
439.5
|
|
|
|
Diluted
|
|
442.3
|
|
|
440.0
|
|
|
|
|
441.8
|
|
|
439.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Calculation not
meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Under the
two-class method, earnings (loss) per share is calculated using net
gain allocable to common shares, which is derived by reducing net
income (loss) by the income (loss) allocable to participating
securities and earnings allocated to convertible preferred stock.
Net income allocable to common shares used in the basic and diluted
earnings per share calculation was $94.3 and $6.5 for the three
months ended September 30, 2018 and 2017, respectively. Net income
(loss) allocable to common shares used in the basic and diluted
earnings (loss) per share calculation was $39.3 and ($85.8) for the
nine months ended September 30, 2018 and 2017,
respectively.
|
AVON PRODUCTS,
INC.
|
CONSOLIDATED
BALANCE SHEETS
|
December 31, 2017
(Audited) and September 30, 2018 (Unaudited)
|
(In
millions)
|
|
|
|
|
|
|
|
September
30,
|
|
December
31,
|
|
|
2018
|
|
2017
|
Assets
|
|
|
|
|
Current
Assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
452.6
|
|
|
$
|
881.5
|
|
Accounts receivable,
net
|
|
374.3
|
|
|
457.2
|
|
Inventories
|
|
682.2
|
|
|
598.2
|
|
Prepaid expenses and
other
|
|
264.2
|
|
|
296.4
|
|
Total current
assets
|
|
1,773.3
|
|
|
2,233.3
|
|
Property, plant and
equipment, at cost
|
|
1,395.3
|
|
|
1,481.9
|
|
Less accumulated
depreciation
|
|
(771.3)
|
|
|
(779.2)
|
|
Property, plant and
equipment, net
|
|
624.0
|
|
|
702.7
|
|
Goodwill
|
|
92.8
|
|
|
95.7
|
|
Other
assets
|
|
584.5
|
|
|
666.2
|
|
Total
assets
|
|
$
|
3,074.6
|
|
|
$
|
3,697.9
|
|
Liabilities,
Series C Convertible Preferred Stock and Shareholders'
Deficit
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
Debt maturing within
one year
|
|
$
|
16.3
|
|
|
$
|
25.7
|
|
Accounts
payable
|
|
764.8
|
|
|
832.2
|
|
Accrued
compensation
|
|
105.2
|
|
|
130.3
|
|
Other accrued
liabilities
|
|
391.5
|
|
|
405.6
|
|
Sales taxes and taxes
other than income
|
|
114.9
|
|
|
153.0
|
|
Income
taxes
|
|
25.5
|
|
|
12.8
|
|
Total current
liabilities
|
|
1,418.2
|
|
|
1,559.6
|
|
Long-term
debt
|
|
1,630.8
|
|
|
1,872.2
|
|
Employee benefit
plans
|
|
132.3
|
|
|
150.6
|
|
Long-term income
taxes
|
|
132.7
|
|
|
84.9
|
|
Long-term sales taxes
and taxes other than income
|
|
—
|
|
|
193.1
|
|
Other
liabilities
|
|
77.6
|
|
|
84.4
|
|
Total
liabilities
|
|
3,391.6
|
|
|
3,944.8
|
|
|
|
|
|
|
Series C convertible
preferred stock
|
|
485.9
|
|
|
467.8
|
|
|
|
|
|
|
Shareholders'
Deficit
|
|
|
|
|
Common
stock
|
|
190.3
|
|
|
189.7
|
|
Additional paid-in
capital
|
|
2,299.1
|
|
|
2,291.2
|
|
Retained
earnings
|
|
2,318.4
|
|
|
2,320.3
|
|
Accumulated other
comprehensive loss
|
|
(1,015.9)
|
|
|
(926.2)
|
|
Treasury stock, at
cost
|
|
(4,602.3)
|
|
|
(4,600.0)
|
|
Total Avon
shareholders' deficit
|
|
(810.4)
|
|
|
(725.0)
|
|
Noncontrolling
interests
|
|
7.5
|
|
|
10.3
|
|
Total shareholders'
deficit
|
|
(802.9)
|
|
|
(714.7)
|
|
Total liabilities,
series C convertible preferred stock and shareholders'
deficit
|
|
$
|
3,074.6
|
|
|
$
|
3,697.9
|
|
|
|
|
|
|
AVON PRODUCTS,
INC.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(Unaudited)
|
(In
millions)
|
|
|
|
Nine Months
Ended
|
|
|
September
30
|
|
|
2018
|
|
2017
|
Cash Flows from
Operating Activities
|
|
|
|
|
Net income
(loss)
|
|
$
|
55.7
|
|
|
$
|
(70.4)
|
|
Adjustments to
reconcile net income (loss) to net cash (used) provided by
operating activities:
|
|
|
|
|
Depreciation
|
|
61.1
|
|
|
63.4
|
|
Amortization
|
|
20.3
|
|
|
22.2
|
|
Provision for
doubtful accounts
|
|
126.9
|
|
|
168.5
|
|
Provision for
obsolescence
|
|
22.5
|
|
|
27.7
|
|
Share-based
compensation
|
|
9.5
|
|
