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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Avon Products Inc | NYSE:AVP | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 5.60 | 0 | 01:00:00 |
LONDON, Aug. 2, 2018 /PRNewswire/ -- Avon Products, Inc. (NYSE: AVP) today announced its results for the quarter ended June 30, 2018.
Jan Zijderveld, Avon CEO said, "Entering my seventh month at Avon, I am encouraged by improved revenue growth in 3 of our top 5 markets and the promising trends we are seeing across the majority of the rest of our business. This is underpinned by our improving service quality and operational efficiencies, and in turn reflected in our higher operating margin. However, we are not yet satisfied with the overall operating results of the quarter."
Mr. Zijderveld continued, "The senior leadership team and I continue to focus on immediate corrective priorities, while also finalizing plans for Avon's long-term success. We are prioritizing achieving profitable, sustainable topline growth by focusing on our Representative experience and satisfaction through enhanced training for 500,000 Representatives in the second half, as well as new sales incentives programs, better service and improved forecasting. We are becoming more agile, halving the time to bring on-trend products to market with over 200 expected to launch in the second half. We will support our second half global launches with an additional $30 million of advertising and marketing spend. And, finally, we are placing digital at the center of all actions to drive our future progress, enhancing our digital and e-commerce capabilities through initiatives such as our new mobile e-brochure, which is locally customizable and distributed via social media. This is an important first step to build a digital social selling beauty company."
"Importantly, Avon is rapidly injecting new talent and capabilities into the business, most notably a new Chief Digital Officer and three new General Managers in our top markets, while we continue to institute a performance culture through increased accountability, agility and speed of execution," concluded Mr. Zijderveld.
Jamie Wilson, Avon CFO said, "During the second quarter, we successfully completed the early redemption of our 2019 bonds to reduce our debt and further strengthen our balance sheet. We also continued to generate efficiencies, and will strive to improve on these second quarter trends in the second half. We are strategically redirecting investments to support underlying growth initiatives."
Highlights for Second Quarter of 2018:
New Revenue Recognition Standard (Accounting Standards Update 2014-09, Revenue from Contracts with Customers codified as Accounting Standards Codification Topic 606 ("ASC" 606))
As previously disclosed, during the first quarter, the Company adopted 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 second-quarter 2018 performance is summarized on pages 16-18 of this release.
Second-Quarter 2018 Income Statement Review (compared with second-quarter 2017)
Adjustments to Second-Quarter 2018 GAAP Results to Arrive at Adjusted Results
During the second quarter of 2018, the following adjustments were made to GAAP results to arrive at Adjusted results and, in total, reduced Diluted loss per share by approximately $0.06:
THREE MONTHS ENDED JUNE 30, 2018 | ||||||||||||||||||||||||
SEGMENT RESULTS |
||||||||||||||||||||||||
($ in millions) |
||||||||||||||||||||||||
Revenue |
Active |
Average |
Units |
Price/ |
Ending | |||||||||||||||||||
US$ |
C$ |
|||||||||||||||||||||||
Revenue & Drivers |
% var. |
