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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 |
FORM 8-K |
Avon Products, Inc. | ||||
(Exact name of registrant as specified in charter) | ||||
New York | 1-4881 | 13-0544597 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
AVON PRODUCTS, INC. | |||||||||||||||
(Registrant) | |||||||||||||||
By | /s/ Robert Loughran | ||||||||||||||
Name: Robert Loughran | |||||||||||||||
Title: Acting Chief Financial Officer, Vice President and Corporate Controller |
Exhibit | ||
No. | Description | |
99.1 | Press Release of Avon Products, Inc. dated October 30, 2014 |
Avon Reports Third-Quarter 2014 Results | ||||
Third-Quarter Revenue Down 8%; Up 1% in Constant Dollars1 | ||||
Operating Profit $188 Million; Adjusted1 Operating Profit $198 Million | ||||
Operating Margin 8.8%, up from 2.9% in the Third-Quarter 2013 | ||||
Adjusted1 Operating Margin 9.3%, up from 5.4% in the Third-Quarter 2013 |
• | The Company recorded costs to implement restructuring within operating profit of approximately $3 million pre-tax, primarily related to the Company’s $400 million Cost Savings Initiative. |
• | The Company recorded a settlement charge of approximately $5 million pre-tax, as a result of payments from the Company’s U.S. pension plan. |
• | During the first quarter of 2014, the Company began utilizing the SICAD II rate to remeasure its Venezuelan operations. As a result of the use of the historical U.S. dollar-cost basis of non-monetary assets, such as inventory, third-quarter 2014 operating profit was negatively impacted by approximately $2 million. |
Latin America | |||||||||||
$ in millions | Third-Quarter 2014 | YTD 2014 | |||||||||
% var. vs 3Q13 | % var. vs 9M13 | ||||||||||
Total revenue | $ | 1,067.2 | (12)% | $ | 3,187.7 | (12)% | |||||
C$ revenue** | 2% | 3% | |||||||||
Change in Active Representatives | (4)% | (4)% | |||||||||
Change in units sold | (5)% | (3)% | |||||||||
Operating profit | 142.3 | (17)% | 196.9 | (47)% | |||||||
Adjusted operating profit | 144.5 | 6% | 350.6 | (16)% | |||||||
Operating margin | 13.3 | % | 320 bps | 6.2 | % | (410) bps | |||||
Adjusted operating margin | 13.5 | % | 220 bps | 11.0 | % | (60) bps | |||||
• | Third-quarter constant-dollar revenue growth was favorably impacted by approximately 2 points, due to the net benefit of VAT credits in Brazil in third-quarter 2014, which were greater than the benefit recognized in 2013. In addition, revenue was impacted by higher average order, partially offset by a decrease in Active Representatives. |
• | Brazil revenue was up 1%, or relatively unchanged in constant dollars, favorably impacted by approximately 4 points due to the incremental net benefit of VAT credits. Brazil was impacted by a challenging macroeconomic environment and high levels of competitive activity. Constant-dollar Beauty sales decreased 4%, driven by a decline in color. Constant-dollar Fashion & Home sales decreased 3%. |
• | Mexico revenue declined 7%, or 6% on a constant-dollar basis, primarily due to a decrease in Active Representatives, partially offset by higher average order. |
• | Venezuela revenue was down 84%, or up 29% in constant dollars, primarily due to higher average order, which benefited from the inflationary impact on pricing that was partially offset by a decrease in units sold. In addition, Active Representatives declined. |
• | Adjusted operating margin was favorably impacted by the net benefit of VAT credits in Brazil, lower Representative and sales leader investment and lower bad debt expense. These were partially offset by lower gross margin, primarily due to higher supply chain costs and the unfavorable impact of foreign exchange. |
Europe, Middle East & Africa | |||||||||||
$ in millions | Third-Quarter 2014 | YTD 2014 | |||||||||
% var. vs 3Q13 | % var. vs 9M13 | ||||||||||
Total revenue | $ | 620.0 | —% | $ | 1,932.9 | (5)% | |||||
C$ revenue | 5% | —% | |||||||||
Change in Active Representatives | 2% | (2)% | |||||||||
Change in units sold | 4% | (1)% | |||||||||
Operating profit | 55.5 | (10)% | 199.7 | (28)% | |||||||
Adjusted operating profit | 55.1 | (10)% | 216.9 | (25)% | |||||||
Operating margin | 9.0 | % | (90) bps | 10.3 | % | (330) bps | |||||
Adjusted operating margin | 8.9 | % | (100) bps | 11.2 | % | (310) bps | |||||
• | Third-quarter constant-dollar revenue increased, due to higher average order and an increase in Active Representatives. Growth in the region was largely driven by Russia. Constant-dollar revenue was negatively impacted by approximately 1 point as a result of the closure of the France business. |
• | In Russia, revenue was up 4%, or 14% in constant dollars, primarily due to an increase in Active Representatives and higher average order, reflecting actions to drive unit sales in Beauty and promotional activity to drive Fashion & Home sales of excess inventory. |
• | U.K. revenue was up 12%, or 4% in constant dollars, primarily due to higher average order, partially offset by a decrease in Active Representatives. |
• | Turkey revenue was down 9%, or 1% in constant dollars, primarily due to a decrease in Active Representatives. |
• | South Africa revenue was up 6%, or 13% in constant dollars, primarily due to an increase in Active Representatives. |
