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: Group Vice President and Chief Accounting Officer |
Exhibit | ||
No. | Description | |
99.1 | Press Release of Avon Products, Inc. dated May 5, 2016 | |
99.2 | Recast segment information of Avon Products, Inc. |
Avon Reports First-Quarter Results |
• | First-Quarter Revenue declined 16% to $1.3 Billion; Increased 3% in Constant Dollars1 excluding the divestiture of Liz Earle2 |
• | First-Quarter Operating Profit of $8 Million; Adjusted1 Operating Profit of $55 Million |
• | First-Quarter Operating Margin increased 270 bps to 0.6%; Adjusted1 Operating Margin declined 230 bps to 4.2% |
• | First-Quarter Diluted Loss per Share From Continuing Operations of $(0.36); Adjusted1 Diluted Loss per Share From Continuing Operations of $(0.07) |
(1) | The Company deconsolidated its Venezuela business as of March 31, 2016 due to the continued lack of exchangeability of the Venezuelan currency and its impact on the Company’s ability to exercise sufficient control over the operations of the business in Venezuela. For reporting purposes, this means that the operating results (revenue and |
(2) | Changes to segment reporting: |
a. | To align with the revised operating model, the Company has changed its reportable segments to now be: Europe, Middle East & Africa; South Latin America; North Latin America; and Asia Pacific; |
b. | Avon is including the items below in Other operating segments and business activities. The Company believes this presentation will provide a clearer comparison of core operating results. |
i. | Venezuela operating results, which have been deconsolidated as of March 31, 2016; |
ii. | The historical results of the Liz Earle business, which was sold in July of 2015; |
c. | Avon has changed the methodology of allocating global expenses to the segments. Segment profit excludes any allocation of global expenses other than global marketing expenses. The Company has allocated global marketing expenses to the reportable segments to ensure comparability between periods; |
d. | Avon has changed the measure of profit disclosed for segments and refers to it as Segment profit and Segment margin, which is similar to what the Company previously used in its segment reporting as Adjusted operating profit and Adjusted operating margin, which will simplify the disclosure of segment profit; |
(3) | A new metric: Change in Ending Representatives3, which the Company believes can be a useful indicator of potential revenue performance; and |
(4) | A discussion of the impact of the newly issued Series C Preferred Stock to an affiliate of Cerberus Capital Management for $435 million. |
• | Total revenue for Avon Products, Inc. declined 16% to $1.3 billion, but increased 2% in constant dollars and increased 3% in constant dollars when excluding the impact of the sale of Liz Earle. |
• | Total revenue from reportable segments declined 15% to $1.3 billion, and increased 2% in constant dollars. In addition, the year-over-year comparison is impacted by the Industrial Production Tax ("IPI") levied by the Brazilian government on cosmetics beginning in May 2015. Excluding the estimated impact of the Brazil IPI tax, constant-dollar revenue would have grown approximately 4%2. While we will anniversary the Brazil IPI tax in May, there have been additional state taxes, referred to as MVA taxes, that went into effect in various jurisdictions in Brazil in the latter part of 2015. These taxes negatively impacted the results in the first quarter of 2016 and will continue to affect the growth rates |
◦ | Active Representatives were down 1% year over year, as increases in Europe, Middle East & Africa were more than offset by declines in the other reportable segments, most significantly South Latin America. |