% var. |
% var. |
% var. vs 2Q17 |
% var. vs 2Q17 |
% var. vs 2Q17 |
% var. | |||||||||||||||||
Europe, Middle East & |
$ |
500.7 |
1 |
% |
— |
% |
(3) |
% |
3 |
% |
(3) |
% |
3 |
% |
(2) |
% | ||||||||
South Latin America |
516.1 |
(8) |
% |
3 |
% |
(5) |
% |
8 |
% |
(6) |
% |
9 |
% |
(4) |
% | |||||||||
North Latin America |
207.3 |
— |
% |
3 |
% |
(5) |
% |
8 |
% |
(6) |
% |
9 |
% |
(8) |
% | |||||||||
Asia Pacific |
113.1 |
(1) |
% |
1 |
% |
(1) |
% |
2 |
% |
— |
% |
1 |
% |
(4) |
% | |||||||||
Total from reportable segments |
1,337.2 |
(3) |
% |
2 |
% |
(4) |
% |
6 |
% |
(4) |
% |
6 |
% |
(4) |
% | |||||||||
Other operating |
14.7 |
(32) |
% |
(32) |
% |
(70) |
% |
* |
(33) |
% |
1 |
% |
— |
% | ||||||||||
Total Avon |
$ |
1,351.9 |
(3) |
% |
1 |
% |
(4) |
% |
5 |
% |
(5) |
% |
6 |
% |
(4) |
% |
Operating Profit/Margin |
2018 Operating |
2018 Operating |
Change in |
Change in | ||||||
Segment profit/margin |
||||||||||
Europe, Middle East & Africa |
$ |
74.4 |
14.9% |
(140) bps |
(150) bps | |||||
South Latin America |
55.2 |
10.7 |
250 |
230 | ||||||
North Latin America |
19.0 |
9.2 |
40 |
50 | ||||||
Asia Pacific |
7.3 |
6.5 |
(250) |
(200) | ||||||
Total from reportable segments |
155.9 |
11.7 |
40 |
20 | ||||||
Other operating segments and business |
(0.6) |
|||||||||
Unallocated global expenses |
(78.6) |
|||||||||
CTI restructuring initiatives |
(23.7) |
|||||||||
Total Avon |
$ |
53.0 |
3.9% |
160 bps |
180 bps | |||||
* Calculation not meaningful | ||||||||||
Other operating segments and business activities include revenue from the sale of products to New Avon LLC since the separation of the Company's North America business into New Avon LLC on March 1, 2016 and ongoing royalties from the licensing of the Company's name and products. Other operating segments and business activities also include the business results for Australia and New Zealand, which the Company announced it would exit in 2018. |
Second-Quarter 2018 Segment Review (compared with second-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 decreased 3% to $1.3 billion, or increased 2% in constant dollars, both including a benefit of approximately 4% due to the impact of adopting the new revenue recognition standard. Revenue and constant-dollar revenue were impacted by declines in Active Representatives, primarily in Brazil, Russia and Mexico. The Company experienced continued variability with challenges in key markets, particularly Brazil, including the impact of the truckers' strike.
Second-Quarter 2018 Cash Flow Review (compared with second-quarter 2017)
Conference call
Avon will conduct a conference call at 9:00 a.m. Eastern Time today to discuss its quarterly results. The dial-in number for the call is (800) 843-2086 in the U.S. or +1 (706) 643-1815 from non-U.S. locations (conference ID number: 1961989). The call and related slide presentation will be webcast live at www.avoninvestor.com and can be accessed or downloaded from that site for a period of one year. Please note that the Company intends to file its Form 10-Q on August 3, 2018.
About Avon Products, Inc.
Avon is the Company that for 130 years has proudly stood for beauty, innovation, optimism and, above all, for women. Avon products include well-recognized and beloved brands such as ANEW, Avon Color, Avon Care, Skin-So-Soft, and Advance Techniques sold through approximately 6 million active independent Avon Sales Representatives. Learn more about Avon and its products at www.avoncompany.com.
Footnotes