|
22.0
|
|
Foreign exchange
losses
|
|
12.5
|
|
|
12.0
|
|
Deferred income
taxes
|
|
(28.5)
|
|
|
15.4
|
|
Charge for
Argentinian monetary assets and liabilities
|
|
(8.5)
|
|
|
—
|
|
Brazil IPI tax
release
|
|
(194.7)
|
|
|
|
Other
|
|
14.2
|
|
|
37.0
|
|
Changes in assets and
liabilities:
|
|
|
|
|
Accounts
receivable
|
|
(93.4)
|
|
|
(170.1)
|
|
Inventories
|
|
(131.8)
|
|
|
(71.6)
|
|
Prepaid expenses and
other
|
|
(38.2)
|
|
|
18.0
|
|
Accounts payable and
accrued liabilities
|
|
(30.7)
|
|
|
(51.1)
|
|
Income and other
taxes
|
|
74.1
|
|
|
(15.3)
|
|
Noncurrent assets and
liabilities
|
|
60.7
|
|
|
27.3
|
|
Net cash (used)
provided by operating activities of continuing
operations
|
|
(68.3)
|
|
|
35.0
|
|
Cash Flows from
Investing Activities
|
|
|
|
|
Capital
expenditures
|
|
(71.0)
|
|
|
(66.7)
|
|
Disposal of
assets
|
|
2.3
|
|
|
3.3
|
|
Distribution from New
Avon LLC
|
|
—
|
|
|
22.0
|
|
Other investing
activities
|
|
(3.3)
|
|
|
(0.1)
|
|
Net cash used by
investing activities of continuing operations
|
|
(72.0)
|
|
|
(41.5)
|
|
Cash Flows from
Financing Activities
|
|
|
|
|
Debt, net (maturities
of three months or less)
|
|
(6.8)
|
|
|
(0.7)
|
|
Repayment of
debt
|
|
(238.9)
|
|
|
(2.3)
|
|
Repurchase of common
stock
|
|
(3.1)
|
|
|
(6.6)
|
|
Other financing
activities
|
|
(6.3)
|
|
|
(0.2)
|
|
Net cash used by
financing activities of continuing operations
|
|
(255.1)
|
|
|
(9.8)
|
|
Cash Flows from
Discontinued Operations
|
|
|
|
|
Net cash used by
operating activities of discontinued operations
|
|
—
|
|
|
(7.5)
|
|
Net cash used by
discontinued operations
|
|
—
|
|
|
(7.5)
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
(33.5)
|
|
|
33.2
|
|
Net (decrease)
increase in cash and cash equivalents
|
|
(428.9)
|
|
|
9.4
|
|
Cash and cash
equivalents at beginning of year
|
|
881.5
|
|
|
654.4
|
|
Cash and cash
equivalents at end of period
|
|
$
|
452.6
|
|
|
$
|
663.8
|
|
AVON PRODUCTS,
INC.
|
SUPPLEMENTAL
SCHEDULE
|
(Unaudited)
|
(In
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CATEGORY SALES
FROM REPORTABLE SEGMENTS (US$)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
Reported
|
|
Excluding the
impact
of adopting ASC 606
|
|
|
Three Months
Ended
September 30
|
|
US$
|
|
C$
|
|
US$
|
|
C$
|
|
|
2018
|
|
2017
|
|
% var.
vs
3Q17
|
|
% var.
vs
3Q17
|
|
% var. vs
3Q17
|
|
% var. vs
3Q17
|
Beauty:
|
|
|
|
|
|
|
|
|
|
|
|
|
Skincare
|
|
$
|
339.0
|
|
|
$
|
393.7
|
|
|
(14)%
|
|
(4)%
|
|
(14)%
|
|
(4)%
|
Fragrance
|
|
331.9
|
|
|
388.1
|
|
|
(14)
|
|
(3)
|
|
(14)
|
|
(3)
|
Color
|
|
192.0
|
|
|
243.6
|
|
|
(21)
|
|
(11)
|
|
(21)
|
|
(10)
|
Total
Beauty
|
|
862.9
|
|
|
1,025.4
|
|
|
(16)
|
|
(5)
|
|
(16)
|
|
(5)
|
Fashion &
Home:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fashion
(jewelry/watches/apparel/ footwear/accessories/children's)
|
|
174.7
|
|
|
192.9
|
|
|
(9)
|
|
(3)
|
|
(9)
|
|
(2)
|
Home (gift & decorative products/housewares/
entertainment & leisure/children's/nutrition)
|
|
140.1
|
|
|
148.7
|
|
|
(6)
|
|
8
|
|
(6)
|
|
9
|
Total Fashion &
Home
|
|
314.8
|
|
|
341.6
|
|
|
(8)
|
|
2
|
|
(8)
|
|
2
|
Brazil IPI tax
release
|
|
168.4
|
|
|
—
|
|
|
*
|
|
*
|
|
*
|
|
*
|
Net sales from
reportable segments
|
|
1,346.1
|
|
|
1,367.0
|
|
|
(2)
|
|
12
|
|
(1)
|
|
13
|
Other revenue from
reportable segments
|
|
69.7
|
|
|
29.8
|
|
|
*
|
|
*
|
|
(28)
|
|
(19)
|
Total revenue from
reportable segments
|
|
1,415.8
|
|
|
1,396.8
|
|
|
1
|
|
16
|
|
(2)
|
|
12
|
Total revenue from
Other operating segments and
business activities
|
|
8.4
|
|
|
21.0
|
|
|
(60)
|
|
(60)
|
|
(60)
|
|
(60)
|
Total
revenue
|
|
$
|
1,424.2
|
|
|
$
|
1,417.8
|
|
|
—
|
|
14
|
|
(3)
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Calculation not
meaningful
|
AVON PRODUCTS,
INC.
