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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 |
|
x
|
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
¨
|
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
New York
|
|
13-0544597
|
(State or other jurisdiction of
Incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
Large accelerated filer
|
Q
|
|
Accelerated filer
|
¨
|
Non-accelerated filer
|
¨
(do not check if a smaller reporting company)
|
|
Smaller reporting company
|
¨
|
|
|
|
Page
Numbers
|
|
|
|
Item 1.
|
|
|
|
|
|
|
Consolidated Statements of Income
Three and Six Months Ended June 30, 2014 and June 30, 2013 |
3
-4
|
|
|
|
|
Three and Six Months Ended June 30, 2014 and June 30, 2013
|
5
-6
|
|
|
|
|
June 30, 2014 and December 31, 2013
|
|
|
|
|
|
Consolidated Statements of Cash Flows
Three and Six Months Ended June 30, 2014 and June 30, 2013 |
8
-9
|
|
|
|
|
10
-27
|
|
|
|
|
Item 2.
|
28
-50
|
|
|
|
|
Item 3.
|
||
|
|
|
Item 4.
|
||
|
||
|
|
|
Item 1.
|
||
|
|
|
Item 2.
|
||
|
|
|
Item 6.
|
||
|
|
|
|
|
Three Months Ended
|
||||||
(In millions, except per share data)
|
June 30, 2014
|
|
June 30, 2013
|
||||
Net sales
|
$
|
2,139.8
|
|
|
$
|
2,466.8
|
|
Other revenue
|
48.8
|
|
|
42.1
|
|
||
Total revenue
|
2,188.6
|
|
|
2,508.9
|
|
||
Costs, expenses and other:
|
|
|
|
||||
Cost of sales
|
810.7
|
|
|
935.4
|
|
||
Selling, general and administrative expenses
|
1,284.7
|
|
|
1,371.3
|
|
||
Operating profit
|
93.2
|
|
|
202.2
|
|
||
Interest expense
|
28.7
|
|
|
31.1
|
|
||
Loss on extinguishment of debt
|
—
|
|
|
13.0
|
|
||
Interest income
|
(3.8
|
)
|
|
(2.8
|
)
|
||
Other expense, net
|
2.6
|
|
|
15.6
|
|
||
Total other expenses
|
27.5
|
|
|
56.9
|
|
||
Income from continuing operations, before taxes
|
65.7
|
|
|
145.3
|
|
||
Income taxes
|
(45.8
|
)
|
|
(60.7
|
)
|
||
Income from continuing operations, net of tax
|
19.9
|
|
|
84.6
|
|
||
Loss from discontinued operations, net of tax
|
—
|
|
|
(50.4
|
)
|
||
Net income
|
19.9
|
|
|
34.2
|
|
||
Net income attributable to noncontrolling interests
|
(0.9
|
)
|
|
(2.3
|
)
|
||
Net income attributable to Avon
|
$
|
19.0
|
|
|
$
|
31.9
|
|
Earnings (loss) per share:
|
|
|
|
||||
Basic from continuing operations
|
$
|
0.04
|
|
|
$
|
0.19
|
|
Basic from discontinued operations
|
—
|
|
|
(0.12
|
)
|
||
Basic attributable to Avon
|
0.04
|
|
|
0.07
|
|
||
Diluted from continuing operations
|
0.04
|
|
|
0.19
|
|
||
Diluted from discontinued operations
|
—
|
|
|
(0.11
|
)
|
||
Diluted attributable to Avon
|
0.04
|
|
|
0.07
|
|
||
Cash dividends per common share
|
$
|
0.06
|
|
|
$
|
0.06
|
|
|
|
|
|
||||
|
Six Months Ended
|
||||||
(In millions, except per share data)
|
June 30, 2014
|
|
June 30, 2013
|
||||
Net sales
|
$
|
4,281.5
|
|
|
$
|
4,873.9
|
|
Other revenue
|
90.7
|
|
|
91.0
|
|
||
Total revenue
|
4,372.2
|
|
|
4,964.9
|
|
||
Costs, expenses and other:
|
|
|
|
||||
Cost of sales
|
1,766.1
|
|
|
1,860.8
|
|
||
Selling, general and administrative expenses
|
2,563.8
|
|
|
2,727.9
|
|
||
Operating profit
|
42.3
|
|
|
376.2
|
|
||
Interest expense
|
56.2
|
|
|
60.5
|
|
||
Loss on extinguishment of debt
|
—
|
|
|
86.0
|
|
||
Interest income
|
(7.6
|
)
|
|
(4.8
|
)
|
||
Other expense, net
|
69.0
|
|
|
59.9
|
|
||
Total other expenses
|
117.6
|
|
|
201.6
|
|
||
(Loss) income from continuing operations, before taxes
|
(75.3
|
)
|
|
174.6
|
|
||
Income taxes
|
(72.0
|
)
|
|
(101.5
|
)
|
||
(Loss) income from continuing operations, net of tax
|
(147.3
|
)
|
|
73.1
|
|
||
Loss from discontinued operations, net of tax
|
—
|
|
|
(51.5
|
)
|
||
Net (loss) income
|
(147.3
|
)
|
|
21.6
|
|
||
Net income attributable to noncontrolling interests
|
(2.0
|
)
|
|
(3.4
|
)
|
||
Net (loss) income attributable to Avon
|
$
|
(149.3
|
)
|
|
$
|
18.2
|
|
(Loss) earnings per share:
|
|
|
|
||||
Basic from continuing operations
|
$
|
(0.34
|
)
|
|
$
|
0.16
|
|
Basic from discontinued operations
|
—
|
|
|
(0.12
|
)
|
||
Basic attributable to Avon
|
(0.34
|
)
|
|
0.04
|
|
||
Diluted from continuing operations
|
(0.34
|
)
|
|
0.16
|
|
||
Diluted from discontinued operations
|
—
|
|
|
(0.12
|
)
|
||
Diluted attributable to Avon
|
(0.34
|
)
|
|
0.04
|
|
||
Cash dividends per common share
|
$
|
0.12
|
|
|
$
|
0.12
|
|
|
Three Months Ended
|
||||||
(In millions)
|
June 30, 2014
|
|
June 30, 2013
|
||||
Net income
|
$
|
19.9
|
|
|
$
|
34.2
|
|
Other comprehensive income (loss):
|
|
|
|
||||
Foreign currency translation adjustments
|
32.5
|
|
|
(107.7
|
)
|
||
Change in derivative losses on cash flow hedges, net of taxes of $0.2 and $0.2
|
0.3
|
|
|
0.3
|
|
||
Adjustments of and amortization of net actuarial loss and prior service cost, net of taxes of $(5.1) and $7.1
|
(7.8
|
)
|
|
19.6
|
|
||
Total other comprehensive income (loss), net of taxes
|
25.0
|
|
|
(87.8
|
)
|
||
Comprehensive income (loss)
|
44.9
|
|
|
(53.6
|
)
|
||
Less: comprehensive income (loss) attributable to noncontrolling interests
|
1.2
|
|
|
(0.4
|
)
|
||
Comprehensive income (loss) attributable to Avon
|
$
|
43.7
|
|
|
$
|
(53.2
|
)
|
|
|
|
|
||||
|
Six Months Ended
|
||||||
(In millions)
|
June 30, 2014
|
|
June 30, 2013
|
||||
Net (loss) income
|
$
|
(147.3
|
)
|
|
$
|
21.6
|
|
Other comprehensive income (loss):
|
|
|
|
||||
Foreign currency translation adjustments
|
23.6
|
|
|
(131.1
|
)
|
||
Change in derivative losses on cash flow hedges, net of taxes of $0.4 and $0.6
|
0.6
|
|
|
1.1
|
|
||
Adjustments of and amortization of net actuarial loss and prior service cost, net of taxes of $(0.3) and $12.1
|
0.2
|
|
|
29.7
|
|
||
Total other comprehensive income (loss), net of taxes
|
24.4
|
|
|
(100.3
|
)
|
||
Comprehensive loss
|
(122.9
|
)
|
|
(78.7
|
)
|
||
Less: comprehensive (loss) income attributable to noncontrolling interests
|
(0.3
|
)
|
|
0.5
|
|
||
Comprehensive loss attributable to Avon
|
$
|
(122.6
|
)
|
|
$
|
(79.2
|
)
|
(In millions)
|
June 30,
2014 |
|
December 31,
2013 |
||||
Assets
|
|
|
|
||||
Current Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
777.5
|
|
|
$
|
1,107.9
|
|
Accounts receivable, net
|
634.0
|
|
|
676.3
|
|
||
Inventories
|
965.7
|
|
|
967.7
|
|
||
Prepaid expenses and other
|
663.3
|
|
|
689.3
|
|
||
Total current assets
|
3,040.5
|
|
|
3,441.2
|
|
||
Property, plant and equipment, at cost
|
2,514.6
|
|
|
2,484.5
|
|
||
Less accumulated depreciation
|
(1,149.3
|
)
|
|
(1,091.2
|
)
|
||
Property, plant and equipment, net
|
1,365.3
|
|
|
1,393.3
|
|
||
Goodwill
|
288.9
|
|
|
282.5
|
|
||
Other assets
|
1,420.5
|
|
|
1,375.3
|
|
||
Total assets
|
$
|
6,115.2
|
|
|
$
|
6,492.3
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
||||
Current Liabilities
|
|
|
|
||||
Debt maturing within one year
|
$
|
154.1
|
|
|
$
|
188.0
|
|
Accounts payable
|
876.3
|
|
|
896.5
|
|
||
Accrued compensation
|
213.2
|
|
|
271.2
|
|
||
Other accrued liabilities
|
674.9
|
|
|
652.6
|
|
||
Sales and taxes other than income
|
167.8
|
|
|
186.8
|
|
||
Income taxes
|
21.2
|
|
|
45.4
|
|
||
Total current liabilities
|
2,107.5
|
|
|
2,240.5