1 "Adjusted" items refer to financial measures that are derived from measures calculated in accordance with GAAP, but which have been adjusted to exclude certain items. "Like-for-like" refers to comparable year-over-year figures that exclude the impact of the adoption of ASC 606. Other Adjusted financial measures that the Company refers to include constant dollar ("C$") 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, improved representative engagement and service, efforts to implement new digital strategies and advertising spend. 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 |
Six Months Ended |
Percent Change | ||||||||||||||||||||
June 30 |
June 30 |
||||||||||||||||||||||
2018 |
2017 |
2018 |
2017 |
||||||||||||||||||||
Net sales |
$ |
1,268.8 |
$ |
1,353.5 |
(6) |
% |
$ |
2,578.4 |
$ |
2,651.6 |
(3) |
% | |||||||||||
Other revenue |
83.1 |
42.4 |
167.0 |
77.4 |
|||||||||||||||||||
Total revenue |
1,351.9 |
1,395.9 |
(3) |
% |
2,745.4 |
2,729.0 |
1 |
% | |||||||||||||||
Cost of sales |
539.7 |
525.0 |
1,119.4 |
1,042.1 |
|||||||||||||||||||
Selling, general and administrative expenses |
759.2 |
838.2 |
1,528.1 |
1,624.4 |
|||||||||||||||||||
Operating profit |
53.0 |
32.7 |
62 |
% |
97.9 |
62.5 |
57 |
% | |||||||||||||||
Interest expense |
34.5 |
36.1 |
70.7 |
71.2 |
|||||||||||||||||||
Loss on extinguishment of debt |
2.9 |
— |
2.9 |
— |
|||||||||||||||||||
Interest income |
(3.5) |
(3.1) |
(7.7) |
(7.8) |
|||||||||||||||||||
Other expense, net |
19.4 |
11.9 |
21.9 |
18.0 |
|||||||||||||||||||
Total other expenses |
53.3 |
44.9 |
87.8 |
81.4 |
|||||||||||||||||||
(Loss) Income, before income taxes |
(0.3) |
(12.2) |
* |
10.1 |
(18.9) |
* | |||||||||||||||||
Income taxes |
(36.7) |
(33.6) |
(68.2) |
(63.4) |
|||||||||||||||||||
Loss from continuing operations, net of tax |
(37.0) |
(45.8) |
* |
(58.1) |
(82.3) |
29 |
% | ||||||||||||||||
— |
— |
— |
— |
||||||||||||||||||||
Net loss |
(37.0) |
(45.8) |
19 |
% |
(58.1) |
(82.3) |
29 |
% | |||||||||||||||
Net loss attributable to noncontrolling interests |
0.9 |
0.3 |
1.7 |
0.3 |
|||||||||||||||||||
Net loss attributable to Avon |
$ |
(36.1) |
$ |
(45.5) |
21 |
% |
$ |
(56.4) |
$ |
(82.0) |
31 |
% | |||||||||||
Loss per share:(1) |
|||||||||||||||||||||||
Basic |
|||||||||||||||||||||||
Basic EPS from continuing operations |
$ |
(0.09) |
$ |
(0.12) |
25 |
% |
$ |
(0.15) |
$ |
(0.21) |
29 |
% | |||||||||||
Diluted |
|||||||||||||||||||||||
Diluted EPS from continuing operations |
$ |
(0.09) |
$ |
(0.12) |
25 |
% |
$ |
(0.15) |
$ |
(0.21) |
29 |
% | |||||||||||
Weighted-average shares outstanding: |
|||||||||||||||||||||||
Basic |
442.2 |
439.9 |
441.5 |
439.3 |
|||||||||||||||||||
Diluted |
442.2 |
439.9 |
441.5 |
439.3 |
|||||||||||||||||||
* 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 ($41.7) and ($50.6) for the three months ended June 30, 2018 and 2017, respectively. Net loss allocable to common shares used in the basic and diluted loss per share calculation was ($67.8) and ($92.4) for the six months ended June 30, 2018 and 2017, respectively. |
AVON PRODUCTS, INC. | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
(Unaudited) | ||||||||
(In millions) | ||||||||
June 30, |
December 31, | |||||||
2018 |
2017 | |||||||
Assets |
||||||||
Current Assets |
||||||||
Cash and cash equivalents |
$ |
443.9 |
$ |
881.5 |
||||
Accounts receivable, net |
386.4 |
457.2 |
||||||
Inventories |
662.2 |
598.2 |
||||||
Prepaid expenses and other |
290.9 |
296.4 |
||||||
Total current assets |
1,783.4 |
2,233.3 |
||||||
Property, plant and equipment, at cost |
1,402.9 |
1,481.9 |
||||||
Less accumulated depreciation |
(768.7) |
(779.2) |
||||||
Property, plant and equipment, net |
634.2 |