◦ | Average order increased 3% due to growth in all reportable segments as the Company continues to benefit from pricing. |
◦ | Ending Representatives increased 2% due to growth in Europe, Middle East & Africa, most significantly Russia and South Africa. |
• | Gross margin was 60.3%, down 30 basis points. Adjusted gross margin was 60.3%, down 130 basis points, driven by an approximate 420 basis points of unfavorable impact of foreign exchange, partially offset by the favorable net impact of price/mix and lower supply chain costs. |
• | Operating margin was 0.6% in the quarter, up 270 basis points. Adjusted operating margin was 4.2%, down 230 basis points. These year-over-year comparisons were negatively impacted by approximately 80 basis points due to the impact of the IPI tax in Brazil. Excluding this impact, Adjusted operating margin would have decreased 150 basis points2, which was primarily driven by an estimated 560 basis points of unfavorable impact of foreign exchange. The foreign exchange impact was partially offset by the favorable net impact of price/mix, as well as the continued benefits from cost savings initiatives. |
• | The effective tax rate from continuing operations was impacted by the deconsolidation of the Venezuelan operations. This negative impact to the effective tax rate was partially offset by the recognition of a benefit associated with the implementation of foreign tax planning strategies. The Adjusted effective tax rate in first-quarter 2016 was negatively impacted by the country mix of earnings and the inability to recognize additional deferred tax assets associated with current period operating losses in various jurisdictions. The Adjusted effective tax rate is expected to be volatile on a quarterly basis due to the country mix of quarterly earnings, as well as withholding taxes associated with repatriation of cash, on lower pre-tax earnings. |
• | Loss from continuing operations, net of tax was $156 million, or a loss of $0.36 per diluted share, compared with a loss of $143 million, or a loss of $0.33 per diluted share, for the first quarter of 2015. Adjusted loss from continuing operations, net of tax was $27 million, or $0.07 per diluted share, compared with Adjusted income from continuing operations, net of tax of $15 million, or $0.03 per diluted share, for the first quarter of 2015. |
• | Loss from discontinued operations, net of tax was $10 million, or a loss of $0.02 per diluted share, compared with a loss of $4 million, or $0.01 per diluted share, for the first quarter of 2015. |
• | Foreign currency has impacted the Company’s financial results of continuing operations as shown in the table below: |
Estimated Impact of Foreign Currency on Continuing Operations | |||||||
First-Quarter 2016 Year-over-Year Impact | |||||||
Estimated impact ($ in millions) | Estimated impact on diluted EPS | ||||||
Total revenue | (18) pts | ||||||
Adjusted operating profit - transaction | $ | (70 | ) | $ | (0.10 | ) | |
Adjusted operating profit - translation | (30 | ) | (0.05 | ) | |||
Total Adjusted operating profit | $ | (100 | ) | $ | (0.15 | ) | |
Adjusted operating margin | (560) bps | ||||||
Revaluation of working capital | $ | 10 | $ | 0.01 | |||
Adjusted diluted EPS | $ | (0.13 | ) | ||||
• | The Company recorded costs to implement restructuring within operating profit of approximately $47 million before tax, primarily related to employee-related costs as part of the previously announced Transformation Plan. |
• | The impact of the deconsolidation of the Venezuela operations as of March 31, 2016 for which the Company recorded an after-tax loss of approximately $120 million. |
