FORM 8-K |
Avon Products, Inc. | ||||
(Exact name of registrant as specified in charter) | ||||
New York | 1-4881 | 13-0544597 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
AVON PRODUCTS, INC. | |||||||||||||||
(Registrant) | |||||||||||||||
By | /s/ Robert Loughran | ||||||||||||||
Name: Robert Loughran | |||||||||||||||
Title: Vice President and Corporate Controller |
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Avon Reports Second-Quarter 2013 Results | ||||
Second-Quarter Revenue Down 2%; Growth of 2% in Constant Dollars1 | ||||
Operating Profit $202 Million; Adjusted1 Operating Profit $239 Million | ||||
Operating Margin 8.1%, up from 5.0% in the Second-Quarter 2012 | ||||
Adjusted1 Operating Margin 9.5%, up from 6.5% in the Second-Quarter 2012 |
• | As a result of the 32% devaluation of Venezuelan currency, and using the U.S. historic dollar cost basis of non-monetary assets, such as inventory, second-quarter 2013 operating profit was negatively impacted by approximately $17 million, or $.04 per diluted share. |
• | The Company recorded an accrual related to the previously disclosed government FCPA investigations within operating profit of $12 million, or $.03 per diluted share. The accrued amount reflects the June 2013 settlement offer of $12 million with respect to the investigations. The DOJ and SEC have rejected the terms of the offer. As further discussed in the Form 10-Q, we believe it is probable that we will incur a loss upon settlement that is higher than the offer and it is reasonably possible that such additional loss will be material.3 |
• | The Company recorded a loss on extinguishment of debt of approximately $13 million pre-tax, or $.02 per diluted share, associated with the prepayment of the $500 million principal of the Company's 2014 Notes, including a make-whole premium. |
• | The Company also recorded CTI restructuring charges, within operating profit, of approximately $8 million pre-tax, or $.01 per diluted share. |
Latin America | |||||||||||
$ in millions | Second-Quarter 2013 | YTD 2013 | |||||||||
% var. vs 2Q12 | % var. vs 1H12 | ||||||||||
Total revenue | $ | 1,252.1 | 1% | $ | 2,396.5 | —% | |||||
C$ revenue | 7% | 7% | |||||||||
Change in Active Representatives | 2% | 3% | |||||||||
Change in units sold | 1% | —% | |||||||||
Operating profit | 147.8 | 29% | 249.2 | 50% | |||||||
Adjusted operating profit | 168.3 | 38% | 281.1 | 58% | |||||||
Operating margin | 11.8 | % | 260 bps | 10.4 | % | 350 bps | |||||
Adjusted operating margin | 13.4 | % | 360 bps | 11.7 | % | 430 bps | |||||
• | Second-quarter constant-dollar revenue growth was driven by the positive impact of the timing of the Easter holiday, higher average order and an increase in Active Representatives. |
• | Brazil revenue was down 1%, or up 4% in constant dollars, primarily driven by an increase in Active Representatives, partially offset by lower average order. Constant-dollar revenue growth was driven by Fashion & Home, while Beauty sales were relatively unchanged. There was also some benefit from the timing of the Easter holiday. |
• | Mexico revenue was up 12%, or 4% in constant dollars, primarily driven by the positive impact of the timing of the Easter holiday, as well as an increase in Active Representatives. |
• | Venezuela revenue was down 22%, or up 15% in constant dollars, primarily due to higher average order, benefiting from the inflationary impact on pricing as well as an increase in units sold. The positive impact of the timing of the Easter holiday also contributed to the revenue growth. Higher average order was partially offset by a decrease in Active Representatives, which was impacted by continued economic and political instability. |
• | The increase in Adjusted operating margin was partially due to lower advertising expenses, primarily due to higher spending on product launches in the prior-year period. Gross margin was also higher than in the prior-year period, primarily due to lower freight costs. |
Europe, Middle East & Africa | |||||||||||
$ in millions | Second-Quarter 2013 | YTD 2013 | |||||||||
% var. vs 2Q12 | % var. vs 1H12 | ||||||||||
Total revenue | $ | 678.4 | 2% | $ | 1,411.5 | 2% | |||||
C$ revenue | 5% | 4% | |||||||||
Change in Active Representatives | 3% | 3% | |||||||||
Change in units sold | 6% | 5% | |||||||||
Operating profit | 104.1 | 46% | 215.5 | 69% | |||||||
Adjusted operating profit | 107.7 | 36% | 228.4 | 63% | |||||||