|
SUPPLEMENTAL
SCHEDULE
|
(Unaudited)
|
(In
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CATEGORY SALES
FROM REPORTABLE SEGMENTS (US$)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
Reported
|
|
Excluding the
impact of adopting ASC 606
|
|
|
Nine Months
Ended
September 30
|
|
US$
|
|
C$
|
|
US$
|
|
C$
|
|
|
2018
|
|
2017
|
|
% var.
vs
9M17
|
|
% var.
vs
9M17
|
|
% var. vs
9M17
|
|
% var. vs
9M17
|
Beauty:
|
|
|
|
|
|
|
|
|
|
|
|
|
Skincare
|
|
$
|
1,100.5
|
|
|
$
|
1,171.7
|
|
|
(6)%
|
|
(2)%
|
|
(7)%
|
|
(3)%
|
Fragrance
|
|
1,033.7
|
|
|
1,096.8
|
|
|
(6)
|
|
(1)%
|
|
(7)
|
|
(2)
|
Color
|
|
640.0
|
|
|
716.9
|
|
|
(11)
|
|
(7)
|
|
(11)
|
|
(8)
|
Total
Beauty
|
|
2,774.2
|
|
|
2,985.4
|
|
|
(7)
|
|
(3)
|
|
(8)
|
|
(4)
|
Fashion &
Home:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fashion
(jewelry/watches/apparel/
footwear/accessories/children's)
|
|
549.2
|
|
|
585.6
|
|
|
(6)
|
|
(4)
|
|
(7)
|
|
(5)
|
Home (gift & decorative products/housewares/
entertainment & leisure/children's/nutrition)
|
|
413.8
|
|
|
427.3
|
|
|
(3)
|
|
4
|
|
(4)
|
|
3
|
Total Fashion &
Home
|
|
963.0
|
|
|
1,012.9
|
|
|
(5)
|
|
(1)
|
|
(6)
|
|
(2)
|
Brazil IPI tax
release
|
|
168.4
|
|
|
—
|
|
|
*
|
|
*
|
|
*
|
|
*
|
Net sales from
reportable segments
|
|
3,905.6
|
|
|
3,998.3
|
|
|
(2)
|
|
3
|
|
(3)
|
|
2
|
Other revenue from
reportable segments
|
|
219.9
|
|
|
86.2
|
|
|
*
|
|
*
|
|
(22)
|
|
(18)
|
Total revenue from
reportable segments
|
|
4,125.5
|
|
|
4,084.5
|
|
|
1
|
|
6
|
|
(3)
|
|
2
|
Total revenue from
Other operating segments and
business activities
|
|
44.1
|
|
|
62.3
|
|
|
(29)
|
|
(30)
|
|
(32)
|
|
(32)
|
Total
revenue
|
|
$
|
4,169.6
|
|
|
$
|
4,146.8
|
|
|
1
|
|
6
|
|
(4)
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Calculation not
meaningful
|
AVON PRODUCTS,
INC.
|
SUPPLEMENTAL
SCHEDULE
|
(Unaudited)
|
(In
millions)
|
|
NINE MONTHS ENDED
SEPTEMBER 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SEGMENT
RESULTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
Active
Representatives
|
|
Average
Order
C$
|
|
Units
Sold
|
|
Price/ Mix
C$
|
|
Ending
Representatives
|
|
US$
|
|
US$
|
|
C$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue &
Drivers
|
Reported
(GAAP)
|
|
% var.
vs
9M17
|
|
Adjusted
(non-
GAAP)
|
|
% var.
vs
9M17
|
|
% var.
vs
9M17
|
|
% var. vs
9M17
|
|
% var.
vs
9M17
|
|
% var.
vs
9M17
|
|
% var.
