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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
|
x
|
|
Accelerated filer
|
¨
|
Non-accelerated filer
|
¨
(do not check if a smaller reporting company)
|
|
Smaller reporting company
|
¨
|
|
|
|
Emerging growth company
|
¨
|
|
|
Three Months Ended
|
||||||
(In millions, except per share data)
|
June 30, 2018
|
|
June 30, 2017
|
||||
Net sales
|
$
|
1,268.8
|
|
|
$
|
1,353.5
|
|
Other revenue
|
83.1
|
|
|
42.4
|
|
||
Total revenue
|
1,351.9
|
|
|
1,395.9
|
|
||
Costs, expenses and other:
|
|
|
|
||||
Cost of sales
|
539.7
|
|
|
525.0
|
|
||
Selling, general and administrative expenses
|
759.2
|
|
|
838.2
|
|
||
Operating profit
|
53.0
|
|
|
32.7
|
|
||
Interest expense
|
34.5
|
|
|
36.1
|
|
||
Loss on extinguishment of debt
|
2.9
|
|
|
—
|
|
||
Interest income
|
(3.5
|
)
|
|
(3.1
|
)
|
||
Other expense, net
|
19.4
|
|
|
11.9
|
|
||
Total other expenses
|
53.3
|
|
|
44.9
|
|
||
Loss before income taxes
|
(0.3
|
)
|
|
(12.2
|
)
|
||
Income taxes
|
(36.7
|
)
|
|
(33.6
|
)
|
||
Net loss
|
(37.0
|
)
|
|
(45.8
|
)
|
||
Net loss attributable to noncontrolling interests
|
0.9
|
|
|
0.3
|
|
||
Net loss attributable to Avon
|
$
|
(36.1
|
)
|
|
$
|
(45.5
|
)
|
Loss per share:
|
|
|
|
||||
Basic attributable to Avon
|
$
|
(0.09
|
)
|
|
$
|
(0.12
|
)
|
Diluted attributable to Avon
|
(0.09
|
)
|
|
(0.12
|
)
|
|
Six Months Ended
|
||||||
(In millions, except per share data)
|
June 30, 2018
|
|
June 30, 2017
|
||||
Net sales
|
$
|
2,578.4
|
|
|
$
|
2,651.6
|
|
Other revenue
|
167.0
|
|
|
77.4
|
|
||
Total revenue
|
2,745.4
|
|
|
2,729.0
|
|
||
Costs, expenses and other:
|
|
|
|
||||
Cost of sales
|
1,119.4
|
|
|
1,042.1
|
|
||
Selling, general and administrative expenses
|
1,528.1
|
|
|
1,624.4
|
|
||
Operating profit
|
97.9
|
|
|
62.5
|
|
||
Interest expense
|
70.7
|
|
|
71.2
|
|
||
Loss on extinguishment of debt
|
2.9
|
|
|
—
|
|
||
Interest income
|
(7.7
|
)
|
|
(7.8
|
)
|
||
Other expense, net
|
21.9
|
|
|
18.0
|
|
||
Total other expenses
|
87.8
|
|
|
81.4
|
|
||
Income (loss), before income taxes
|
10.1
|
|
|
(18.9
|
)
|
||
Income taxes
|
(68.2
|
)
|
|
(63.4
|
)
|
||
Net loss
|
(58.1
|
)
|
|
(82.3
|
)
|
||
Net loss attributable to noncontrolling interests
|
1.7
|
|
|
0.3
|
|
||
Net loss attributable to Avon
|
(56.4
|
)
|
|
$
|
(82.0
|
)
|
|
Loss per share:
|
|
|
|
||||
Basic attributable to Avon
|
(0.15
|
)
|
|
(0.21
|
)
|
||
Diluted attributable to Avon
|
(0.15
|
)
|
|
(0.21
|
)
|
|
Three Months Ended
|
||||||
(In millions)
|
June 30, 2018
|
|
June 30, 2017
|
||||
Net loss
|
$
|
(37.0
|
)
|
|
$
|
(45.8
|
)
|
Other comprehensive income:
|
|
|
|
||||
Foreign currency translation adjustments
|
(126.6
|
)
|
|
9.5
|
|
||
Adjustments of and amortization of net actuarial loss and prior service cost, net of taxes of $0.1 and $0.0
|
2.8
|
|
|
3.1
|
|
||
Other comprehensive income related to New Avon investment, net of taxes of $0.0
|
—
|
|
|
0.1
|
|
||
Total other comprehensive (loss) income, net of income taxes
|
(123.8
|
)
|
|
12.7
|
|
||
Comprehensive loss
|
(160.8
|
)
|
|
(33.1
|
)
|
||
Less: comprehensive loss attributable to noncontrolling interests
|
(1.2
|
)
|
|
(0.2
|
)
|
||
Comprehensive loss attributable to Avon
|
$
|
(159.6
|
)
|
|
$
|
(32.9
|
)
|
|
Six Months Ended
|
||||||
(In millions)
|
June 30, 2018
|
|
June 30, 2017
|
||||
Net loss
|
$
|
(58.1
|
)
|
|
$
|
(82.3
|
)
|
Other comprehensive income:
|
|
|
|
||||
Foreign currency translation adjustments
|
(93.9
|
)
|
|
71.5
|
|
||
Adjustments of and amortization of net actuarial loss and prior service cost, net of taxes of $0.3 and $0.0
|
5.7
|
|
|
6.2
|
|
||
Other comprehensive income related to New Avon investment, net of taxes of $0.0
|
—
|
|
|
1.2
|
|
||
Total other comprehensive (loss) income, net of income taxes
|
(88.2
|
)
|
|
78.9
|
|
||
Comprehensive loss
|
(146.3
|
)
|
|
(3.4
|
)
|
||
Less: comprehensive loss attributable to noncontrolling interests
|
(1.8
|
)
|
|
(0.1
|
)
|
||
Comprehensive loss attributable to Avon
|
$
|
(144.5
|
)
|
|
$
|
(3.3
|
)
|
(In millions)
|
June 30,
2018 |
|
December 31,
2017 |
||||
Assets
|
|
|
|
||||
Current Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
443.9
|
|
|
$
|
881.5
|
|
Accounts receivable, net
|
386.4
|
|
|
457.2
|
|
||
Inventories
|
662.2
|
|
|
598.2
|
|
||
Prepaid expenses and other
|
290.9
|
|
|
296.4
|
|
||
Total current assets
|
1,783.4
|
|
|
2,233.3
|
|
||
Property, plant and equipment, at cost
|
1,402.9
|
|
|
1,481.9
|
|
||
Less accumulated depreciation
|
(768.7
|
)
|
|
(779.2
|
)
|
||
Property, plant and equipment, net
|
634.2
|
|
|
702.7
|
|
||
Goodwill
|
94.9
|
|
|
95.7
|
|
||
Other assets
|
573.9
|
|
|
666.2
|
|
||
Total assets
|
$
|
3,086.4
|
|
|
$
|
3,697.9
|
|
Liabilities, Series C Convertible Preferred Stock and Shareholders’ Deficit
|
|
|
|
||||
Current Liabilities
|
|
|
|
||||
Debt maturing within one year
|
$
|
12.0
|
|
|
$
|
25.7
|
|
Accounts payable
|
729.5
|
|
|
832.2
|
|
||
Accrued compensation
|
109.2
|
|
|
130.3
|
|
||
Other accrued liabilities
|
400.9
|
|
|
405.6
|
|
||
Sales taxes and taxes other than income
|
123.4
|
|
|
153.0
|
|
||
Income taxes
|
8.6
|
|
|
12.8
|
|
||
Total current liabilities
|
1,383.6
|
|
|
1,559.6
|
|
||
Long-term debt
|
1,630.3
|
|
|
1,872.2
|
|
||
Employee benefit plans
|
134.2
|
|
|
150.6
|
|
||
Long-term income taxes
|
97.6
|
|
|
84.9
|
|
||
Long-term sales taxes and taxes other than income
|
191.1
|
|
|
193.1
|
|
||
Other liabilities
|
80.3
|
|
|
84.4
|
|
||
Total liabilities
|
3,517.1
|
|
|
3,944.8
|
|
||
|
|
|
|
||||
Commitments and contingencies (Note 7)
|
|
|
|
|
|
||
Series C convertible preferred stock
|
479.8
|
|
|
467.8
|
|
||
|
|
|
|
||||
Shareholders’ Deficit
|
|
|
|
||||
Common stock
|
190.3
|
|
|
189.7
|
|
||
Additional paid-in capital
|
2,297.5
|
|
|
2,291.2
|
|
||
Retained earnings
|
2,210.0
|
|
|
2,320.3
|
|
||
Accumulated other comprehensive loss
|
(1,014.4
|
)
|
|
(926.2
|
)
|
||
Treasury stock, at cost
|
(4,602.3
|
)
|
|
(4,600.0
|
)
|
||
Total Avon shareholders’ deficit
|
(918.9
|
)
|
|
(725.0
|
)
|
||
Noncontrolling interests
|
8.4
|
|
|
10.3
|
|
||
Total shareholders’ deficit
|
(910.5
|
)
|
|
(714.7
|
)
|
||
Total liabilities, series C convertible preferred stock and shareholders’ deficit
|
$
|
3,086.4
|
|
|
$
|
3,697.9
|
|
|
Six Months Ended
|
||||||
(In millions)
|
June 30, 2018
|
|
June 30, 2017
|
||||
Cash Flows from Operating Activities
|
|
|
|
||||
Net loss
|
$
|
(58.1
|
)
|
|
$
|
(82.3
|
)
|
Adjustments to reconcile net loss to net cash (used) provided by operating activities:
|
|
|
|
||||
Depreciation
|
41.6
|
|
|
41.7
|
|
||
Amortization
|
13.8
|
|
|
15.0
|
|
||
Provision for doubtful accounts
|
86.2
|
|
|
113.0
|
|
||
Provision for obsolescence
|
13.3
|
|
|
16.5
|
|
||
Share-based compensation
|
7.5
|
|
|
16.2
|
|
||
Foreign exchange losses
|
13.5
|
|
|
8.5
|
|
||
Deferred income taxes
|
(0.2
|
)
|
|
12.0
|
|
||
Other
|
3.2
|
|
|
16.1
|
|
||
Changes in assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
(50.0
|
)
|
|
(92.0
|
)
|
||
Inventories
|
(99.7
|
)
|
|
(36.1
|
)
|
||
Prepaid expenses and other
|
1.7
|
|
|
14.2
|
|
||
Accounts payable and accrued liabilities
|
(76.6
|
)
|
|
(53.2
|
)
|
||
Income and other taxes
|
(0.3
|
)
|
|
(5.0
|
)
|
||
Noncurrent assets and liabilities
|
(2.6
|
)
|
|
26.6
|
|
||
Net cash (used) provided by operating activities of continuing operations
|
(106.7
|
)
|
|
11.2
|
|
||
Cash Flows from Investing Activities
|
|
|
|
||||
Capital expenditures
|
(48.0
|
)
|
|
(43.0
|
)
|
||
Disposal of assets
|
1.4
|
|
|
2.7
|
|
||
Other investing activities
|
(3.3
|
)
|
|
(0.1
|
)
|
||
Net cash used by investing activities of continuing operations
|
(49.9
|
)
|
|
(40.4
|
)
|
||
Cash Flows from Financing Activities
|
|
|
|
||||
Debt, net (maturities of three months or less)
|
(10.4
|
)
|
|
(4.4
|
)
|
||
Repayment of debt
|
(238.6
|
)
|
|
(2.0
|
)
|
||
Repurchase of common stock
|
(3.2
|
)
|
|
(6.4
|
)
|
||
Other financing activities
|
(0.1
|
)
|
|
(0.2
|
)
|
||
Net cash used by financing activities of continuing operations
|
(252.3
|
)
|
|
(13.0
|
)
|
||
Cash Flows from Discontinued Operations
|
|
|
|
||||
Net cash used by operating activities of discontinued operations
|
—
|
|
|
(6.4
|
)
|
||
Net cash used by discontinued operations
|
—
|
|
|
(6.4
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(28.7
|
)
|
|
28.0
|
|
||
Net decrease in cash and cash equivalents
|
(437.6
|
)
|
|
(20.6
|
)
|
||
Cash and cash equivalents at beginning of year
|
881.5
|
|
|
654.4
|
|
||
Cash and cash equivalents at end of period
|
$
|
443.9
|
|
|
$
|
633.8
|
|
•
|
the effects of significant, unusual or extraordinary pretax and income tax items, if any;
|
•
|
withholding taxes recognized associated with cash repatriations; and
|
•
|
the impact of loss-making subsidiaries for which we cannot recognize an income tax benefit and subsidiaries for which an effective tax rate cannot be reliably estimated.