|
|
||
Long-term debt
|
2,480.0
|
|
|
2,532.7
|
|
||
Employee benefit plans
|
390.3
|
|
|
398.0
|
|
||
Long-term income taxes
|
75.3
|
|
|
53.3
|
|
||
Other liabilities
|
102.0
|
|
|
140.3
|
|
||
Total liabilities
|
$
|
5,155.1
|
|
|
$
|
5,364.8
|
|
Contingencies (Note 6)
|
|
|
|
|
|
||
Shareholders’ Equity
|
|
|
|
||||
Common stock
|
$
|
187.6
|
|
|
$
|
189.4
|
|
Additional paid-in capital
|
2,196.2
|
|
|
2,175.6
|
|
||
Retained earnings
|
3,995.3
|
|
|
4,196.7
|
|
||
Accumulated other comprehensive loss
|
(846.3
|
)
|
|
(870.4
|
)
|
||
Treasury stock, at cost
|
(4,589.8
|
)
|
|
(4,581.2
|
)
|
||
Total Avon shareholders’ equity
|
943.0
|
|
|
1,110.1
|
|
||
Noncontrolling interests
|
17.1
|
|
|
17.4
|
|
||
Total shareholders’ equity
|
$
|
960.1
|
|
|
$
|
1,127.5
|
|
Total liabilities and shareholders’ equity
|
$
|
6,115.2
|
|
|
$
|
6,492.3
|
|
|
Six Months Ended
|
||||||
(In millions)
|
June 30, 2014
|
|
June 30, 2013
|
||||
Cash Flows from Operating Activities
|
|
|
|
||||
Net (loss) income
|
$
|
(147.3
|
)
|
|
$
|
21.6
|
|
Loss from discontinued operations, net of tax
|
—
|
|
|
51.5
|
|
||
(Loss) income from continuing operations, net of tax
|
$
|
(147.3
|
)
|
|
$
|
73.1
|
|
Adjustments to reconcile net (loss) income to net cash (used) provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
97.7
|
|
|
119.8
|
|
||
Provision for doubtful accounts
|
105.7
|
|
|
113.4
|
|
||
Provision for obsolescence
|
43.8
|
|
|
53.7
|
|
||
Share-based compensation
|
24.9
|
|
|
26.2
|
|
||
Deferred income taxes
|
(50.1
|
)
|
|
(27.4
|
)
|
||
Charge for Venezuelan monetary assets and liabilities
|
53.7
|
|
|
34.1
|
|
||
Charge for Venezuelan non-monetary assets to their net realizable value
|
115.7
|
|
|
—
|
|
||
Other
|
54.5
|
|
|
30.1
|
|
||
Changes in assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
(91.0
|
)
|
|
(103.3
|
)
|
||
Inventories
|
(126.4
|
)
|
|
(159.8
|
)
|
||
Prepaid expenses and other
|
(10.4
|
)
|
|
67.6
|
|
||
Accounts payable and accrued liabilities
|
14.6
|
|
|
(65.8
|
)
|
||
Income and other taxes
|
(10.0
|
)
|
|
(28.6
|
)
|
||
Noncurrent assets and liabilities
|
(82.5
|
)
|
|
(63.4
|
)
|
||
Net cash (used) provided by operating activities of continuing operations
|
(7.1
|
)
|
|
69.7
|
|
||
Cash Flows from Investing Activities
|
|
|
|
||||
Capital expenditures
|
(58.6
|
)
|
|
(75.8
|
)
|
||
Disposal of assets
|
5.4
|
|
|
12.8
|
|
||
Purchases of investments
|
(13.4
|
)
|
|
(14.2
|
)
|
||
Proceeds from sale of investments
|
10.8
|
|
|
0.2
|
|
||
Net cash used by investing activities of continuing operations
|
(55.8
|
)
|
|
(77.0
|
)
|
||
Cash Flows from Financing Activities*
|
|
|
|
||||
Cash dividends
|
(54.6
|
)
|
|
(53.9
|
)
|
||
Debt, net (maturities of three months or less)
|
3.4
|
|
|
31.6
|
|
||
Proceeds from debt
|
9.2
|
|
|
1,478.8
|
|
||
Repayment of debt
|
(92.0
|
)
|
|
(1,796.2
|
)
|
||
Interest rate swap termination
|
—
|
|
|
88.1
|
|
||
Net proceeds from exercise of stock options
|
0.2
|
|
|
16.9
|
|
||
Repurchase of common stock
|
(8.6
|
)
|
|
(7.6
|
)
|
||
Net cash used by financing activities of continuing operations
|
(142.4
|
)
|
|
(242.3
|
)
|
||
Cash Flows from Discontinued Operations
|
|
|
|
||||
Net cash used by operating activities of discontinued operations
|
—
|
|
|
(0.5
|
)
|
||
Net cash used by investing activities of discontinued operations
|
—
|
|
|
(0.2
|
)
|
||
Net cash used by discontinued operations
|
—
|
|
|
(0.7
|
)
|
||
Effect of exchange rate changes on cash and equivalents
|
(125.1
|
)
|
|
(81.0
|
)
|
||
Net decrease in cash and equivalents
|
(330.4
|
)
|
|
(331.3
|
)
|
||
Cash and equivalents at beginning of year
(1)
|
$
|
1,107.9
|
|
|
$
|
1,209.6
|
|
Cash and equivalents at end of period
(2)
|
$
|
777.5
|
|
|
$
|
878.3
|
|
*
|
Non-cash financing activities in the six months ended
June 30,
2013
included the change in fair market value of interest-rate swap agreements of
$(.7)
.
|
(1)
|
Includes cash and cash equivalents of discontinued operations of
$2.7
at the beginning of the year in 2013.
|
(2)
|
Includes cash and cash equivalents of discontinued operations of
$5.1
at the end of the period in 2013.
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30,
|
|
June 30,
|
||||||||||||
(Shares in millions)
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Numerator from continuing operations:
|
|
|
|
|
|
|
|
|
||||||||
Income (loss) from continuing operations, less amounts attributable to noncontrolling interests
|
|
$
|
19.0
|
|
|
$
|
82.3
|
|
|
$
|
(149.3
|
)
|
|
$
|
69.7
|
|
Less: Loss (income) allocated to participating securities
|
|
.1
|
|
|
(.7
|
)
|
|
2.3
|
|
|
(.6
|
)
|
||||
Income (loss) from continuing operations allocated to common shareholders
|
|
19.1
|
|
|
81.6
|
|
|
(147.0
|
)
|
|
69.1
|
|
||||
Numerator from discontinued operations:
|
|
|
|
|
|
|
|
|
||||||||
Loss from discontinued operations
|
|
$
|
—
|
|
|
$
|
(50.4
|
)
|
|
$
|
—
|
|
|
$
|
(51.5
|
)
|
Less: Loss allocated to participating securities
|
|
—
|
|
|
.4
|
|
|
—
|
|
|
.5
|
|
||||
Loss allocated to common shareholders
|
|
—
|
|
|
(50.0
|
)
|
|
—
|
|
|
(51.0
|
)
|
||||
Numerator attributable to Avon:
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss) attributable to Avon
|
|
$
|
19.0
|
|
|
$
|
31.9
|
|
|
$
|
(149.3
|
)
|
|
$
|
18.2
|
|
Less: Loss (income) allocated to participating securities
|
|
.1
|
|
|
(.3
|
)
|
|
2.3
|
|
|
(.2
|
)
|
||||
Income (loss) allocated to common shareholders
|
|
19.1
|
|
|
31.6
|
|
|
(147.0
|
)
|
|
18.0
|
|
||||
Denominator:
|
|
|
|
|
|
|
|
|
||||||||
Basic EPS weighted-average shares outstanding
|
|
434.6
|
|
|
433.5
|
|
|
434.4
|
|
|
433.0
|
|
||||
Diluted effect of assumed conversion of stock options
|
|
—
|
|
|
1.1
|
|
|
—
|
|
|
.9
|
|
||||
Diluted EPS adjusted weighted-average shares outstanding
|
|
434.6
|
|
|
434.6
|
|
|
434.4
|
|
|
433.9
|
|
||||
Income (Loss) per Common Share from continuing operations:
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
$
|
.04
|
|
|
$
|
.19
|
|
|
$
|
(.34
|
)
|
|
$
|
.16
|
|
Diluted
|
|
.04
|
|
|
.19
|
|
|
(.34
|
)
|
|
.16
|
|
||||
Loss per Common Share from discontinued operations:
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
$
|
—
|
|
|
$
|
(.12
|
)
|
|
$
|
—
|
|
|
$
|
(.12
|
)
|
Diluted
|
|
—
|
|
|
(.11
|
)
|
|
—
|
|
|
(.12
|
)
|
||||
Income (Loss) per Common Share attributable to Avon:
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
$
|
.04
|
|
|
$
|
.07
|
|
|
$
|
(.34
|
)
|
|
$
|
.04
|
|
Diluted
|
|
.04
|
|
|
.07
|
|
|
(.34
|
)
|
|
.04
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||
|
|
2013
|
|
2013
|
||||
Total revenue
|
|
$
|
24.7
|
|
|
$
|
52.3
|
|
Operating loss
(1)
|
|
(80.0
|
)
|
|
(81.9
|
)
|
Components of Inventories
|
|
June 30, 2014
|
|
December 31, 2013
|
||||
Raw materials
|
|
$
|
302.0
|
|
|
$
|
272.9
|
|
Finished goods
|
|
663.7
|
|
|
694.8
|
|
||
Total
|
|
$
|
965.7
|
|
|
$
|
967.7
|
|
|
|
Three Months Ended June 30,
|
||||||||||||||||||||||
|
|
Pension Benefits
|
|
|
|
|
||||||||||||||||||
Net Periodic Benefit Costs