• | The Company recorded an income tax benefit of approximately $29 million, which was recognized as a result of the implementation of foreign tax planning strategies. |
THREE MONTHS ENDED MARCH 31, 2016 | |||||||||||||||||
REGIONAL RESULTS | |||||||||||||||||
($ in millions) | |||||||||||||||||
Revenue | Active Representatives | Average Order C$ | Units Sold | Price/ Mix C$ | Ending Representatives | ||||||||||||
US $ | C$ | ||||||||||||||||
Revenue & Drivers | % var. vs 1Q15 | % var. vs 1Q15 | % var. vs 1Q15 | % var. vs 1Q15 | % var. vs 1Q15 | % var. vs 1Q15 | % var. vs 1Q15 | ||||||||||
Europe, Middle East & Africa | $ | 520.4 | (2)% | 11% | 7% | 4% | 7% | 4% | 8% | ||||||||
South Latin America | 426.4 | (28) | (2) | (3) | 1 | (11) | 9 | (1) | |||||||||
North Latin America | 204.7 | (11) | 2 | (4) | 6 | (4) | 6 | (1) | |||||||||
Asia Pacific | 136.7 | (17) | (10) | (10) | — | (8) | (2) | (4) | |||||||||
Total from Reportable Segments | 1,288.2 | (15) | 2 | (1) | 3 | (3) | 5 | 2 | |||||||||
Other operating segments and business activities | 18.3 | (49) | (42) | (52) | 10 | (71) | 29 | (100) | |||||||||
Total | $ | 1,306.5 | (16)% | 2% | (2)% | 4% | (4)% | 6% | (1)% |
Operating Profit/Margin | 2016 Operating Profit (Loss) US$ | 2016 Operating Margin US$ | Change in US$ vs 2015 | Change in C$ vs 2015 | |||||||
Europe, Middle East & Africa | $ | 68.7 | 13.2 | % | 120 bps | 180 bps | |||||
South Latin America | 23.1 | 5.4 | (610) | (600) | |||||||
North Latin America | 28.5 | 13.9 | 140 | 170 | |||||||
Asia Pacific | 14.7 | 10.8 | (270) | (230) | |||||||
Total from Reportable Segments | 135.0 | 10.5 | (150) | (120) | |||||||
Other operating segments and business activities | 4.2 | 22.7 | 840 | 1070 | |||||||
Unallocated Global Expenses | (84.6 | ) | — | — | — | ||||||
Adjusted Total | $ | 54.6 | 4.2 | % | (230) bps | (80) bps | |||||
CTI restructuring initiatives | (46.8 | ) | |||||||||
GAAP Total | $ | 7.8 | 0.6 | % | 270 bps | ||||||
• | Europe, Middle East & Africa revenue was down 2%, and up 11% in constant dollars. Constant-dollar revenue was driven by an increase in Active Representatives as well as higher average order. |
◦ | Russia revenue was up 5%, or up 25% in constant dollars, primarily driven by an increase in Active Representatives, which continued to benefit from sustained momentum in recruiting and retention, and higher average order, which was driven by pricing. |
◦ | U.K. revenue was down 3%, or up 4% in constant dollars, primarily driven by higher average order as a result of strength in Fashion & Home, while Active Representatives declined. |
• | South Latin America revenue was down 28% and declined 2% in constant dollars. Constant-dollar revenue was negatively impacted by the IPI tax in Brazil (as discussed above). Excluding the estimated impact of this item, constant-dollar revenue would have grown approximately 2%2 driven by higher average order, which was partially offset by a decline in Active Representatives. The additional MVA taxes in Brazil (as discussed above), had an estimated 1 point impact on revenue growth for South Latin America. Argentina contributed approximately 3 points to this constant-dollar revenue growth. |
◦ | Brazil revenue was down 33%, and declined 7% in constant dollars. Constant-dollar revenue growth was negatively impacted by an estimated 8 points due to the impact of the IPI tax. Excluding this impact, constant-dollar revenue would have increased approximately 1%2, driven primarily by higher average order, which was partially offset by a decline in Active Representatives. This market continues to be impacted by a difficult macroeconomic environment as well as the additional MVA taxes (as discussed above). These additional taxes negatively impacted Brazil’s constant-dollar revenue growth by an estimated 3 points, as it has not been offset by pricing given the macroeconomic environment combined with the pricing taken to offset a portion of the IPI tax. |