|
|
|
Three Months Ended June 30, 2018
|
||||||||||||||||||||||||||
|
|
Reportable segments
|
|
|
|
|
||||||||||||||||||||||
|
|
Europe, Middle East & Africa
|
|
South Latin America
|
|
North Latin America
|
|
Asia Pacific
|
|
Total reportable segments
|
|
Other operating segments and business activities
|
|
Total
|
||||||||||||||
Beauty:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Skincare
|
|
$
|
154.4
|
|
|
$
|
143.9
|
|
|
$
|
43.8
|
|
|
$
|
30.3
|
|
|
$
|
372.4
|
|
|
$
|
2.3
|
|
|
$
|
374.7
|
|
Fragrance
|
|
143.8
|
|
|
131.5
|
|
|
52.4
|
|
|
20.1
|
|
|
347.8
|
|
|
0.7
|
|
|
348.5
|
|
|||||||
Color
|
|
98.1
|
|
|
80.6
|
|
|
20.8
|
|
|
12.9
|
|
|
212.4
|
|
|
1.4
|
|
|
213.8
|
|
|||||||
Total Beauty
|
|
396.3
|
|
|
356.0
|
|
|
117.0
|
|
|
63.3
|
|
|
932.6
|
|
|
4.4
|
|
|
937.0
|
|
|||||||
Fashion & Home:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Fashion
|
|
72.9
|
|
|
49.9
|
|
|
22.5
|
|
|
40.7
|
|
|
185.8
|
|
|
1.3
|
|
|
187.1
|
|
|||||||
Home
|
|
7.6
|
|
|
72.5
|
|
|
56.6
|
|
|
7.5
|
|
|
144.3
|
|
|
.4
|
|
|
144.7
|
|
|||||||
Total Fashion & Home
|
|
80.5
|
|
|
122.4
|
|
|
79.1
|
|
|
48.2
|
|
|
330.1
|
|
|
1.7
|
|
|
331.8
|
|
|||||||
Net sales
|
|
476.8
|
|
|
478.4
|
|
|
196.1
|
|
|
111.5
|
|
|
1,262.7
|
|
|
6.1
|
|
|
1,268.8
|
|
|||||||
Representative fees
|
|
23.7
|
|
|
35.2
|
|
|
11.2
|
|
|
1.5
|
|
|
71.6
|
|
|
0.5
|
|
|
72.1
|
|
|||||||
Other
|
|
0.2
|
|
|
2.6
|
|
|
—
|
|
|
0.1
|
|
|
2.9
|
|
|
8.1
|
|
|
11.0
|
|
|||||||
Other revenue
|
|
23.9
|
|
|
37.8
|
|
|
11.2
|
|
|
1.6
|
|
|
74.5
|
|
|
8.6
|
|
|
83.1
|
|
|||||||
Total revenue
|
|
$
|
500.7
|
|
|
$
|
516.1
|
|
|
$
|
207.3
|
|
|
$
|
113.1
|
|
|
$
|
1,337.2
|
|
|
$
|
14.7
|
|
|
$
|
1,351.9
|
|
|
|
Six Months Ended June 30, 2018
|
||||||||||||||||||||||||||
|
|
Reportable segments
|
|
|
|
|
||||||||||||||||||||||
|
|
Europe, Middle East & Africa
|
|
South Latin America
|
|
North Latin America
|
|
Asia Pacific
|
|
Total reportable segments
|
|
Other operating segments and business activities
|
|
Total
|
||||||||||||||
Beauty:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Skincare
|
|
$
|
323.8
|
|
|
$
|
285.7
|
|
|
$
|
90.5
|
|
|
$
|
61.6
|
|
|
$
|
761.5
|
|
|
$
|
7.0
|
|
|
$
|
768.5
|
|
Fragrance
|
|
307.0
|
|
|
250.0
|
|
|
106.0
|
|
|
38.7
|
|
|
701.8
|
|
|
2.9
|
|
|
704.7
|
|
|||||||
Color
|
|
218.8
|
|
|
161.5
|
|
|
41.6
|
|
|
26.1
|
|
|
448.1
|
|
|
4.7
|
|
|
452.8
|
|
|||||||
Total Beauty
|
|
849.6
|
|
|
697.2
|
|
|
238.1
|
|
|
126.4
|
|
|
1,911.4
|
|
|
14.6
|
|
|
1,926.0
|
|
|||||||
Fashion & Home:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Fashion
|
|
152.6
|
|
|
96.4
|
|
|
45.1
|
|
|
80.4
|
|
|
374.5
|
|
|
3.0
|
|
|
377.5
|
|
|||||||
Home
|
|
16.9
|
|
|
144.4
|
|
|
97.9
|
|
|
14.5
|
|
|
273.6
|
|
|
1.3
|
|
|
274.9
|
|
|||||||
Total Fashion & Home
|
|
169.5
|
|
|
240.8
|
|
|
143.0
|
|
|
94.9
|
|
|
648.1
|
|
|
4.3
|
|
|
652.4
|
|
|||||||
Net sales
|
|
1,019.1
|
|
|
938.0
|
|
|
381.1
|
|
|
221.3
|
|
|
2,559.5
|
|
|
18.9
|
|
|
2,578.4
|
|
|||||||
Representative fees
|
|
49.7
|
|
|
71.5
|
|
|
21.8
|
|
|
3.1
|
|
|
146.1
|
|
|
1.9
|
|
|
148.0
|
|
|||||||
Other
|
|
0.3
|
|
|
3.7
|
|
|
—
|
|
|
0.1
|
|
|
4.1
|
|
|
14.9
|
|
|
19.0
|
|
|||||||
Other revenue
|
|
50.0
|
|
|
75.2
|
|
|
21.8
|
|
|
3.2
|
|
|
150.2
|
|
|
16.8
|
|
|
167.0
|
|
|||||||
Total revenue
|
|
$
|
1,069.1
|
|
|
$
|
1,013.2
|
|
|
$
|
402.9
|
|
|
$
|
224.5
|
|
|
$
|
2,709.7
|
|
|
$
|
35.7
|
|
|
$
|
2,745.4
|
|
|
|
June 30, 2018
|
||
Accounts receivable, net of allowances of $108.5
|
|
$
|
386.4
|
|
Contract liabilities
|
|
$
|
70.3
|
|
•
|
a reduction to retained earnings of
$52.7
before taxes (
$41.1
after tax), with a corresponding impact to deferred income taxes of
$11.6
;
|
•
|
a reduction to prepaid expenses and other of
$54.9
;
|
•
|
an increase to inventories of
$39.3
; and
|
•
|
an increase to other accrued liabilities of
$37.1
due to the net impact of the establishment of a contract liability of
$91.8
for deferred revenue where our performance obligations are not yet satisfied, which is partially offset by a reduction in the sales incentive accrual of
$54.7
.