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Postretirement Benefits
|
||||||||||||||||||
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||||||
Service cost
|
|
$
|
3.1
|
|
|
$
|
3.4
|
|
|
$
|
2.1
|
|
|
$
|
2.8
|
|
|
$
|
.3
|
|
|
$
|
.5
|
|
Interest cost
|
|
8.3
|
|
|
7.0
|
|
|
9.0
|
|
|
9.0
|
|
|
1.3
|
|
|
1.1
|
|
||||||
Expected return on plan assets
|
|
(9.5
|
)
|
|
(9.4
|
)
|
|
(11.1
|
)
|
|
(10.1
|
)
|
|
—
|
|
|
—
|
|
||||||
Amortization of prior service credit
|
|
(.1
|
)
|
|
(.1
|
)
|
|
—
|
|
|
—
|
|
|
(1.1
|
)
|
|
(1.2
|
)
|
||||||
Amortization of net actuarial losses
|
|
13.8
|
|
|
12.0
|
|
|
2.3
|
|
|
2.7
|
|
|
.5
|
|
|
.6
|
|
||||||
Settlements/curtailments
|
|
25.0
|
|
|
—
|
|
|
—
|
|
|
(7.5
|
)
|
|
—
|
|
|
—
|
|
||||||
Net periodic benefit costs
|
|
$
|
40.6
|
|
|
$
|
12.9
|
|
|
$
|
2.3
|
|
|
$
|
(3.1
|
)
|
|
$
|
1.0
|
|
|
$
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
Six Months Ended June 30,
|
||||||||||||||||||||||
|
|
Pension Benefits
|
|
|
|
|
||||||||||||||||||
Net Periodic Benefit Costs
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Postretirement Benefits
|
||||||||||||||||||
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||||||
Service cost
|
|
$
|
6.5
|
|
|
$
|
8.4
|
|
|
$
|
4.5
|
|
|
$
|
7.6
|
|
|
$
|
.6
|
|
|
$
|
1.0
|
|
Interest cost
|
|
15.0
|
|
|
13.6
|
|
|
18.6
|
|
|
18.1
|
|
|
2.6
|
|
|
2.5
|
|
||||||
Expected return on plan assets
|
|
(17.9
|
)
|
|
(18.8
|
)
|
|
(22.0
|
)
|
|
(19.9
|
)
|
|
—
|
|
|
—
|
|
||||||
Amortization of prior service credit
|
|
(.2
|
)
|
|
(.2
|
)
|
|
—
|
|
|
(.3
|
)
|
|
(2.2
|
)
|
|
(2.4
|
)
|
||||||
Amortization of net actuarial losses
|
|
24.5
|
|
|
23.3
|
|
|
4.6
|
|
|
7.3
|
|
|
1.0
|
|
|
1.4
|
|
||||||
Settlements/curtailments
|
|
25.0
|
|
|
—
|
|
|
—
|
|
|
(7.5
|
)
|
|
—
|
|
|
—
|
|
||||||
Net periodic benefit costs
|
|
$
|
52.9
|
|
|
$
|
26.3
|
|
|
$
|
5.7
|
|
|
$
|
5.3
|
|
|
$
|
2.0
|
|
|
$
|
2.5
|
|
Three Months Ended June 30, 2014:
|
|
Foreign Currency Translation Adjustments
|
|
Cash Flow Hedges
|
|
Net Investment Hedges
|
|
Pension and Postretirement Benefits
|
|
Total
|
||||||||||
Balance at March 31, 2014
|
|
$
|
(438.3
|
)
|
|
$
|
(4.8
|
)
|
|
$
|
(4.3
|
)
|
|
$
|
(423.7
|
)
|
|
$
|
(871.1
|
)
|
Other comprehensive income other than reclassifications
|
|
32.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
32.3
|
|
|||||
Reclassifications into earnings:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Derivative losses on cash flow hedges, net of tax of $.2
(1)
|
|
—
|
|
|
.3
|
|
|
—
|
|
|
—
|
|
|
.3
|
|
|||||
Adjustments of and amortization of net actuarial gain and prior service cost, net of tax of $(5.1)
(2)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7.8
|
)
|
|
(7.8
|
)
|
|||||
Total reclassifications into earnings
|
|
—
|
|
|
.3
|
|
|
—
|
|
|
(7.8
|
)
|
|
(7.5
|
)
|
|||||
Balance at June 30, 2014
|
|
$
|
(406.0
|
)
|
|
$
|
(4.5
|
)
|
|
$
|
(4.3
|
)
|
|
$
|
(431.5
|
)
|
|
$
|
(846.3
|
)
|
Three Months Ended June 30, 2013:
|
|
Foreign Currency Translation Adjustments
|
|
Cash Flow Hedges
|
|
Net Investment Hedges
|
|
Pension and Postretirement Benefits
|
|
Total
|
||||||||||
Balance at March 31, 2013
|
|
$
|
(341.0
|
)
|
|
$
|
(6.0
|
)
|
|
$
|
(4.3
|
)
|
|
$
|
(537.9
|
)
|
|
$
|
(889.2
|
)
|
Other comprehensive loss other than reclassifications
|
|
(107.7
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(107.7
|
)
|
|||||
Reclassifications into earnings:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Derivative losses on cash flow hedges, net of tax of $.2
(1)
|
|
—
|
|
|
.3
|
|
|
—
|
|
|
—
|
|
|
.3
|
|
|||||
Adjustments of and amortization of net actuarial loss and prior service cost, net of tax of $7.1
(2)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19.6
|
|
|
19.6
|
|
|||||
Total reclassifications into earnings
|
|
—
|
|
|
.3
|
|
|
—
|
|
|
19.6
|
|
|
19.9
|
|
|||||
Balance at June 30, 2013
|
|
$
|
(448.7
|
)
|
|
$
|
(5.7
|
)
|
|
$
|
(4.3
|
)
|
|
$
|
(518.3
|
)
|
|
$
|
(977.0
|
)
|
Six Months Ended June 30, 2014:
|
|
Foreign Currency Translation Adjustments
|
|
Cash Flow Hedges
|
|
Net Investment Hedges
|
|
Pension and Postretirement Benefits
|
|
Total
|
||||||||||
Balance at December 31, 2013
|
|
$
|
(429.3
|
)
|
|
$
|
(5.1
|
)
|
|
$
|
(4.3
|
)
|
|
$
|
(431.7
|
)
|
|
$
|
(870.4
|
)
|
Other comprehensive income other than reclassifications
|
|
23.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23.3
|
|
|||||
Reclassifications into earnings:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Derivative losses on cash flow hedges, net of tax of $.4
(1)
|
|
—
|
|
|
.6
|
|
|
—
|
|
|
—
|
|
|
.6
|
|
|||||
Adjustments of and amortization of net actuarial loss and prior service cost, net of tax of $(.3)
(2)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
.2
|
|
|
.2
|
|
|||||
Total reclassifications into earnings
|
|
—
|
|
|
.6
|
|
|
—
|
|
|
.2
|
|
|
.8
|
|
|||||
Balance at June 30, 2014
|
|
$
|
(406.0
|
)
|
|
$
|
(4.5
|
)
|
|
$
|
(4.3
|
)
|
|
$
|
(431.5
|
)
|
|
$
|
(846.3
|
)
|
Six Months Ended June 30, 2013:
|
|
Foreign Currency Translation Adjustments
|
|
Cash Flow Hedges
|
|
Net Investment Hedges
|
|
Pension and Postretirement Benefits
|
|
Total
|
||||||||||
Balance at December 31, 2012
|
|
$
|
(317.6
|
)
|
|
$
|
(6.8
|
)
|
|
$
|
(4.3
|
)
|
|
$
|
(548.0
|
)
|
|
$
|
(876.7
|
)
|
Other comprehensive loss other than reclassifications
|
|
(131.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(131.1
|
)
|
|||||
Reclassifications into earnings:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Derivative losses on cash flow hedges, net of tax of $.6
(1)
|
|
—
|
|
|
1.1
|
|
|
—
|
|
|
—
|
|
|
1.1
|
|
|||||
Adjustments of and amortization of net actuarial loss and prior service cost, net of tax of $12.1
(2)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29.7
|
|
|
29.7
|
|
|||||
Total reclassifications into earnings
|
|
—
|
|
|
1.1
|
|
|
—
|
|
|
29.7
|
|
|
30.8
|
|
|||||
Balance at June 30, 2013
|
|
$
|
(448.7
|
)
|
|
$
|
(5.7
|
)
|
|
$
|
(4.3
|
)
|
|
$
|
(518.3
|
)
|
|
$
|
(977.0
|
)
|
|
Three Months Ended June 30,
|
||||||||||||||
|
2014
|
|
2013
|
||||||||||||
|
Revenue
|
|
Operating
Profit (Loss)
|
|
Revenue
|
|
Operating
Profit (Loss)
|
||||||||
Latin America
|
$
|
1,053.8
|
|
|
$
|
98.0
|
|
|
$
|
1,252.1
|
|
|
$
|
147.8
|
|
Europe, Middle East & Africa
|
658.1
|
|
|
76.8
|
|
|
678.4
|
|
|
104.1
|
|
||||
North America
|
304.1
|
|
|
(27.3
|
)
|
|
380.3
|
|
|
(11.5
|
)
|
||||
Asia Pacific
|
172.6
|
|
|
(1.1
|
)
|
|
198.1
|
|
|
16.4
|
|
||||
Total from operations
|
$
|
2,188.6
|
|
|
$
|
146.4
|
|
|
$
|
2,508.9
|
|
|
$
|
256.8
|
|
Global and other
|
—
|
|
|
(53.2
|
)
|
|
—
|
|
|
(54.6
|
)
|
||||
Total
|
$
|
2,188.6
|
|
|
$
|
93.2
|
|
|
$
|
2,508.9
|
|
|
$
|
202.2
|
|
|
|
|
|
|
|
|
|
||||||||
|
Six Months Ended June 30,
|
||||||||||||||
|
2014
|
|
2013
|
||||||||||||
|
Revenue
|
|
Operating
Profit (Loss)
|
|
Revenue
|
|
Operating
Profit (Loss)
|
||||||||
Latin America
|
$
|
2,120.5
|
|
|
$
|
54.6
|
|
|
$
|