vs
9M17
|
|
% var. vs
9M17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe,
Middle
East & Africa
|
$
|
1,512.0
|
|
|
2%
|
|
$
|
1,512.0
|
|
|
2%
|
|
—%
|
|
(3)%
|
|
3%
|
|
(3)%
|
|
3%
|
|
(5)%
|
South
Latin
America
|
1,658.6
|
|
|
1
|
|
1,490.2
|
|
|
(10)
|
|
2
|
|
(6)
|
|
8
|
|
(7)
|
|
9
|
|
(7)
|
North Latin
America
|
609.9
|
|
|
—
|
|
609.9
|
|
|
—
|
|
2
|
|
(5)
|
|
7
|
|
(4)
|
|
6
|
|
(9)
|
Asia
Pacific
|
345.0
|
|
|
—
|
|
345.0
|
|
|
—
|
|
2
|
|
(2)
|
|
4
|
|
—
|
|
2
|
|
(2)
|
Total
from
reportable
segments
|
4,125.5
|
|
|
1
|
|
3,957.1
|
|
|
(3)
|
|
1
|
|
(4)
|
|
5
|
|
(5)
|
|
6
|
|
(6)
|
Other
operating
segments and
business
activities
|
44.1
|
|
|
(29)
|
|
44.1
|
|
|
(29)
|
|
(30)
|
|
*
|
|
*
|
|
*
|
|
*
|
|
*
|
Total
Avon
|
$
|
4,169.6
|
|
|
1%
|
|
$
|
4,001.2
|
|
|
(4)%
|
|
1%
|
|
(4)%
|
|
5%
|
|
(5)%
|
|
6%
|
|
(6)%
|
Operating
Profit/Margin
|
|
2018
Operating
Profit
US$
|
|
2018
Operating
Margin
US$
|
|
2018 Adjusted
Operating Profit US$
|
|
2018 Adjusted
Operating
Margin US$
|
|
Change in
US$ vs
9M17
|
|
Change in
C$ vs
9M17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
profit/margin
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe, Middle East
& Africa
|
|
$
|
194.9
|
|
|
12.9%
|
|
$
|
194.9
|
|
|
12.9%
|
|
(210) bps
|
|
(220) bps
|
South Latin
America
|
|
276.5
|
|
|
16.7
|
|
108.1
|
|
|
7.3
|
|
(40)
|
|
(20)
|
North Latin
America
|
|
54.1
|
|
|
8.9
|
|
54.1
|
|
|
8.9
|
|
(50)
|
|
(70)
|
Asia
Pacific
|
|
27.3
|
|
|
7.9
|
|
27.3
|
|
|
7.9
|
|
(290)
|
|
(240)
|
Total from
reportable segments
|
|
552.8
|
|
|
13.4
|
|
384.4
|
|
|
9.7
|
|
(110)
|
|
(130)
|
Other operating
segments and
business activities
|
|
2.7
|
|
|
|
|
2.7
|
|
|
|
|
|
|
|
Unallocated global
expenses
|
|
(216.3)
|
|
|
|
|
(216.3)
|
|
|
|
|
|
|
|
CTI restructuring
initiatives
|
|
(54.4)
|
|
|
|
|
|
|
|
|
|
|
|
Total
Avon
|
|
$
|
284.8
|
|
|
6.8%
|
|
$
|
170.8
|
|
|
4.3%
|
|
(60)
bps
|
|
(50)
bps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Calculation not
meaningful
|
|
The Brazil IPI tax
release of $168.4 is excluded from Adjusted Revenue and Adjusted
Operating Profit, and CTI restructuring initiatives of $54.4 is
excluded
from Adjusted Operating Profit.
|
|
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 Australia and New Zealand, which the Company exited in
2018.
|
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
SEPTEMBER 30, 2018
|
|
|
Reported
(GAAP)
|
|
Brazil IPI
release
|
|
CTI
restructuring
initiatives
|
|
Special tax
items
|
|
Adjusted
(Non-GAAP)
|
|
Impact of revenue
recognition
|
|
Like-for-Like
|
Total
revenue
|
|
$
|
1,424.2
|
|
|
$
|
168.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,255.8
|
|
|
$
|
(45.5)
|
|
|
$
|
1,210.3
|
|
Cost of
sales
|
|
538.4
|
|
|
—
|
|
|
(0.1)
|
|
|
—
|
|
|
538.5
|
|
|
(69.9)
|
|
|
468.6
|
|
Selling, general and
administrative
expenses
|
|
698.9
|
|
|
—
|
|
|
19.9
|
|
|
—
|
|
|
679.0
|
|
|
16.3
|
|
|
695.3
|
|
Operating
profit
|
|
186.9
|
|
|
(168.4)
|
|
|
19.8
|
|
|
—
|
|
|
38.3
|
|
|
8.1
|
|
|
46.4
|
|
Income before income
taxes
|
|
182.1
|
|
|
(194.7)
|
|
|
19.8
|
|
|
—
|
|
|
7.2
|
|
|
8.1
|
|
|
15.3
|
|
Income
taxes
|
|
(68.3)
|
|
|
66.2
|
|
|
(2.3)
|
|
|
3.7
|
|
|
(0.7)
|
|
|
(0.7)
|
|
|
(1.4)
|
|
Net income
|
|
$
|
113.8
|
|
|
$
|
(128.5)
|
|
|
$
|
17.5
|
|
|
$
|
3.7
|
|
|
$
|
6.5
|
|
|
$
|
7.4
|
|
|
$
|
13.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
|
$
|
0.21
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
62.2
|
%
|
|
(5.1)
|
|
|
—
|
|
|
—
|
|
|
57.1
|
%
|
|
|
|
61.3
|
%
|
SG&A as a % of
revenue
|
|
49.1
|
%
|
|
6.4
|
|
|
(1.4)
|
|
|
—
|
|
|
54.1
|
%
|
|
|
|
57.4
|
%
|
Operating
margin
|
|
13.1
|
%
|
|
(11.5)
|
|
|
1.4
|
|
|
—
|
|
|
3.0
|
%
|
|
|
|
3.8
|
%
|
Effective tax
rate
|
|
37.5
|
%
|
|
|
|
|
|
|
|
9.7
|
%
|
|
|
|
9.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 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.