|
|
Impact of change in revenue recognition standard
|
||||||||||
Line items impacted within the Consolidated Statements of Operations
|
Per consolidated financial statements
|
|
Adjustments
|
|
Balances excluding the impact of adopting ASC 606
|
||||||
Revenue
|
|
|
|
|
|
||||||
Net sales
|
$
|
1,268.8
|
|
|
$
|
(7.6
|
)
|
(1)
|
$
|
1,261.2
|
|
Other revenue
|
83.1
|
|
|
(50.5
|
)
|
(2)
|
32.6
|
|
|||
Total revenue
|
1,351.9
|
|
|
(58.1
|
)
|
|
1,293.8
|
|
|||
|
|
|
|
|
|
||||||
Costs and expenses
|
|
|
|
|
|
||||||
Cost of sales
|
539.7
|
|
|
(65.6
|
)
|
(3)
|
474.1
|
|
|||
Selling, general and administrative expenses
|
759.2
|
|
|
9.5
|
|
(4)
|
768.7
|
|
|||
Operating profit
|
53.0
|
|
|
(2.0
|
)
|
|
51.0
|
|
|||
Loss before income taxes
|
(0.3
|
)
|
|
(2.0
|
)
|
|
(2.3
|
)
|
|||
Income taxes
|
(36.7
|
)
|
|
(0.1
|
)
|
|
(36.8
|
)
|
|||
Net loss
|
(37.0
|
)
|
|
(2.1
|
)
|
|
(39.1
|
)
|
|||
Net loss attributable to Avon
|
(36.1
|
)
|
|
(2.1
|
)
|
|
(38.2
|
)
|
|
Impact of change in revenue recognition standard
|
|||||||||
Line items impacted within the Consolidated Statements of Other Comprehensive Income
|
Per consolidated financial statements
|
|
Adjustments
|
|
Balances excluding the impact of adopting ASC 606
|
|||||
Net loss
|
(37.0
|
)
|
|
$
|
(2.1
|
)
|
|
$
|
(39.1
|
)
|
Other comprehensive income:
|
|
|
|
|
|
|||||
Total other comprehensive income, net of income taxes
|
(123.8
|
)
|
|
(2.0
|
)
|
|
(125.8
|
)
|
||
Comprehensive loss
|
(160.8
|
)
|
|
(4.1
|
)
|
|
(164.9
|
)
|
||
Comprehensive loss attributable to Avon
|
(159.6
|
)
|
|
(4.1
|
)
|
|
(163.7
|
)
|
|
Impact of change in revenue recognition standard
|
||||||||||
Line items impacted within the Consolidated Statements of Operations
|
Per consolidated financial statements
|
|
Adjustments
|
|
Balances excluding the impact of adopting ASC 606
|
||||||
Revenue
|
|
|
|
|
|
||||||
Net sales
|
$
|
2,578.4
|
|
|
$
|
(33.1
|
)
|
(1)
|
$
|
2,545.3
|
|
Other revenue
|
167.0
|
|
|
(105.3
|
)
|
(2)
|
61.7
|
|
|||
Total revenue
|
2,745.4
|
|
|
(138.4
|
)
|
|
2,607.0
|
|
|||
|
|
|
|
|
|
||||||
Costs and expenses
|
|
|
|
|
|
||||||
Cost of sales
|
1,119.4
|
|
|
(138.6
|
)
|
(3)
|
980.8
|
|
|||
Selling, general and administrative expenses
|
1,528.1
|
|
|
21.3
|
|
(4)
|
1,549.4
|
|
|||
Operating profit
|
97.9
|
|
|
(21.1
|
)
|
|
76.8
|
|
|||
Income (loss) before income taxes
|
10.1
|
|
|
(21.1
|
)
|
|
(11.0
|
)
|
|||
Income taxes
|
(68.2
|
)
|
|
3.7
|
|
|
(64.5
|
)
|
|||
Net loss
|
(58.1
|
)
|
|
(17.4
|
)
|
|
(75.5
|
)
|
|||
Net loss attributable to Avon
|
(56.4
|
)
|
|
(17.4
|
)
|
|
(73.8
|
)
|
|
Impact of change in revenue recognition standard
|
||||||||||
Line items impacted within the Consolidated Statements of Other Comprehensive Income
|
Per consolidated financial statements
|
|
Adjustments
|
|
Balances excluding the impact of adopting ASC 606
|
||||||
Net loss
|
$
|
(58.1
|
)
|
|
$
|
(17.4
|
)
|
|
$
|
(75.5
|
)
|
Other comprehensive income:
|
|
|
|
|
|
||||||
Total other comprehensive income, net of income taxes
|
(88.2
|
)
|
|
(1.3
|
)
|
|
(89.5
|
)
|
|||
Comprehensive loss
|
(146.3
|
)
|
|
(18.7
|
)
|
|
(165.0
|
)
|
|||
Comprehensive loss attributable to Avon
|
(144.5
|
)
|
|
(18.7
|
)
|
|
(163.2
|
)
|
|
Impact of change in revenue recognition standard
|
||||||||||
Line items impacted within the Consolidated Balance Sheets
|
Per consolidated financial statements
|
|
Adjustments
|
|
Balances excluding the impact of adopting ASC 606
|
||||||
Assets
|
|
|
|
|
|
||||||
Accounts receivable, net
|
$
|
386.4
|
|
|
$
|
(6.2
|
)
|
(1)
|
$
|
380.2
|
|
Inventories
|
662.2
|
|
|
(40.9
|
)
|
(2)
|
621.3
|
|
|||
Prepaid expenses and other
|
290.9
|
|
|
47.1
|
|
(2)
|
338.0
|
|
|||
Other assets
|
573.9
|
|
|
(10.9
|
)
|
(3)
|
563.0
|
|
|||
Total assets
|
3,086.4
|
|
|
(10.9
|
)
|
|
3,075.5
|
|
|||
Liabilities, Series C Convertible Preferred Stock and Shareholders’ Deficit
|
|
|
|
|
|
||||||
Other accrued liabilities
|
400.9
|
|
|
(28.2
|
)
|
(4)
|
372.7
|
|
|||
Income taxes
|
8.6
|
|
|
(3.7
|
)
|
|
4.9
|
|
|||
Total current liabilities
|
1,383.6
|
|
|
(31.9
|
)
|
|
1,351.7
|
|
|||
Other liabilities
|
80.3
|
|
|
(1.4
|
)
|
|
78.9
|
|
|||
Total liabilities
|
3,517.1
|
|
|
(33.3
|
)
|
|
3,483.8
|
|
|||
|
|
|
|
|
|
|
|||||
Retained earnings
|
2,210.0
|
|
|
23.7
|
|
(5)
|
2,233.7
|
|
|||
Accumulated other comprehensive loss
|
(1,014.4
|
)
|
|
(1.3
|
)
|
|
(1,015.7
|
)
|
|||
Total Avon shareholders’ deficit
|
(918.9
|
)
|
|
22.4
|
|
|
(896.5
|
)
|
|||
Total shareholders’ deficit
|
(910.5
|
)
|
|
22.4
|
|
|
(888.1
|
)
|
|||
Total liabilities, series C convertible preferred stock and shareholders’ deficit
|
3,086.4
|
|
|
(10.9
|
)
|
|
3,075.5
|
|
|
Impact of change in revenue recognition standard
|
||||||||||
Line items impacted within the Consolidated Statements of Cash Flows
|
Per consolidated financial statements
|
|
Adjustments
|
|
Balances excluding the impact of adopting ASC 606
|
||||||
Net loss
|
$
|
(58.1
|
)
|
|
$
|
(17.4
|
)
|
|
$
|
(75.5
|
)
|
Other
|
3.2
|
|
|
1.7
|
|
|
$
|
4.9
|
|
||
Changes in assets and liabilities:
|
|
|
|
|
|
|
|||||
Accounts receivable
|
(50.0
|
)
|
|
(2.4
|
)
|
|
$
|
(52.4
|
)
|
||
Inventories
|
(99.7
|
)
|
|
1.6
|
|
|
$
|
(98.1
|
)
|
||
Prepaid expenses and other
|
1.7
|
|
|
4.6
|
|
|
$
|
6.3
|
|
||
Accounts payable and accrued liabilities
|
(76.6
|
)
|
|
20.3
|
|
|
$
|
(56.3
|
)
|
||
Income and other taxes
|
(.3
|
)
|
|
(3.7
|
)
|
|
$
|
(4.0
|
)
|
||
Noncurrent assets and liabilities
|
(2.6
|
)
|
|
(4.7
|
)
|
|
$
|
(7.3
|
)
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
(Shares in millions)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Numerator attributable to Avon:
|
|
|
|
|
|
|
|
|
||||||||
Net loss attributable to Avon
|
|
$
|
(36.1
|
)
|
|
$
|
(45.5
|
)
|
|
$
|
(56.4
|
)
|
|
$
|
(82.0
|
)
|
Less: Loss allocated to participating securities
|
|
(.4
|
)
|
|
(.6
|
)
|
|
(.6
|
)
|
|
(1.0
|
)
|
||||
Less: Earnings allocated to convertible preferred stock
|
|
6.0
|
|
|
5.7
|
|
|
12.0
|
|
|
11.4
|
|
||||
Loss allocated to common shareholders
|
|
(41.7
|
)
|
|
(50.6
|
)
|
|
(67.8
|
)
|
|
(92.4
|
)
|
||||
Denominator:
|
|
|
|
|
|
|
|
|
||||||||
Basic EPS weighted-average shares outstanding
|
|
442.2
|
|
|
439.9
|
|
|
441.5
|
|
|
439.3
|
|
||||
Diluted effect of assumed conversion of stock options
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Diluted effect of assumed conversion of preferred stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Diluted EPS adjusted weighted-average shares outstanding
|
|
442.2
|
|
|
439.9
|
|
|
441.5
|
|
|
439.3
|
|
||||
Loss per Common Share attributable to Avon:
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
$
|
(.09
|
)
|
|
$
|
(.12
|
)
|
|
$
|
(.15
|
)
|
|
$
|
(.21
|
)
|
Diluted
|
|
(.09
|
)
|
|
(.12
|
)
|
|
(.15
|
)
|
|
(.21
|
)
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Statement of Operations Data
|
|
|
|
|
|
|
|
|
||||||||
Revenue from sale of product to New Avon
(1)
|
|
$
|
7.1
|
|
|
$
|
9.6
|
|
|
$
|
13.0
|
|
|
$
|
17.6
|
|
Gross profit from sale of product to New Avon
(1)
|
|
$
|
.4
|
|
|
$
|
.7
|
|
|
$
|
.7
|
|
|
$
|
1.3
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cost of sales for purchases from New Avon
(2)
|
|
$
|
.7
|
|
|
$
|
1.3
|
|
|
$
|
1.2
|
|
|
$
|
2.1
|
|
|
|
|
|
|
|
|
|
|
||||||||
Selling, general and administrative expenses related to New Avon:
|
|
|
|
|
|
|
|
|
||||||||
Transition services, intellectual property, technical support and innovation and subleases
(3)
|
|
$
|
(.5
|
)
|
|
$
|