Operating margin | 15.3 | % | 450 bps | 15.3 | % | 610 bps | |||||
Adjusted operating margin | 15.9 | % | 390 bps | 16.2 | % | 610 bps | |||||
• | Second-quarter constant-dollar revenue growth was driven both by an increase in Active Representatives and higher average order. |
• | Russia revenue was up 6%, or 8% in constant dollars, primarily due to an increase in Active Representatives as well as strong unit growth. |
• | U.K. revenue was down 8%, or 5% in constant dollars, primarily due to a decrease in Active Representatives. |
• | Turkey revenue was up 6%, or 9% in constant dollars, primarily due to higher average order, partially offset by a decrease in Active Representatives. |
• | South Africa revenue was down 6%, or up 11% in constant dollars, primarily due to higher average order, partially offset by a decrease in Active Representatives. |
• | Adjusted operating margin increased partially due to lower bad debt expense, largely in South Africa, and lower net brochure costs. Adjusted operating margin was also positively impacted by revenue leverage due to strong unit growth. |
North America | |||||||||||
$ in millions | Second-Quarter 2013 | YTD 2013 | |||||||||
% var. vs 2Q12 | % var. vs 1H12 | ||||||||||
Total revenue | $ | 380.3 | (12)% | $ | 758.8 | (14)% | |||||
C$ revenue | (12)% | (13)% | |||||||||
Change in Active Representatives | (13)% | (13)% | |||||||||
Change in units sold | (10)% | (12)% | |||||||||
Operating loss | (11.5 | ) | * | (20.8 | ) | * | |||||
Adjusted operating loss | (6.2 | ) | * | (9.7 | ) | * | |||||
Operating margin | (3.0 | )% | (260) bps | (2.7 | )% | (310) bps | |||||
Adjusted operating margin | (1.6 | )% | (260) bps | (1.3 | )% | (280) bps | |||||
• | Second-quarter North America revenue decline was primarily due to a decrease in Active Representatives, as the Company continues to address challenges in the field and the overall consumer proposition. |
• | North America Beauty sales declined 14%, driven primarily by skincare, while Fashion & Home sales declined 9%, on both a reported and constant-dollar basis. |
• | The decline in Adjusted operating margin was primarily due to revenue deleverage on fixed expenses and lower gross margin, primarily due to a one-time benefit in the second quarter of 2012. These items were partially offset by benefits resulting from the Company's cost-savings initiatives. |
Asia Pacific | |||||||||||
$ in millions | Second-Quarter 2013 | YTD 2013 | |||||||||
% var. vs 2Q12 | % var. vs 1H12 | ||||||||||
Total revenue | $ | 198.1 | (9)% | $ | 398.1 | (10)% | |||||
C$ revenue | (10)% | (11)% | |||||||||
Change in Active Representatives* | (11)% | (7)% | |||||||||
Change in units sold | (12)% | (11)% | |||||||||
Operating profit | 16.4 | 48% | 27.5 | 3% | |||||||
Adjusted operating profit | 12.5 | (18)% | 28.4 | (9)% | |||||||
Operating margin | 8.3 | % | 320 bps | 6.9 | % | 90 bps | |||||
Adjusted operating margin | 6.3 | % | (70) bps | 7.1 | % | 0 bps | |||||
• | Second-quarter constant-dollar revenue decreased, driven by the unfavorable results of our China operations, as well as a decrease in Active Representatives in the other Asia Pacific markets. The region's revenue was also negatively impacted by approximately one point as a result of the Company's decision to exit the South Korea and Vietnam markets. |
• | Revenue in China declined 27%, or 28% in constant dollars, primarily due to declines in unit sales and the transition to a retail incentive model during the third quarter of 2012. |
• | Revenue in the Philippines was relatively unchanged, or declined 2% in constant dollars, as a decrease in Active Representatives was primarily due to ongoing operational challenges in that market. This decrease in Active Representatives was partially offset by higher average order. |
• | The region's Adjusted operating margin decline was primarily driven by higher bad debt expense, largely in the Philippines. Gross margin was also lower, primarily due to higher obsolescence, largely in China, partially offset by the favorable net impact of mix and pricing, primarily in the Philippines. |
Global Expenses | |||||||||||
$ in millions | Second-Quarter 2013 | YTD 2013 | |||||||||
% var. vs 2Q12 | % var. vs 1H12 | ||||||||||
Total global expenses | $ | 163.3 | (13)% | $ | 304.0 | (14)% | |||||
Allocated to segments | (108.7 | ) | (10)% | (208.8 | ) | (10)% | |||||
Net global expenses | 54.6 | (18)% | 95.2 | (22)% | |||||||