• | The decrease in Adjusted operating margin was primarily due to the unfavorable impact of foreign exchange, partially offset by lower expenses associated with employee incentive compensation plans, and the favorable impact of the revenue increase with respect to fixed expenses. |
North America | |||||||||||
$ in millions | Third-Quarter 2014 | YTD 2014 | |||||||||
% var. vs 3Q13 | % var. vs 9M13 | ||||||||||
Total revenue | $ | 276.7 | (16)% | $ | 876.5 | (19)% | |||||
C$ revenue | (15)% | (19)% | |||||||||
Change in Active Representatives | (18)% | (18)% | |||||||||
Change in units sold | (22)% | (26)% | |||||||||
Operating loss | (18.3 | ) | 44% | (54.1 | ) | (1)% | |||||
Adjusted operating loss | (12.5 | ) | 63% | (15.3 | ) | 65% | |||||
Operating margin | (6.6 | )% | 340 bps | (6.2 | )% | (130) bps | |||||
Adjusted operating margin | (4.5 | )% | 570 bps | (1.7 | )% | 230 bps | |||||
• | Third-quarter constant-dollar revenue declined, primarily due to a decrease in Active Representatives, partially offset by higher average order. In addition, units sold declined. |
• | North America constant-dollar Beauty sales and Fashion & Home sales both declined 15%. |
• | Adjusted operating margin increased, primarily due to cost reduction actions. These impacts were partially offset by the impact of the revenue decline with respect to fixed expenses. |
Asia Pacific | |||||||||||
$ in millions | Third-Quarter 2014 | YTD 2014 | |||||||||
% var. vs 3Q13 | % var. vs 9M13 | ||||||||||
Total revenue | $ | 174.3 | 4% | $ | 513.3 | (9)% | |||||
C$ revenue | 4% | (6)% | |||||||||
Change in Active Representatives | (9)% | (8)% | |||||||||
Change in units sold | 11% | (3)% | |||||||||
Operating profit | 9.0 | * | 15.6 | * | |||||||
Adjusted operating profit | 9.0 | * | 18.5 | (40)% | |||||||
Operating margin | 5.2 | % | 2890 bps | 3.0 | % | 520 bps | |||||
Adjusted operating margin | 5.2 | % | 360 bps | 3.6 | % | (190) bps | |||||
• | Third-quarter constant-dollar revenue increased, due to higher average order which was driven by an increase in units sold, partially offset by a decrease in Active Representatives. |
• | Revenue in the Philippines was up 5% on both a reported and constant-dollar basis, as higher average order was partially offset by a decrease in Active Representatives. |
• | Revenue in China increased on both a reported and constant-dollar basis, primarily due to an increase in units sold. The increase in units sold was primarily due to the comparison with a year ago when the Company took actions to reduce inventory levels held by the beauty boutiques. |
• | Adjusted operating margin increased, primarily due to cost reduction actions. These were partially offset by lower gross margin, primarily due to the unfavorable impact of pricing and mix, higher supply chain costs and foreign exchange. |
Global Expenses | |||||||||||
$ in millions | Third-Quarter 2014 | YTD 2014 | |||||||||
% var. vs 3Q13 | % var. vs 9M13 | ||||||||||
Total global expenses | $ | 105.0 | (31)% | $ | 444.0 | (3)% | |||||
Adjusted total global expenses | 102.7 | (32)% | 369.9 | (16)% | |||||||
Allocated to segments | (104.4 | ) | (5)% | (316.1 | ) | (1)% | |||||
Adjusted net global expenses | (1.7 | ) | * | 53.5 | (57)% | ||||||
Net global expenses | 0.6 | (99)% | 127.9 | (7)% | |||||||
Contacts: | |
INVESTORS: | MEDIA: |
Amy Low Chasen | Jennifer Vargas |
Adam Zerfass | (212) 282-5404 |
(212) 282-5320 |
Footnotes | |
1 "Adjusted" items refer to financial results presented in accordance with U.S. GAAP that have been adjusted to exclude certain costs as described below, under "Non-GAAP Financial Measures." We also refer to Adjusted financial measures as Constant $ items, which are Non-GAAP financial measures as described below under “Non-GAAP Financial Measures." | |
² In the first quarter of 2014, we revised the definition of our "Change in Active Representatives" performance metric. The change from the previous definition is that we no longer divide the unique orders by the number of billing days. This update aligns our external performance metrics with how we internally monitor the performance of our business. The updated definition is as follows: This metric is a measure of Representative activity based on the number of unique Representatives submitting at least one order in a sales campaign, totaled for all campaigns in the related period. To determine the change in Active Representatives, this calculation is compared to the same calculation in the corresponding period of the prior year. Orders in China are excluded from this metric as our business in China is predominantly retail. Liz Earle is also excluded from this calculation as they do not distribute through the direct-selling channel. In addition, we have added a definition for our "Change in Average Order" performance metric, as follows: This metric is a measure of Representative productivity. The calculation is the difference of the year-over-year change in revenue on a Constant $ basis and the change in Active Representatives. Change in Average Order may be impacted by a combination of factors such as inflation, units, product mix, and/or pricing. | |