(7.2
|
)
|
|
$
|
(3.7
|
)
|
|
$
|
(15.1
|
)
|
Project management team
(4)
|
|
.2
|
|
|
$
|
.8
|
|
|
$
|
.8
|
|
|
$
|
1.6
|
|
|
Net reduction of selling, general and administrative expenses
|
|
$
|
(.3
|
)
|
|
$
|
(6.4
|
)
|
|
$
|
(2.9
|
)
|
|
$
|
(13.5
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Interest income from Instituto Avon
(5)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
Balance Sheet Data
|
|
|
|
|
||||
Inventories
(6)
|
|
$
|
.4
|
|
|
$
|
.4
|
|
Receivables due from New Avon
(7)
|
|
$
|
6.7
|
|
|
$
|
9.8
|
|
Receivables due from Instituto Avon
(5)
|
|
$
|
3.6
|
|
|
$
|
—
|
|
Payables due to New Avon
(8)
|
|
$
|
.3
|
|
|
$
|
.2
|
|
Payables due to an affiliate of Cerberus
(9)
|
|
$
|
.4
|
|
|
$
|
.4
|
|
Components of Inventories
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
Raw materials
|
|
$
|
191.3
|
|
|
$
|
190.6
|
|
Finished goods
|
|
470.9
|
|
|
407.6
|
|
||
Total
|
|
$
|
662.2
|
|
|
$
|
598.2
|
|
|
|
Three Months Ended June 30,
|
||||||||||||||||||||||
|
|
Pension Benefits
|
|
|
|
|
||||||||||||||||||
Net Periodic Benefit Costs
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Postretirement Benefits
|
||||||||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||||
Service cost
|
|
$
|
.9
|
|
|
$
|
1.3
|
|
|
$
|
1.2
|
|
|
$
|
1.2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest cost
|
|
.6
|
|
|
.8
|
|
|
4.0
|
|
|
4.4
|
|
|
.3
|
|
|
.3
|
|
||||||
Expected return on plan assets
|
|
(.8
|
)
|
|
(.8
|
)
|
|
(8.2
|
)
|
|
(6.9
|
)
|
|
—
|
|
|
—
|
|
||||||
Amortization of prior service credit
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(.1
|
)
|
|
(.1
|
)
|
|
(.1
|
)
|
||||||
Amortization of net actuarial losses
|
|
1.3
|
|
|
1.3
|
|
|
1.8
|
|
|
2.0
|
|
|
—
|
|
|
.1
|
|
||||||
Net periodic benefit costs
(1)
|
|
$
|
2.0
|
|
|
$
|
2.6
|
|
|
$
|
(1.2
|
)
|
|
$
|
.6
|
|
|
$
|
.2
|
|
|
$
|
.3
|
|
|
|
Six Months Ended June 30,
|
||||||||||||||||||||||
|
|
Pension Benefits
|
|
|
|
|
||||||||||||||||||
Net Periodic Benefit Costs
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Postretirement Benefits
|
||||||||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||||
Service cost
|
|
$
|
1.8
|
|
|
$
|
2.7
|
|
|
$
|
2.4
|
|
|
$
|
2.4
|
|
|
$
|
.1
|
|
|
$
|
—
|
|
Interest cost
|
|
1.2
|
|
|
1.5
|
|
|
8.2
|
|
|
8.8
|
|
|
.6
|
|
|
.7
|
|
||||||
Expected return on plan assets
|
|
(1.6
|
)
|
|
(1.6
|
)
|
|
(16.6
|
)
|
|
(13.6
|
)
|
|
—
|
|
|
—
|
|
||||||
Amortization of prior service credit
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(.1
|
)
|
|
(.2
|
)
|
|
(.2
|
)
|
||||||
Amortization of net actuarial losses
|
|
2.6
|
|
|
2.5
|
|
|
3.6
|
|
|
3.8
|
|
|
—
|
|
|
.1
|
|
||||||
Net periodic benefit costs
(1)
|
|
$
|
4.0
|
|
|
$
|
5.1
|
|
|
$
|
(2.4
|
)
|
|
$
|
1.3
|
|
|
$
|
.5
|
|
|
$
|
.6
|
|
Three Months Ended June 30, 2018
|
|
Foreign Currency Translation Adjustments
|
|
Net Investment Hedges
|
|
Pension and Postretirement Benefits
|
|
Investment in New Avon
|
|
Total
|
||||||||||
Balance at March 31, 2018
|
|
$
|
(797.3
|
)
|
|
$
|
(4.3
|
)
|
|
$
|
(92.8
|
)
|
|
$
|
3.4
|
|
|
$
|
(891.0
|
)
|
Other comprehensive income other than reclassifications
|
|
(126.2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(126.2
|
)
|
|||||
Reclassifications into earnings:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Amortization of net actuarial loss and prior service cost, net of tax of $.1
(1)
|
|
—
|
|
|
—
|
|
|
2.8
|
|
|
—
|
|
|
2.8
|
|
|||||
Total reclassifications into earnings
|
|
—
|
|
|
—
|
|
|
2.8
|
|
|
—
|
|
|
2.8
|
|
|||||
Balance at June 30, 2018
|
|
$
|
(923.5
|
)
|
|
$
|
(4.3
|
)
|
|
$
|
(90.0
|
)
|
|
$
|
3.4
|
|
|
$
|
(1,014.4
|
)
|
Three Months Ended June 30, 2017:
|
|
Foreign Currency Translation Adjustments
|
|
Net Investment Hedges
|
|
Pension and Postretirement Benefits
|
|
Investment in New Avon
|
|
Total
|
||||||||||
Balance at March 31, 2017
|
|
$
|
(849.0
|
)
|
|
$
|
(4.3
|
)
|
|
$
|
(117.1
|
)
|
|
$
|
3.3
|
|
|
$
|
(967.1
|
)
|
Other comprehensive income other than reclassifications
|
|
9.3
|
|
|
—
|
|
|
—
|
|
|
.1
|
|
|
9.4
|
|
|||||
Reclassifications into earnings:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Amortization of net actuarial loss and prior service cost, net of tax of $0.0
(1)
|
|
—
|
|
|
—
|
|
|
3.1
|
|
|
—
|
|
|
3.1
|
|
|||||
Total reclassifications into earnings
|
|
—
|
|
|
—
|
|
|
3.1
|
|
|
—
|
|
|
3.1
|
|
|||||
Balance at June 30, 2017
|
|
$
|
(839.7
|
)
|
|
$
|
(4.3
|
)
|
|
$
|
(114.0
|
)
|
|
$
|
3.4
|
|
|
$
|
(954.6
|
)
|
Six Months Ended June 30, 2018:
|
|
Foreign Currency Translation Adjustments
|
|
Net Investment Hedges
|
|
Pension and Postretirement Benefits
|
|
Investment in New Avon
|
|
Total
|
||||||||||
Balance at December 31, 2017
|
|
$
|
(829.6
|
)
|
|
$
|
(4.3
|
)
|
|
$
|
(95.7
|
)
|
|
$
|
3.4
|
|
|
$
|
(926.2
|
)
|
Other comprehensive income other than reclassifications
|
|
(93.9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(93.9
|
)
|
|||||
Reclassifications into earnings:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Amortization of net actuarial loss and prior service cost, net of tax of $0.3
(1)
|
|
—
|
|
|
—
|
|
|
5.7
|
|
|
—
|
|
|
5.7
|
|
|||||
Total reclassifications into earnings
|
|
—
|
|
|
—
|
|
|
5.7
|
|
|
—
|
|
|
5.7
|
|
|||||
Balance at June 30, 2018
|
|
$
|
(923.5
|
)
|
|
$
|
(4.3
|
)
|
|
$
|
(90.0
|
)
|
|
$
|
3.4
|
|
|
$
|
(1,014.4
|
)
|
Six Months Ended June 30, 2017:
|
|
Foreign Currency Translation Adjustments
|
|
Net Investment Hedges
|
|
Pension and Postretirement Benefits
|
|
Investment in New Avon
|
|
Total
|
||||||||||
Balance at December 31, 2016
|
|
$
|
(910.9
|
)
|
|
$
|
(4.3
|
)
|
|
$
|
(120.2
|
)
|
|
$
|
2.2
|
|
|
$
|
(1,033.2
|
)
|
Other comprehensive income other than reclassifications
|
|
71.2
|
|
|
—
|
|
|
—
|
|
|
1.2
|
|
|
72.4
|
|
|||||
Reclassifications into earnings:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Amortization of net actuarial loss and prior service cost, net of tax of $0.0
(1)
|
|
—
|
|
|
—
|
|
|
6.2
|
|
|
—
|
|
|
6.2
|
|
|||||
Total reclassifications into earnings
|
|
—
|
|
|
—
|
|
|
6.2
|
|
|
—
|
|
|
6.2
|
|
|||||
Balance at June 30, 2017
|
|
$
|
(839.7
|
)
|
|
$
|
(4.3
|
)
|
|
$
|
(114.0
|
)
|
|
$
|
3.4
|
|
|
$
|
(954.6
|
)
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
Total Revenue
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Europe, Middle East & Africa
|
|
$
|
500.7
|
|
|
$
|
494.6
|
|
|
$
|
1,069.1
|
|
|
$
|
1,002.1
|
|
South Latin America
|
|
516.1
|
|
|
558.1
|
|
|
1,013.2
|
|
|
1,057.3
|
|
||||
North Latin America
|
|
207.3
|
|
|
207.8
|
|
|
402.9
|
|
|
401.0
|
|
||||
Asia Pacific
|
|
113.1
|
|
|
113.9
|
|
|
224.5
|
|
|
227.3
|
|
||||
Total revenue from reportable segments
|
|
1,337.2
|
|
|
1,374.4
|
|
|
2,709.7
|
|
|
2,687.7
|
|
||||
Other operating segments and business activities
|
|
14.7
|
|
|
21.5
|
|
|
35.7
|
|
|
41.3
|
|
||||
Total revenue
|
|
$
|
1,351.9
|
|
|
$
|
1,395.9
|
|
|
$
|
2,745.4
|
|
|
$
|
2,729.0
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
Operating Profit
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Segment Profit
|
|
|
|
|
|
|
|
|
||||||||
Europe, Middle East & Africa
|
|
$
|
74.4
|
|
|
$
|
80.8
|
|
|
$
|
148.8
|
|
|
$
|
154.3
|
|
South Latin America
|
|
55.2
|
|
|
45.7
|
|
|
82.4
|
|
|
59.4
|
|
||||
North Latin America
|
|
19.0
|
|
|
18.2
|
|
|
39.8
|
|
|
39.6
|
|
||||
Asia Pacific
|
|
7.3
|
|
|
10.2
|
|
|
17.7
|
|
|
23.5
|
|
||||
Total profit from reportable segments
|
|
$
|
155.9
|
|
|
$
|
154.9
|
|
|
$
|