Adjusted net global expenses | 43.2 | (20)% | 81.5 | (15)% | |||||||
• | Adjusted net global expenses decreased, compared with the prior-year period, primarily due to lower professional and related fees associated with the FCPA matter. |
Contacts: | |
INVESTORS: | MEDIA: |
Amy Low Chasen | Jennifer Vargas |
Natalija Jovasevic | (212) 282-5404 |
(212) 282-5320 |
Footnotes | |
1 “Adjusted” items refer to financial results presented in accordance with U.S. GAAP that have been adjusted to exclude certain costs as described below, under “Non-GAAP Financial Measures.” We also refer to Adjusted financial measures as Constant $ items, which are Non-GAAP financial measures as described below under “Non-GAAP Financial Measures.” .” | |
2 In the first quarter of 2013, we renamed our "Growth in Active Representatives" performance metric as "Change in Active Representatives." In addition, we revised the definition of this metric to exclude China. As previously disclosed, our business in China is predominantly retail, and as a result, we do not believe including China within the Change in Active Representatives calculation provides for a relevant indicator of underlying business trends. There were no changes to the underlying calculation other than the exclusion of China. | |
3 Please refer to Note 6, Contingencies, in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2013, for additional information on this matter. |
• | 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 |
• | the possibility of business disruption in connection with our stabilization strategies, cost savings initiative, multi-year restructuring programs or other initiatives; |
• | our ability to improve our business in North America, including with respect to the field and the overall consumer proposition; |
• | 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 implement our sales Leadership program globally, to generate Representative activity, to increase the number of consumers served per Representative and their engagement online, to enhance the Representative and consumer experience and increase Representative productivity through field activation programs and technology tools and enablers, execution of Service Model Transformation and other investments 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; |
• | our ability to reverse declining margins and net income; |
• | general economic and business conditions in our markets, including social, economic and political uncertainties in the international markets in our portfolio; |
• | our ability to achieve profitable growth, particularly in our largest markets, such as Brazil and the United States ("U.S."), and developing and emerging markets, such as Mexico and Russia, and our ability to realize sustainable growth from our investments in our brand and the direct-selling channel; |
• | 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, foreign exchange restrictions 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 FCPA and related 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 reach a settlement with the SEC and the DOJ with regard to the ongoing FCPA investigations or, if a settlement is reached, the timing of any such settlement or the terms of such settlement; |
• | 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, |
• | 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 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 on our ability to realize foreign tax credits in the U.S.; |
• | our access to cash and short-term financing, and our ability to secure financing or financing at attractive rates; |
• | any changes to our credit ratings and the impact of such changes on our financing costs, rates, terms, debt service obligations and access to lending sources; |
• | 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; |
• | our ability to attract and retain key personnel; |
• | 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 typically seasonal nature of our business, 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; |
• | 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 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 and strategic alternatives and identify and analyze acquisition candidates, secure financing on favorable terms and negotiate and consummate acquisitions, as well as to successfully integrate or manage any acquired business; |
• | the challenges to our China business, including the effects of rising costs, macro-economic pressures, competition, and the impact of declines in expected future |