• | our ability to improve our financial and operational performance and execute fully our global business strategy, including our ability to implement the key initiatives of, and realize the projected benefits (in the amounts and time schedules we expect) from, our stabilization strategies, cost savings initiatives, multi-year restructuring programs and other initiatives, product mix and pricing strategies, enterprise resource planning, customer service initiatives, sales and operation planning process, outsourcing strategies, Internet platform and technology strategies including e-commerce, marketing and advertising strategies, information technology and related system enhancements and cash management, tax, foreign currency hedging and risk management strategies, and any plans to invest these projected benefits ahead of future growth; |
• | the possibility of business disruption in connection with our stabilization strategies, cost savings initiatives, multi-year restructuring programs, or other initiatives; |
• | our ability to reverse declining revenue, margins and net income, particularly in North America, and to achieve profitable growth, particularly in our largest markets, such as Brazil, and developing and emerging markets, such as Mexico and Russia; |
• | our ability to improve working capital and effectively manage doubtful accounts and inventory and implement initiatives to reduce inventory levels, including the potential impact on cash flows and obsolescence; |
• | our ability to reverse declines in Active Representatives, to enhance our sales Leadership programs, to generate Representative activity, to increase the number of consumers served per Representative and their engagement online, to enhance branding and the Representative and consumer experience and increase Representative productivity through field activation programs and technology tools and enablers, to invest in the direct-selling channel, and to compete with other direct-selling organizations to recruit, retain and service Representatives and to continue to innovate the direct-selling model; |
• | general economic and business conditions in our markets, including social, economic and political uncertainties in the international markets in our portfolio, such as in Russia and Ukraine, and any potential sanctions, restrictions or responses to such conditions imposed by other markets in which we operate; |
• | the effect of economic factors, including inflation and fluctuations in interest rates and currency exchange rates, as well as the designation of Venezuela as a highly inflationary economy and the devaluation of its currency, the availability of various foreign exchange systems including limited access to SICAD II in Venezuela, foreign exchange restrictions, particularly currency restrictions in Venezuela and Argentina, and the potential effect of such factors on our business, results of operations and financial condition; |
• | any developments in or consequences of investigations and compliance reviews, and any litigation related thereto, including the ongoing investigations and compliance reviews of Foreign Corrupt Practices Act ("FCPA") and related United States ("U.S.") and foreign law matters in China and additional countries, as well as any disruption or adverse consequences resulting from such investigations, reviews, related actions or litigation, including our ability to finalize settlements with the United States Securities and Exchange Commission ("SEC") and the United States Department of Justice ("DOJ") with regard to the ongoing FCPA investigations on terms consistent with our current understandings with the government or, if we are able to reach such final settlements, what the timing of such final settlements will be or whether the SEC settlement will be authorized by the Commission or whether each of the settlements will receive the necessary court approvals, or if we are unable to reach such final settlements, the outcome of any subsequent litigation with the government which could have a material adverse effect; |
• | a general economic downturn, a recession globally or in one or more of our geographic regions, or sudden disruption in business conditions, and the ability of our broad-based geographic portfolio to withstand an economic downturn, recession, cost inflation, commodity cost pressures, economic or political instability, competitive or other market pressures or conditions; |
• | the effect of political, legal, tax and regulatory risks imposed on us in the U.S. and abroad, our operations or our Representatives, including foreign exchange, pricing, data privacy or other restrictions, the adoption, interpretation and enforcement of foreign laws, including in jurisdictions such as Brazil, Russia, Venezuela and Argentina, and any changes thereto, as well as reviews and investigations by government regulators that have occurred or may occur from time to time, including, for example, local regulatory scrutiny in China; |
• | the impact of changes in tax rates on the value of our deferred tax assets, and declining earnings, including the amount of any domestic source loss and the type, jurisdiction and timing of any foreign source income, on our ability to realize foreign tax credits in the U.S.; |
• | competitive uncertainties in our markets, including competition from companies in the cosmetics, fragrances, skincare and toiletries industry, some of which are larger than we are and have greater resources; |