702.7 |
||||||
Goodwill |
94.9 |
95.7 |
||||||
Other assets |
573.9 |
666.2 |
||||||
Total assets |
$ |
3,086.4 |
$ |
3,697.9 |
||||
Liabilities, Series C Convertible Preferred Stock and Shareholders' Deficit |
||||||||
Current Liabilities |
||||||||
Debt maturing within one year |
$ |
12.0 |
$ |
25.7 |
||||
Accounts payable |
729.5 |
832.2 |
||||||
Accrued compensation |
109.2 |
130.3 |
||||||
Other accrued liabilities |
400.9 |
405.6 |
||||||
Sales taxes and taxes other than income |
123.4 |
153.0 |
||||||
Income taxes |
8.6 |
12.8 |
||||||
Total current liabilities |
1,383.6 |
1,559.6 |
||||||
Long-term debt |
1,630.3 |
1,872.2 |
||||||
Employee benefit plans |
134.2 |
150.6 |
||||||
Long-term income taxes |
97.6 |
84.9 |
||||||
Long-term sales taxes and taxes other than income |
191.1 |
193.1 |
||||||
Other liabilities |
80.3 |
84.4 |
||||||
Total liabilities |
3,517.1 |
3,944.8 |
||||||
Series C convertible preferred stock |
479.8 |
467.8 |
||||||
Shareholders' Deficit |
||||||||
Common stock |
190.3 |
189.7 |
||||||
Additional paid-in capital |
2,297.5 |
2,291.2 |
||||||
Retained earnings |
2,210.0 |
2,320.3 |
||||||
Accumulated other comprehensive loss |
(1,014.4) |
(926.2) |
||||||
Treasury stock, at cost |
(4,602.3) |
(4,600.0) |
||||||
Total Avon shareholders' deficit |
(918.9) |
(725.0) |
||||||
Noncontrolling interests |
8.4 |
10.3 |
||||||
Total shareholders' deficit |
(910.5) |
(714.7) |
||||||
Total liabilities, series C convertible preferred stock and shareholders' deficit |
$ |
3,086.4 |
$ |
3,697.9 |
||||
AVON PRODUCTS, INC. | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(Unaudited) | ||||||||
(In millions) | ||||||||
Six Months Ended | ||||||||
June 30 | ||||||||
2018 |
2017 | |||||||
Cash Flows from Operating Activities |
||||||||
Net loss |
$ |
(58.1) |
$ |
(82.3) |
||||
Adjustments to reconcile net loss to net cash (used) provided by operating activities: |
||||||||
Depreciation |
41.6 |
41.7 |
||||||
Amortization |
13.8 |
15.0 |
||||||
Provision for doubtful accounts |
86.2 |
113.0 |
||||||
Provision for obsolescence |
13.3 |
16.5 |
||||||
Share-based compensation |
7.5 |
16.2 |
||||||
Foreign exchange losses |
13.5 |
8.5 |
||||||
Deferred income taxes |
(0.2) |
12.0 |
||||||
Other |
3.2 |
16.1 |
||||||
Changes in assets and liabilities: |
||||||||
Accounts receivable |
(50.0) |
(92.0) |
||||||
Inventories |
(99.7) |
(36.1) |
||||||
Prepaid expenses and other |
1.7 |
14.2 |
||||||
Accounts payable and accrued liabilities |
(76.6) |
(53.2) |
||||||
Income and other taxes |
(0.3) |
(5.0) |
||||||
Noncurrent assets and liabilities |
(2.6) |
26.6 |
||||||
Net cash (used) provided by operating activities of continuing operations |
(106.7) |
11.2 |
||||||
Cash Flows from Investing Activities |
||||||||
Capital expenditures |
(48.0) |
(43.0) |
||||||
Disposal of assets |
1.4 |
2.7 |
||||||
Other investing activities |
(3.3) |
(0.1) |
||||||
Net cash used by investing activities of continuing operations |
(49.9) |
(40.4) |
||||||
Cash Flows from Financing Activities |
||||||||
Debt, net (maturities of three months or less) |
(10.4) |
(4.4) |
||||||
Repayment of debt |
(238.6) |
(2.0) |
||||||
Repurchase of common stock |
(3.2) |
(6.4) |
||||||
Other financing activities |
(0.1) |
(0.2) |
||||||
Net cash used by financing activities of continuing operations |
(252.3) |
(13.0) |
||||||
Cash Flows from Discontinued Operations |
||||||||
Net cash used by operating activities of discontinued operations |
— |
(6.4) |
||||||
Net cash used by discontinued operations |
— |
(6.4) |
||||||
Effect of exchange rate changes on cash and cash equivalents |