• | 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 litigations or with respect to the legal status of Representatives. |
Three Months Ended | Percent Change | Six Months Ended | Percent Change | ||||||||||||||||||||
June 30 | June 30 | ||||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||||||||
Net sales | $ | 2,466.8 | $ | 2,518.2 | (2 | )% | $ | 4,873.9 | $ | 5,019.4 | (3 | )% | |||||||||||
Other revenue | 42.1 | 40.0 | 91.0 | 79.2 | |||||||||||||||||||
Total revenue | 2,508.9 | 2,558.2 | (2 | )% | 4,964.9 | 5,098.6 | (3 | )% | |||||||||||||||
Cost of sales | 935.4 | 949.7 | 1,860.8 | 1,944.4 | |||||||||||||||||||
Selling, general and administrative expenses | 1,371.3 | 1,479.6 | 2,727.9 | 2,952.6 | |||||||||||||||||||
Operating profit | 202.2 | 128.9 | 57 | % | 376.2 | 201.6 | 87 | % | |||||||||||||||
Interest expense | 31.1 | 24.9 | 60.5 | 49.5 | |||||||||||||||||||
Loss on extinguishment of debt | 13.0 | — | 86.0 | — | |||||||||||||||||||
Interest income | (2.8 | ) | (2.8 | ) | (4.8 | ) | (6.7 | ) | |||||||||||||||
Other expense, net | 15.6 | 13.8 | 59.9 | 23.8 | |||||||||||||||||||
Total other expenses | 56.9 | 35.9 | 201.6 | 66.6 | |||||||||||||||||||
Income from continuing operations, before taxes | 145.3 | 93.0 | 56 | % | 174.6 | 135.0 | 29 | % | |||||||||||||||
Income taxes | (60.7 | ) | (27.9 | ) | (101.5 | ) | (41.7 | ) | |||||||||||||||
Income from continuing operations, net of tax | 84.6 | 65.1 | 30 | % | 73.1 | 93.3 | (22 | )% | |||||||||||||||
Loss from discontinued operations, net tax | (50.4 | ) | (2.4 | ) | (51.5 | ) | (3.0 | ) | |||||||||||||||
Net income | 34.2 | 62.7 | 21.6 | 90.3 | |||||||||||||||||||
Net income attributable to noncontrolling interests | (2.3 | ) | (1.1 | ) | (3.4 | ) | (2.2 | ) | |||||||||||||||
Net income attributable to Avon | $ | 31.9 | $ | 61.6 | (48 | )% | $ | 18.2 | $ | 88.1 | (79 | )% | |||||||||||
Earnings (loss) per share:(1) | |||||||||||||||||||||||
Basic | |||||||||||||||||||||||
Basic EPS from continuing operations | $ | .19 | $ | .15 | 27 | % | $ | .16 | $ | .21 | (24 | )% | |||||||||||
Basic EPS from discontinued operations | $ | (.12 | ) | $ | (.01 | ) | $ | (.12 | ) | $ | (.01 | ) | |||||||||||
Basic EPS attributable to Avon | $ | .07 | $ | .14 | (50 | )% | $ | .04 | $ | .20 | (80 | )% | |||||||||||
Diluted | |||||||||||||||||||||||
Diluted EPS from continuing operations | $ | .19 | $ | .15 | 27 | % | $ | .16 | $ | .21 | (24 | )% | |||||||||||
Diluted EPS from discontinued operations | $ | (.11 | ) | $ | (.01 | ) | $ | (.12 | ) | $ | (.01 | ) | |||||||||||
Diluted EPS attributable to Avon | $ | .07 | $ | .14 | (50 | )% | $ | .04 | $ | .20 | (80 | )% | |||||||||||
Weighted-average shares outstanding: | |||||||||||||||||||||||
Basic | 433.5 | 432.0 | 433.0 | 431.6 | |||||||||||||||||||
Diluted | 434.6 | 432.8 | 433.9 | 432.4 | |||||||||||||||||||
(1) Under the two-class method, earnings per share is calculated using net earnings allocable to common shares, which is derived by reducing net earnings by the earnings allocable to participating securities. Net earnings allocable to common shares used in the basic and diluted earnings per share calculation were $31.6 and $60.5 for the three months ended June 30, 2013 and 2012, respectively. Net earnings allocable to common shares used in the basic and diluted earnings per share calculation were $18.0 and $86.2 for the six months ended June 30, 2013 and 2012, respectively. | |||||||||||||||||||||||
June 30 | December 31 | |||||||
2013 | 2012 | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 873.2 | $ | 1,206.9 | ||||
Accounts receivable, net | 691.7 | 752.1 | ||||||
Inventories | 1,154.3 | 1,101.1 | ||||||
Prepaid expenses and other | 707.6 | 827.0 | ||||||
Current assets of discontinued operations | 36.1 | 41.8 | ||||||
Total current assets | 3,462.9 | 3,928.9 | ||||||
Property, plant and equipment, at cost | 2,496.7 | 2,684.8 | ||||||
Less accumulated depreciation | (1,102.8 | ) | (1,158.8 | ) | ||||
Property, plant and equipment, net | 1,393.9 | 1,526.0 | ||||||
Goodwill | 311.3 | 330.3 | ||||||
Other intangible assets, net | 36.4 | 40.6 | ||||||
Other assets | 1,413.4 | 1,407.9 | ||||||
Noncurrent assets of discontinued operations | 67.4 | 148.8 | ||||||
Total assets | $ | 6,685.3 | $ | 7,382.5 | ||||
Liabilities and Shareholders’ Equity | ||||||||
Current Liabilities | ||||||||