• | the impact of the adverse effect of rising energy, commodity and raw material prices, changes in market trends, purchasing habits of our consumers and changes in consumer preferences, particularly given the global nature of our business and the conduct of our business in primarily one channel; |
• | our ability to attract and retain key personnel; |
• | other sudden disruption in business operations beyond our control as a result of events such as acts of terrorism or war, natural disasters, pandemic situations, large-scale power outages and similar events; |
• | key information technology systems, process or site outages and disruptions, and any cyber security breaches, including any security breach of our systems or those of a third-party provider that results in the theft, transfer or unauthorized disclosure of customer, employee or company information or compliance with information security and privacy laws and regulations in the event of such an incident which could disrupt business operations, result in the loss of critical and confidential information, and adversely impact our reputation and results of operations, and related costs to address such malicious intentional acts and to implement adequate preventative measures against cyber security breaches; |
• | the risk of product or ingredient shortages resulting from our concentration of sourcing in fewer suppliers; |
• | the impact of any significant restructuring charges or significant legal or regulatory settlements on our ability to comply with certain covenants in our debt instruments; |
• | any changes to our credit ratings and the impact of such changes on our financing costs, rates, terms, debt service obligations, access to lending sources and working capital needs; |
• | the impact of our indebtedness, our access to cash and financing, and our ability to secure financing or financing at attractive rates; |
• | the impact of possible pension funding obligations, increased pension expense and any changes in pension regulations or interpretations thereof on our cash flow and results of operations; |
• | our ability to successfully identify new business opportunities, strategic alliances and strategic alternatives and identify and analyze alliance and acquisition candidates, secure financing on favorable terms and negotiate and consummate alliances and acquisitions, as well as to successfully integrate or manage any acquired business; |
• | disruption in our supply chain or manufacturing and distribution operations; |
• | the quality, safety and efficacy of our products; |
• | the success of our research and development activities; |
• | our ability to protect our intellectual property rights; and |
• | the risk of an adverse outcome in any material pending and future litigation or with respect to the legal status of Representatives. |
Three Months Ended | Percent Change | Nine Months Ended | Percent Change | ||||||||||||||||||||
September 30 | September 30 | ||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||
Net sales | $ | 2,059.0 | $ | 2,265.3 | (9 | )% | $ | 6,340.5 | $ | 7,139.2 | (11 | )% | |||||||||||
Other revenue | 79.2 | 57.6 | 169.9 | 148.6 | |||||||||||||||||||
Total revenue | 2,138.2 | 2,322.9 | (8 | )% | 6,510.4 | 7,287.8 | (11 | )% | |||||||||||||||
Cost of sales | 813.9 | 871.7 | 2,580.0 | 2,732.5 | |||||||||||||||||||
Selling, general and administrative expenses | 1,136.4 | 1,340.9 | 3,700.2 | 4,068.8 | |||||||||||||||||||
Impairment of goodwill and intangible asset | — | 42.1 | — | 42.1 | |||||||||||||||||||
Operating profit | 187.9 | 68.2 | * | 230.2 | 444.4 | (48 | )% | ||||||||||||||||
Interest expense | 27.5 | 30.3 | 83.7 | 90.8 | |||||||||||||||||||
Loss on extinguishment of debt | — | — | — | 86.0 | |||||||||||||||||||
Interest income | (3.8 | ) | (3.4 | ) | (11.4 | ) | (8.2 | ) | |||||||||||||||
Other expense, net | 19.8 | 9.7 | 88.8 | 69.6 | |||||||||||||||||||
Total other expenses | 43.5 | 36.6 | 161.1 | 238.2 | |||||||||||||||||||
Income from continuing operations, before taxes | 144.4 | 31.6 | * | 69.1 | 206.2 | (66 | )% | ||||||||||||||||
Income taxes | (52.4 | ) | (38.0 | ) | (124.4 | ) | (139.5 | ) | |||||||||||||||
Income (loss) from continuing operations, net of tax | 92.0 | (6.4 | ) | * | (55.3 | ) | 66.7 | * | |||||||||||||||
Income (loss) from discontinued operations, net of tax | — | 0.6 | — | (50.9 | ) | ||||||||||||||||||
Net income (loss) | 92.0 | (5.8 | ) | (55.3 | ) | 15.8 | |||||||||||||||||
Net (income) loss attributable to noncontrolling interests | (0.6 | ) | 0.3 | (2.6 | ) | (3.1 | ) | ||||||||||||||||
Net income (loss) attributable to Avon | $ | 91.4 | $ | (5.5 | ) | * | $ | (57.9 | ) | $ | 12.7 | * | |||||||||||
Earnings (loss) per share:(1) | |||||||||||||||||||||||
Basic | |||||||||||||||||||||||
Basic EPS from continuing operations | $ | 0.21 | $ | (0.01 | ) | * | $ | (0.13 | ) | $ | 0.15 | * | |||||||||||
Basic EPS from discontinued operations | — | — | — | (0.12 | ) | ||||||||||||||||||
Basic EPS attributable to Avon | 0.21 | (0.01 | ) | * | (0.13 | ) | 0.03 | * | |||||||||||||||
Diluted | |||||||||||||||||||||||
Diluted EPS from continuing operations | $ | 0.21 | $ | (0.01 | ) | * | $ | (0.13 | ) | $ | 0.15 | * | |||||||||||