• | North Latin America revenue was down 11% and up 2% in constant dollars. Constant-dollar revenue benefited from higher average order, which was partially offset by a decrease in Active Representatives. |
◦ | Mexico revenue was down 15% and rose 2% in constant dollars, primarily driven by higher average order due to strength in Fashion & Home, partially offset by a decline in Active Representatives. |
• | Asia Pacific revenue was down 17%, and declined 10% in constant dollars due to declines in most markets, led by China. The region’s constant-dollar revenue decline was primarily due to lower Active Representatives. |
◦ | Philippines revenue was down 6% and relatively unchanged in constant dollars driven by higher average order, offset by a decline in Active Representatives due to a decline in activity, which was impacted by a reduction in the number of sales campaigns as well as the timing of the Easter holiday. |
• | Net cash used by operating activities of continuing operations was $191 million for the three months ended March 31, 2016, compared with $178 million for the same period in 2015. Operating cash flow during the first quarter was unfavorably impacted by lower cash-related earnings (including the unfavorable impact of foreign currency), a contribution to the pension plan for corporate U.S.-based associates and higher purchases of inventory. When comparing the year-over-year use of cash from operations, the comparison benefits from the $67 million payment made during the first quarter of 2015 to the U.S. Securities and Exchange Commission in connection with the FCPA settlement, which did not recur in 2016. |
• | For the three months ended March 31, 2016, there was $25 million of net cash used by investing activities of continuing operations, a $2 million increase over the prior year. |
• | Net cash provided by financing activities of continuing operations was $436 million for the three months ended March 31, 2016, or $472 million higher than the prior year, primarily due to the proceeds from the sales of Series C Preferred Stock and the suspension of the dividend. |
Contacts: | |
INVESTORS: | MEDIA: |
Adam Zerfass | Brunswick Group |
(212) 282-5320 | Claudia Gray |
(212) 333-3810 |
Three Months Ended | Percent Change | ||||||||||
March 31 | |||||||||||
2016 | 2015 | ||||||||||
Net sales | $ | 1,280.0 | $ | 1,532.9 | (16 | )% | |||||
Other revenue | 26.5 | 19.2 | |||||||||
Total revenue | 1,306.5 | 1,552.1 | (16 | )% | |||||||
Cost of sales | 518.8 | 611.7 | |||||||||
Selling, general and administrative expenses | 779.9 | 973.3 | |||||||||
Operating profit (loss) | 7.8 | (32.9 | ) | * | |||||||
Interest expense | 32.7 | 28.1 | |||||||||
Interest income | (4.0 | ) | (3.0 | ) | |||||||
Other expense, net | 137.2 | 18.7 | |||||||||
Total other expenses | 165.9 | 43.8 | |||||||||
Loss from continuing operations, before taxes | (158.1 | ) | (76.7 | ) | * | ||||||
Income taxes | 2.3 | (65.9 | ) | ||||||||
Loss from continuing operations, net of tax | (155.8 | ) | (142.6 | ) | (9 | )% | |||||
Loss from discontinued operations, net of tax | (9.6 | ) | (3.8 | ) | |||||||
Net loss | (165.4 | ) | (146.4 | ) | |||||||
Net income attributable to noncontrolling interests | (0.5 | ) | (0.9 | ) | |||||||
Net loss attributable to Avon | $ | (165.9 | ) | $ | (147.3 | ) | (13 | )% | |||
Loss per share:(1) | |||||||||||
Basic | |||||||||||
Basic loss per share from continuing operations | $ | (0.36 | ) | $ | (0.33 | ) | * | ||||