288.7
|
|
|
$
|
276.8
|
|
Other operating segments and business activities
|
|
(.6
|
)
|
|
(.3
|
)
|
|
1.6
|
|
|
.6
|
|
||||
Unallocated global expenses
|
|
(78.6
|
)
|
|
(83.3
|
)
|
|
(157.8
|
)
|
|
(166.4
|
)
|
||||
CTI restructuring initiatives
|
|
(23.7
|
)
|
|
(20.4
|
)
|
|
(34.6
|
)
|
|
(30.3
|
)
|
||||
Loss contingency
|
|
—
|
|
|
(18.2
|
)
|
|
—
|
|
|
(18.2
|
)
|
||||
Operating profit
|
|
$
|
53.0
|
|
|
$
|
32.7
|
|
|
$
|
97.9
|
|
|
$
|
62.5
|
|
Components of Prepaid Expenses and Other
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
Prepaid taxes and tax refunds receivable
|
|
$
|
113.3
|
|
|
$
|
111.6
|
|
Receivables other than trade
|
|
54.8
|
|
|
67.2
|
|
||
Prepaid brochure costs, paper and other literature
(1)
|
|
13.9
|
|
|
64.8
|
|
||
Judicial deposit for Brazil IPI tax on cosmetics (Note 7)
|
|
65.0
|
|
|
—
|
|
||
Other
|
|
43.9
|
|
|
52.8
|
|
||
Prepaid expenses and other
|
|
$
|
290.9
|
|
|
$
|
296.4
|
|
Components of Other Assets
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
Deferred tax assets
|
|
$
|
199.8
|
|
|
$
|
203.8
|
|
Net overfunded pension plans
|
|
90.6
|
|
|
82.0
|
|
||
Capitalized software
|
|
81.8
|
|
|
85.2
|
|
||
Judicial deposits other than Brazil IPI tax (see below)
|
|
71.7
|
|
|
82.2
|
|
||
Judicial deposit for Brazil IPI tax on cosmetics (Note 7)
|
|
—
|
|
|
73.8
|
|
||
Long-term receivables
|
|
71.1
|
|
|
75.6
|
|
||
Trust assets associated with supplemental benefit plans
|
|
37.4
|
|
|
37.1
|
|
||
Tooling (plates and molds associated with our beauty products)
|
|
10.2
|
|
|
12.5
|
|
||
Other
|
|
11.3
|
|
|
14.0
|
|
||
Other assets
|
|
$
|
573.9
|
|
|
$
|
666.2
|
|
•
|
net charges of
$17.3
and
$25.5
, respectively, for employee-related costs, including severance benefits;
|
•
|
implementation costs of $
4.7
and
$5.7
, respectively, primarily related to professional service fees;
|
•
|
accelerated depreciation of $
.9
and
$1.6
, respectively;
|
•
|
inventory write-offs of
$.4
and
$1.1
, respectively;
|
•
|
foreign currency translation adjustment charges of
$.7
and
$.7
, respectively; and
|
•
|
contract termination and other net charges of $
.5
and
$.7
, respectively.
|
•
|
net charges of
$9.5
, and
$17.1
, respectively, for employee-related costs, including severance benefits;
|
•
|
contract termination and other net charges of
$10.8
and
$12.2
, respectively, associated with vacating our previous corporate headquarters;
|
•
|
implementation costs of
$.2
and
$.7
, respectively, primarily related to professional service fees; and
|
•
|
accelerated depreciation of
$.5
and
$1.0
, respectively.
|
|
|
Employee-Related Costs
|
|
Inventory Write-offs
|
|
Contract Terminations/Other
|
|
Foreign Currency Translation Adjustment
|
|
Total
|
||||||||||
Balance at December 31, 2017
|
|
$
|
41.2
|
|
|
$
|
—
|
|
|
$
|
8.0
|
|
|
$
|
—
|
|
|
$
|
49.2
|
|
2018 charges
|
|
30.1
|
|
|
1.1
|
|
|
1.4
|
|
|
.7
|
|
|
33.3
|
|
|||||
Adjustments
|
|
(4.6
|
)
|
|
—
|
|
|
(0.7
|
)
|
|
—
|
|
|
(5.3
|
)
|
|||||
Cash payments
|
|
(13.3
|
)
|
|
—
|
|
|
(3.8
|
)
|
|
—
|
|
|
(17.1
|
)
|
|||||
Non-cash write-offs
|
|
—
|
|
|
(1.1
|
)
|
|
—
|
|
|
(.7
|
)
|
|
(1.8
|
)
|
|||||
Foreign exchange
|
|
(2.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.0
|
)
|
|||||
Balance at June 30, 2018
|
|
$
|
51.4
|
|
|
$
|
—
|
|
|
$
|
4.9
|
|
|
$
|
—
|
|
|
$
|
56.3
|
|
|
|
Employee- Related Costs
|
|
Inventory Write-offs
|
|
Foreign Currency Translation Adjustment Write-offs
|
|
Contract
Terminations/Other
|
|
Total
|
||||||||||
Charges incurred to-date
|
|
$
|
136.5
|
|
|
$
|
2.0
|
|
|
$
|
3.4
|
|
|
$
|
36.7
|
|
|
$
|
178.6
|
|
Estimated charges to be incurred on approved initiatives
|
|
6.6
|
|
|
—
|
|
|
—
|
|
|
6.8
|
|
|
13.4
|
|
|||||
Total expected charges on approved initiatives
|
|
$
|
143.1
|
|
|
$
|
2.0
|
|
|
$
|
3.4
|
|
|
$
|
43.5
|
|
|
$
|
192.0
|
|
|
|
Europe, Middle East & Africa
|
|
South Latin America
|
|
North Latin America
|
|
Asia
Pacific
|
|
Global & Other Operating Segments
|
|
Total
|
||||||||||||
2015
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21.4
|
|
|
$
|
21.4
|
|
2016
|
|
30.9
|
|
|
13.2
|
|
|
4.4
|
|
|
9.1
|
|
|
16.8
|
|
|
74.4
|
|
||||||
2017
|
|
.9
|
|
|
5.6
|
|
|
(.6
|
)
|
|
(.5
|
)
|
|
49.4
|
|
|
54.8
|
|
||||||
First quarter 2018
|
|
3.2
|
|
|
5.3
|
|
|
0.6
|
|
|
—
|
|
|
—
|
|
|
9.1
|
|
||||||
Second quarter 2018
|
|
4.7
|
|
|
(.1
|
)
|
|
—
|
|
|
—
|
|
|
14.3
|
|
|
18.9
|
|
||||||
Charges incurred to-date
|
|
39.7
|
|
|
24.0
|
|
|
4.4
|
|
|
8.6
|
|
|
101.9
|
|
|
178.6
|
|
||||||
Estimated charges to be incurred on approved initiatives
|
|
.5
|
|
|
—
|
|
|
—
|
|
|
6.5
|
|
|
6.4
|
|
|
13.4
|
|
||||||
Total expected charges on approved initiatives
|
|
$
|
40.2
|
|
|
$
|
24.0
|
|
|
$
|
4.4
|
|
|
$
|
15.1
|
|
|
$
|
108.3
|
|
|
$
|
192.0
|
|
|
|
Europe, Middle East & Africa
|
|
South Latin
America
|
|
Asia
Pacific
|
|
Total
|
||||||||
Net balance at December 31, 2017
|
|
$
|
20.4
|
|
|
$
|
72.7
|
|
|
$
|
2.6
|
|
|
$
|
95.7
|
|
|
|
|
|
|
|
|
|
|
||||||||
Changes during the period ended June 30, 2018:
|
|
|
|
|
|
|
|
|
||||||||
Foreign exchange
|
|
(1.7
|
)
|
|
.9
|
|
|
—
|
|
|
(.8
|
)
|
||||
Net balance at June 30, 2018
|
|
$
|
18.7
|
|
|
$
|
73.6
|
|
|
$
|
2.6
|
|
|
$
|
94.9
|
|
|
June 30, 2018
|
|
December 31, 2017
|
||||||||||||
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
||||||||
Available-for-sale securities
|
$
|
3.7
|
|
|
$
|
3.7
|
|
|
$
|
3.7
|
|
|
$
|
3.7
|
|
Debt maturing within one year
(1)
|
(12.0
|
)
|
|
(12.0
|
)
|
|
(25.7
|
)
|
|
(25.7
|
)
|
||||
Long-term debt
(1)
|
(1,630.3
|
)
|
|
(1,502.3
|
)
|
|
(1,872.2
|
)
|
|
(1,718.6
|
)
|
||||
Foreign exchange forward contracts
|
(.6
|
)
|
|
(.6
|
)
|
|
—
|
|
|
—
|
|
•
|
Available-for-sale securities - The fair values of these investments were the quoted market prices for issues listed on securities exchanges.
|
•
|
Debt maturing within one year and long-term debt - The fair values of our debt and other financing were determined using Level 2 inputs based on indicative market prices.
|
•
|
Foreign exchange forward contracts - The fair values of forward contracts were estimated based on quoted forward foreign exchange prices at the reporting date.
|
|
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
|
$
|
.5
|
|
|
Accounts payable
|
$
|
1.1
|
|
Total derivatives not designated as hedges
|
|
$
|
.5
|
|
|
|
$
|
1.1
|
|
Total derivatives
|
|
$
|
.5
|
|
|
|
$
|
1.1
|
|
|
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
|
$
|
.2
|
|
|
Accounts payable
|
$
|
.2
|
|
Total derivatives not designated as hedges
|
|
$
|
.2
|
|
|
|
$
|
.2
|
|
Total derivatives
|
|
$
|
.2
|
|
|
|
$
|
.2
|
|
•
|
Certain of our sales incentives and prospective discounts are now considered to be a separate deliverable, thus initially revenue is deferred generally until delivery of the incentive prize to the Representative or future discounts are realized, and at that time the associated cost is recognized in cost of sales. Historically, the cost of sales incentives was recognized in SG&A over the period that the sales incentive was earned; and
|
•
|
Fees paid by Representatives to the Company for brochures, late payments and payment processing are now reflected as revenue, rather than reflected as a reduction of SG&A. The associated cost for brochures that are sold is now recognized in cost of sales rather than in SG&A. Further, the fees and costs associated with brochures are now recognized upon delivery to the Representatives, rather than recognized over the campaign length.