2,396.5
|
|
|
$
|
249.2
|
|
Europe, Middle East & Africa
|
1,312.9
|
|
|
144.2
|
|
|
1,411.5
|
|
|
215.5
|
|
||||
North America
|
599.8
|
|
|
(35.8
|
)
|
|
758.8
|
|
|
(20.8
|
)
|
||||
Asia Pacific
|
339.0
|
|
|
6.6
|
|
|
398.1
|
|
|
27.5
|
|
||||
Total from operations
|
$
|
4,372.2
|
|
|
$
|
169.6
|
|
|
$
|
4,964.9
|
|
|
$
|
471.4
|
|
Global and other
|
—
|
|
|
(127.3
|
)
|
|
—
|
|
|
(95.2
|
)
|
||||
Total
|
$
|
4,372.2
|
|
|
$
|
42.3
|
|
|
$
|
4,964.9
|
|
|
$
|
376.2
|
|
Components of Prepaid Expenses and Other
|
|
June 30, 2014
|
|
December 31, 2013
|
||||
Deferred tax assets
|
|
$
|
243.7
|
|
|
$
|
233.6
|
|
Prepaid taxes and tax refunds receivable
|
|
136.5
|
|
|
145.9
|
|
||
Prepaid brochure costs, paper, and other literature
|
|
80.8
|
|
|
95.7
|
|
||
Receivables other than trade
|
|
74.0
|
|
|
86.6
|
|
||
Short-term investments
|
|
32.9
|
|
|
31.7
|
|
||
Other
|
|
95.4
|
|
|
95.8
|
|
||
Prepaid expenses and other
|
|
$
|
663.3
|
|
|
$
|
689.3
|
|
Components of Other Assets
|
|
June 30, 2014
|
|
December 31, 2013
|
||||
Deferred tax assets
|
|
$
|
979.9
|
|
|
$
|
944.7
|
|
Long-term receivables
|
|
187.7
|
|
|
168.0
|
|
||
Capitalized software
|
|
118.8
|
|
|
122.9
|
|
||
Investments
|
|
34.2
|
|
|
33.8
|
|
||
Other intangible assets, net (Note 11)
|
|
33.1
|
|
|
33.5
|
|
||
Tooling
|
|
30.4
|
|
|
37.9
|
|
||
Other
|
|
36.4
|
|
|
34.5
|
|
||
Other assets
|
|
$
|
1,420.5
|
|
|
$
|
1,375.3
|
|
•
|
charges of
$34.6
and
$49.5
, respectively, primarily for employee-related costs, primarily severance benefits;
|
•
|
contract termination and other charges of
$6.2
and
$7.5
, respectively, primarily related to the costs associated with the closure of the France market and the exit of the Service Model Transformation ("SMT") facility;
|
•
|
accelerated depreciation of
$6.1
and
$7.5
, respectively, associated with the closure and rationalization of certain facilities and other assets;
|
•
|
charges of $
3.7
and $
3.7
, respectively, primarily related to the accumulated foreign currency translation adjustments associated with the closure of the France market; and
|
•
|
implementation costs of
$.4
during the three months ended June 30, 2014, primarily associated with the closure of the France market, and
$4.9
during the six months ended June 30, 2014, primarily for professional service fees associated with our North America business.
|
•
|
net charges of
$3.2
and
$16.5
, respectively, primarily for employee-related costs, including severance benefits;
|
•
|
contract termination and other charges of
$3.9
and
$3.9
, respectively, primarily related to costs associated with the closure of the Republic of Ireland market;
|
•
|
accelerated depreciation of
$4.9
and
$11.8
, respectively, associated with the closure and rationalization of certain facilities;
|
•
|
net benefits of
$3.5
and
$3.5
, respectively, primarily related to the accumulated foreign currency translation adjustments associated with the closure of the Vietnam market;
|
•
|
implementation costs of
$.4
and
$.8
, respectively, for professional service fees; and
|
•
|
net benefits of
$.4
and
$.7
, respectively, related to inventory adjustments.
|
|
|
Employee-
Related
Costs
|
|
Currency Translation Adjustment Write-offs
|
|
Contract Terminations/Other
|
|
Total
|
||||||||
Balance at December 31, 2013
|
|
$
|
46.7
|
|
|
$
|
—
|
|
|
$
|
1.8
|
|
|
$
|
48.5
|
|
2014 charges
|
|
53.4
|
|
|
3.7
|
|
|
7.8
|
|
|
64.9
|
|
||||
Adjustments
|
|
(3.9
|
)
|
|
—
|
|
|
(.3
|
)
|
|
(4.2
|
)
|
||||
Cash payments
|
|
(32.1
|
)
|
|
—
|
|
|
(5.8
|
)
|
|
(37.9
|
)
|
||||
Non-cash write-offs
|
|
(1.6
|
)
|
|
(3.7
|
)
|
|
—
|
|
|
(5.3
|
)
|
||||
Foreign exchange
|
|
(.5
|
)
|
|
—
|
|
|
—
|
|
|
(.5
|
)
|
||||
Balance at June 30, 2014
|
|
$
|
62.0
|
|
|
$
|
—
|
|
|
$
|
3.5
|
|
|
$
|
65.5
|
|
|
|
Employee-
Related
Costs
|
|
Inventory/Asset
Write-offs
|
|
Currency
Translation
Adjustment
Write-offs
|
|
Contract
Terminations/Other
|
|
Total
|
||||||||||
Charges incurred to date
|
|
$
|
145.1
|
|
|
$
|
.7
|
|
|
.2
|
|
|
$
|
14.2
|
|
|
$
|
160.2
|
|
|
Estimated charges to be incurred on approved initiatives
|
|
2.7
|
|
|
—
|
|
|
—
|
|
|
.4
|
|
|
3.1
|
|
|||||
Total expected charges on approved initiatives
|
|
$
|
147.8
|
|
|
$
|
.7
|
|
|
$
|
.2
|
|
|
$
|
14.6
|
|
|
$
|
163.3
|
|
|
|
Latin
America
|
|
Europe, Middle East & Africa
|
|
North
America
|
|
Asia
Pacific
|
|
Corporate
|
|
Total
|
||||||||||||
2012
|
|
$
|
12.9
|
|
|
$
|
1.1
|
|
|
$
|
18.0
|
|
|
$
|
12.9
|
|
|
$
|
3.6
|
|
|
$
|
48.5
|
|
2013
|
|
11.1
|
|
|
15.6
|
|
|
5.3
|
|
|
1.3
|
|
|
17.7
|
|
|
51.0
|
|
||||||
First quarter 2014
|
|
13.8
|
|
|
2.0
|
|
|
.7
|
|
|
.3
|
|
|
(.6
|
)
|
|
16.2
|
|
||||||
Second quarter 2014
|
|
1.6
|
|
|
13.2
|
|
|
9.8
|
|
|
2.6
|
|
|
17.3
|
|
|
44.5
|
|
||||||
Charges incurred to date
|
|
39.4
|
|
|
31.9
|
|
|
33.8
|
|
|
17.1
|
|
|
38.0
|
|
|
160.2
|
|
||||||
Estimated charges to be incurred on approved initiatives
|
|
4.3
|
|
|
—
|
|
|
(1.1
|
)
|
|
.3
|
|
|
(.4
|
)
|
|
3.1
|
|
||||||
Total expected charges on approved initiatives
|
|
$
|
43.7
|
|
|
$
|
31.9
|
|
|
$
|
32.7
|
|
|
$
|
17.4
|
|
|
$
|
37.6
|
|
|
$
|
163.3
|
|
|
|
Employee-
Related
Costs
|
|
Contract Terminations/Other
|
|
Total
|
||||||
Balance at December 31, 2013
|
|
$
|
2.0
|
|
|
$
|
12.3
|
|
|
$
|
14.3
|
|
Adjustments
|
|
(.1
|
)
|
|
—
|
|
|
(.1
|
)
|
|||
Cash payments
|
|
(1.1
|
)
|
|
(2.9
|
)
|
|
(4.0
|
)
|
|||
Balance at June 30, 2014
|
|
$
|
.8
|
|
|
$
|
9.4
|
|
|
$
|
10.2
|
|
|
Latin
America
|
|
Europe, Middle East & Africa
|
|
Asia
Pacific
|
|
Total
|
||||||||
Gross balance at December 31, 2013
|
$
|
112.6
|
|
|
$
|
167.3
|
|
|
$
|
85.0
|
|
|
$
|
364.9
|
|
Accumulated impairments
|
—
|
|
|
—
|
|
|
(82.4
|
)
|
|
(82.4
|
)
|
||||
Net balance at December 31, 2013
|
$
|
112.6
|
|
|
$
|
167.3
|
|
|
$
|
2.6
|
|
|
$
|
282.5
|
|
|
|
|
|
|
|
|
|
||||||||
Changes during the period ended June 30, 2014:
|
|
|
|
|
|
|
|
||||||||
Foreign exchange
|
$
|
2.8
|
|
|
$
|
3.6
|
|
|
$
|
—
|
|
|
$
|
6.4
|
|
|
|
|
|
|
|
|
|
||||||||
Gross balance at June 30, 2014
|
$
|
115.4
|
|
|
$
|
170.9
|
|
|
$
|
85.0
|
|
|
$
|
371.3
|
|
Accumulated impairments
|
—
|
|
|
—
|
|
|
(82.4
|
)
|
|
(82.4
|
)
|
||||
Net balance at June 30, 2014
|
$
|
115.4
|
|
|
$
|
170.9
|
|
|
$
|
2.6
|
|
|
$
|
288.9
|
|
|
June 30, 2014
|
|
December 31, 2013
|
||||||||||||
|
Gross
Amount
|
|
Accumulated
Amortization
|
|
Gross
Amount
|
|
Accumulated
Amortization
|
||||||||
Finite-Lived Intangible Assets
|
|
|
|
|
|
|
|
||||||||
Customer relationships
|
$
|
40.9
|
|
|
$
|
(38.2
|
)
|
|
$
|
39.9
|
|
|
$
|
(36.5
|
)
|
Licensing agreements
|
53.6
|
|
|
(49.1
|
)
|
|
52.3
|
|
|
(47.3
|
)
|
||||
Noncompete agreements
|
8.2
|
|
|
(8.2
|
)
|
|
8.1
|
|
|
(8.1
|
)
|
||||
Trademarks
|
6.6
|
|
|
(6.6
|
)
|
|
6.6
|
|
|
(6.6
|
)
|
||||
Indefinite-Lived Trademarks
|
25.9
|
|
|
—
|
|
|
25.1
|
|
|
—
|
|
||||
Total
|
$
|
135.2
|
|
|
$
|
(102.1
|
)
|
|
$
|
132.0
|
|
|
$
|
(98.5
|
)
|
•
|
Level 1 - Quoted prices in active markets for identical assets or liabilities.