Basic loss per share from discontinued operations | (0.02 | ) | (0.01 | ) | |||||||
Basic loss per share attributable to Avon | (0.38 | ) | (0.33 | ) | * | ||||||
Diluted | |||||||||||
Diluted loss per share from continuing operations | $ | (0.36 | ) | $ | (0.33 | ) | * | ||||
Diluted loss per share from discontinued operations | (0.02 | ) | (0.01 | ) | |||||||
Diluted loss per share attributable to Avon | (0.38 | ) | (0.33 | ) | * | ||||||
Weighted-average shares outstanding: | |||||||||||
Basic | 435.9 | 434.9 | |||||||||
Diluted | 435.9 | 434.9 | |||||||||
* Calculation not meaningful | |||||||||||
(1) Under the two-class method, loss per share is calculated using net loss allocable to common shares, which is derived by reducing net loss by the loss allocable to participating securities. Net loss allocable to common shares used in the basic and diluted loss per share calculation was $(163.8) and $(145.3) for the three months ended March 31, 2016 and 2015, respectively. |
March 31 | December 31 | |||||||
2016 | 2015 | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 753.5 | $ | 686.9 | ||||
Accounts receivable, net | 427.9 | 443.0 | ||||||
Inventories | 683.6 | 624.0 | ||||||
Prepaid expenses and other | 331.2 | 296.1 | ||||||
Current assets of discontinued operations | 13.5 | 291.1 | ||||||
Total current assets | 2,209.7 | 2,341.1 | ||||||
Property, plant and equipment, at cost | 1,502.8 | 1,495.7 | ||||||
Less accumulated depreciation | (754.1 | ) | (728.8 | ) | ||||
Property, plant and equipment, net | 748.7 | 766.9 | ||||||
Goodwill | 94.9 | 92.3 | ||||||
Other assets | 575.8 | 490.0 | ||||||
Noncurrent assets of discontinued operations | — | 180.1 | ||||||
Total assets | $ | 3,629.1 | $ | 3,870.4 | ||||
Liabilities and Shareholders’ Deficit | ||||||||
Current Liabilities | ||||||||
Debt maturing within one year | $ | 69.0 | $ | 55.2 | ||||
Accounts payable | 732.9 | 774.2 | ||||||
Accrued compensation | 124.4 | 157.6 | ||||||
Other accrued liabilities | 413.2 | 419.6 | ||||||
Sales and taxes other than income | 204.2 | 174.9 | ||||||
Income taxes | 24.1 | 23.9 | ||||||
Payable to discontinued operations | — | 100.0 | ||||||
Current liabilities of discontinued operations | 37.3 | 489.7 | ||||||
Total current liabilities | 1,605.1 | 2,195.1 | ||||||
Long-term debt | 2,145.0 | 2,150.5 | ||||||
Employee benefit plans | 169.1 | 177.5 | ||||||
Long-term income taxes | 67.4 | 65.1 | ||||||
Other liabilities | 78.2 | 78.4 | ||||||
Noncurrent liabilities of discontinued operations | — | 260.2 | ||||||
Total liabilities | 4,064.8 | 4,926.8 | ||||||
Commitments and contingencies | ||||||||
Series C convertible preferred stock | 428.1 | — | ||||||
Shareholders’ Deficit | ||||||||
Common stock | 188.4 | 187.9 | ||||||
Additional paid-in-capital | 2,256.5 | 2,254.0 | ||||||
Retained earnings | 2,280.5 | 2,448.1 | ||||||
Accumulated other comprehensive loss | (1,006.6 | ) | (1,366.2 | ) | ||||
Treasury stock, at cost | (4,597.6 | ) | (4,594.1 | ) | ||||
Total Avon shareholders’ deficit | (878.8 | ) | (1,070.3 | ) | ||||
Noncontrolling interests | 15.0 | 13.9 | ||||||
Total shareholders’ deficit | (863.8 | ) | (1,056.4 | ) | ||||
Total liabilities, series C convertible preferred stock and shareholders’ deficit | $ | 3,629.1 | $ | 3,870.4 | ||||
Twelve Months Ended | ||||||||
March 31 | ||||||||
2016 | 2015 | |||||||
Cash Flows from Operating Activities | ||||||||
Net loss | $ | (165.4 | ) | $ | (146.4 | ) | ||
Loss from discontinued operations, net of tax | 9.6 | 3.8 | ||||||
Loss from continuing operations, net of tax | $ | (155.8 | ) | $ | (142.6 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Depreciation | 20.5 | 26.9 | ||||||
Amortization | 7.1 | 8.8 | ||||||
Provision for doubtful accounts | 37.0 | 35.4 | ||||||