|
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.
|
|
|
|
NINE MONTHS ENDED
SEPTEMBER 30, 2018
|
|
|
Reported
(GAAP)
|
|
Brazil IPI
release
|
|
CTI
restructuring
initiatives
|
|
Special
tax
items
|
|
Adjusted
(Non-GAAP)
|
|
Impact of
revenue
recognition
|
|
Like-for-Like
|
Total
revenue
|
|
$
|
4,169.6
|
|
|
$
|
168.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,001.2
|
|
|
$
|
(183.9)
|
|
|
$
|
3,817.3
|
|
Cost of
sales
|
|
1,657.8
|
|
|
—
|
|
|
1.0
|
|
|
—
|
|
|
1,656.8
|
|
|
(208.5)
|
|
|
1,448.3
|
|
Selling, general and
administrative
expenses
|
|
2,227.0
|
|
|
—
|
|
|
53.4
|
|
|
—
|
|
|
2,173.6
|
|
|
37.6
|
|
|
2,211.2
|
|
Operating
profit
|
|
284.8
|
|
|
(168.4)
|
|
|
54.4
|
|
|
—
|
|
|
170.8
|
|
|
(13.0)
|
|
|
157.8
|
|
Income before income
taxes
|
|
192.2
|
|
|
(194.7)
|
|
|
54.4
|
|
|
—
|
|
|
51.9
|
|
|
(13.0)
|
|
|
38.9
|
|
Income
taxes
|
|
(136.5)
|
|
|
66.2
|
|
|
(4.4)
|
|
|
18.4
|
|
|
(56.3)
|
|
|
3.0
|
|
|
(53.3)
|
|
Net income
(loss)
|
|
$
|
55.7
|
|
|
$
|
(128.5)
|
|
|
$
|
50.0
|
|
|
$
|
18.4
|
|
|
$
|
(4.4)
|
|
|
$
|
(10.0)
|
|
|
$
|
(14.4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
|
$
|
0.09
|
|
|
|
|
|
|
|
|
$
|
(0.05)
|
|
|
|
|
$
|
(0.07)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
60.2
|
%
|
|
(1.6)
|
|
|
—
|
|
|
—
|
|
|
58.6
|
%
|
|
|
|
62.1
|
%
|
SG&A as a % of
revenue
|
|
53.4
|
%
|
|
2.2
|
|
|
(1.3)
|
|
|
—
|
|
|
54.3
|
%
|
|
|
|
57.9
|
%
|
Operating
margin
|
|
6.8
|
%
|
|
(3.8)
|
|
|
1.3
|
|
|
—
|
|
|
4.3
|
%
|
|
|
|
4.1
|
%
|
Effective tax
rate
|
|
71.0
|
%
|
|
|
|
|
|
|
|
108.5
|
%
|
|
|
|
137.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
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.
|
AVON PRODUCTS,
INC.
|
SUPPLEMENTAL
SCHEDULE
|
NON-GAAP FINANCIAL
MEASURES
|
(Unaudited)
|
(In millions,
except per share data)
|
|
This supplemental
schedule provides adjusted Non-GAAP financial information and a
quantitative reconciliation of the difference between the Non-GAAP
financial measure and the financial measure calculated and reported
in accordance with GAAP.
|
|
|
|
THREE MONTHS ENDED
SEPTEMBER 30, 2017
|
|
|
Reported
(GAAP)
|
|
CTI
restructuring
initiatives
|
|
Adjusted
(Non-GAAP)
|
Total
revenue
|
|
$
|
1,417.8
|
|
|
$
|
—
|
|
|
$
|
1,417.8
|
|
Cost of
sales
|
|
550.0
|
|
|
—
|
|
|
550.0
|
|
Selling, general and
administrative expenses
|
|
780.5
|
|
|
6.2
|
|
|
774.3
|
|
Operating
profit
|
|
87.3
|
|
|
6.2
|
|
|
93.5
|
|
Income before income
taxes
|
|
48.0
|
|
|
6.2
|
|
|
54.2
|
|
Income
taxes
|
|
(36.1)
|
|
|
(0.1)
|
|
|
(36.2)
|
|
Net income
|
|
$
|
11.9
|
|
|
$
|
6.1
|
|
|
$
|
18.0
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
|
$
|
0.01
|
|
|
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
61.2
|
%
|
|
—
|
|
|
61.2
|
%
|
SG&A as a % of
revenue
|
|
55.1
|
%
|
|
(0.4)
|
|
|
54.6
|
%
|
Operating
margin
|
|
6.2
|
%
|
|
0.4
|
|
|
6.6
|
%
|
Effective tax
rate
|
|
75.2
|
%
|
|
|
|
66.8
|
%
|
|
|
|
|
|
|
|
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
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.
|
AVON PRODUCTS,
INC.