Debt maturing within one year | $ | 263.2 | $ | 572.0 | ||||
Accounts payable | 861.1 | 914.3 | ||||||
Accrued compensation | 241.1 | 264.7 | ||||||
Other accrued liabilities | 564.7 | 645.3 | ||||||
Sales and taxes other than income | 187.7 | 210.6 | ||||||
Income taxes | 46.4 | 73.6 | ||||||
Current liabilities of discontinued operations | 16.1 | 24.1 | ||||||
Total current liabilities | 2,180.3 | 2,704.6 | ||||||
Long-term debt | 2,634.8 | 2,623.8 | ||||||
Employee benefit plans | 568.3 | 637.6 | ||||||
Long-term income taxes | 49.8 | 52.0 | ||||||
Other liabilities | 119.0 | 131.1 | ||||||
Noncurrent liabilities of discontinued operations | 0.1 | 0.1 | ||||||
Total liabilities | $ | 5,552.3 | $ | 6,149.2 | ||||
Shareholders’ Equity | ||||||||
Common stock | $ | 189.3 | $ | 188.3 | ||||
Additional paid-in-capital | 2,159.5 | 2,119.6 | ||||||
Retained earnings | 4,323.8 | 4,357.8 | ||||||
Accumulated other comprehensive loss | (977.0 | ) | (876.7 | ) | ||||
Treasury stock, at cost | (4,579.3 | ) | (4,571.9 | ) | ||||
Total Avon shareholders’ equity | 1,116.3 | 1,217.1 | ||||||
Noncontrolling interests | 16.7 | 16.2 | ||||||
Total shareholders’ equity | $ | 1,133.0 | $ | 1,233.3 | ||||
Total liabilities and shareholders’ equity | $ | 6,685.3 | $ | 7,382.5 | ||||
Six Months Ended | ||||||||
June 30 | ||||||||
2013 | 2012 | |||||||
Cash Flows from Operating Activities | ||||||||
Net income | $ | 21.6 | $ | 90.3 | ||||
Loss from discontinued operations, net of tax | 51.5 | 3.0 | ||||||
Income from continuing operations | $ | 73.1 | $ | 93.3 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 119.8 | 109.1 | ||||||
Provision for doubtful accounts | 113.4 | 134.5 | ||||||
Provision for obsolescence | 53.7 | 59.7 | ||||||
Share-based compensation | 26.2 | 23.2 | ||||||
Deferred income taxes | (27.4 | ) | (72.0 | ) | ||||
Charge for Venezuelan monetary assets and liabilities | 34.1 | — | ||||||
Other | 30.1 | 20.9 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | (103.3 | ) | (94.4 | ) | ||||
Inventories | (154.3 | ) | (170.4 | ) | ||||
Prepaid expenses and other | 67.6 | 45.6 | ||||||
Accounts payable and accrued liabilities | (65.8 | ) | 1.0 | |||||
Income and other taxes | (28.6 | ) | (70.8 | ) | ||||
Noncurrent assets and liabilities | (68.9 | ) | (43.0 | ) | ||||
Net cash provided by operating activities of continuing operations | 69.7 | 36.7 | ||||||
Cash Flows from Investing Activities | ||||||||
Capital expenditures | (75.8 | ) | (87.5 | ) | ||||
Disposal of assets | 12.8 | 9.5 | ||||||
Purchases of investments | (14.2 | ) | (0.8 | ) | ||||
Proceeds from sale of investments | 0.2 | — | ||||||
Net cash used by investing activities of continuing operations | (77.0 | ) | (78.8 | ) | ||||
Cash Flows from Financing Activities | ||||||||
Cash dividends | (53.9 | ) | (199.2 | ) | ||||
Debt, net (maturities of three months or less) | 31.6 | (343.1 | ) | |||||
Proceeds from debt | 1,478.8 | 638.4 | ||||||
Repayment of debt | (1,796.2 | ) | (71.2 | ) | ||||
Interest rate swap termination | 88.1 | 43.6 | ||||||
Proceeds from exercise of stock options | 16.8 | 7.6 | ||||||
Excess tax benefit realized from share-based compensation | 0.1 | (2.6 | ) | |||||
Repurchase of common stock | (7.6 | ) | (8.1 | ) | ||||
Net cash (used) provided by financing activities of continuing operations | (242.3 | ) | 65.4 | |||||
Net cash (used) provided by operating activities of discontinued operations | (0.5 | ) | 4.4 | |||||
Net cash used by investing activities of discontinued operations | (0.2 | ) | (0.1 | ) | ||||
Net cash (used) provided by discontinued operations | (0.7 | ) | 4.3 | |||||
Effect of exchange rate changes on cash and equivalents | (81.0 | ) | 3.7 | |||||
Net (decrease) increase in cash and equivalents | (331.3 | ) | 31.3 | |||||
Cash and equivalents at beginning of year (1) | $ | 1,209.6 | $ | 1,245.1 | ||||
Cash and equivalents at end of period (2) | $ | 878.3 | $ | 1,276.4 |
THREE MONTHS ENDED JUNE 30, 2013 |
REGIONAL RESULTS | ||||||||||||||||||
$ in Millions | Total Revenue US$ | C$ | Units Sold | Price/Mix C$ | Active Reps (1) | Average Order C$ | ||||||||||||
% var. vs 2Q12 | % var. vs 2Q12 | % var. vs 2Q12 | % var. vs 2Q12 | % var. vs 2Q12 | % var. vs 2Q12 | |||||||||||||
Latin America | $ | 1,252.1 | 1% | 7% | 1% | 6% | 2% | 5% | ||||||||||
Europe, Middle East & Africa | 678.4 | 2 | 5 | 6 | (1) | 3 | 2 | |||||||||||
North America | 380.3 | (12) | (12) | (10) | (2) | (13) | 1 | |||||||||||