Provision for obsolescence | 12.6 | 12.5 | ||||||
Share-based compensation | 6.2 | (0.1 | ) | |||||
Foreign exchange losses | 1.7 | 5.8 | ||||||
Deferred income taxes | (13.5 | ) | 28.7 | |||||
Charge for Venezuelan monetary assets and liabilities | — | (4.2 | ) | |||||
Charge for Venezuelan non-monetary assets | — | 101.7 | ||||||
Loss on deconsolidation of Venezuela | 120.5 | — | ||||||
Other | 2.2 | 0.4 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | (21.4 | ) | (28.3 | ) | ||||
Inventories | (80.5 | ) | (62.8 | ) | ||||
Prepaid expenses and other | (14.2 | ) | (6.4 | ) | ||||
Accounts payable and accrued liabilities | (61.8 | ) | (123.9 | ) | ||||
Income and other taxes | 8.0 | (11.3 | ) | |||||
Noncurrent assets and liabilities | (59.9 | ) | (18.1 | ) | ||||
Net cash used by operating activities of continuing operations | (191.3 | ) | (177.5 | ) | ||||
Cash Flows from Investing Activities | ||||||||
Capital expenditures | (23.7 | ) | (21.3 | ) | ||||
Disposal of assets | 1.3 | 2.4 | ||||||
Purchases of investments | — | (4.6 | ) | |||||
Proceeds from sale of investments | — | 0.6 | ||||||
Reduction of cash due to Venezuela deconsolidation | (4.5 | ) | — | |||||
Other investing activities | 1.6 | — | ||||||
Net cash used by investing activities of continuing operations | (25.3 | ) | (22.9 | ) | ||||
Cash Flows from Financing Activities | ||||||||
Cash dividends | — | (26.2 | ) | |||||
Debt, net (maturities of three months or less) | 3.7 | (7.4 | ) | |||||
Proceeds from debt | 8.6 | — | ||||||
Repayment of debt | (1.0 | ) | (0.8 | ) | ||||
Repurchase of common stock | (3.5 | ) | (1.9 | ) | ||||
Net proceeds from the sale of series C convertible preferred stock | 428.1 | — | ||||||
Net cash provided (used) by financing activities of continuing operations | 435.9 | (36.3 | ) | |||||
Cash Flows from Discontinued Operations | ||||||||
Net cash used by operating activities of discontinued operations | (44.9 | ) | (20.6 | ) | ||||
Net cash used by investing activities of discontinued operations | (96.7 | ) | (1.1 | ) | ||||
Net cash used by financing activities of discontinued operations | — | (1.0 | ) | |||||
Net cash used by discontinued operations | (141.6 | ) | (22.7 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | (8.9 | ) | (32.2 | ) | ||||
Net increase (decrease) in cash and cash equivalents | 68.8 | (291.6 | ) | |||||
Cash and cash equivalents at beginning of year (1) | 684.7 | 960.5 | ||||||
Cash and cash equivalents at end of year (2) | $ | 753.5 | $ | 668.9 | ||||
(1) | Includes cash and cash equivalents of discontinued operations of $(2.2) and $24.1 at the beginning of the year in 2016 and 2015. |
(2) | Includes cash and cash equivalents of discontinued operations of $14.8 at March 31, 2015. |
THREE MONTHS ENDED MARCH 31, 2016 | |||||||||||||||||
REGIONAL RESULTS | |||||||||||||||||
Revenue | Active Representatives | Average Order C$ | Units Sold | Price/ Mix C$ | Ending Representatives | ||||||||||||
US $ | C$ | ||||||||||||||||
Revenue & Drivers | % var. vs 1Q15 | % var. vs 1Q15 | % var. vs 1Q15 | % var. vs 1Q15 | % var. vs 1Q15 | % var. vs 1Q15 | % var. vs 1Q15 | ||||||||||
Europe, Middle East & Africa | $ | 520.4 | (2)% | 11% | 7% | 4% | 7% | 4% | 8% | ||||||||
South Latin America | 426.4 | (28) | (2) | (3) | 1 | (11) | 9 | (1) | |||||||||
North Latin America | 204.7 | (11) | 2 | (4) | 6 | (4) | 6 | (1) | |||||||||
Asia Pacific | 136.7 | (17) | (10) | (10) | — | (8) | (2) | (4) | |||||||||
Total from Reportable Segments | 1,288.2 | (15) | 2 | (1) | 3 | (3) | 5 | 2 | |||||||||
Other operating segments and business activities | 18.3 | (49) | (42) | (52) | 10 | (71) | 29 | (100) | |||||||||
Total | $ | 1,306.5 | (16)% | 2% | (2)% | 4% | (4)% | 6% | (1)% |