(28.7) |
28.0 |
||||||
Net decrease in cash and cash equivalents |
(437.6) |
(20.6) |
||||||
Cash and cash equivalents at beginning of year |
881.5 |
654.4 |
||||||
Cash and cash equivalents at end of period |
$ |
443.9 |
$ |
633.8 |
AVON PRODUCTS, INC. | ||||||||||||||||
SUPPLEMENTAL SCHEDULE | ||||||||||||||||
(Unaudited) | ||||||||||||||||
(In millions) | ||||||||||||||||
CATEGORY SALES FROM REPORTABLE |
||||||||||||||||
Consolidated | ||||||||||||||||
Reported |
Excluding the impact | |||||||||||||||
Three Months Ended |
US$ |
C$ |
US$ |
C$ | ||||||||||||
2018 |
2017 |
% var. |
% var. |
% var. vs |
% var. vs | |||||||||||
Beauty: |
||||||||||||||||
Skincare |
$ |
372.4 |
$ |
396.3 |
(6)% |
(2)% |
(7)% |
(3)% | ||||||||
Fragrance |
347.8 |
366.7 |
(5) |
— |
(6) |
(1) | ||||||||||
Color |
212.4 |
234.1 |
(9) |
(5) |
(10) |
(6) | ||||||||||
Total Beauty |
932.6 |
997.1 |
(6) |
(2) |
(7) |
(3) | ||||||||||
Fashion & Home: |
||||||||||||||||
Fashion (jewelry/watches/apparel/ |
185.9 |
200.8 |
(7) |
(5) |
(8) |
(6) | ||||||||||
Home (gift & decorative products/housewares/ |
144.3 |
145.5 |
(1) |
7 |
(1) |
6 | ||||||||||
Total Fashion & Home |
330.2 |
346.3 |
(5) |
— |
(5) |
(1) | ||||||||||
Net sales from reportable segments |
1,262.8 |
1,343.4 |
(6) |
(2) |
(7) |
(2) | ||||||||||
Other revenue from reportable segments |
74.4 |
31.0 |
* |
* |
* |
* | ||||||||||
Total revenue from reportable segments |
1,337.2 |
1,374.4 |
(3) |
2 |
(7) |
(2) | ||||||||||
Total revenue from Other operating segments and |
14.7 |
21.5 |
(32) |
(32) |
(32) |
(32) | ||||||||||
Total revenue |
$ |
1,351.9 |
$ |
1,395.9 |
(3) |
1 |
(7) |
(3) | ||||||||
*Calculation not meaningful |
AVON PRODUCTS, INC. | ||||||||||||||||
SUPPLEMENTAL SCHEDULE | ||||||||||||||||
(Unaudited) | ||||||||||||||||
(In millions) | ||||||||||||||||
CATEGORY SALES FROM REPORTABLE |
||||||||||||||||
Consolidated | ||||||||||||||||
Reported |
Excluding the impact | |||||||||||||||
Six Months Ended |
US$ |
C$ |
US$ |
C$ | ||||||||||||
2018 |
2017 |
% var. |
% var. |
% var. |
% var. | |||||||||||
Beauty: |
||||||||||||||||
Skincare |
$ |
761.5 |
$ |
778.0 |
(2)% |
(2)% |
(3)% |
(3)% | ||||||||
Fragrance |
701.8 |
708.7 |
(1) |
1 |
(2) |
(1) | ||||||||||
Color |
448.1 |
473.3 |
(5) |
(5) |
(6) |
(6) | ||||||||||
Total Beauty |
1,911.4 |
1,960.0 |
(2) |
(2) |
(4) |
(3) | ||||||||||
Fashion & Home: |
||||||||||||||||
Fashion (jewelry/watches/apparel/ |
374.5 |
392.7 |
(5) |
(5) |
(6) |
(7) | ||||||||||
Home (gift & decorative products/housewares/ |
273.7 |
278.6 |
(2) |
2 |
(3) |
1 | ||||||||||
Total Fashion & Home |
648.2 |
671.3 |
(3) |
(2) |
(5) |
(4) | ||||||||||
Net sales from reportable segments |
2,559.6 |
2,631.3 |
(3) |
(2) |
(4) |
(3) | ||||||||||
Other revenue from reportable segments |
150.1 |
56.4 |
* |
* |
* |
* | ||||||||||
Total revenue from reportable segments |
2,709.7 |
2,687.7 |
1 |
2 |
(4) |
(3) | ||||||||||
Total revenue from Other operating segments and |
35.7 |
41.3 |
(14) |
(15) |
(17) |
(18) | ||||||||||
Total revenue |
$ |
2,745.4 |
$ |
2,729.0 |
1 |
2 |
(4) |
(4) | ||||||||
*Calculation not meaningful |
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 JUNE 30, 2018 | ||||||||||||||||
Reported (GAAP) |
CTI restructuring initiatives |
Special tax items |
Adjusted (Non-GAAP) | |||||||||||||
Total revenue |
$ |
1,351.9 |
$ |
— |
$ |
— |
$ |
1,351.9 |
||||||||
Cost of sales |
539.7 |
0.5 |
— |
539.2 |
||||||||||||
Selling, general and administrative expenses |
759.2 |
23.2 |
— |
736.0 |
||||||||||||
Operating profit |
53.0 |
23.7 |
— |
76.7 |
||||||||||||
(Loss) Income before income taxes |