Diluted EPS from discontinued operations | — | — | — | (0.12 | ) | ||||||||||||||||||
Diluted EPS attributable to Avon | 0.21 | (0.01 | ) | * | (0.13 | ) | 0.03 | * | |||||||||||||||
Weighted-average shares outstanding: | |||||||||||||||||||||||
Basic | 434.6 | 433.5 | 434.4 | 433.3 | |||||||||||||||||||
Diluted | 434.6 | 433.5 | 434.4 | 434.2 | |||||||||||||||||||
* Calculation not meaningful | |||||||||||||||||||||||
(1) Under the two-class method, earnings (loss) per share is calculated using net earnings (loss) allocable to common shares, which is derived by reducing net earnings (loss) by the earnings (loss) allocable to participating securities. Net earnings (loss) allocable to common shares used in the basic and diluted (loss) earnings per share calculation were $90.6 and ($5.4) for the three months ended September 30, 2014 and 2013, respectively. Net (loss) earnings allocable to common shares used in the basic and diluted (loss) earnings per share calculation were $(56.3) and $12.6 for the nine months ended September 30, 2014 and 2013, respectively. | |||||||||||||||||||||||
September 30 | December 31 | |||||||
2014 | 2013 | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 826.0 | $ | 1,107.9 | ||||
Accounts receivable, net | 590.0 | 676.3 | ||||||
Inventories | 994.0 | 967.7 | ||||||
Prepaid expenses and other | 679.4 | 689.3 | ||||||
Total current assets | 3,089.4 | 3,441.2 | ||||||
Property, plant and equipment, at cost | 2,402.1 | 2,484.5 | ||||||
Less accumulated depreciation | (1,102.4 | ) | (1,091.2 | ) | ||||
Property, plant and equipment, net | 1,299.7 | 1,393.3 | ||||||
Goodwill | 273.0 | 282.5 | ||||||
Other assets | 1,428.3 | 1,375.3 | ||||||
Total assets | $ | 6,090.4 | $ | 6,492.3 | ||||
Liabilities and Shareholders’ Equity | ||||||||
Current Liabilities | ||||||||
Debt maturing within one year | $ | 156.9 | $ | 188.0 | ||||
Accounts payable | 937.4 | 896.5 | ||||||
Accrued compensation | 216.9 | 271.2 | ||||||
Other accrued liabilities | 627.0 | 652.6 | ||||||
Sales and taxes other than income | 170.8 | 186.8 | ||||||
Income taxes | 44.1 | 45.4 | ||||||
Total current liabilities | 2,153.1 | 2,240.5 | ||||||
Long-term debt | 2,472.8 | 2,532.7 | ||||||
Employee benefit plans | 363.1 | 398.0 | ||||||
Long-term income taxes | 76.2 | 53.3 | ||||||
Other liabilities | 100.2 | 140.3 | ||||||
Total liabilities | $ | 5,165.4 | $ | 5,364.8 | ||||
Shareholders’ Equity | ||||||||
Common stock | $ | 187.6 | $ | 189.4 | ||||
Additional paid-in-capital | 2,199.0 | 2,175.6 | ||||||
Retained earnings | 4,060.6 | 4,196.7 | ||||||
Accumulated other comprehensive loss | (948.0 | ) | (870.4 | ) | ||||
Treasury stock, at cost | (4,590.5 | ) | (4,581.2 | ) | ||||
Total Avon shareholders’ equity | 908.7 | 1,110.1 | ||||||
Noncontrolling interests | 16.3 | 17.4 | ||||||
Total shareholders’ equity | $ | 925.0 | $ | 1,127.5 | ||||
Total liabilities and shareholders’ equity | $ | 6,090.4 | $ | 6,492.3 | ||||
Nine Months Ended | ||||||||
September 30 | ||||||||
2014 | 2013 | |||||||
Cash Flows from Operating Activities | ||||||||
Net (loss) income | $ | (55.3 | ) | $ | 15.8 | |||
Loss from discontinued operations, net of tax | — | 50.9 | ||||||
(Loss) income from continuing operations, net of tax | $ | (55.3 | ) | $ | 66.7 | |||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 144.8 | 174.9 | ||||||
Provision for doubtful accounts | 146.9 | 175.6 | ||||||
Provision for obsolescence | 67.6 | 84.6 | ||||||
Share-based compensation | 28.4 | 35.9 | ||||||
Deferred income taxes | (87.9 | ) | (49.2 | ) | ||||
Charge for Venezuelan monetary assets and liabilities | 53.7 | 34.1 | ||||||
Charge for Venezuelan non-monetary assets to their net realizable value | 115.7 | — | ||||||
Impairment of goodwill and intangible asset | — | 42.1 | ||||||
Other | 76.9 | 43.4 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | (120.0 | ) | (164.8 | ) | ||||
Inventories | (229.7 | ) | (233.7 | ) | ||||
Prepaid expenses and other | (64.1 | ) | 58.7 | |||||
Accounts payable and accrued liabilities | 100.0 | (61.7 | ) | |||||
Income and other taxes | 31.6 | (36.8 | ) | |||||
Noncurrent assets and liabilities | (82.8 | ) | (73.5 | ) | ||||
Net cash provided by operating activities of continuing operations | 125.8 | 96.3 | ||||||
Cash Flows from Investing Activities | ||||||||
Capital expenditures | (88.2 | ) | (118.2 | ) | ||||
Disposal of assets | 7.0 | 15.5 | ||||||
Purchases of investments | (22.9 | ) | (23.7 | ) | ||||
Proceeds from sale of investments | 18.4 | 6.4 | ||||||
Net cash used by investing activities of continuing operations | (85.7 | ) | (120.0 | ) | ||||
Cash Flows from Financing Activities | ||||||||
Cash dividends | (81.9 | ) | (79.8 | ) | ||||
Debt, net (maturities of three months or less) | 9.8 | 49.0 | ||||||
Proceeds from debt | 9.1 | 1,481.1 | ||||||
Repayment of debt | (95.3 | ) | (1,927.9 | ) | ||||
Interest rate swap termination | — | 88.1 | ||||||
Net proceeds from exercise of stock options | 0.2 | 17.5 | ||||||
Repurchase of common stock | (9.4 | ) | (8.4 | ) | ||||
Net cash used by financing activities of continuing operations | (167.5 | ) | (380.4 | ) | ||||
Net cash used by operating activities of discontinued operations | — | (4.0 | ) | |||||