Asia Pacific (1) | 198.1 | (9) | (10) | (12) | 2 | (11) | 1 | |||||||||||
Total from operations | 2,508.9 | (2) | 2 | — | 2 | — | 2 | |||||||||||
Global and other | — | — | — | — | — | — | — | |||||||||||
Total | $ | 2,508.9 | (2)% | 2% | —% | 2% | —% | 2% | ||||||||||
2013 GAAP Operating Profit (Loss)US$ | % var. vs 2Q12 | 2013 GAAP Operating Margin US$ | 2013 Adjusted Operating Profit US$ (2) | 2012 Adjusted Operating Profit US$ (2) | 2013 Adjusted Operating Margin (2) | 2012 Adjusted Operating Margin (2) | ||||||||||||
Latin America | $ | 147.8 | 29% | 11.8% | $ | 168.3 | $ | 122.0 | 13.4% | 9.8% | ||||||||
Europe, Middle East & Africa | 104.1 | 46 | 15.3 | 107.7 | 79.4 | 15.9 | 12.0 | |||||||||||
North America | (11.5 | ) | * | (3.0) | (6.2 | ) | 4.2 | (1.6) | 1.0 | |||||||||
Asia Pacific | 16.4 | 48 | 8.3 | 12.5 | 15.2 | 6.3 | 7.0 | |||||||||||
Total from operations | 256.8 | 31 | 10.2 | 282.3 | 220.8 | 11.3 | 8.6 | |||||||||||
Global and other | (54.6 | ) | 18 | — | (43.2 | ) | (53.7 | ) | — | — | ||||||||
Total | $ | 202.2 | 57% | 8.1% | $ | 239.1 | $ | 167.1 | 9.5% | 6.5% |
CATEGORY SALES (US$) |
Consolidated | ||||||||
US$ | C$ | |||||||
% var. vs 2Q12 | % var. vs 2Q12 | |||||||
Beauty (color cosmetics/fragrances/skincare/personal care) | $ | 1,787.5 | (4)% | —% | ||||
Fashion (jewelry/watches/apparel/footwear/accessories/children's) | 414.7 | (4) | (1) | |||||
Home (gift & decorative products/housewares/entertainment & leisure/children's/nutrition) | 264.6 | 13 | 17 | |||||
Net sales | $ | 2,466.8 | (2)% | 2% | ||||
Other revenue | 42.1 | 5 | 5 | |||||
Total revenue | $ | 2,508.9 | (2)% | 2% | ||||
Beauty Category: | ||||||||
Fragrance | (1)% | 4% | ||||||
Color | (3) | — | ||||||
Skincare | (9) | (6) | ||||||
Personal care | (3) | 1 | ||||||
* calculation not meaningful | ||||||||
(1) In the first quarter of 2013, we revised the definition of Active Representatives to exclude China. As previously disclosed, our business in China is predominantly retail, and as a result, we do not believe including China within the Change in Active Representatives calculation provides for a relevant indicator of underlying business trends. There were no changes to the underlying calculation other than the exclusion of China. | ||||||||
(2) For a further discussion on our Non-GAAP financial measures, please refer to our discussion of Non-GAAP financial measures in this release and reconciliations of our Non-GAAP financial measures to the related GAAP financial measure in the following supplemental schedules. |
SIX MONTHS ENDED JUNE 30, 2013 |
REGIONAL RESULTS | ||||||||||||||||||
$ in Millions | Total Revenue US$ | C$ | Units Sold | Price/Mix C$ | Active Reps (1) | Average Order C$ | ||||||||||||
% var. vs 1H12 | % var. vs 1H12 | % var. vs 1H12 | % var. vs 1H12 | % var. vs 1H12 | % var. vs 1H12 | |||||||||||||
Latin America | $ | 2,396.5 | —% | 7% | —% | 7% | 3% | 4% | ||||||||||
Europe, Middle East & Africa | 1,411.5 | 2 | 4 | 5 | (1) | 3 | 1 | |||||||||||
North America | 758.8 | (14) | (13) | (12) | (1) | (13) | — | |||||||||||
Asia Pacific (1) | 398.1 | (10) | (11) | (11) | — | (7) | (4) | |||||||||||
Total from operations | 4,964.9 | (3) | 1 | (2) | 3 | 1 | — | |||||||||||
Global and other | — | — | — | — | — | — | — | |||||||||||
Total | $ | 4,964.9 | (3)% | 1% | (2)% | 3% | 1% | —% | ||||||||||
2013 GAAP Operating Profit (Loss)US$ | % var. vs 1H12 | 2013 GAAP Operating Margin US$ | 2013 Adjusted Operating Profit US$ (2) | 2012 Adjusted Operating Profit US$ (2) | 2013 Adjusted Operating Margin (2) | 2012 Adjusted Operating Margin (2) | ||||||||||||
Latin America | $ | 249.2 | 50% | 10.4% | $ | 281.1 | $ | 177.5 | 11.7% | 7.4% | ||||||||
Europe, Middle East & Africa | 215.5 | 69 | 15.3 | 228.4 | 140.5 | 16.2 | 10.1 | |||||||||||
North America | (20.8 | ) | * | (2.7) | (9.7 | ) | 13.6 | (1.3) | 1.5 | |||||||||
Asia Pacific | 27.5 | 3 | 6.9 | 28.4 | 31.3 | 7.1 | 7.1 | |||||||||||
Total from operations | 471.4 | 46 | 9.5 | 528.2 | 362.9 | 10.6 | 7.1 | |||||||||||
Global and other | (95.2 | ) | 22 | — | (81.5 | ) | (95.8 | ) | — | — | ||||||||
Total | $ | 376.2 | 87% | 7.6% | $ | 446.7 | $ | 267.1 | 9.0% | 5.2% |
CATEGORY SALES (US$) |
Consolidated | ||||||||
US$ | C$ | |||||||
% var. vs 1H12 | % var. vs 1H12 | |||||||
Beauty (color cosmetics/fragrances/skincare/personal care) | $ | 3,555.7 | (4)% | —% | ||||
Fashion (jewelry/watches/apparel/footwear/accessories/children's) | 819.6 | (3) | (1) | |||||