|
SUPPLEMENTAL
SCHEDULE
|
NON-GAAP FINANCIAL
MEASURES
|
(Unaudited)
|
(In millions,
except per share data)
|
|
This supplemental
schedule provides adjusted Non-GAAP financial information and a
quantitative reconciliation of the difference between the Non-GAAP
financial measure and the financial measure calculated and reported
in accordance with GAAP.
|
|
|
|
NINE MONTHS ENDED
SEPTEMBER 30, 2017
|
|
|
Reported
(GAAP)
|
|
CTI
restructuring initiatives
|
|
Loss contingency
|
|
Adjusted
(Non-GAAP)
|
Total
revenue
|
|
$
|
4,146.8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,146.8
|
|
Cost of
sales
|
|
1,592.1
|
|
|
(0.1)
|
|
|
—
|
|
|
1,592.2
|
|
Selling, general and
administrative expenses
|
|
2,404.9
|
|
|
36.6
|
|
|
18.2
|
|
|
2,350.1
|
|
Operating
profit
|
|
149.8
|
|
|
36.5
|
|
|
18.2
|
|
|
204.5
|
|
Income before income
taxes
|
|
29.1
|
|
|
36.5
|
|
|
18.2
|
|
|
83.8
|
|
Income
taxes
|
|
(99.5)
|
|
|
(1.9)
|
|
|
—
|
|
|
(101.4)
|
|
Net loss
|
|
$
|
(70.4)
|
|
|
$
|
34.6
|
|
|
$
|
18.2
|
|
|
$
|
(17.6)
|
|
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
|
$
|
(0.20)
|
|
|
|
|
|
|
$
|
(0.08)
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
61.6
|
%
|
|
—
|
|
|
—
|
|
|
61.6
|
%
|
SG&A as a % of
revenue
|
|
58.0
|
%
|
|
(0.9)
|
|
|
(0.4)
|
|
|
56.7
|
%
|
Operating
margin
|
|
3.6
|
%
|
|
0.9
|
|
|
0.4
|
|
|
4.9
|
%
|
Effective tax
rate
|
|
341.9
|
%
|
|
|
|
|
|
121.0
|
%
|
|
|
|
|
|
|
|
|
|
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
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.
|
AVON PRODUCTS,
INC.
|
SUPPLEMENTAL
SCHEDULE
|
(Unaudited)
|
(In millions,
except per share data)
|
|
Approximate Impact
of Foreign Currency
|
|
|
|
|
|
Third-Quarter
2018
|
|
Nine-Months
2018
|
|
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
|
(14) pts
|
|
|
|
|
(5) pts
|
|
|
|
Operating profit -
transaction
|
$
|
(5)
|
|
|
$
|
(0.01)
|
|
|
$
|
(15)
|
|
|
$
|
(0.02)
|
|
Operating profit -
translation
|
(60)
|
|
|
(0.10)
|
|
|
(60)
|
|
|
(0.11)
|
|
Total operating
profit
|
$
|
(65)
|
|
|
$
|
(0.11)
|
|
|
$
|
(75)
|
|
|
$
|
(0.13)
|
|
Operating
margin
|
|
(240) bps
|
|
|
|
|
(130)
bps
|
|
|
|
Revaluation of
working capital
|
$
|
(5)
|
|
|
$
|
(0.01)
|
|
|
$
|
(20)
|
|
|
$
|
(0.03)
|
|
Diluted
EPS
|
|
|
$
|
(0.12)
|
|
|
|
|
$
|
(0.16)
|
|
|
|
|
|
|
|
|
|
Year-on-Year
impact on Adjusted (Non-
GAAP) results:
|
|
|
|
|
|
|
|
Adjusted
revenue
|
(10) pts
|
|
|
|
|
(3) pts
|
|
|
|
Adjusted operating
profit - transaction
|
$
|
(5)
|
|
|
$
|
(0.01)
|
|
|
$
|
(15)
|
|
|
$
|
(0.02)
|
|
Adjusted operating
profit - translation
|
(15)
|
|
|
(0.02)
|
|
|
(15)
|
|
|
(0.03)
|
|
Total Adjusted
operating profit
|
$
|
(20)
|
|
|
$
|
(0.03)
|
|
|
$
|
(30)
|
|
|
$
|
(0.05)
|
|
Adjusted operating
margin
|
(100)
bps
|
|
|
|
|
(50)
bps
|
|
|
|
Revaluation of
working capital
|
$
|
(5)
|
|
|
$
|
(0.01)
|
|
|
$
|
(20)
|
|
|
$
|
(0.03)
|
|
Adjusted diluted
EPS
|
|
|
$
|
(0.04)
|
|
|
|
|
$
|
(0.08)
|
|
|
|
|
|
|
|
|
|
Amounts in the table
above may not necessarily sum because the computations are made
independently.
|
|
|
|
|
AVON
PRODUCTS, INC.
SUPPLEMENTAL
SCHEDULE
(Unaudited)
(In millions)
The Company adopted ASC 606, as a cumulative-effect adjustment
to retained earnings, as of January 1,
2018. Comparative information for prior periods has not been
restated. Therefore, this supplemental schedule provides balances
without the adoption of ASC 606 to enhance comparability to the
prior year. We applied the transition guidance to all outstanding
contracts at January 1, 2018.