Net cash provided by investing activities of discontinued operations | — | 84.8 | ||||||
Net cash provided by discontinued operations | — | 80.8 | ||||||
Effect of exchange rate changes on cash and equivalents | (154.5 | ) | (78.0 | ) | ||||
Net decrease in cash and equivalents | (281.9 | ) | (401.3 | ) | ||||
Cash and equivalents at beginning of year (1) | $ | 1,107.9 | $ | 1,209.6 | ||||
Cash and equivalents at end of period | $ | 826.0 | $ | 808.3 | ||||
THREE MONTHS ENDED SEPTEMBER 30, 2014 |
REGIONAL RESULTS | ||||||||||||||||||
Total Revenue US$ | C$ | Units Sold | Price/Mix C$ | Active Reps (1) | Average Order C$ | |||||||||||||
% var. vs 3Q13 | % var. vs 3Q13 | % var. vs 3Q13 | % var. vs 3Q13 | % var. vs 3Q13 | % var. vs 3Q13 | |||||||||||||
Latin America | $ | 1,067.2 | (12)% | 2% | (5)% | 7% | (4)% | 6% | ||||||||||
Europe, Middle East & Africa | 620.0 | — | 5 | 4 | 1 | 2 | 3 | |||||||||||
North America | 276.7 | (16) | (15) | (22) | 7 | (18) | 3 | |||||||||||
Asia Pacific (1) | 174.3 | 4 | 4 | 11 | (7) | (9) | 13 | |||||||||||
Total from operations | 2,138.2 | (8) | 1 | (4) | 5 | (4) | 5 | |||||||||||
Global and other | — | — | — | — | — | — | — | |||||||||||
Total | $ | 2,138.2 | (8)% | 1% | (4)% | 5% | (4)% | 5% | ||||||||||
2014 GAAP Operating Profit (Loss) US$ | % var. vs 3Q13 | 2014 GAAP Operating Margin US$ | 2014 Adjusted Operating Profit (Loss)US$ (2) | 2013 Adjusted Operating Profit (Loss) US$ (2) | 2014 Adjusted Operating Margin (2) | 2013 Adjusted Operating Margin (2) | ||||||||||||
Latin America | $ | 142.3 | 17% | 13.3% | $ | 144.5 | $ | 136.7 | 13.5% | 11.3% | ||||||||
Europe, Middle East & Africa | 55.5 | (10) | 9.0 | 55.1 | 61.0 | 8.9 | 9.9 | |||||||||||
North America | (18.3 | ) | 44 | (6.6) | (12.5 | ) | (33.5 | ) | (4.5) | (10.2) | ||||||||
Asia Pacific | 9.0 | * | 5.2 | 9.0 | 2.6 | 5.2 | 1.6 | |||||||||||
Total from operations | 188.5 | 70 | 8.8 | 196.1 | 166.8 | 9.2 | 7.2 | |||||||||||
Global and other | (0.6 | ) | (99) | — | 1.7 | (41.8 | ) | — | — | |||||||||
Total | $ | 187.9 | * | 8.8% | $ | 197.8 | $ | 125.0 | 9.3% | 5.4% |
CATEGORY SALES (US$) |
Consolidated | ||||||||||||
Three months ended September 30 | US$ | C$ | ||||||||||
2014 | 2013 | % var. vs 3Q13 | % var. vs 3Q13 | |||||||||
Beauty: | ||||||||||||
Skincare | $ | 638.8 | $ | 678.3 | (6)% | 2% | ||||||
Fragrance | 507.2 | 555.6 | (9) | 3 | ||||||||
Color | 371.5 | 426.1 | (13) | (4) | ||||||||
Total Beauty | 1,517.5 | 1,660.0 | (9) | 1 | ||||||||
Fashion & Home: | ||||||||||||
Fashion (jewelry/watches/apparel/footwear/accessories/children's) | 331.4 | 362.7 | (9) | (3) | ||||||||
Home (gift & decorative products/housewares/entertainment & leisure/children's/nutrition) | 210.1 | 242.6 | (13) | (6) | ||||||||
Total Fashion & Home | 541.5 | 605.3 | (11) | (4) | ||||||||
Net sales | $ | 2,059.0 | $ | 2,265.3 | (9) | — | ||||||
Other revenue | 79.2 | 57.6 | 38 | 36 | ||||||||
Total revenue | $ | 2,138.2 | $ | 2,322.9 | (8) | 1 | ||||||
* Calculation not meaningful | ||||||||||||
(1) Excludes China. In the first quarter of 2014, we revised the definition of our "Change in Active Representatives" performance metric. The change from the previous definition is that we no longer divide the unique orders by the number of billing days. | ||||||||||||
(2) For a further discussion on our Non-GAAP financial measures, please refer to our discussion of Non-GAAP financial measures in this release and reconciliations of our Non-GAAP financial measures to related GAAP financial measure in the following supplemental schedules. |
NINE MONTHS ENDED SEPTEMBER 30, 2014 |
REGIONAL RESULTS | ||||||||||||||||||
Total Revenue US$ | C$ | Units Sold | Price/Mix C$ | Active Reps (1) | Average Order C$ | |||||||||||||
% var. vs 9M13 | % var. vs 9M13 | % var. vs 9M13 | % var. vs 9M13 | % var. vs 9M13 | % var. vs 9M13 | |||||||||||||
Latin America | $ | 3,187.7 | (12)% | 3% | (3)% | 6% | (4)% | 7% | ||||||||||
Europe, Middle East & Africa | 1,932.9 | (5) | — | (1) | 1 | (2) | 2 | |||||||||||
North America | 876.5 | (19) | (19) | (26) | 7 | (18) | (1) | |||||||||||
Asia Pacific (1) | 513.3 | (9) | (6) | (3) | (3) | (8) | 2 | |||||||||||
Total from operations | 6,510.4 | (11) | (2) | (5) | 3 | (5) | 3 | |||||||||||
Global and other | — | — | — | — | — | — | — | |||||||||||
Total | $ | 6,510.4 | (11)% | (2)% | (5)% | 3% | (5)% | 3% | ||||||||||
2014 GAAP Operating Profit (Loss)US$ | % var. vs 9M13 | 2014 GAAP Operating Margin US$ | 2014 Adjusted Operating Profit (Loss)US$ (2) | 2013 Adjusted Operating Profit (Loss) US$ (2) | 2014 Adjusted Operating Margin (2) | 2013 Adjusted Operating Margin (2) | ||||||||||||
Latin America | $ | 196.9 | (47)% | 6.2% | $ | 350.6 | $ | 417.8 | 11.0% | 11.6% | ||||||||
Europe, Middle East & Africa | 199.7 | (28) | 10.3 | 216.9 | 289.4 | 11.2 | 14.3 | |||||||||||
North America | (54.1 | ) | (1) | (6.2) | (15.3 | ) | (43.2 | ) | (1.7) | (4.0) | ||||||||
Asia Pacific | 15.6 | * | 3.0 | 18.5 | 31.0 | 3.6 | 5.5 | |||||||||||
Total from operations | 358.1 | (38) | 5.5 | 570.7 | 695.0 | 8.8 | 9.5 | |||||||||||
Global and other | (127.9 | ) | 7 | — | (53.5 | ) | (123.3 | ) | — | — | ||||||||
Total | $ | 230.2 | (48)% | 3.5% | $ | 517.2 | $ | 571.7 | 7.9% | 7.8% |
CATEGORY SALES (US$) |
Consolidated | ||||||||||||
Nine months ended September 30 | US$ | C$ | ||||||||||