Home (gift & decorative products/housewares/entertainment & leisure/children's/nutrition) | 498.6 | 9 | 13 | |||||
Net sales | $ | 4,873.9 | (3)% | 1% | ||||
Other revenue | 91.0 | 15 | 14 | |||||
Total revenue | $ | 4,964.9 | (3)% | 1% | ||||
Beauty Category: | ||||||||
Fragrance | —% | 5% | ||||||
Color | (5) | (1) | ||||||
Skincare | (11) | (7) | ||||||
Personal care | (3) | — | ||||||
* calculation not meaningful | ||||||||
(1) In the first quarter of 2013, we revised the definition of Active Representatives to exclude China. As previously disclosed, our business in China is predominantly retail, and as a result, we do not believe including China within the Change in Active Representatives calculation provides for a relevant indicator of underlying business trends. There were no changes to the underlying calculation other than the exclusion of China. | ||||||||
(2) For a further discussion on our Non-GAAP financial measures, please refer to our discussion of Non-GAAP financial measures in this release and reconciliations of our Non-GAAP financial measures to the related GAAP financial measure in the following supplemental schedules. |
$ in Millions (except per share data) | THREE MONTHS ENDED JUNE 30, 2013 | |||||||||||||||||||||||
Reported (GAAP) | CTI restructuring initiatives | Venezuelan special items | FCPA accrual | Loss on extinguishment of debt | Adjusted (Non-GAAP) | |||||||||||||||||||
Cost of sales | $ | 935.4 | $ | (0.3 | ) | $ | 14.9 | $ | — | $ | — | $ | 920.8 | |||||||||||
Selling, general and administrative expenses | 1,371.3 | 8.7 | 1.7 | 12.0 | — | 1,348.9 | ||||||||||||||||||
Operating profit | 202.2 | 8.4 | 16.5 | 12.0 | — | 239.1 | ||||||||||||||||||
Income from continuing operations, before taxes | 145.3 | 8.4 | 16.5 | 12.0 | 13.0 | 195.2 | ||||||||||||||||||
Income taxes | (60.7 | ) | (2.8 | ) | — | — | (4.8 | ) | (68.2 | ) | ||||||||||||||
Income from continuing operations | $ | 84.6 | $ | 5.6 | $ | 16.5 | $ | 12.0 | $ | 8.2 | $ | 126.9 | ||||||||||||
Diluted EPS from continuing operations | $ | 0.19 | $ | 0.01 | $ | 0.04 | $ | 0.03 | $ | 0.02 | $ | 0.29 | ||||||||||||
Gross margin | 62.7 | % | — | 0.6 | — | — | 63.3 | % | ||||||||||||||||
SG&A as a % of revenues | 54.7 | % | (0.3 | ) | (0.1 | ) | (0.5 | ) | — | 53.8 | % | |||||||||||||
Operating margin | 8.1 | % | 3.0 | 0.7 | 0.5 | — | 9.5 | % | ||||||||||||||||
Effective tax rate | 41.8 | % | (1.0 | ) | (4.3 | ) | (2.6 | ) | 0.1 | 34.9 | % | |||||||||||||
SEGMENT OPERATING PROFIT (LOSS) | ||||||||||||||||||||||||
Latin America | $ | 147.8 | $ | 3.9 | $ | 16.5 | $ | — | $ | 168.3 | ||||||||||||||
Europe, Middle East & Africa | 104.1 | 3.7 | — | — | 107.7 | |||||||||||||||||||
North America | (11.5 | ) | 5.3 | — | — | (6.2 | ) | |||||||||||||||||
Asia Pacific | 16.4 | (3.9 | ) | — | — | 12.5 | ||||||||||||||||||
Global and other | (54.6 | ) | (0.6 | ) | — | 12.0 | (43.2 | ) | ||||||||||||||||
Total | $ | 202.2 | $ | 8.4 | $ | 16.5 | $ | 12.0 | $ | 239.1 | ||||||||||||||
SEGMENT OPERATING MARGIN | ||||||||||||||||||||||||
Latin America | 11.8 | % | 0.3 | 1.3 | — | 13.4 | % | |||||||||||||||||
Europe, Middle East & Africa | 15.3 | % | 0.5 | — | — | 15.9 | % | |||||||||||||||||
North America | (3.0 | )% | 1.4 | — | — | (1.6 | )% | |||||||||||||||||
Asia Pacific | 8.3 | % | (2.0 | ) | — | — | 6.3 | % | ||||||||||||||||
Global and other | — | — | — | — | — | |||||||||||||||||||
Total | 8.1 | % | 0.3 | 0.7 | 0.5 | % | 9.5 | % |
$ in Millions (except per share data) | SIX MONTHS ENDED JUNE 30, 2013 | |||||||||||||||||||||||
Reported (GAAP) | CTI restructuring initiatives | Venezuelan special items | FCPA accrual | Loss on extinguishment of debt | Adjusted (Non-GAAP) | |||||||||||||||||||
Cost of sales | $ | 1,860.8 | $ | (0.9 | ) | $ | 24.8 | $ | — | $ | — | $ | 1,836.9 | |||||||||||
Selling, general and administrative expenses | 2,727.9 | 29.6 | 5.0 | 12.0 | — | 2,681.3 | ||||||||||||||||||
Operating profit | 376.2 | 28.7 | 29.8 | 12.0 | — | 446.7 | ||||||||||||||||||
Income from continuing operations, before taxes | 174.6 | 28.7 | 63.9 | 12.0 | 86.0 | 365.1 | ||||||||||||||||||
Income taxes | (101.5 | ) | (9.2 | ) | 16.6 | — | (31.6 | ) | (125.6 | ) | ||||||||||||||
Income from continuing operations | $ | 73.1 | $ | 19.5 | $ | 80.5 | $ | 12.0 | $ | 54.4 | $ | 239.5 | ||||||||||||
Diluted EPS from continuing operations | $ | 0.16 | $ | 0.04 | $ | 0.18 | $ | 0.03 | $ | 0.12 | $ | 0.55 | ||||||||||||