(0.3) |
23.7 |
— |
23.4 |
||||||||||||
Income taxes |
(36.7) |
— |
5.5 |
(31.2) |
||||||||||||
Net loss |
$ |
(37.0) |
$ |
23.7 |
$ |
5.5 |
$ |
(7.8) |
||||||||
Diluted EPS |
$ |
(0.09) |
$ |
(0.03) |
||||||||||||
Gross margin |
60.1 |
% |
— |
— |
60.1 |
% | ||||||||||
SG&A as a % of revenues |
56.2 |
% |
(1.8) |
— |
54.4 |
% | ||||||||||
Operating margin |
3.9 |
% |
1.8 |
— |
5.7 |
% | ||||||||||
Effective tax rate |
* |
* | ||||||||||||||
*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 are calculated independently and factor in the participation rights of the Series C convertible preferred stock, and, therefore, would cause the amounts not to sum to Adjusted diluted EPS from continuing operations. |
AVON PRODUCTS, INC. | ||||||||||||||||
SUPPLEMENTAL SCHEDULE | ||||||||||||||||
NON-GAAP FINANCIAL MEASURES | ||||||||||||||||
(Unaudited) | ||||||||||||||||
(In millions, except per share data) | ||||||||||||||||
This supplemental schedule provides adjusted Non-GAAP financial information and a quantitative reconciliation of the difference between the Non-GAAP financial measure and the most directly comparable financial measure calculated and reported in accordance with GAAP. | ||||||||||||||||
SIX MONTHS ENDED JUNE 30, 2018 | ||||||||||||||||
Reported (GAAP) |
CTI restructuring initiatives |
Special tax items |
Adjusted (Non-GAAP) | |||||||||||||
Total revenue |
$ |
2,745.4 |
$ |
— |
$ |
— |
$ |
2,745.4 |
||||||||
Cost of sales |
1,119.4 |
1.1 |
— |
1,118.3 |
||||||||||||
Selling, general and administrative expenses |
1,528.1 |
33.5 |
— |
1,494.6 |
||||||||||||
Operating profit |
97.9 |
34.6 |
— |
132.5 |
||||||||||||
Income before income taxes |
10.1 |
34.6 |
— |
44.7 |
||||||||||||
Income taxes |
(68.2) |
(2.1) |
14.7 |
(55.6) |
||||||||||||
Net loss |
$ |
(58.1) |
$ |
32.5 |
$ |
14.7 |
$ |
(10.9) |
||||||||
Diluted EPS |
$ |
(0.15) |
$ |
(0.05) |
||||||||||||
Gross margin |
59.2 |
% |
— |
— |
59.3 |
% | ||||||||||
SG&A as a % of revenues |
55.7 |
% |
(1.2) |
— |
54.4 |
% | ||||||||||
Operating margin |
3.6 |
% |
1.2 |
— |
4.8 |
% | ||||||||||
Effective tax rate |
* |
* | ||||||||||||||
*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 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 JUNE 30, 2017 | ||||||||||||||||
Reported (GAAP) |
CTI restructuring initiatives |
Loss |
Adjusted (Non-GAAP) | |||||||||||||
Total revenue |
$ |
1,395.9 |
$ |
— |
$ |
— |
$ |
1,395.9 |
||||||||
Cost of sales |
525.0 |
— |
— |
525.0 |
||||||||||||
Selling, general and administrative expenses |
838.2 |
20.3 |
18.2 |
799.7 |
||||||||||||
Operating profit |
32.7 |
20.3 |
18.2 |
71.2 |
||||||||||||
(Loss) Income before income taxes |
(12.2) |
20.3 |
18.2 |
26.3 |
||||||||||||
Income taxes |
(33.6) |
(0.8) |
— |
(34.4) |
||||||||||||
Net loss |
$ |
(45.8) |
$ |
19.5 |
$ |
18.2 |
$ |
(8.1) |
||||||||
Diluted EPS |
$ |
(0.12) |
$ |
(0.03) |
||||||||||||
Gross margin |
62.4 |
% |
— |
— |
62.4 |
% | ||||||||||
SG&A as a % of revenues |
60.1 |
% |
(1.5) |
(1.3) |
57.3 |
% | ||||||||||
Operating margin |
2.3 |
% |
1.5 |
1.3 |
5.1 |
% | ||||||||||
Effective tax rate |
* |
* | ||||||||||||||
*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 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. | ||||||||||||||||
SIX MONTHS ENDED JUNE 30, 2017 | ||||||||||||||||
Reported (GAAP) |
CTI restructuring initiatives |
Loss |
Adjusted (Non-GAAP) | |||||||||||||
Total revenue |
$ |
2,729.0 |
$ |
— |
$ |
— |
$ |
2,729.0 |
||||||||
Cost of sales |
1,042.1 |
(0.1) |
— |
1,042.2 |
||||||||||||
Selling, general and administrative expenses |
1,624.4 |
30.4 |