2014 | 2013 | % var. vs 9M13 | % var. vs 9M13 | |||||||||
Beauty: | ||||||||||||
Skincare | $ | 1,946.1 | $ | 2,186.8 | (11)% | (3)% | ||||||
Fragrance | 1,524.4 | 1,699.4 | (10) | 1 | ||||||||
Color | 1,167.9 | 1,329.5 | (12) | (4) | ||||||||
Total Beauty | 4,638.4 | 5,215.7 | (11) | (2) | ||||||||
Fashion & Home: | ||||||||||||
Fashion (jewelry/watches/apparel/footwear/accessories/children's) | 1,035.2 | 1,182.3 | (12) | (6) | ||||||||
Home (gift & decorative products/housewares/entertainment & leisure/children's/nutrition) | 666.9 | 741.2 | (10) | 1 | ||||||||
Total Fashion & Home | 1,702.1 | 1,923.5 | (12) | (3) | ||||||||
Net sales | $ | 6,340.5 | $ | 7,139.2 | (11) | (2) | ||||||
Other revenue | 169.9 | 148.6 | 14 | 16 | ||||||||
Total revenue | $ | 6,510.4 | $ | 7,287.8 | (11) | (2) | ||||||
* Calculation not meaningful | ||||||||||||
(1) Excludes China. In the first quarter of 2014, we revised the definition of our "Change in Active Representatives" performance metric. The change from the previous definition is that we no longer divide the unique orders by the number of billing days. | ||||||||||||
(2) For a further discussion on our Non-GAAP financial measures, please refer to our discussion of Non-GAAP financial measures in this release and reconciliations of our Non-GAAP financial measures to related GAAP financial measure in the following supplemental schedules. |
THREE MONTHS ENDED SEPTEMBER 30, 2014 | ||||||||||||||||||||
Reported (GAAP) | CTI restructuring initiatives | Venezuelan special items | Pension settlement charge | Adjusted (Non-GAAP) | ||||||||||||||||
Cost of sales | $ | 813.9 | $ | — | $ | 2.0 | $ | — | $ | 811.8 | ||||||||||
Selling, general and administrative expenses | 1,136.4 | 2.5 | — | 5.4 | 1,128.6 | |||||||||||||||
Operating profit | 187.9 | 2.5 | 2.0 | 5.4 | 197.8 | |||||||||||||||
Income from continuing operations, before taxes | 144.4 | 2.5 | 2.0 | 5.4 | 154.3 | |||||||||||||||
Income taxes | (52.4 | ) | (0.5 | ) | — | (2.0 | ) | (54.9 | ) | |||||||||||
Income from continuing operations, net of tax | $ | 92.0 | $ | 2.0 | $ | 2.0 | $ | 3.4 | $ | 99.4 | ||||||||||
Diluted EPS from continuing operations | $ | 0.21 | $ | 0.01 | $ | 0.01 | $ | 0.01 | $ | 0.23 | ||||||||||
Gross margin | 61.9 | % | — | 0.1 | — | 62.0 | % | |||||||||||||
SG&A as a % of revenues | 53.1 | % | (0.1 | ) | — | (0.3 | ) | 52.8 | % | |||||||||||
Operating margin | 8.8 | % | 0.1 | 0.1 | 0.3 | 9.3 | % | |||||||||||||
Effective tax rate | 36.3 | % | 35.6 | % | ||||||||||||||||
SEGMENT OPERATING PROFIT (LOSS) | ||||||||||||||||||||
Latin America | $ | 142.3 | $ | 0.2 | $ | 2.0 | $ | — | $ | 144.5 | ||||||||||
Europe, Middle East & Africa | 55.5 | (0.4 | ) | — | — | 55.1 | ||||||||||||||
North America | (18.3 | ) | 1.8 | — | 4.0 | (12.5 | ) | |||||||||||||
Asia Pacific | 9.0 | — | — | — | 9.0 | |||||||||||||||
Global and other | (0.6 | ) | 0.9 | — | 1.4 | 1.7 | ||||||||||||||
Total | $ | 187.9 | $ | 2.5 | $ | 2.0 | $ | 5.4 | $ | 197.8 | ||||||||||
SEGMENT OPERATING MARGIN | ||||||||||||||||||||
Latin America | 13.3 | % | — | 0.2 | — | 13.5 | % | |||||||||||||
Europe, Middle East & Africa | 9.0 | % | (0.1 | ) | — | — | 8.9 | % | ||||||||||||
North America | (6.6 | )% | 0.7 | — | 1.4 | (4.5 | )% | |||||||||||||
Asia Pacific | 5.2 | % | — | — | — | 5.2 | % | |||||||||||||
Global and other | — | % | — | — | — | — | % | |||||||||||||
Total | 8.8 | % | 0.1 | 0.1 | 0.3 | 9.3 | % |
NINE MONTHS ENDED SEPTEMBER 30, 2014 | ||||||||||||||||||||||||
Reported (GAAP) | CTI restructuring initiatives | Venezuelan special items | FCPA Accrual | Pension settlement charge | Adjusted (Non-GAAP) | |||||||||||||||||||
Cost of sales | $ | 2,580.0 | $ | — | $ | 119.7 | $ | — | $ | — | $ | 2,460.2 | ||||||||||||
Selling, general and administrative expenses | 3,700.2 | 76.4 | 16.0 | 46.0 | 28.9 | 3,533.0 | ||||||||||||||||||
Operating profit | 230.2 | 76.4 | 135.7 | 46.0 | 28.9 | 517.2 | ||||||||||||||||||
Income from continuing operations, before taxes | 69.1 | 76.4 | 189.4 | 46.0 | 28.9 | 409.8 | ||||||||||||||||||
Income taxes | (124.4 | ) | (20.8 | ) | (11.9 | ) | — | (10.4 | ) | (167.5 | ) | |||||||||||||
(Loss) income from continuing operations, net of tax | $ | (55.3 | ) | $ | 55.6 | $ | 177.5 | $ | 46.0 | $ | 18.5 | $ | 242.3 | |||||||||||
Diluted EPS from continuing operations | $ | (0.13 | ) | $ | 0.13 | $ | 0.41 | $ | 0.11 | $ | 0.04 | $ | 0.55 | |||||||||||
Gross margin | 60.4 | % | — | 1.8 | — | — | 62.2 | % | ||||||||||||||||
SG&A as a % of revenues | 56.8 | % | (1.2 | ) | (0.2 | ) | (0.7 | ) | (0.4 | ) | 54.3 | % | ||||||||||||
Operating margin | 3.5 | % | 1.2 | 2.1 | 0.7 | 0.4 | 7.9 | % | ||||||||||||||||
Effective tax rate | 180.0 | % | 40.9 | % | ||||||||||||||||||||
SEGMENT OPERATING PROFIT (LOSS) | ||||||||||||||||||||||||
Latin America | $ | 196.9 | $ | 18.0 | $ | 135.7 | $ | — | $ | — | $ | 350.6 | ||||||||||||
Europe, Middle East & Africa | 199.7 | 17.2 | — | — | — | 216.9 | ||||||||||||||||||
North America | (54.1 | ) | 17.4 | — | — | 21.4 | (15.3 | ) | ||||||||||||||||
Asia Pacific | 15.6 | 2.9 | — | — | — | 18.5 | ||||||||||||||||||
Global and other | (127.9 | ) | 20.9 | — | 46.0 | 7.5 | (53.5 | ) | ||||||||||||||||
Total | $ | 230.2 | $ | 76.4 | $ | 135.7 | $ | 46.0 | $ | 28.9 | $ | 517.2 | ||||||||||||