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||
|
|
2018
|
|
2017
|
|
%/Basis Point
Change
|
|
2018
|
|
2017
|
|
%/Basis Point
Change
|
||||||||||
Select Consolidated Financial Information
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total revenue
|
|
$
|
1,351.9
|
|
|
$
|
1,395.9
|
|
|
(3
|
)%
|
|
$
|
2,745.4
|
|
|
$
|
2,729.0
|
|
|
1
|
%
|
Cost of sales
|
|
539.7
|
|
|
525.0
|
|
|
3
|
%
|
|
1,119.4
|
|
|
1,042.1
|
|
|
7
|
%
|
||||
Selling, general and administrative expenses
|
|
759.2
|
|
|
838.2
|
|
|
(9
|
)%
|
|
1,528.1
|
|
|
1,624.4
|
|
|
(6
|
)%
|
||||
Operating profit
|
|
53.0
|
|
|
32.7
|
|
|
62
|
%
|
|
97.9
|
|
|
62.5
|
|
|
57
|
%
|
||||
Interest expense
|
|
34.5
|
|
|
36.1
|
|
|
(4
|
)%
|
|
70.7
|
|
|
71.2
|
|
|
(1
|
)%
|
||||
Interest income
|
|
(3.5
|
)
|
|
(3.1
|
)
|
|
13
|
%
|
|
(7.7
|
)
|
|
(7.8
|
)
|
|
(1
|
)%
|
||||
Other expense, net
|
|
19.4
|
|
|
11.9
|
|
|
63
|
%
|
|
21.9
|
|
|
18.0
|
|
|
22
|
%
|
||||
Income (loss) before taxes
|
|
(0.3
|
)
|
|
(12.2
|
)
|
|
*
|
|
|
10.1
|
|
|
(18.9
|
)
|
|
*
|
|
||||
Net loss attributable to Avon
|
|
$
|
(36.1
|
)
|
|
$
|
(45.5
|
)
|
|
21
|
%
|
|
$
|
(56.4
|
)
|
|
$
|
(82.0
|
)
|
|
31
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Diluted loss per share attributable to Avon
|
|
$
|
(.09
|
)
|
|
$
|
(.12
|
)
|
|
25
|
%
|
|
$
|
(.15
|
)
|
|
$
|
(.21
|
)
|
|
29
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Advertising expenses
(1)
|
|
$
|
31.9
|
|
|
$
|
33.3
|
|
|
(4
|
)%
|
|
$
|
61.1
|
|
|
$
|
63.4
|
|
|
(4
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Reconciliation of Non-GAAP Financial Measures
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Gross margin
|
|
60.1
|
%
|
|
62.4
|
%
|
|
(230
|
)
|
|
59.2
|
%
|
|
61.8
|
%
|
|
(260
|
)
|
||||
CTI restructuring
|
|
—
|
%
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
—
|
%
|
|
—
|
|
||||
Adjusted gross margin
|
|
60.1
|
%
|
|
62.4
|
%
|
|
(230
|
)
|
|
59.2
|
%
|
|
61.8
|
%
|
|
(260
|
)
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Selling, general and administrative expenses as a % of total revenue
|
|
56.2
|
%
|
|
60.1
|
%
|
|
(390
|
)
|
|
55.7
|
%
|
|
59.5
|
%
|
|
(380
|
)
|
||||
CTI restructuring
|
|
(1.8
|
)
|
|
(1.5
|
)
|
|
20
|
%
|
|
(1.2
|
)
|
|
(1.1
|
)
|
|
9
|
%
|
||||
Loss contingency
|
|
—
|
|
|
(1.3
|
)
|
|
(100
|
)%
|
|
—
|
|
|
(.7
|
)
|
|
(100
|
)%
|
||||
Adjusted selling, general and administrative expenses as a % of total revenue
|
|
54.4
|
%
|
|
57.3
|
%
|
|
(290
|
)
|
|
54.4
|
%
|
|
57.7
|
%
|
|
(330
|
)
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating profit
|
|
$
|
53.0
|
|
|
$
|
32.7
|
|
|
62
|
%
|
|
$
|
97.9
|
|
|
$
|
62.5
|
|
|
57
|
%
|
CTI restructuring
|
|
23.7
|
|
|
20.3
|
|
|
17
|
%
|
|
34.6
|
|
|
30.3
|
|
|
14
|
%
|
||||
Loss contingency
|
|
—
|
|
|
18.2
|
|
|
(100
|
)%
|
|
—
|
|
|
18.2
|
|
|
(100
|
)%
|
||||
Adjusted operating profit
|
|
$
|
76.7
|
|
|
$
|
71.2
|
|
|
8
|
%
|
|
$
|
132.5
|
|
|
$
|
111.0
|
|
|
19
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating margin
|
|
3.9
|
%
|
|
2.3
|
%
|
|
160
|
|
|
3.6
|
%
|
|
2.3
|
%
|
|
130
|
|
||||
CTI restructuring
|
|
1.8
|
|
|
1.5
|
|
|
20
|
%
|
|
1.2
|
|
|
1.1
|
|
|
9
|
%
|
||||
Loss contingency
|
|
—
|
|
|
1.3
|
|
|
(100
|
)%
|
|
—
|
|
|
.7
|
|
|
(100
|
)%
|
||||
Adjusted operating margin
|
|
5.7
|
%
|
|
5.1
|
%
|
|
60
|
|
|
4.8
|
%
|
|
4.1
|
%
|
|
70
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Change in Constant $ Adjusted operating margin
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Income (loss) before taxes
|
|
$
|
(0.3
|
)
|
|
$
|
(12.2
|
)
|
|
(98
|
)%
|
|
$
|
10.1
|
|
|
$
|
(18.9
|
)
|
|
(153
|
)%
|
CTI restructuring
|
|
23.7
|
|
|
20.3
|
|
|
17
|
%
|
|
34.6
|
|
|
30.3
|
|
|
14
|
%
|
||||
Loss contingency
|
|
$
|
—
|
|
|
$
|
18.2
|
|
|
(100
|
)%
|
|
$
|
—
|
|
|
$
|
18.2
|
|
|
(100
|
)%
|
Adjusted income before taxes
|
|
$
|
23.4
|
|
|
$
|
26.3
|
|
|
(11
|
)%
|
|
$
|
44.7
|
|
|
$
|
29.6
|
|
|
51
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Income taxes
|
|
(36.7
|
)
|
|
(33.6
|
)
|
|
9
|
%
|
|
(68.2
|
)
|
|
(63.4
|
)
|
|
8
|
%
|
||||
CTI restructuring
|
|
—
|
|
|
(0.8
|
)
|
|
(100
|
)%
|
|
(2.1
|
)
|
|
(1.8
|
)
|
|
17
|
%
|
||||
Special tax items
|
|
5.5
|
|
|
—
|
|
|
—
|
|
|
14.7
|
|
|
—
|
|
|
100.0
|
|
||||
Adjusted income taxes
|
|
$
|
(31.2
|
)
|
|
$
|
(34.4
|
)
|
|
(9
|
)%
|
|
$
|
(55.6
|
)
|
|
$
|
(65.2
|
)
|
|
(15
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Effective tax rate
|
|
(12,233.3
|
)%
|
|
(275.4
|
)%
|
|
*
|
|
|
675.2
|
%
|
|
(335.4
|
)%
|
|
*
|
|
||||
Adjusted effective tax rate
|
|
133.3
|
%
|
|
130.8
|
%
|
|
250
|
|
|
124.4
|
%
|
|
220.3
|
%
|
|
*
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||
|
|
2018
|
|
2017
|
|
%/Basis Point
Change
|
|
2018
|
|
2017
|
|
%/Basis Point
Change
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Performance Metrics
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Change in Active Representatives
|
|
|
|
|
|
(4
|
)%
|
|
|
|
|
|
(4
|
)%
|
||||||||
Change in units sold
|
|
|
|
|
|
(5
|
)%
|
|
|
|
|
|
(4
|
)%
|
||||||||
Change in Ending Representatives
|
|
|
|
|
|
(4
|
)%
|
|
|
|
|
|
(4
|
)%
|
(1)
|
Advertising expenses are recorded in selling, general and administrative expenses.
|
(2)
|
Change in Constant $ Adjusted operating margin for all years presented is calculated using the current-year Constant $ rates.
|
•
|
Certain of our sales incentives and prospective discounts are now considered to be a separate deliverable, thus initially revenue is deferred generally until delivery of the incentive prize to the Representative or future discounts are realized, and at that time the associated cost is recognized in cost of sales. Historically, the cost of sales incentives was recognized in SG&A over the period that the sales incentive was earned; and
|
•
|
Fees paid by Representatives to the Company for brochures, late payments and payment processing are now reflected as revenue, rather than reflected as a reduction of SG&A. The associated cost for brochures that are sold is now recognized in cost of sales rather than in SG&A. Further, the fees and costs associated with brochures are now recognized upon delivery to the Representatives, rather than recognized over the campaign length.