|
•
|
Level 2 - Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.
|
•
|
Level 3 - Unobservable inputs based on our own assumptions.
|
|
Level 1
|
|
Level 2
|
|
Total
|
||||||
Assets:
|
|
|
|
|
|
||||||
Available-for-sale securities
|
$
|
2.6
|
|
|
$
|
—
|
|
|
$
|
2.6
|
|
Foreign exchange forward contracts
|
—
|
|
|
.9
|
|
|
.9
|
|
|||
Total
|
$
|
2.6
|
|
|
$
|
.9
|
|
|
$
|
3.5
|
|
Liabilities:
|
|
|
|
|
|
||||||
Foreign exchange forward contracts
|
$
|
—
|
|
|
$
|
.9
|
|
|
$
|
.9
|
|
Total
|
$
|
—
|
|
|
.9
|
|
|
.9
|
|
|
Level 1
|
|
Level 2
|
|
Total
|
||||||
Assets:
|
|
|
|
|
|
||||||
Money market funds
|
$
|
.5
|
|
|
$
|
—
|
|
|
$
|
.5
|
|
Available-for-sale securities
|
2.5
|
|
|
—
|
|
|
2.5
|
|
|||
Foreign exchange forward contracts
|
—
|
|
|
3.4
|
|
|
3.4
|
|
|||
Total
|
$
|
3.0
|
|
|
$
|
3.4
|
|
|
$
|
6.4
|
|
Liabilities:
|
|
|
|
|
|
||||||
Foreign exchange forward contracts
|
$
|
—
|
|
|
$
|
.3
|
|
|
$
|
.3
|
|
Total
|
$
|
—
|
|
|
$
|
.3
|
|
|
$
|
.3
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
December 31, 2013
|
||||||||||||
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
||||||||
Available-for-sale securities
|
$
|
2.6
|
|
|
$
|
2.6
|
|
|
$
|
2.5
|
|
|
$
|
2.5
|
|
Money market funds
|
—
|
|
|
—
|
|
|
.5
|
|
|
.5
|
|
||||
Debt maturing within one year
(1)
|
(154.1
|
)
|
|
(154.1
|
)
|
|
(188.0
|
)
|
|
(188.0
|
)
|
||||
Long-term debt
(1)
|
(2,480.0
|
)
|
|
(2,536.9
|
)
|
|
(2,532.7
|
)
|
|
(2,511.6
|
)
|
||||
Foreign exchange forward contracts
|
—
|
|
|
—
|
|
|
3.1
|
|
|
3.1
|
|
|
Asset
|
|
Liability
|
||||||||
|
Balance Sheet
Classification
|
|
Fair
Value
|
|
Balance Sheet
Classification
|
|
Fair
Value
|
||||
Derivatives not designated as hedges:
|
|
|
|
|
|
|
|
||||
Foreign exchange forward contracts
|
Prepaid expenses and other
|
|
$
|
.9
|
|
|
Accounts payable
|
|
$
|
.9
|
|
Total derivatives not designated as hedges
|
|
|
$
|
.9
|
|
|
|
|
$
|
.9
|
|
Total derivatives
|
|
|
$
|
.9
|
|
|
|
|
$
|
.9
|
|
|
Asset
|
|
|
|
Liability
|
||||||
|
Balance Sheet
Classification
|
|
Fair
Value
|
|
Balance Sheet
Classification
|
|
Fair
Value
|
||||
Derivatives not designated as hedges:
|
|
|
|
|
|
|
|
||||
Foreign exchange forward contracts
|
Prepaid expenses and other
|
|
$
|
3.4
|
|
|
Accounts payable
|
|
$
|
.3
|
|
Total derivatives not designated as hedges
|
|
|
$
|
3.4
|
|
|
|
|
$
|
.3
|
|
Total derivatives
|
|
|
$
|
3.4
|
|
|
|
|
$
|
.3
|
|
•
|
Changes in the fair value of a derivative that is designated as a fair value hedge, along with the loss or gain on the hedged asset or liability that is attributable to the hedged risk are recorded in earnings.
|
•
|
Changes in the fair value of a derivative that is designated as a cash flow hedge are recorded in AOCI to the extent effective and reclassified into earnings in the same period or periods during which the transaction hedged by that derivative also affects earnings.
|
•
|
Changes in the fair value of a derivative that is designated as a hedge of a net investment in a foreign operation are recorded in foreign currency translation adjustments within AOCI to the extent effective as a hedge.
|
•
|
Changes in the fair value of a derivative that is not designated as a hedging instrument are recognized in earnings in other expense, net in the Consolidated Statements of Income.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||
|
2014
|
|
2013
|
|
%/Point
Change
|
|
2014
|
|
2013
|
|
%/Point
Change
|
||||||||||
Total revenue
|
$
|
2,188.6
|
|
|
$
|
2,508.9
|
|
|
(13
|
)%
|
|
$
|
4,372.2
|
|
|
$
|
4,964.9
|
|
|
(12
|
)%
|
Cost of sales
|
810.7
|
|
|
935.4
|
|
|
(13
|
)%
|
|
1,766.1
|
|
|
1,860.8
|
|
|
(5
|
)%
|
||||
Selling, general and administrative expenses
|
1,284.7
|
|
|
1,371.3
|
|
|
(6
|
)%
|
|
2,563.8
|
|
|
2,727.9
|
|
|
(6
|
)%
|
||||
Operating profit
|
93.2
|
|
|
202.2
|
|
|
(54
|
)%
|
|
42.3
|
|
|
376.2
|
|
|
(89
|
)%
|
||||
Interest expense
|
28.7
|
|
|
31.1
|
|
|
(8
|
)%
|
|
56.2
|
|
|
60.5
|
|
|
(7
|
)%
|
||||
Loss on extinguishment of debt
|
—
|
|
|
13.0
|
|
|
*
|
|
|
—
|
|
|
86.0
|
|
|
*
|
|
||||
Interest income
|
(3.8
|
)
|
|
(2.8
|
)
|
|
36
|
%
|
|
(7.6
|
)
|
|
(4.8
|
)
|
|
58
|
%
|
||||
Other expense, net
|
2.6
|
|
|
15.6
|
|
|
(83
|
)%
|
|
69.0
|
|
|
59.9
|
|
|
15
|
%
|
||||
Income (loss) from continuing operations, net of tax
|
19.9
|
|
|
84.6
|
|
|
(76
|
)%
|
|
(147.3
|
)
|
|
73.1
|
|
|
*
|
|
||||
Net income (loss) attributable to Avon
|
$
|
19.0
|
|
|
$
|
31.9
|
|
|
(40
|
)%
|
|
$
|
(149.3
|
)
|
|
$
|
18.2
|
|
|
*
|
|
Diluted earnings (loss) per share from continuing operations
|
$
|
.04
|
|
|
$
|
.19
|
|
|
(79
|
)%
|
|
$
|
(.34
|
)
|
|
$
|
.16
|
|
|
*
|
|
Diluted earnings (loss) per share attributable to Avon
|
$
|
.04
|
|
|
$
|
.07
|
|
|
(43
|
)%
|
|
$
|
(.34
|
)
|
|
$
|
.04
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Advertising expenses
(1)
|
$
|
46.9
|
|
|
$
|
41.8
|
|
|
12
|
%
|
|
$
|
79.2
|
|
|
$
|
87.7
|
|
|
(10
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Gross margin
|
63.0
|
%
|
|
62.7
|
%
|
|
.2
|
|
|
59.6
|
%
|
|
62.5
|
%
|
|
(2.9
|
)
|
||||
CTI restructuring
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Venezuelan special items
|
.1
|
|
|
.6
|
|
|
(.5
|
)
|
|
2.7
|
|
|
.5
|
|
|
2.2
|
|
||||
Adjusted gross margin
|
63.0
|
%
|
|
63.3
|
%
|
|
(.3
|
)
|
|
62.3
|
%
|
|
63.0
|
%
|
|
(.7
|
)
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Selling, general and administrative expenses as a % of total revenue
|
58.7
|
%
|
|
54.7
|
%
|
|
4.0
|
|
|
58.6
|
%
|
|
54.9
|
%
|
|
3.7
|
|
||||
CTI restructuring
|
(2.3
|
)
|
|
(.3
|
)
|
|
(2.0
|
)
|
|
(1.7
|
)
|
|
(.6
|
)
|
|
(1.1
|
)
|
||||
Venezuelan special items
|
(.7
|
)
|
|
(.1
|
)
|
|
(.6
|
)
|
|
(.4
|
)
|
|
(.1
|
)
|
|
(.3
|
)
|
||||
FCPA accrual
|
—
|
|
|
(.5
|
)
|
|
.5
|
|
|
(1.1
|
)
|
|
(.2
|
)
|
|
(.9
|
)
|
||||
Pension settlement charge
|
(1.1
|
)
|
|
—
|
|
|
(1.1
|
)
|
|
(.5
|
)
|
|
—
|
|
|
(.5
|
)
|
||||
Adjusted selling, general and administrative expenses as a % of total revenue