Gross margin | 62.5 | % | — | 0.5 | — | — | 63.0 | % | ||||||||||||||||
SG&A as a % of revenues | 54.9 | % | (0.6 | ) | (0.1 | ) | (0.2 | ) | — | 54.0 | % | |||||||||||||
Operating margin | 7.6 | % | 0.6 | 0.6 | 0.2 | — | 9.0 | % | ||||||||||||||||
Effective tax rate | 58.1 | % | (0.2 | ) | (22.6 | ) | (1.7 | ) | 0.7 | 34.4 | % | |||||||||||||
SEGMENT OPERATING PROFIT (LOSS) | ||||||||||||||||||||||||
Latin America | $ | 249.2 | $ | 2.1 | $ | 29.8 | $ | — | $ | 281.1 | ||||||||||||||
Europe, Middle East & Africa | 215.5 | 12.9 | — | — | 228.4 | |||||||||||||||||||
North America | (20.8 | ) | 11.1 | — | — | (9.7 | ) | |||||||||||||||||
Asia Pacific | 27.5 | 0.9 | — | — | 28.4 | |||||||||||||||||||
Global and other | (95.2 | ) | 1.7 | — | 12.0 | (81.5 | ) | |||||||||||||||||
Total | $ | 376.2 | $ | 28.7 | $ | 29.8 | $ | 12.0 | $ | 446.7 | ||||||||||||||
SEGMENT OPERATING MARGIN | ||||||||||||||||||||||||
Latin America | 10.4 | % | 0.1 | 1.2 | — | 11.7 | % | |||||||||||||||||
Europe, Middle East & Africa | 15.3 | % | 0.9 | — | — | 16.2 | % | |||||||||||||||||
North America | (2.7 | )% | 1.5 | — | — | (1.3 | )% | |||||||||||||||||
Asia Pacific | 6.9 | % | 0.2 | — | — | 7.1 | % | |||||||||||||||||
Global and other | — | — | — | — | — | |||||||||||||||||||
Total | 7.6 | % | 0.6 | 0.6 | 0.2 | 9.0 | % |
$ in Millions (except per share data) | THREE MONTHS ENDED JUNE 30, 2012 | |||||||||||
Reported (GAAP) | CTI restructuring initiatives | Adjusted (Non-GAAP) | ||||||||||
Cost of sales | $ | 949.7 | $ | 0.7 | $ | 949.0 | ||||||
Selling, general and administrative expenses | 1,479.6 | 37.5 | 1,442.1 | |||||||||
Operating profit | 128.9 | 38.2 | 167.1 | |||||||||
Income from continuing operations, before taxes | 93.0 | 38.2 | 131.2 | |||||||||
Income taxes | (27.9 | ) | (12.2 | ) | (40.1 | ) | ||||||
Income from continuing operations | $ | 65.1 | $ | 26.0 | $ | 91.1 | ||||||
Diluted EPS from continuing operations | $ | 0.15 | $ | 0.06 | $ | 0.21 | ||||||
Gross margin | 62.9 | % | — | 62.9 | % | |||||||
SG&A as a % of revenues | 57.8 | % | (1.5 | ) | 56.4 | % | ||||||
Operating margin | 5.0 | % | 1.5 | 6.5 | % | |||||||
Effective tax rate | 30.0 | % | 0.5 | 30.6 | % | |||||||
SEGMENT OPERATING PROFIT (LOSS) | ||||||||||||
Latin America | $ | 114.9 | $ | 7.1 | $ | 122.0 | ||||||
Europe, Middle East & Africa | 71.3 | 8.1 | 79.4 | |||||||||
North America | (1.6 | ) | 5.8 | 4.2 | ||||||||
Asia Pacific | 11.1 | 4.1 | 15.2 | |||||||||
Global and other | (66.8 | ) | 13.1 | (53.7 | ) | |||||||
Total | $ | 128.9 | $ | 38.2 | $ | 167.1 | ||||||
SEGMENT OPERATING MARGIN | ||||||||||||
Latin America | 9.2 | % | 0.6 | 9.8 | % | |||||||
Europe, Middle East & Africa | 10.8 | % | 1.2 | 12.0 | % | |||||||
North America | (0.4 | )% | 1.3 | 1.0 | % | |||||||
Asia Pacific | 5.1 | % | 1.9 | 7.0 | % | |||||||
Global and other | — | — | — | |||||||||
Total | 5.0 | % | 1.5 | 6.5 | % |
$ in Millions (except per share data) | SIX MONTHS ENDED JUNE 30, 2012 | |||||||||||
Reported (GAAP) | CTI restructuring initiatives | Adjusted (Non-GAAP) | ||||||||||
Cost of sales | $ | 1,944.4 | $ | 3.4 | $ | 1,941.0 | ||||||
Selling, general and administrative expenses | 2,952.6 | 62.1 | 2,890.5 | |||||||||
Operating profit | 201.6 | 65.5 | 267.1 | |||||||||
Income from continuing operations, before taxes | 135.0 | 65.5 | 200.5 | |||||||||
Income taxes | (41.7 | ) | (21.4 | ) | (63.1 | ) | ||||||
Income from continuing operations | $ | 93.3 | $ | 44.1 | $ | 137.4 | ||||||
Diluted EPS from continuing operations | $ | 0.21 | $ | 0.10 | $ | 0.31 | ||||||
Gross margin | 61.9 | % | 0.1 | 61.9 | % | |||||||
SG&A as a % of revenues | 57.9 | % | (1.2 | ) | 56.7 | % | ||||||
Operating margin | 4.0 | % | 1.3 | 5.2 | % | |||||||
Effective tax rate | 30.9 | % | 6.0 | 31.5 | % | |||||||
SEGMENT OPERATING PROFIT (LOSS) | ||||||||||||
Latin America | $ | 165.7 | $ | 11.8 | $ | 177.5 | ||||||
Europe, Middle East & Africa | 127.8 | 12.7 | 140.5 | |||||||||
North America | 3.4 | 10.2 | 13.6 | |||||||||
Asia Pacific | 26.5 | 4.8 | 31.3 | |||||||||
Global and other | (121.8 | ) | 26.0 | (95.8 | ) | |||||||
Total | $ | 201.6 | $ | 65.5 | $ | 267.1 | ||||||
SEGMENT OPERATING MARGIN | ||||||||||||
Latin America | 6.9 | % | 0.5 | 7.4 | % | |||||||
Europe, Middle East & Africa | 9.2 | % | 0.9 | 10.1 | % | |||||||
North America | 0.4 | % | 1.2 | 1.5 | % | |||||||
Asia Pacific | 6.0 | % | 1.1 | 7.1 | % | |||||||
Global and other | — | — | — | |||||||||
Total | 4.0 | % | 1.3 | 5.2 | % |