Operating Profit/Margin | 2016 Operating Profit (Loss) US$ | 2016 Operating Margin US$ | Change in US$ vs 2015 | Change in C$ vs 2015 | |||||||
Europe, Middle East & Africa | $ | 68.7 | 13.2 | % | 120 bps | 180 bps | |||||
South Latin America | 23.1 | 5.4 | (610) | (600) | |||||||
North Latin America | 28.5 | 13.9 | 140 | 170 | |||||||
Asia Pacific | 14.7 | 10.8 | (270) | (230) | |||||||
Total from Reportable Segments | 135.0 | 10.5 | (150) | (120) | |||||||
Other operating segments and business activities | 4.2 | 22.7 | 840 | 1070 | |||||||
Unallocated Global Expenses | (84.6 | ) | — | — | — | ||||||
Adjusted Total | $ | 54.6 | 4.2 | % | (230) bps | (80) bps | |||||
CTI restructuring initiatives | (46.8 | ) | |||||||||
GAAP Total | $ | 7.8 | 0.6 | % | 270 bps | ||||||
CATEGORY SALES (US$) | ||||||||||||
Consolidated | ||||||||||||
Three Months Ended March 31 | US$ | C$ | ||||||||||
2016 | 2015 | % var. vs 1Q15 | % var. vs 1Q15 | |||||||||
Beauty: | ||||||||||||
Skincare | $ | 367.0 | $ | 468.0 | (22)% | (6)% | ||||||
Fragrance | 336.5 | 393.2 | (14) | 4 | ||||||||
Color | 247.9 | 292.7 | (15) | 3 | ||||||||
Total Beauty | 951.4 | 1,153.9 | (18) | — | ||||||||
Fashion & Home: | ||||||||||||
Fashion (jewelry/watches/apparel/footwear/accessories/children's) | 197.4 | 215.2 | (8) | 7 | ||||||||
Home (gift & decorative products/housewares/entertainment & leisure/children's/nutrition) | 131.2 | 163.8 | (20) | — | ||||||||
Total Fashion & Home | 328.6 | 379.0 | (13) | 4 | ||||||||
Net sales | 1,280.0 | 1,532.9 | (16) | 1 | ||||||||
Other revenue | 26.5 | 19.2 | 38 | 65 | ||||||||
Total revenue | $ | 1,306.5 | $ | 1,552.1 | (16) | 2 | ||||||
THREE MONTHS ENDED MARCH 31, 2016 | ||||||||||||||||||||
Reported (GAAP) | CTI restructuring initiatives | Venezuelan special items | Special tax items | Adjusted (Non-GAAP) | ||||||||||||||||
Total revenue | $ | 1,306.5 | $ | — | $ | — | $ | — | $ | 1,306.5 | ||||||||||
Cost of sales | 518.8 | — | — | — | 518.8 | |||||||||||||||
Selling, general and administrative expenses | 779.9 | 46.8 | — | — | 733.1 | |||||||||||||||
Operating profit | 7.8 | 46.8 | — | — | 54.6 | |||||||||||||||
Income from continuing operations, before taxes | (158.1 | ) | 46.8 | 120.5 | — | 9.2 | ||||||||||||||
Income taxes | 2.3 | (9.5 | ) | — | (29.3 | ) | (36.5 | ) | ||||||||||||
(Loss) income from continuing operations, net of tax | $ | (155.8 | ) | $ | 37.3 | $ | 120.5 | $ | (29.3 | ) | $ | (27.3 | ) | |||||||
Diluted EPS from continuing operations | $ | (0.36 | ) | $ | 0.08 | $ | 0.27 | $ | (0.07 | ) | $ | (0.07 | ) | |||||||
Gross margin | 60.3 | % | — | — | — | 60.3 | % | |||||||||||||
SG&A as a % of revenues | 59.7 | % | (3.6 | ) | — | — | 56.1 | % | ||||||||||||
Operating margin | 0.6 | % | 3.6 | — | — | 4.2 | % | |||||||||||||
Effective tax rate | (1.5 | )% | * | |||||||||||||||||
THREE MONTHS ENDED MARCH 31, 2015 | ||||||||||||||||||||
Reported (GAAP) | CTI restructuring initiatives | Venezuelan special items | Special tax items | Adjusted (Non-GAAP) | ||||||||||||||||
Total revenue | $ | 1,552.1 | $ | — | $ | — | $ | — | $ | 1,552.1 | ||||||||||
Cost of sales | 611.7 | — | 15.2 | — | 596.5 | |||||||||||||||
Selling, general and administrative expenses | 973.3 | 27.2 | 91.2 | — | 854.9 | |||||||||||||||
Operating profit | (32.9 | ) | 27.2 | 106.4 | — | 100.7 | ||||||||||||||
Income from continuing operations, before taxes | (76.7 | ) | 27.2 | 102.2 | — | 52.8 | ||||||||||||||
Income taxes | (65.9 | ) | (3.5 | ) | 0.8 | 31.3 | (37.3 | ) | ||||||||||||
(Loss) income from continuing operations, net of tax | $ | (142.6 | ) | $ | 23.7 | $ | 103.0 | $ | 31.3 | $ | 15.5 | |||||||||
Diluted EPS from continuing operations | $ | (0.33 | ) | $ | 0.05 | $ | 0.23 | $ | 0.07 | $ | 0.03 | |||||||||