|
54.6
|
%
|
|
53.8
|
%
|
|
.8
|
|
|
55.0
|
%
|
|
54.0
|
%
|
|
1.0
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating profit
|
$
|
93.2
|
|
|
$
|
202.2
|
|
|
(54
|
)%
|
|
$
|
42.3
|
|
|
$
|
376.2
|
|
|
(89
|
)%
|
CTI restructuring
|
51.2
|
|
|
8.4
|
|
|
|
|
|
73.9
|
|
|
28.7
|
|
|
|
|||||
Venezuelan special items
|
18.0
|
|
|
16.5
|
|
|
|
|
|
133.7
|
|
|
29.8
|
|
|
|
|||||
FCPA accrual
|
—
|
|
|
12.0
|
|
|
|
|
46.0
|
|
|
12.0
|
|
|
|
||||||
Pension settlement charge
|
23.5
|
|
|
—
|
|
|
|
|
23.5
|
|
|
—
|
|
|
|
||||||
Adjusted operating profit
|
$
|
185.9
|
|
|
$
|
239.1
|
|
|
(22
|
)%
|
|
$
|
319.4
|
|
|
$
|
446.7
|
|
|
(28
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating margin
|
4.3
|
%
|
|
8.1
|
%
|
|
(3.8
|
)
|
|
1.0
|
%
|
|
7.6
|
%
|
|
(6.6
|
)
|
||||
CTI restructuring
|
2.3
|
|
|
.3
|
|
|
2.0
|
|
|
1.7
|
|
|
.6
|
|
|
1.1
|
|
||||
Venezuelan special items
|
.8
|
|
|
.7
|
|
|
.1
|
|
|
3.1
|
|
|
.6
|
|
|
2.5
|
|
||||
FCPA accrual
|
—
|
|
|
.5
|
|
|
(.5
|
)
|
|
1.1
|
|
|
.2
|
|
|
.9
|
|
||||
Pension settlement charge
|
1.1
|
|
|
—
|
|
|
1.1
|
|
|
.5
|
|
|
—
|
|
|
.5
|
|
||||
Adjusted operating margin
|
8.5
|
%
|
|
9.5
|
%
|
|
(1.0
|
)
|
|
7.3
|
%
|
|
9.0
|
%
|
|
(1.7
|
)
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Effective tax rate
|
69.7
|
%
|
|
41.8
|
%
|
|
27.9
|
|
|
(95.7
|
)%
|
|
58.1
|
%
|
|
(153.8
|
)
|
||||
CTI restructuring
|
(7.9
|
)
|
|
(.1
|
)
|
|
(7.8
|
)
|
|
(6.8
|
)
|
|
(.2
|
)
|
|
(6.6
|
)
|
||||
Venezuelan special items
|
(15.0
|
)
|
|
(4.3
|
)
|
|
(10.7
|
)
|
|
170.5
|
|
|
(22.6
|
)
|
|
193.1
|
|
||||
FCPA accrual
|
—
|
|
|
(2.6
|
)
|
|
2.6
|
|
|
(17.2
|
)
|
|
(1.7
|
)
|
|
(15.5
|
)
|
||||
Pension settlement charge
|
(4.1
|
)
|
|
—
|
|
|
(4.1
|
)
|
|
(6.7
|
)
|
|
—
|
|
|
(6.7
|
)
|
||||
Loss on extinguishment of debt
|
—
|
|
|
.1
|
|
|
(.1
|
)
|
|
—
|
|
|
.7
|
|
|
(.7
|
)
|
||||
Adjusted effective tax rate
|
42.7
|
%
|
|
34.9
|
%
|
|
7.8
|
|
|
44.1
|
%
|
|
34.4
|
%
|
|
9.7
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Change in Active Representatives
(2)
|
|
|
|
|
(6
|
)%
|
|
|
|
|
|
(5
|
)%
|
||||||||
Change in units sold
|
|
|
|
|
(6
|
)%
|
|
|
|
|
|
(6
|
)%
|
(1)
|
Advertising expenses are included within selling, general and administrative expenses.
|
(2)
|
See "Performance Metrics" in this MD&A for a discussion of the update to the definition of Change in Active Representatives.
|
|
Three Months Ended June 30,
|
|
%/Point Change
|
||||||||||
|
2014
|
|
2013
|
|
US$
|
|
Constant $
|
||||||
Beauty:
|
|
|
|
|
|
|
|
||||||
Skincare
|
$
|
662.4
|
|
|
$
|
758.8
|
|
|
(13
|
)%
|
|
(5
|
)%
|
Fragrance
|
504.0
|
|
|
580.4
|
|
|
(13
|
)
|
|
—
|
|
||
Color
|
395.2
|
|
|
448.3
|
|
|
(12
|
)
|
|
(4
|
)
|
||
Total Beauty
|
1,561.6
|
|
|
1,787.5
|
|
|
(13
|
)
|
|
(3
|
)
|
||
Fashion & Home:
|
|
|
|
|
|
|
|
||||||
Fashion
|
359.4
|
|
|
414.7
|
|
|
(13
|
)
|
|
(6
|
)
|
||
Home
|
218.8
|
|
|
264.6
|
|
|
(17
|
)
|
|
(2
|
)
|
||
Total Fashion & Home
|
578.2
|
|
|
679.3
|
|
|
(15
|
)
|
|
(5
|
)
|
||
Net sales
|
$
|
2,139.8
|
|
|
$
|
2,466.8
|
|
|
(13
|
)
|
|
(4
|
)
|
•
|
a decrease of 200 basis points due to the unfavorable impact of foreign exchange, driven by Latin America and Europe, Middle East & Africa;
|
•
|
an increase of 90 basis points due to lower supply chain costs largely attributable to productivity initiatives in Latin America; and
|
•
|
an increase of 70 basis points due to the favorable net impact of mix and pricing, primarily in Latin America, which includes the realization of price increases in markets experiencing relatively high inflation (Venezuela and Argentina).
|
•
|
an increase of 100 basis points from foreign exchange;
|
•
|
an increase of 70 basis points due to the net impact of declining revenue with respect to our fixed expenses; and
|
•
|
an increase of 40 basis points from higher advertising costs, primarily in Latin America and Asia Pacific, partially offset by reduced spend in North America.
|
•
|
a decrease of 60 basis points from lower expenses related to our Service Model Transformation ("SMT") project;
|
•
|
a decrease of 30 basis points from lower professional and related fees associated with the FCPA investigations and compliance reviews; and
|
•
|
various other insignificant items that benefited selling, general and administrative expenses and Adjusted selling, general and administrative expenses as a percentage of revenue.
|
|
Six Months Ended June 30,
|
|
%/Point Change
|
||||||||||
|
2014
|
|
2013
|
|
US$
|
|
Constant $
|
||||||
Beauty:
|
|
|
|
|
|
|
|
||||||
Skincare
|
$
|
1,307.3
|
|
|
$
|
1,508.5
|
|
|
(13
|
)%
|
|
(6
|
)%
|
Fragrance
|
1,017.2
|
|
|
1,143.8
|
|
|
(11
|
)
|
|
1
|
|
||
Color
|
796.4
|
|
|
903.4
|
|
|
(12
|
)
|
|
(4
|
)
|
||
Total Beauty
|
3,120.9
|
|
|
3,555.7
|
|
|
(12
|
)
|
|
(4
|
)
|
||
Fashion & Home:
|
|
|
|
|
|
|
|
||||||
Fashion
|
703.8
|
|
|
819.6
|
|
|
(14
|
)
|
|
(8
|
)
|
||
Home
|
456.8
|
|
|
498.6
|
|
|
(8
|
)
|
|
5
|
|
||
Total Fashion & Home
|
1,160.6
|
|
|
1,318.2
|
|
|
(12
|
)
|
|
(3
|
)
|
||
Net sales
|
$
|
4,281.5
|
|
|
$
|
4,873.9
|
|
|
(12
|
)
|
|
(3
|
)
|
•
|
a decrease of 190 basis points due to the unfavorable impact of foreign exchange, driven by Latin America and Europe, Middle East & Africa;
|
•
|
an increase of 60 basis points due to lower supply chain costs largely attributable to productivity initiatives in Latin America; and
|
•
|
an increase of 40 basis points due to the favorable net impact of mix and pricing, primarily in Latin America, which includes the realization of price increases in markets experiencing relatively high inflation (Venezuela and Argentina).
|
•
|
an increase of 100 basis points from foreign exchange;
|
•
|
an increase of 70 basis points due to the net impact of declining revenue with respect to our fixed expenses; and
|
•
|
an increase of 30 basis points from higher transportation expenses, driven by inflationary pressures in Latin America.