18.2 |
1,575.8 |
||||||||||||
Operating profit |
62.5 |
30.3 |
18.2 |
111.0 |
||||||||||||
(Loss) income before income taxes |
(18.9) |
30.3 |
18.2 |
29.6 |
||||||||||||
Income taxes |
(63.4) |
(1.8) |
— |
(65.2) |
||||||||||||
Net loss |
$ |
(82.3) |
$ |
28.5 |
$ |
18.2 |
$ |
(35.6) |
||||||||
Diluted EPS |
$ |
(0.21) |
$ |
(0.11) |
||||||||||||
Gross margin |
61.8 |
% |
— |
— |
61.8 |
% | ||||||||||
SG&A as a % of revenues |
59.5 |
% |
(1.1) |
(0.7) |
57.7 |
% | ||||||||||
Operating margin |
2.3 |
% |
1.1 |
0.7 |
4.1 |
% | ||||||||||
Effective tax rate |
* |
* | ||||||||||||||
*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 are calculated independently and factor in the participation rights of the Series C convertible preferred stock, and, therefore, would cause the amounts not to sum to Adjusted diluted EPS from continuing operations. |
AVON PRODUCTS, INC. | |||||||||||||||
SUPPLEMENTAL SCHEDULE | |||||||||||||||
(Unaudited) | |||||||||||||||
(In millions, except per share data) | |||||||||||||||
Approximate Impact of Foreign Currency |
|||||||||||||||
Second-Quarter 2018 |
Half Year 2018 | ||||||||||||||
Estimated impact |
Estimated impact |
Estimated impact |
Estimated impact | ||||||||||||
Year-on-Year impact on Reported |
|||||||||||||||
Total revenue |
(4) pts |
(1) pt |
|||||||||||||
Operating profit - transaction |
$ |
(5) |
$ |
(0.01) |
$ |
(10) |
$ |
(0.01) |
|||||||
Operating profit - translation |
(5) |
(0.01) |
— |
— |
|||||||||||
Total operating profit |
$ |
(10) |
$ |
(0.02) |
$ |
(10) |
$ |
(0.01) |
|||||||
Operating margin |
(60) bps |
(40) bps |
|||||||||||||
Revaluation of working capital |
$ |
(15) |
$ |
(0.03) |
$ |
(15) |
$ |
(0.03) |
|||||||
Diluted EPS |
$ |
(0.05) |
$ |
(0.04) |
|||||||||||
Year-on-Year impact on Adjusted (Non- |
|||||||||||||||
Adjusted operating profit - transaction |
$ |
(5) |
$ |
(0.01) |
$ |
(10) |
$ |
(0.01) |
|||||||
Adjusted operating profit - translation |
(5) |
(0.01) |
— |
— |
|||||||||||
Total Adjusted operating profit |
$ |
(10) |
$ |
(0.02) |
$ |
(10) |
$ |
(0.01) |
|||||||
Adjusted operating margin |
(50) bps |
(30) bps |
|||||||||||||
Revaluation of working capital |
$ |
(15) |
$ |
(0.03) |
$ |
(15) |
$ |
(0.03) |
|||||||
Adjusted diluted EPS |
$ |
(0.05) |
$ |
(0.04) |
|||||||||||
Amounts in the table above may not necessarily sum because the computations are made |
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:
The impact of the change in accounting standard on second-quarter 2018 performance is:
Impact of change in revenue recognition standard | |||||||||||
Line items impacted within the Consolidated |
Per consolidated |
Adjustments |
Balances excluding the | ||||||||
Revenue |
|||||||||||
Net sales |
$ |
1,268.8 |
$ |
(7.6) |
(1) |
$ |
1,261.2 |
||||
Other revenue |
83.1 |
(50.5) |
(2) |
32.6 |
|||||||
Total revenue |
1,351.9 |
(58.1) |
1,293.8 |
||||||||
Costs and expenses |
|||||||||||
Cost of sales |
539.7 |
(65.6) |
(3) |
474.1 |
|||||||
Selling, general and administrative expenses |
759.2 |
9.5 |
(4) |
768.7 |
|||||||
Operating profit |
53.0 |
(2.0) |
51.0 |
||||||||
(Loss) before income taxes |
(0.3) |
(2.0) |
(2.3) |
||||||||
Income taxes |
(36.7) |
(0.1) |
(36.8) |
||||||||
Net loss |
(37.0) |
(2.1) |
(39.1) |
||||||||
Net loss attributable to Avon |
(36.1) |
(2.1) |
(38.2) |
||||||||
(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 first and second-quarter 2018 performance is:
Impact of change in revenue recognition standard | |||||||||||
Line items impacted within the Consolidated |
Per consolidated |
Adjustments |
Balances excluding the | ||||||||
Revenue |