|
|
Three Months Ended June 30,
|
|
% Change
|
||||||||||
|
2018
|
|
2017
|
|
US$
|
|
Constant $
|
||||||
Beauty:
|
|
|
|
|
|
|
|
||||||
Skincare
|
$
|
372.4
|
|
|
$
|
396.3
|
|
|
(6
|
)%
|
|
(2
|
)%
|
Fragrance
|
347.8
|
|
|
366.7
|
|
|
(5
|
)
|
|
—
|
|
||
Color
|
212.4
|
|
|
234.1
|
|
|
(9
|
)
|
|
(5
|
)
|
||
Total Beauty
|
932.6
|
|
|
997.1
|
|
|
(6
|
)
|
|
(2
|
)
|
||
Fashion & Home:
|
|
|
|
|
|
|
|
||||||
Fashion
|
185.9
|
|
|
200.8
|
|
|
(7
|
)
|
|
(5
|
)
|
||
Home
|
144.3
|
|
|
145.5
|
|
|
(1
|
)
|
|
7
|
|
||
Total Fashion & Home
|
330.2
|
|
|
346.3
|
|
|
(5
|
)
|
|
—
|
|
||
Net sales from reportable segments
|
$
|
1,262.8
|
|
|
$
|
1,343.4
|
|
|
(6
|
)
|
|
(2
|
)
|
Net sales from Other operating segments and business activities
|
6.0
|
|
|
10.1
|
|
|
(41
|
)
|
|
(32
|
)
|
||
Net sales
|
$
|
1,268.8
|
|
|
$
|
1,353.5
|
|
|
(6
|
)
|
|
1
|
|
•
|
an increase of 70 basis points due to non-recurring net tax recoveries in Brazil; and
|
•
|
an increase of 40 basis points due to the favorable net impact of mix and pricing, driven by inflationary pricing in Argentina.
|
•
|
a decrease of 30 basis points due to higher supply chain costs, driven by higher material costs primarily in South Latin America, partially offset by Europe, Middle East and Africa.
|
•
|
an increase of 50 basis points from higher transportation costs, primarily in Brazil relating to inefficiencies caused by the national transportation strike, in the United Kingdom due to increased flexibility in order processing, further increases in delivery rates in Russia and an increase in fuel prices in Mexico;
|
•
|
an increase of 40 basis points from higher net brochure cost, primarily in Brazil, and to a lesser extent, in the United Kingdom and South Africa; and
|
•
|
a decrease of 60 basis points due to lower Representative, sales leader and field expense, primarily in South Latin America and North Latin America in line with sales performance.
|
•
|
foreign currency transaction losses (classified within cost of sales, and SG&A in our Consolidated Statements of Operations), which had an unfavorable impact to operating profit and Adjusted operating profit of approximately $5, or approximately 30 basis points to operating margin and Adjusted operating margin;
|
•
|
foreign currency translation, which had an unfavorable impact to operating profit and Adjusted operating profit of approximately $5, or approximately 20 basis points to operating margin and Adjusted operating margin; and
|
•
|
higher foreign exchange net losses on our working capital (classified within other expense, net in our Consolidated Statements of Operations) as compared to the prior year, resulting in an unfavorable impact of approximately
$15
before tax on both a reported and Adjusted basis.
|
|
Six Months Ended June 30,
|
|
% Change
|
||||||||||
|
2,018
|
|
2017
|
|
US$
|
|
Constant $
|
||||||
Beauty:
|
|
|
|
|
|
|
|
||||||
Skincare
|
$
|
761.5
|
|
|
$
|
778.0
|
|
|
(2
|
)%
|
|
(2
|
)%
|
Fragrance
|
701.8
|
|
|
708.7
|
|
|
(1
|
)
|
|
1
|
|
||
Color
|
448.1
|
|
|
473.3
|
|
|
(5
|
)
|
|
(5
|
)
|
||
Total Beauty
|
1,911.4
|
|
|
1,960.0
|
|
|
(2
|
)
|
|
(2
|
)
|
||
Fashion & Home:
|
|
|
|
|
|
|
|
||||||
Fashion
|
374.5
|
|
|
392.7
|
|
|
(5
|
)
|
|
(5
|
)
|
||
Home
|
273.7
|
|
|
278.6
|
|
|
(2
|
)
|
|
2
|
|
||
Total Fashion & Home
|
648.2
|
|
|
671.3
|
|
|
(3
|
)
|
|
(2
|
)
|
||
Net sales from reportable segments
|
$
|
2,559.6
|
|
|
$
|
2,631.3
|
|
|
(3
|
)
|
|
(2
|
)
|
Net sales from Other operating segments and business activities
|
185.8
|
|
|
97.7
|
|
|
90
|
|
|
(15
|
)
|
||
Net sales
|
$
|
2,745.4
|
|
|
$
|
2,729.0
|
|
|
1
|
|
|
2
|
|
•
|
an increase of 30 basis points due to non-recurring net tax recoveries in Brazil;
|
•
|
an increase of 60 basis points due to the favorable net impact of mix and pricing, driven by inflationary pricing in Argentina;
|
•
|
a decrease of 50 basis points due to higher supply chain costs, driven by higher material costs primarily in South Latin America.
|
•
|
an increase of 30 basis points due to the impact higher net brochure expense primarily in Brazil, and to a lesser extent, in the United Kingdom and South Africa.
|
•
|
a decrease of 50 basis points from lower bad debt expense, primarily in Brazil, as the prior-year period was impacted by lower than anticipated collection of receivables;
|
•
|
foreign currency transaction gains (classified within cost of sales, and selling, general and administrative expenses), which had an unfavorable impact to operating profit and Adjusted operating profit of an estimated $10, or approximately 30 basis points to operating margin and Adjusted operating margin;
|
•
|
foreign currency translation, which had an immaterial net impact to operating profit and Adjusted operating profit; and
|
•
|
foreign exchange net losses on our working capital (classified within other expense, net) as compared to net gains in the prior year, resulting in a year-over-year unfavorable impact of approximately $15 before tax on both a reported and Adjusted basis.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||||||||
|
|
|
|
|
%/Basis Point Change
|
|
|
|
|
|
%/ Basis Point Change
|
||||||||||||||||
|
2018
|
|
2017
|
|
US$
|
|
Constant $
|
|
2018
|
|
2017
|
|
US$
|
|
Constant $
|
||||||||||||
Total revenue
|
$
|
500.7
|
|
|
$
|
494.6
|
|
|
1
|
%
|
|
—
|
%
|
|
$
|
1,069.1
|
|
|
$
|
1,002.1
|
|
|
7
|
%
|
|
1
|
%
|
Segment profit
|
74.4
|
|
|
80.8
|
|
|
(8
|
)%
|
|
(9
|
)%
|
|
148.8
|
|
|
154.3
|
|
|
(4
|
)%
|
|
(9
|
)%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Segment margin
|
14.9
|
%
|
|
16.3
|
%
|
|
(140
|
)
|
|
(150
|
)
|
|
13.9
|
%
|
|
15.4
|
%
|
|
(150
|
)
|
|
(160
|
)
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Change in Active Representatives
|
|
|
|
|
|
|
(3
|
)%
|
|
|
|
|
|
|
|
(2
|
)%
|
||||||||||
Change in units sold
|
|
|
|
|
|
|
(3
|
)%
|
|
|
|
|
|
|
|
(1
|
)%
|
||||||||||
Change in Ending Representatives
|
|
|
|
|
|
|
(2
|
)%
|
|
|
|
|
|
|
|
(2
|
)%
|
•
|
a decline of 60 basis points from higher advertising expense, primarily due to increased investment in the United Kingdom and Russia;
|
•
|
a decline of 50 basis points due to higher net brochure cost, primarily in the United Kingdom and in South Africa;
|
•
|
a decline of 50 basis points due to higher transportation costs, primarily in the United Kingdom, primarily relating to increased flexibility in order processing in the United Kingdom and further increases in delivery rates in Russia;
|
•
|
a decline of 30 basis points from higher variable distribution cost, primarily relating to increased flexibility in order processing in the United Kingdom; and
|
•
|
a benefit of 90 basis points due to higher gross margin primarily due to lower supply chain costs driven by material costs.
|
•
|
a decline of 60 basis points due to lower gross margin primarily caused by 70 basis points from the unfavorable impact of foreign currency transaction net losses;
|
•
|
a decline of 50 basis points from higher transportation costs, driven by further increases in delivery rates in Russia and increased flexibility in order processing in the United Kingdom;
|
•
|
a decline of 30 basis points due to the higher Representative, sales leader and field expense in Russia and Turkey, driven by increased investment and higher pay-outs to the field compared to the prior-year period; and
|
•
|
a decline of 20 basis points from higher advertising expense, primarily due to increased investment in the United Kingdom and Russia.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||||||||
|
|
|
|
|
%/Basis Point Change
|
|
|
|
|
|
%/Basis Point Change
|
||||||||||||||||
|
2018
|
|
2017
|
|
US$
|
|
Constant $
|
|
2018
|
|
2017
|
|
US$
|
|
Constant $
|
||||||||||||
Total revenue
|
$
|
516.1
|
|
|
$
|
558.1
|
|
|
(8
|
)%
|
|
3
|
%
|
|
$
|
1,013.2
|
|
|
$
|
1,057.3
|
|
|
(4
|
)%
|
|
4
|
%
|
Segment profit
|
55.2
|
|
|
45.7
|
|
|
21
|
%
|
|
32
|
%
|
|
82.4
|
|
|
59.4
|
|
|
39
|
%
|
|
51
|
%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Segment margin
|
10.7
|
%
|
|
8.2
|
%
|
|
250
|
|
|
230
|
|
|
8.1
|
%
|
|
5.6
|
%
|
|
250
|
|
|
260
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Change in Active Representatives
|
|
|
|
|
|
|
(5
|
)%
|
|
|
|
|
|
|
|
(6
|
)%
|
||||||||||
Change in units sold
|
|
|
|
|
|
|
(6
|
)%
|
|
|
|
|
|
|
|
(6
|
)%
|
||||||||||
Change in Ending Representatives
|
|
|
|
|
|
|
(4
|
)%
|
|
|
|
|
|
|
|
(4
|
)%
|
•
|
a benefit of
240
basis points due to higher gross margin primarily caused by 170 basis points due to non-recurring net tax recoveries in Brazil and 120 basis points from the favorable net impact of mix and pricing, partially offset by 70 basis points due to higher supply chain costs driven by higher material costs;
|
•
|
a benefit of
90
basis points due to lower Representative, sales leader and field expense, in line with sales performance;
|
•
|
a benefit of 60 basis points from lower bad debt expense, primarily in Brazil, as the prior-year period was impacted by lower than anticipated collection of receivables;
|
•
|
a decline of 70 basis points primarily related to higher transportation costs in Brazil, primarily driven by inefficiencies caused by the national transportation strike; and
|
•
|
a decline of
40
basis points due to higher net brochure cost, primarily due to an increase in brochure volumes in Brazil.