We recorded a cumulative-effect adjustment upon adoption of the
new revenue recognition standard as of January 1, 2018 comprised of the following:
- a reduction to retained earnings of $52.7 before taxes ($41.1 after tax), with a corresponding impact to
deferred income taxes of $11.6;
- a reduction to prepaid expenses and other of $54.9;
- an increase to inventories of $39.3; and
- an increase to other accrued liabilities of $37.1 due to the net impact of the establishment
of a contract liability of $91.8 for
deferred revenue where our performance obligations are not yet
satisfied, which is partially offset by a reduction in the sales
incentive accrual of $54.7.
The impact of the change in accounting standard on third-quarter
2018 performance is:
|
Impact of change in
revenue recognition standard
|
Line items
impacted within the Consolidated
Statements of Operations
|
Per consolidated
financial statements
|
|
Adjustments
|
|
Balances excluding
the
impact of adopting
ASC 606
|
Revenue
|
|
|
|
|
|
Net sales
|
$
|
1,346.3
|
|
|
$
|
2.8
|
(1)
|
$
|
1,349.1
|
|
Other
revenue
|
77.9
|
|
|
(48.3)
|
(2)
|
29.6
|
|
Total
revenue
|
1,424.2
|
|
|
(45.5)
|
|
1,378.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and
expenses
|
|
|
|
|
|
|
|
Cost of
sales
|
538.4
|
|
|
(69.9)
|
(3)
|
468.5
|
|
Selling, general and
administrative expenses
|
698.9
|
|
|
16.3
|
(4)
|
715.2
|
|
Operating
profit
|
186.9
|
|
|
8.1
|
|
195.0
|
|
Income before
income taxes
|
182.1
|
|
|
8.1
|
|
190.2
|
|
Income
taxes
|
(68.3)
|
|
|
(.7)
|
|
(69.0)
|
|
Net
income
|
113.8
|
|
|
7.4
|
|
121.2
|
|
Net income
attributable to Avon
|
114.5
|
|
|
7.4
|
|
121.9
|
|
|
|
|
|
|
|
|
|
|
(1) Primarily relates
to net impact of the timing of recognition of sales
incentives.
|
(2) Relates to
Representative fees (primarily brochure fees, late payment fees and
certain other fees), which were reclassified
from SG&A. Brochure fees were also impacted by the timing of
recognition.
|
(3) Primarily relates
to the cost of sales incentives and the cost of brochures paid for
by Representatives, both of which were reclassified from SG&A
and were also impacted by the timing of recognition.
|
(4) Relates to the
cost of sales incentives, which were reclassified to cost of sales
and were also impacted by the timing of recognition. This was
partially offset by Representative fees, which were reclassified to
other revenue.
|
The impact of the change in accounting standard on the
year-to-date 2018 performance is:
|
Impact of change in
revenue recognition standard
|
Line items
impacted within the Consolidated
Statements of Operations
|
Per
consolidated
financial statements
|
|
Adjustments
|
|
Balances excluding
the
impact of adopting
ASC 606
|
Revenue
|
|
|
|
|
|
Net sales
|
$
|
3,924.7
|
|
|
$
|
(30.3)
|
|
(1)
|
$
|
3,894.4
|
|
Other
revenue
|
244.9
|
|
|
(153.6)
|
|
(2)
|
91.3
|
|
Total
revenue
|
4,169.6
|
|
|
(183.9)
|
|
|
3,985.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and
expenses
|
|
|
|
|
|
|
|
|
Cost of
sales
|
1,657.8
|
|
|
(208.5)
|
|
(3)
|
1,449.3
|
|
Selling, general and
administrative expenses
|
2,227.0
|
|
|
37.6
|
|
(4)
|
2,264.6
|
|
Operating
profit
|
284.8
|
|
|
(13.0)
|
|
|
271.8
|
|
Income before
income taxes
|
192.2
|
|
|
(13.0)
|
|
|
179.2
|
|
Income
taxes
|
(136.5)
|
|
|
3.0
|
|
|
(133.5)
|
|
Net
income
|
55.7
|
|
|
(10.0)
|
|
|
45.7
|
|
Net income
attributable to Avon
|
58.1
|
|
|
(10.0)
|
|
|
48.1
|
|
|
|
|
|
|
|
|
|
|
(1) Primarily relates
to net impact of the timing of recognition of sales
incentives.
|
|
(2) Relates to
Representative fees (primarily brochure fees, late payment fees and
certain other fees), which were reclassified from SG&A.