|||||||||||
Net sales |
$ |
2,578.4 |
$ |
(33.1) |
(1) |
$ |
2,545.3 |
||||
Other revenue |
167.0 |
(105.3) |
(2) |
61.7 |
|||||||
Total revenue |
2,745.4 |
(138.4) |
2,607.0 |
||||||||
Costs and expenses |
|||||||||||
Cost of sales |
1,119.4 |
(138.6) |
(3) |
980.8 |
|||||||
Selling, general and administrative expenses |
1,528.1 |
21.3 |
(4) |
1,549.4 |
|||||||
Operating profit |
97.9 |
(21.1) |
76.8 |
||||||||
Income (loss) before income taxes |
10.1 |
(21.1) |
(11.0) |
||||||||
Income taxes |
(68.2) |
3.7 |
(64.5) |
||||||||
Net loss |
(58.1) |
(17.4) |
(75.5) |
||||||||
Net loss attributable to Avon |
(56.4) |
(17.4) |
(73.8) |
||||||||
(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 |
Per consolidated |
Adjustments |
Balances excluding the | ||||||||
Assets |
|||||||||||
Accounts receivable, net |
$ |
386.4 |
$ |
(6.2) |
(1) |
$ |
380.2 |
||||
Inventories |
662.2 |
(40.9) |
(2) |
621.3 |
|||||||
Prepaid expenses and other |
290.9 |
47.1 |
(2) |
338.0 |
|||||||
Other assets |
573.9 |
(10.9) |
(3) |
563.0 |
|||||||
Total assets |
3,086.4 |
(10.9) |
3,075.5 |
||||||||
Liabilities, Series C Convertible Preferred Stock |
|||||||||||
Other accrued liabilities |
400.9 |
(28.2) |
(4) |
372.7 |
|||||||
Income taxes |
8.6 |
(3.7) |
4.9 |
||||||||
Total current liabilities |
1,383.6 |
(31.9) |
1,351.7 |
||||||||
Other liabilities |
80.3 |
(1.4) |
78.9 |
||||||||
Total liabilities |
3,517.1 |
(33.3) |
3,483.8 |
||||||||
Retained earnings |
2,210.0 |
23.7 |
(5) |
2,233.7 |
|||||||
Accumulated other comprehensive loss |
(1,014.4) |
(1.3) |
(1,015.7) |
||||||||
Total Avon shareholders' deficit |
(918.9) |
22.4 |
(896.5) |
||||||||
Total shareholders' deficit |
(910.5) |
22.4 |
(888.1) |
||||||||
Total liabilities, series C convertible preferred |
3,086.4 |
(10.9) |
3,075.5 |
||||||||
(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 cumulative-effect adjustment upon adoption of ASC 606, partially offset by the $17.4 net loss adjustment. |
Impact of change in revenue recognition standard | |||||||||||
Line items impacted within the Consolidated |
Per consolidated |
Adjustments |
Balances excluding the | ||||||||
Net loss |
$ |
(58.1) |
$ |
(17.4) |
$ |
(75.5) |
|||||
Other |
3.2 |
1.7 |
4.9 |
||||||||
Changes in assets and liabilities: |
|||||||||||
Accounts receivable |
(50.0) |
(2.4) |
(52.4) |
||||||||
Inventories |
(99.7) |
1.6 |
(98.1) |
||||||||
Prepaid expenses and other |
1.7 |
4.6 |
6.3 |
||||||||
Accounts payable and accrued liabilities |
(76.6) |
20.3 |
(56.3) |
||||||||
Income and other taxes |
(.3) |
(3.7) |
(4.0) |
||||||||
Noncurrent assets and liabilities |
(2.6) |
(4.7) |
(7.3) |
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, 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) 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) CTI restructuring initiatives; and 2) one-time tax reserves associated with the Company's uncertain tax positions ("Special tax items"); and 3) a charge for a loss contingency related to a non-US pension plan ("Loss contingency").
The Special tax items include the impact during the first and second quarters of 2018 on the provision for income taxes in the Consolidated Statements of Operations due to one-time tax reserves of approximately $9.2 million and $5.5 million, respectively, associated with the Company's uncertain tax positions. There was no Special tax impact in 2017.
View original content:http://www.prnewswire.com/news-releases/avon-reports-second-quarter-2018-results-300690773.html
SOURCE Avon Products, Inc.
Copyright 2018 PR Newswire
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