|
•
|
a benefit of 210 basis points due to higher gross margin including 90 basis points due to non-recurring net tax recoveries in Brazil, 110 basis points from the favorable net impact of mix and pricing and 40 basis points from the favorable impact of foreign currency net gains. These items were partially offset by 60 basis points due to higher supply chain costs driven by higher material costs;
|
•
|
a benefit of 150 basis points from lower net bad debt expense, primarily in Brazil, as the prior-year period was impacted by lower than anticipated collection of receivables;
|
•
|
a decline of 70 basis points due to higher transportation costs in Brazil, primarily driven by inefficiencies caused by the national transportation strike, and the unfavorable impact of declining revenue with respect to transportation costs; and
|
•
|
a decline of 70 basis points due to higher net brochure cost, primarily due to an increase in brochure volumes in Brazil.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||||||||
|
|
|
|
|
%/Basis Point Change
|
|
|
|
|
|
%/Basis Point Change
|
||||||||||||||||
|
2018
|
|
2017
|
|
US$
|
|
Constant $
|
|
2018
|
|
2017
|
|
US$
|
|
Constant $
|
||||||||||||
Total revenue
|
$
|
207.3
|
|
|
$
|
207.8
|
|
|
—
|
%
|
|
3
|
%
|
|
$
|
402.9
|
|
|
$
|
401.0
|
|
|
—
|
%
|
|
—
|
%
|
Segment profit
|
19.0
|
|
|
18.2
|
|
|
4
|
%
|
|
9
|
%
|
|
39.8
|
|
|
39.6
|
|
|
1
|
%
|
|
(1
|
)%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Segment margin
|
9.2
|
%
|
|
8.8
|
%
|
|
40
|
|
|
50
|
|
|
9.9
|
%
|
|
9.9
|
%
|
|
—
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Change in Active Representatives
|
|
|
|
|
|
|
(5
|
)%
|
|
|
|
|
|
|
|
(6
|
)%
|
||||||||||
Change in units sold
|
|
|
|
|
|
|
(6
|
)%
|
|
|
|
|
|
|
|
(8
|
)%
|
||||||||||
Change in Ending Representatives
|
|
|
|
|
|
|
(8
|
)%
|
|
|
|
|
|
|
|
(8
|
)%
|
•
|
a net decline of 170 basis points due to higher fixed expenses, primarily related to personnel cost;
|
•
|
a decline of 70 basis points due to increased net bad debt expense primarily driven by lower payments in Mexico and political unrest in Nicaragua;
|
•
|
a decline of
40
basis points due to higher transportation costs, primarily related to an increase in fuel prices in Mexico;
|
•
|
a benefit of 210 basis points due to lower Representative, sales leader and field expense in line with sales performance; and
|
•
|
a benefit of
60
basis points from lower advertising expense as compared to the prior-year period.
|
•
|
a net decline of 190 basis points primarily due to higher fixed expenses, primarily related to personnel cost and the impact of the Constant $ revenue decline causing deleverage of our fixed expenses;
|
•
|
a decline of 60 basis points primarily due to an increase in fuel prices in Mexico;
|
•
|
a benefit of 120 basis points due to lower Representative, sales leader and field expense in line with sales performance; and
|
•
|
a benefit of 40 basis points from lower advertising expense as compared to the prior-year period.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||||||||
|
|
|
|
|
%/Basis Point Change
|
|
|
|
|
|
%/Basis Point Change
|
||||||||||||||||
|
2018
|
|
2017
|
|
US$
|
|
Constant $
|
|
2018
|
|
2017
|
|
US$
|
|
Constant $
|
||||||||||||
Total revenue
|
$
|
113.1
|
|
|
$
|
113.9
|
|
|
(1
|
)%
|
|
1
|
%
|
|
$
|
224.5
|
|
|
$
|
227.3
|
|
|
(1
|
)%
|
|
(1
|
)%
|
Segment profit
|
7.3
|
|
|
10.2
|
|
|
(28
|
)%
|
|
(21
|
)%
|
|
17.7
|
|
|
23.5
|
|
|
(25
|
)%
|
|
(19
|
)%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Segment margin
|
6.5
|
%
|
|
9.0
|
%
|
|
(250
|
)
|
|
(200
|
)
|
|
7.9
|
%
|
|
10.3
|
%
|
|
(240
|
)
|
|
(180
|
)
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Change in Active Representatives
|
|
|
|
|
|
|
(1
|
)%
|
|
|
|
|
|
|
|
(1
|
)%
|
||||||||||
Change in units sold
|
|
|
|
|
|
|
—
|
%
|
|
|
|
|
|
|
|
(3
|
)%
|
||||||||||
Change in Ending Representatives
|
|
|
|
|
|
|
(4
|
)%
|
|
|
|
|
|
|
|
(4
|
)%
|
•
|
a decline of 90 basis points from lower gross margin, primarily due to higher logistics cost in the Philippines to address service disruptions caused by the inventory system implementation earlier in the year;
|
•
|
a decline of 50 basis points due to higher fixed expenses primarily relating to the impairment of the inventory system implemented in the Philippines; and
|
•
|
a decline of 30 basis points due to higher advertising expense, primarily in China, related to celebrity and digital advertising to support growth.
|
•
|
a decline of 70 basis points related to higher Representative, sales leader and field expense, primarily due to investments in store upgrades and e-commerce in China;
|
•
|
a decline of 60 basis points primarily relating to the impairment of the inventory system implemented in the Philippines;
|
•
|
a decline of 50 basis points due to higher advertising expense, primarily in the Philippines, related to television advertising associated with our Color category, and in China, related to celebrity and digital advertising to support growth; and
|
•
|
a benefit of 30 basis points due to higher gross margin caused by 160 basis points from benefits in supply chain costs due to lower obsolescence and overhead costs, partially offset by 100 basis points due to higher logistics cost in the Philippines to address service disruptions caused by the inventory system implementation earlier in the year.
|
•
|
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/or realize the projected benefits (in the amounts and time schedules we expect) from, our transformation plan, stabilization strategies, cost savings initiatives, restructuring 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;
|
•
|
our ability to achieve the anticipated benefits of our strategic partnership with Cerberus Capital Management, L.P.;
|
•
|
our broad-based geographic portfolio, which is heavily weighted towards emerging markets, a general economic downturn, a recession globally or in one or more of our geographic regions or markets, such as Brazil, Mexico or Russia, or sudden disruption in business conditions, and the ability to withstand an economic downturn, recession, cost inflation, commodity cost pressures, economic or political instability (including fluctuations in foreign exchange rates), competitive or other market pressures or conditions;
|
•
|
the effect of economic factors, including inflation and fluctuations in interest rates and foreign currency exchange rates; as well as the designation of Argentina as a highly inflationary economy, and the potential effect of such factors on our business, results of operations and financial condition;
|
•
|
the possibility of business disruption in connection with our transformation plan, stabilization strategies, cost savings initiatives, or restructuring and other initiatives;
|
•
|
our ability to reverse declining revenue, to improve margins and net income, or to achieve profitable growth, particularly in our largest markets and developing and emerging markets, such as Brazil, 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 and segmentation programs and technology tools and enablers, to invest in the direct-selling channel, to offer a more social selling experience, 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, such as in Russia and Ukraine or elsewhere, and any potential sanctions, restrictions or responses to such conditions imposed by other markets in which we operate;
|
•
|
developments in or consequences of any investigations and compliance reviews, and any litigation related thereto, including the investigations and compliance reviews of Foreign Corrupt Practices Act and related United States ("U.S.") and foreign law matters, as well as any disruption or adverse consequences resulting from such investigations, reviews, related actions or litigation;
|
•
|
the effect of political, legal, tax, including changes in tax rates, and other regulatory risks imposed on us abroad and in the U.S., our operations or the Representatives, including foreign exchange, pricing, data privacy or other restrictions, the adoption, interpretation and enforcement of foreign laws, including in jurisdictions such as Brazil and Russia, 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;
|
•
|
competitive uncertainties in our markets, including competition from companies in the consumer packaged goods industry, some of which are larger than we are and have greater resources;
|
•
|
the impact of the adverse effect of volatile 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 Representative, 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;
|
•
|
our ability to comply with various data privacy laws affecting the markets in which we do business;
|
•
|
the risk of product or ingredient shortages resulting from our concentration of sourcing in fewer suppliers;
|
•
|
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 and terms and conditions;
|
•
|
the impact of our business results (including the impact of any adverse foreign exchange movements and significant restructuring charges), on our ability to comply with certain covenants in our revolving credit facility;
|
•
|
our ability to successfully identify new business opportunities, strategic alliances and strategic alternatives and identify and analyze alliance candidates, secure financing on favorable terms and negotiate and consummate alliances;
|
•
|
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, including in connection with the separation of the North America business;
|
•
|
our ability to repurchase the series C preferred stock in connection with a change of control; 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 - 4/30/18
|
|
120,511
|
|
(1)
|
2.77
|
|
|
*
|
|
*
|
|
5/1 - 5/31/18
|
|
48,667
|
|
(1)
|
$
|
2.65
|
|
|
*
|
|
*
|
6/1 - 6/30/18
|
|
9,089
|
|
|
2.69
|
|
|
*
|
|
*
|
|
Total
|
|
178,267
|
|
|
$
|
2.73
|
|
|
*
|
|
*
|
*
|
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 and performance restricted stock units.
|
|
|
10.1
|
|
|
|
10.2
|
|
|
|
10.3
|
|
|
|
10.4
|
|
|
|
31.1
|
|
|
|
31.2
|
|
|
|
32.1
|
|
|
|
32.2
|
|
|
|
101
|
The following materials formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Statements of Operations, (ii) Consolidated Statements of Comprehensive Loss, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements
|
|
|
AVON PRODUCTS, INC.
|
|
|
(Registrant)
|
|
|
|
Date:
|
August 3, 2018
|
/s/ Laura Barbrook
|
|
|
Laura Barbrook
|
|
|
Vice President and Corporate
|
|
|
Controller - Principal Accounting Officer
|
|
|
|
|
|
Signed both on behalf of the
|
|
|
registrant and as chief
|
|
|
accounting officer.
|
1 Year Avon Products Chart |
1 Month Avon Products Chart |
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