|
•
|
a decrease of 30 basis points from lower field spend, primarily in Latin America driven by Brazil;
|
•
|
a decrease of 30 basis points from lower expenses related to our SMT project; and
|
•
|
a decrease of 30 basis points from lower professional and related fees associated with the FCPA investigations and compliance reviews.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||||||||
|
|
|
|
|
%/Point Change
|
|
|
|
|
|
%/Point Change
|
||||||||||||||||
|
2014
|
|
2013
|
|
US$
|
|
Constant $
|
|
2014
|
|
2013
|
|
US$
|
|
Constant $
|
||||||||||||
Total revenue
|
$
|
1,053.8
|
|
|
$
|
1,252.1
|
|
|
(16
|
)%
|
|
1
|
%
|
|
$
|
2,120.5
|
|
|
$
|
2,396.5
|
|
|
(12
|
)%
|
|
4
|
%
|
Operating profit
|
98.0
|
|
|
147.8
|
|
|
(34
|
)%
|
|
(15
|
)%
|
|
54.6
|
|
|
249.2
|
|
|
(78
|
)%
|
|
(19
|
)%
|
||||
CTI restructuring
|
2.9
|
|
|
3.9
|
|
|
|
|
|
|
17.8
|
|
|
2.1
|
|
|
|
|
|
||||||||
Venezuelan special items
|
18.0
|
|
|
16.5
|
|
|
|
|
|
|
133.7
|
|
|
29.8
|
|
|
|
|
|
||||||||
Adjusted operating profit
|
$
|
118.9
|
|
|
$
|
168.3
|
|
|
(29
|
)%
|
|
(16
|
)%
|
|
$
|
206.1
|
|
|
$
|
281.1
|
|
|
(27
|
)%
|
|
(12
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Operating margin
|
9.3
|
%
|
|
11.8
|
%
|
|
(2.5
|
)
|
|
(2.0
|
)
|
|
2.6
|
%
|
|
10.4
|
%
|
|
(7.8
|
)
|
|
(2.4
|
)
|
||||
CTI restructuring
|
.3
|
|
|
.3
|
|
|
|
|
|
|
.8
|
|
|
.1
|
|
|
|
|
|
||||||||
Venezuelan special items
|
1.7
|
|
|
1.3
|
|
|
|
|
|
|
6.3
|
|
|
1.2
|
|
|
|
|
|
||||||||
Adjusted operating margin
|
11.3
|
%
|
|
13.4
|
%
|
|
(2.1
|
)
|
|
(2.2
|
)
|
|
9.7
|
%
|
|
11.7
|
%
|
|
(2.0
|
)
|
|
(1.8
|
)
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Change in Active Representatives
(1)
|
|
|
|
|
|
|
(6
|
)%
|
|
|
|
|
|
|
|
(4
|
)%
|
||||||||||
Change in units sold
|
|
|
|
|
|
|
(3
|
)%
|
|
|
|
|
|
|
|
(2
|
)%
|
•
|
a decline of 1.1 points due to lower gross margin caused primarily by 3.3 points from foreign exchange, primarily in Venezuela. The negative impact of foreign exchange was partially offset by 1.3 points from the favorable net impact of mix and pricing and .9 points from lower supply chain costs. Benefits from pricing include the realization of price increases in markets experiencing relatively high inflation (Venezuela and Argentina), and lower supply chain costs was primarily attributable to productivity initiatives;
|
•
|
a decline of .7 points from higher transportation expenses, driven by inflation in Venezuela and Argentina and other cost pressures in the region;
|
•
|
a decline of .4 points from higher administrative expenses, driven by inflationary costs;
|
•
|
a decline of .4 points from higher advertising spend, primarily in Brazil; and
|
•
|
a benefit of .8 points associated with the VAT credits in Brazil recognized in the second quarter of 2014, discussed above.
|
•
|
a decline of .9 points due to lower gross margin caused primarily by 2.2 points from foreign exchange, primarily in Venezuela. The negative impact of foreign exchange was partially offset by .7 points from the favorable net impact of mix and pricing and .6 points from lower supply chain costs. Benefits from pricing include the realization of price increases in markets experiencing relatively high inflation (Venezuela and Argentina), on inventory acquired in advance of such inflation;
|
•
|
a decline of .5 points from higher administrative expenses, driven by inflationary costs;
|
•
|
a decline of .6 points from higher transportation expenses, driven by inflation in Venezuela and Argentina and other cost pressures in the region;
|
•
|
a benefit of .5 points from lower field spend, primarily in Brazil; and
|
•
|
a benefit of .4 points associated with the VAT credits in Brazil recognized in the second quarter of 2014, discussed above.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||||||||
|
|
|
|
|
%/Point Change
|
|
|
|
|
|
%/Point Change
|
||||||||||||||||
|
2014
|
|
2013
|
|
US$
|
|
Constant $
|
|
2014
|
|
2013
|
|
US$
|
|
Constant $
|
||||||||||||
Total revenue
|
$
|
658.1
|
|
|
$
|
678.4
|
|
|
(3
|
)%
|
|
—
|
%
|
|
$
|
1,312.9
|
|
|
$
|
1,411.5
|
|
|
(7
|
)%
|
|
(3
|
)%
|
Operating profit
|
76.8
|
|
|
104.1
|
|
|
(26
|
)%
|
|
(22
|
)%
|
|
144.2
|
|
|
215.5
|
|
|
(33
|
)%
|
|
(28
|
)%
|
||||
CTI restructuring
|
15.4
|
|
|
3.7
|
|
|
|
|
|
|
17.6
|
|
|
12.9
|
|
|
|
|
|
||||||||
Adjusted operating profit
|
$
|
92.2
|
|
|
$
|
107.7
|
|
|
(14
|
)%
|
|
(11
|
)%
|
|
$
|
161.8
|
|
|
$
|
228.4
|
|
|
(29
|
)%
|
|
(25
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Operating margin
|
11.7
|
%
|
|
15.3
|
%
|
|
(3.6
|
)
|
|
(3.4
|
)
|
|
11.0
|
%
|
|
15.3
|
%
|
|
(4.3
|
)
|
|
(3.9
|
)
|
||||
CTI restructuring
|
2.3
|
|
|
.5
|
|
|
|
|
|
|
1.3
|
|
|
.9
|
|
|
|
|
|
||||||||
Adjusted operating margin
|
14.0
|
%
|
|
15.9
|
%
|
|
(1.9
|
)
|
|
(1.7
|
)
|
|
12.3
|
%
|
|
16.2
|
%
|
|
(3.9
|
)
|
|
(3.6
|
)
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Change in Active Representatives
(1)
|
|
|
|
|
|
|
(1
|
)%
|
|
|
|
|
|
|
|
(3
|
)%
|
||||||||||
Change in units sold
|
|
|
|
|
|
|
—
|
%
|
|
|
|
|
|
|
|
(3
|
)%
|
•
|
a decline of .7 points due to lower gross margin caused primarily by an estimated 2 points from foreign exchange, partially offset by .7 points from lower logistics costs and .4 points from lower obsolescence expense;
|
•
|
a decline of .5 points primarily due to higher fixed expenses; and
|
•
|
a decline of .3 points due to the net impact of items recognized in the prior-year period that did not recur in the current-year period. Due to the freeze of the United Kingdom pension plan, a curtailment gain benefited the prior-year period operating margin by 1.2 points. This was partially offset by an impairment of a facility in the United Kingdom that negatively impacted the prior-year period operating margin by .9 points.
|
•
|
a decline of 2.2 points due to lower gross margin caused primarily by an estimated 3 points from foreign exchange, partially offset by .5 points from lower logistics costs and .5 points from lower overhead costs which were attributable to increased productivity;
|
•
|
a decline of 1.2 points primarily due to the net impact of a decline in revenue with respect to our fixed expenses; and
|
•
|
a decline of .1 point due to the net impact of items recognized in the prior-year period that did not recur in the current-year period. Due to the freeze of the United Kingdom pension plan, a curtailment gain benefited the prior-year period operating margin by .6 points. This was partially offset by an impairment of a facility in the United Kingdom that negatively impacted the prior-year period operating margin by .5 points.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||||||||
|
|
|
|
|
%/Point Change
|
|
|
|
|
|
%/Point Change
|
||||||||||||||||
|
2014
|
|
2013
|
|
US$
|
|
Constant $
|
|
2014
|
|
2013
|
|
US$
|
|
Constant $
|
||||||||||||
Total revenue
|
$
|
304.1
|
|
|
$
|
380.3
|
|
|
(20
|
)%
|
|
(20
|
)%
|
|
$
|
599.8
|
|
|
$
|
758.8
|
|
|
(21
|
)%
|
|
(20
|
)%
|
Operating loss
|
(27.3
|
)
|
|
(11.5
|
)
|
|
*
|
|
|
*
|
|
|
(35.8
|
)
|
|
(20.8
|
)
|
|
(72
|
)%
|
|
(71
|
)%
|
||||
CTI restructuring
|
10.0
|
|
|
5.3
|
|
|
|
|
|
|
15.6
|
|
|
11.1
|
|
|
|
|
|
||||||||
Pension settlement charge
|
17.4
|
|
|
—
|
|
|
|
|
|
|
17.4
|
|
|
—
|
|
|
|
|
|
||||||||
Adjusted operating profit (loss)
|
$
|
.1
|
|
|
$
|
(6.2
|
)
|
|
*
|
|
|
*
|
|
|
$
|
(2.8
|
)
|
|
$
|
(9.7
|
)
|
|
71
|
%
|
|
70
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Operating margin
|
(9.0
|
)%
|
|
(3.0
|
)%
|
|
(6.0
|
)
|
|
(5.9
|
)
|
|
(6.0
|
)%
|
|
(2.7
|
)%
|
|
(3.3
|
)
|
|
(3.2
|
)
|
||||
CTI restructuring
|
3.3
|
|
|
1.4
|
|
|
|
|
|
|
2.6
|
|
|
1.5
|
|
|
|
|
|
||||||||
Pension settlement charge
|
5.7
|
|
|
—
|
|
|
|
|
|
|
2.9
|
|
|
—
|
|
|
|
|
|
||||||||
Adjusted operating margin
|
—
|
%
|
|
(1.6
|
)%
|
|
1.6
|
|
|
1.6
|
|
|
(.5
|
)%
|
|
(1.3
|
)%
|
|
.8
|
|
|
.8
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Change in Active Representatives
(1)
|
|
|
|
|
|
|
(19
|
)%
|
|
|
|
|
|
|
|
(18
|
)%
|
||||||||||
Change in units sold
|
|
|
|
|
|
|
(29
|
)%
|
|
|
|
|
|
|
|
(27
|
)%
|
•
|
a benefit of 1.9 points due to higher gross margin caused primarily by 1.4 points from the favorable net impact of mix and pricing and .8 points from lower supply chain costs. Pricing was favorably impacted by the decreased depth and frequency of discounting;
|
•
|
a benefit of 1.1 points due to lower net brochure costs, which was primarily as a result of cost savings initiatives;
|
•
|
a benefit of 1.0 point due to reduced advertising spend, which was primarily attributable to a shift towards more cost effective recruitment strategies;
|
•
|
a benefit of .5 points due to lower bad debt expense;
|
•
|
a decline of 3.1 points due to the net impact of declining revenue with respect to our fixed expenses, partially offset by lower expenses primarily resulting from our cost savings initiatives, mainly reductions in headcount that were associated with the $400M Cost Savings Initiative, and reduced field spending;
|
•
|
a decline of .5 points with respect to transportation expenses, due to the net impact of declining revenue and increased costs per unit as a result of lower volume; and
|
•
|
various other insignificant items that benefited operating margin and Adjusted operating margin.