Brochure fees were also impacted by the timing of
recognition.
|
|
(3) Primarily relates
to the cost of sales incentives and the cost of brochures paid for
by Representatives, both of which were reclassified from SG&A
and were also impacted by the timing of recognition.
|
|
(4) Relates to the
cost of sales incentives, which were reclassified to cost of sales
and were also impacted by the timing of recognition. This was
partially offset by Representative fees, which were reclassified to
other revenue.
|
|
Impact of change in
revenue recognition standard
|
Line items
impacted within the Consolidated
Balance Sheets
|
Per
consolidated
financial statements
|
|
Adjustments
|
|
Balances excluding
the
impact of adopting
ASC 606
|
Assets
|
|
|
|
|
|
Accounts receivable,
net
|
$
|
374.3
|
|
|
$
|
(10.9)
|
|
(1)
|
$
|
363.4
|
|
Inventories
|
682.2
|
|
|
(40.1)
|
|
(2)
|
642.1
|
|
Prepaid expenses and
other
|
264.2
|
|
|
46.4
|
|
(2)
|
310.6
|
|
Other
assets
|
584.5
|
|
|
(10.2)
|
|
(3)
|
574.3
|
|
Total
assets
|
3,074.6
|
|
|
(14.8)
|
|
|
3,059.8
|
|
Liabilities,
Series C Convertible Preferred Stock
and Shareholders' Deficit
|
|
|
|
|
|
Other accrued
liabilities
|
391.5
|
|
|
(38.7)
|
|
(4)
|
352.8
|
|
Income
taxes
|
25.5
|
|
|
(3.0)
|
|
|
22.5
|
|
Total current
liabilities
|
1,418.2
|
|
|
(41.7)
|
|
|
1,376.5
|
|
Other
liabilities
|
77.6
|
|
|
(1.3)
|
|
|
76.3
|
|
Total
liabilities
|
3,391.6
|
|
|
(43.0)
|
|
|
3,348.6
|
|
Retained
earnings
|
2,318.4
|
|
|
31.1
|
|
(5)
|
2,349.5
|
|
Accumulated other
comprehensive loss
|
(1,015.9)
|
|
|
(2.9)
|
|
|
(1,018.8)
|
|
Total Avon
shareholders' deficit
|
(810.4)
|
|
|
28.2
|
|
|
(782.2)
|
|
Total
shareholders' deficit
|
(802.9)
|
|
|
28.2
|
|
|
(774.7)
|
|
Total liabilities,
series C convertible preferred
stock and shareholders'
deficit
|
3,074.6
|
|
|
(14.8)
|
|
|
3,059.8
|
|
|
|
|
|
|
|
|
|
|
(1) Relates to sales
returns, which were reclassified from a reduction of accounts
receivable to a refund liability (within other
accrued liabilities) and a returns asset (within prepaid expenses
and other).
|
(2) Primarily relates
to sales incentives and brochures, both of which were reclassified
from prepaid expenses and other to
inventories, and were also impacted by the timing of recognition.
In addition, prepaid expenses and other was impacted by the
timing of recognition of brochures, as well as the reclassification
of sales returns (described above).
|
(3) Relates to
deferred tax assets associated with the cumulative-effect
adjustment.
|
(4) Primarily relates
to the contract liability for sales incentives, which is partially
offset by the lower accrual for sales
incentives. In addition, other accrued liabilities was impacted by
the reclassification of sales returns (described above).
|
(5) Relates to the
$41.1 million cumulative-effect adjustment upon adoption of ASC
606, partially offset by the $10.0 million
net loss adjustment.
|
|
Impact of change in
revenue recognition standard
|
Line items
impacted within the Consolidated Statements of Cash
Flows
|
Per
consolidated financial statements
|
|
Adjustments
|
|
Balances excluding
the impact of adopting
ASC 606
|
Net income
|
$
|
55.7
|
|
|
$
|
(10.0)
|
|
|
$
|
45.7
|
|
Other
|
|
14.2
|
|
|
|
(2.9)
|
|
|
|
11.3
|
|
Changes in assets and
liabilities:
|
|
|
|
|
|
Accounts
receivable
|
(93.4)
|
|
|
2.3
|
|
|
(91.1)
|
|
Inventories
|
(131.8)
|
|
|
0.8
|
|
|
(131.0)
|
|
Prepaid expenses and
other
|
(38.2)
|
|
|
5.3
|
|
|
(32.9)
|
|
Accounts payable and
accrued liabilities
|
(30.7)
|
|
|
9.8
|
|
|
(20.9)
|
|
Income and other
taxes
|
74.1
|
|
|
(3.0)
|
|
|
71.1
|
|
Noncurrent assets and
liabilities
|
60.7
|
|
|
(2.3)
|
|
|
58.4
|
|
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, 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 revenue, 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) 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 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) the Brazil IPI tax release; 2) CTI
restructuring initiatives; 3) a charge for a loss contingency
related to a non-US pension plan ("Loss contingency") and 4)
one-time tax items that are not associated with recurring, normal
operations ("Special tax items").
The Brazil IPI tax release includes the impact on the
Consolidated Statement of Operations during the third quarter of
2018 of the release of the liability related to IPI tax on
cosmetics in Brazil. The release
was recorded in net sales and other expense, net in the amounts of
approximately $168 million and
approximately $27 million,
respectively. The Brazil IPI tax release also includes
approximately $66 million recorded in
income taxes.
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-US pension
plan, for which an amendment to the plan that occurred in a prior
year many not have been properly implemented.
The Special tax items includes the impact on the provision for
income taxes in the Consolidated Statements of Operations during
the first, second and third quarters of 2018 due to one-time tax
reserves of approximately $9 million,
$6 million and $4 million, respectively, associated with the
Company's uncertain tax positions.
View original
content:http://www.prnewswire.com/news-releases/avon-reports-third-quarter-2018-results-300741809.html
SOURCE Avon Products, Inc.