SEGMENT OPERATING MARGIN | ||||||||||||||||||||||||
Latin America | 6.2 | % | 0.6 | 4.3 | — | — | 11.0 | % | ||||||||||||||||
Europe, Middle East & Africa | 10.3 | % | 0.9 | — | — | — | 11.2 | % | ||||||||||||||||
North America | (6.2 | )% | 2.0 | — | — | 2.4 | (1.7 | )% | ||||||||||||||||
Asia Pacific | 3.0 | % | 0.6 | — | — | — | 3.6 | % | ||||||||||||||||
Global and other | — | % | — | — | — | — | — | % | ||||||||||||||||
Total | 3.5 | % | 1.2 | 2.1 | 0.7 | 0.4 | 7.9 | % |
THREE MONTHS ENDED SEPTEMBER 30, 2013 | ||||||||||||||||||||
Reported (GAAP) | CTI restructuring initiatives | Venezuelan special items | Asset impairment and other charges | Adjusted (Non-GAAP) | ||||||||||||||||
Cost of sales | $ | 871.7 | $ | — | $ | 14.9 | $ | — | $ | 856.8 | ||||||||||
Selling, general and administrative expenses | 1,340.9 | (0.2 | ) | — | — | 1,341.1 | ||||||||||||||
Impairment of goodwill and intangible asset | 42.1 | — | — | 42.1 | — | |||||||||||||||
Operating profit | 68.2 | (0.2 | ) | 14.9 | 42.1 | 125.0 | ||||||||||||||
Income from continuing operations, before taxes | 31.6 | (0.2 | ) | 14.9 | 42.1 | 88.4 | ||||||||||||||
Income taxes | (38.0 | ) | 0.9 | — | 8.3 | (28.8 | ) | |||||||||||||
(Loss) income from continuing operations, net of tax | $ | (6.4 | ) | $ | 0.7 | $ | 14.9 | $ | 50.4 | $ | 59.6 | |||||||||
Diluted EPS from continuing operations | $ | (0.01 | ) | $ | — | $ | 0.03 | $ | 0.12 | $ | 0.14 | |||||||||
Gross margin | 62.5 | % | — | 0.6 | — | 63.1 | % | |||||||||||||
SG&A as a % of revenues | 57.7 | % | — | — | — | 57.7 | % | |||||||||||||
Operating margin | 2.9 | % | — | 0.6 | 1.8 | 5.4 | % | |||||||||||||
Effective tax rate | 120.1 | % | 32.5 | % | ||||||||||||||||
SEGMENT OPERATING PROFIT (LOSS) | ||||||||||||||||||||
Latin America | $ | 121.7 | $ | 0.1 | $ | 14.9 | $ | — | 136.7 | |||||||||||
Europe, Middle East & Africa | 61.4 | (0.4 | ) | — | — | 61.0 | ||||||||||||||
North America | (32.7 | ) | (0.8 | ) | — | — | (33.5 | ) | ||||||||||||
Asia Pacific | (39.7 | ) | 0.2 | — | 42.1 | 2.6 | ||||||||||||||
Global and other | (42.5 | ) | 0.7 | — | — | (41.8 | ) | |||||||||||||
Total | $ | 68.2 | $ | (0.2 | ) | $ | 14.9 | $ | 42.1 | $ | 125.0 | |||||||||
SEGMENT OPERATING MARGIN | ||||||||||||||||||||
Latin America | 10.1 | % | — | 1.2 | — | 11.3 | % | |||||||||||||
Europe, Middle East & Africa | 9.9 | % | (0.1 | ) | — | — | 9.9 | % | ||||||||||||
North America | (10.0 | )% | (0.2 | ) | — | — | (10.2 | )% | ||||||||||||
Asia Pacific | (23.7 | )% | 0.1 | — | 25.1 | 1.6 | % | |||||||||||||
Global and other | — | % | — | — | — | — | % | |||||||||||||
Total | 2.9 | % | — | 0.6 | 1.8 | 5.4 | % |
NINE MONTHS ENDED SEPTEMBER 30, 2013 | ||||||||||||||||||||||||||||
Reported (GAAP) | CTI restructuring initiatives | Venezuelan special items | FCPA accrual | Asset impairment and other charges | Loss on extinguishment of debt | Adjusted (Non-GAAP) | ||||||||||||||||||||||
Cost of sales | $ | 2,732.5 | $ | (0.9 | ) | $ | 39.7 | $ | — | $ | — | $ | — | $ | 2,693.7 | |||||||||||||
Selling, general and administrative expenses | 4,068.8 | 29.4 | 5.0 | 12.0 | — | — | 4,022.4 | |||||||||||||||||||||
Impairment of goodwill and intangible asset | 42.1 | — | — | — | 42.1 | — | — | |||||||||||||||||||||
Operating profit | 444.4 | 28.5 | 44.7 | 12.0 | 42.1 | — | 571.7 | |||||||||||||||||||||
Income from continuing operations, before taxes | 206.2 | 28.5 | 78.8 | 12.0 | 42.1 | 86.0 | 453.5 | |||||||||||||||||||||
Income taxes | (139.5 | ) | (8.3 | ) | 16.6 | — | 8.3 | (31.6 | ) | (154.3 | ) | |||||||||||||||||
Income from continuing operations, net of tax | $ | 66.7 | $ | 20.2 | $ | 95.4 | $ | 12.0 | $ | 50.4 | $ | 54.4 | $ | 299.1 | ||||||||||||||
Diluted EPS from continuing operations | $ | 0.15 | $ | 0.05 | $ | 0.22 | $ | 0.03 | $ | 0.12 | $ | 0.12 | $ | 0.68 | ||||||||||||||
Gross margin | 62.5 | % | — | 0.5 | — | — | 63.0 | % | ||||||||||||||||||||
SG&A as a % of revenues | 55.8 | % | (0.4 | ) | (0.1 | ) | (0.2 | ) | — | 55.2 | % | |||||||||||||||||
Operating margin | 6.1 | % | 0.4 | 0.6 | 0.2 | 0.6 | 7.8 | % | ||||||||||||||||||||
Effective tax rate | 67.6 | % | 34.0 | % | ||||||||||||||||||||||||
SEGMENT OPERATING PROFIT (LOSS) | ||||||||||||||||||||||||||||
Latin America | $ | 370.9 | $ | 2.2 | $ | 44.7 | $ | — | $ | — | $ | 417.8 | ||||||||||||||||
Europe, Middle East & Africa | 276.9 | 12.5 | — | — | — | 289.4 | ||||||||||||||||||||||
North America | (53.5 | ) | 10.3 | — | — | — | (43.2 | ) | ||||||||||||||||||||
Asia Pacific | (12.2 | ) | 1.1 | — | — | 42.1 | 31.0 | |||||||||||||||||||||
Global and other | (137.7 | ) | 2.4 | — | 12.0 | — | (123.3 | ) | ||||||||||||||||||||
Total | $ | 444.4 | $ | 28.5 | $ | 44.7 | $ | 12.0 | $ | 42.1 | $ | 571.7 | ||||||||||||||||
SEGMENT OPERATING MARGIN | ||||||||||||||||||||||||||||
Latin America | 10.3 | % | 0.1 | 1.2 | — | — | 11.6 | % | ||||||||||||||||||||
Europe, Middle East & Africa | 13.6 | % | 0.6 | — | — | — | 14.3 | % | ||||||||||||||||||||
North America | (4.9 | )% | 0.9 | — | — | — | (4.0 | )% | ||||||||||||||||||||
Asia Pacific | (2.2 | )% | 0.2 | — | — | 7.4 | 5.5 | % | ||||||||||||||||||||
Global and other | — | % | — | — | — | — | — | % | ||||||||||||||||||||
Total | 6.1 | % | 0.4 | 0.6 | 0.2 | 0.6 | 7.8 | % |
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