|
•
|
a benefit of 1.8 points due to higher gross margin caused primarily by 1.3 points from the favorable net impact of mix and pricing and 1.0 point from lower supply chain costs. Pricing was favorably impacted by the decreased depth and frequency of discounting;
|
•
|
a benefit of 1.4 points due to reduced advertising spend, which was primarily attributable to a shift towards more cost effective recruitment strategies;
|
•
|
a benefit of .8 points due to lower net brochure costs, which was primarily as a result of cost savings initiatives;
|
•
|
a benefit of .6 points due to lower Representative and sales leader investment primarily due to lower commissions and reduced appointments of new Representatives;
|
•
|
a decline of 3.5 points due to the net impact of declining revenue with respect to our fixed expenses, partially offset by lower expenses primarily resulting from our cost savings initiatives, mainly reductions in headcount that were associated with the $400M Cost Savings Initiative, and reduced field spending;
|
•
|
a decline of .8 points with respect to transportation expenses, due to the net impact of declining revenue and increased costs per unit as a result of lower volume; and
|
•
|
various other insignificant items that benefited operating margin and Adjusted operating margin.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||||||||
|
|
|
|
|
%/Point Change
|
|
|
|
|
|
%/Point Change
|
||||||||||||||||
|
2014
|
|
2013
|
|
US$
|
|
Constant $
|
|
2014
|
|
2013
|
|
US$
|
|
Constant $
|
||||||||||||
Total revenue
|
$
|
172.6
|
|
|
$
|
198.1
|
|
|
(13
|
)%
|
|
(9
|
)%
|
|
$
|
339.0
|
|
|
$
|
398.1
|
|
|
(15
|
)%
|
|
(10
|
)%
|
Operating (loss) profit
|
(1.1
|
)
|
|
16.4
|
|
|
*
|
|
|
*
|
|
|
6.6
|
|
|
27.5
|
|
|
(76
|
)%
|
|
(69
|
)%
|
||||
CTI restructuring
|
2.6
|
|
|
(3.9
|
)
|
|
|
|
|
|
2.9
|
|
|
.9
|
|
|
|
|
|
||||||||
Adjusted operating profit
|
$
|
1.5
|
|
|
$
|
12.5
|
|
|
(88
|
)%
|
|
(84
|
)%
|
|
$
|
9.5
|
|
|
$
|
28.4
|
|
|
(67
|
)%
|
|
(59
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Operating margin
|
(.6
|
)%
|
|
8.3
|
%
|
|
(8.9
|
)
|
|
(8.4
|
)
|
|
1.9
|
%
|
|
6.9
|
%
|
|
(5.0
|
)
|
|
(4.3
|
)
|
||||
CTI restructuring
|
1.5
|
|
|
(2.0
|
)
|
|
|
|
|
|
.9
|
|
|
.2
|
|
|
|
|
|
||||||||
Adjusted operating margin
|
.9
|
%
|
|
6.3
|
%
|
|
(5.4
|
)
|
|
(5.0
|
)
|
|
2.8
|
%
|
|
7.1
|
%
|
|
(4.3
|
)
|
|
(3.7
|
)
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Change in Active Representatives
(1)
|
|
|
|
|
|
|
(8
|
)%
|
|
|
|
|
|
|
|
(8
|
)%
|
||||||||||
Change in units sold
|
|
|
|
|
|
|
(5
|
)%
|
|
|
|
|
|
|
|
(8
|
)%
|
•
|
a decline of 2.5 points due to the impact of declining revenue with respect to our fixed expenses;
|
•
|
a decline of 2.3 points due to lower gross margin caused primarily by 1.0 point from foreign exchange and 1.0 point from the unfavorable net impact of pricing and mix primarily driven by the Philippines;
|
•
|
a decline of 1.8 points due to higher advertising spend; and
|
•
|
a benefit of 2.1 points from lower bad debt expense as the 2013 results included an adjustment associated with prior periods in the Philippines.
|
•
|
a decline of 2.3 points due to lower gross margin caused primarily by .8 points from foreign exchange, .8 points from the unfavorable net impact of pricing and mix primarily driven by the Philippines, and .7 points from higher supply chain costs. Higher supply chain costs was driven by higher overhead costs primarily due to the impact of lower unit volume;
|
•
|
the unfavorable impact of lower revenue on fixed costs was partially offset by benefits from our cost savings initiatives, mainly reductions in headcount associated with the $400M Cost Savings Initiative, resulting in a net negative impact on Adjusted operating margin of approximately 1.5 points;
|
•
|
a decline of 1.2 points due to higher advertising spend; and
|
•
|
a benefit of 1.2 points from lower bad debt expense as the 2013 results included an adjustment associated with prior periods in the Philippines.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||
|
2014
|
|
2013
|
|
% Change
|
|
2014
|
|
2013
|
|
% Change
|
||||||||||
Total global expenses
|
$
|
157.8
|
|
|
$
|
163.3
|
|
|
(3
|
)%
|
|
$
|
339.0
|
|
|
$
|
304.0
|
|
|
12
|
%
|
CTI restructuring
|
20.3
|
|
|
(.6
|
)
|
|
|
|
20.0
|
|
|
1.7
|
|
|
|
||||||
FCPA accrual
|
—
|
|
|
12.0
|
|
|
|
|
46.0
|
|
|
12.0
|
|
|
|
||||||
Pension settlement charge
|
6.1
|
|
|
—
|
|
|
|
|
6.1
|
|
|
—
|
|
|
|
||||||
Adjusted total global expenses
|
$
|
131.4
|
|
|
$
|
151.9
|
|
|
(13
|
)%
|
|
$
|
266.9
|
|
|
$
|
290.3
|
|
|
(8
|
)%
|
Allocated to segments
|
(104.6
|
)
|
|
(108.7
|
)
|
|
(4
|
)%
|
|
(211.7
|
)
|
|
(208.8
|
)
|
|
1
|
%
|
||||
Adjusted net global expenses
|
$
|
26.8
|
|
|
$
|
43.2
|
|
|
(38
|
)%
|
|
$
|
55.2
|
|
|
$
|
81.5
|
|
|
(32
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net global expenses
(1)
|
$
|
53.2
|
|
|
$
|
54.6
|
|
|
(3
|
)%
|
|
$
|
127.3
|
|
|
$
|
95.2
|
|
|
34
|
%
|
•
|
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
|
•
|
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 or other restrictions, 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;
|
•
|
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.
|
|
|
Total Number
of Shares
Purchased
|
|
Average Price
Paid per Share
|
|
Total Number of Shares
Purchased as Part of
Publicly Announced
Programs
|
|
Approximate Dollar
Value of Shares that
May Yet Be Purchased
Under the Program
|
|||
4/1 - 4/30/14
|
|
93,131
|
|
(1)
|
$
|
15.17
|
|
|
*
|
|
*
|
5/1 - 5/31/14
|
|
35,209
|
|
(1)
|
14.80
|
|
|
*
|
|
*
|
|
6/1 - 6/30/14
|
|
7,169
|
|
(1)
|
14.65
|
|
|
*
|
|
*
|
|
Total
|
|
135,509
|
|
|
$
|
15.04
|
|
|
*
|
|
*
|
*
|
These amounts are not applicable as the Company does not have a share repurchase program in effect.
|
(1)
|
All shares were repurchased by the Company in connection with employee elections to use shares to pay withholding taxes upon the vesting of their restricted stock units.
|
|
|
AVON PRODUCTS, INC.
|
|
|
(Registrant)
|
|
|
|
Date:
|
July 31, 2014
|
/s/ Robert Loughran
|
|
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Robert Loughran
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Vice President and
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Corporate Controller
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Signed both on behalf of the
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registrant and as chief
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accounting officer.
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31.1
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Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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31.2
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Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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32.1
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Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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32.2
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Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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101
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The following materials formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Statements of Income, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements.
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