Gross margin | 60.6 | % | — | 1.0 | — | 61.6 | % | |||||||||||||
SG&A as a % of revenues | 62.7 | % | (1.8 | ) | (5.9 | ) | — | 55.1 | % | |||||||||||
Operating margin | (2.1 | )% | 1.8 | 6.9 | — | 6.5 | % | |||||||||||||
Effective tax rate | 85.9 | % | 70.6 | % | ||||||||||||||||
THREE MONTHS ENDED MARCH 31, 2016 | |||||||||||||||||
Constant $ revenue | |||||||||||||||||
Year-over-Year Impacts of: | |||||||||||||||||
Revenue % change | C$ revenue % change | 2016 Brazil IPI tax | Liz Earle divestiture | C$ revenue % change, excluding special revenue items | C$ revenue % change, excluding Liz Earle divestiture | ||||||||||||
Total Avon | (16 | )% | 2 | % | 2 pts | 1 pt | 5 | % | 3 | % | |||||||
Total Reportable Segments | (15 | )% | 2 | % | 2 pts | — | 4 | % | — | % | |||||||
South Latin America | (28 | )% | (2 | )% | 4 pts | — | 2 | % | — | % | |||||||
Brazil | (33 | )% | (7 | )% | 8 pts | — | 1 | % | — | % | |||||||
Gross Margin | Operating Margin | ||||||||||||||||
Total Avon | 2016 | 2015 | Change | 2016 | 2015 | Change | |||||||||||
Reported (GAAP) | 60.3 | % | 60.6 | % | (30) bps | 0.6 | % | (2.1 | )% | 270 bps | |||||||
Adjusted (Non-GAAP) | 60.3 | % | 61.6 | % | (130) bps | 4.2 | % | 6.5 | % | (230) bps | |||||||
Impact of 2016 Brazil IPI tax | 10 bps | — | 80 bps | — | |||||||||||||
Adjusted, excluding special revenue items | 60.4 | % | 61.6 | % | (120) bps | 5.0 | % | 6.5 | % | (150) bps | |||||||
Operating Margin | |||||||||||||||||
South Latin America | 2016 | 2015 | Change | ||||||||||||||
Segment Profit | 5.4 | % | 11.5 | % | (610) bps | ||||||||||||
2016 Brazil IPI tax | 250 bps | — | |||||||||||||||
Adjusted, excluding special revenue items | 7.9 | % | 11.5 | % | (360) bps | ||||||||||||
AVON PRODUCTS, INC. TOP 10 MARKETS BY SEGMENT | ||
Asia Pacific | North Latin America | |
Philippines | Mexico | |
Europe, Middle East & Africa | South Latin America | |
Russia | Brazil | |
United Kingdom | Argentina | |
South Africa | Colombia | |
Turkey | ||
Poland |
THREE MONTHS ENDED MARCH 31, 2015 | |||||||||||||||
REGIONAL RESULTS | |||||||||||||||
Revenue | Active Representatives | Average Order C$ | Units Sold | Price/ Mix C$ | |||||||||||
US$ | C$ | ||||||||||||||
Revenue & Drivers | % var. vs 1Q14 | % var. vs 1Q14 | % var. vs 1Q14 | % var. vs 1Q14 | % var. vs 1Q14 | % var. vs 1Q14 | |||||||||
Europe, Middle East & Africa | $ | 532.2 | (16)% | 9% | 8% | 1% | 9% | —% | |||||||
South Latin America | 590.9 | (11) | 3 | (2) | 5 | — | 3 | ||||||||
North Latin America | 229.3 | (10) | (2) | 2 | (4) | (4) | 2 | ||||||||
Asia Pacific | 164.1 | (1) | 2 | (2) | 4 | (2) | 4 | ||||||||
Total from Reportable Segments | 1,516.5 | (12) | 4 | 2 | 2 | 2 | 2 | ||||||||
Other operating segments and business activities | 35.6 | (79) | 26 | (23) | 49 | (41) | 67 | ||||||||
Total | $ | 1,552.1 | (18)% | 5% | 1% | 4% | 1% | 4% |
Operating Profit/Margin | 2015 Operating Profit (Loss) US$ | 2015 Operating Margin US$ | Change in US$ vs 2014 | Change in C$ vs 2014 | |||||||
Europe, Middle East & Africa | $ | 63.9 | 12.0 | % | (310) bps | (250) bps | |||||
South Latin America | 67.7 | 11.5 | (30) | (20) | |||||||
North Latin America | 28.6 | 12.5 | (90) | (70) | |||||||
Asia Pacific | 22.2 | 13.5 | 450 | 440 | |||||||
Total from Reportable Segments | 182.4 | 12.0 | (100) | (50) | |||||||
Other operating segments and business activities | 5.1 | 14.3 | 450 | 1200 | |||||||
Unallocated Global Expenses | (86.8 | ) | — | — | — | ||||||
Adjusted Total | $ | 100.7 | 6.5 | % | (50) bps | 160 bps | |||||
CTI restructuring initiatives | (27.2 | ) | |||||||||
Venezuelan special items | (106.4 | ) | |||||||||
GAAP Total | $ | (32.9 | ) | (2.1 | )% | 40 bps | |||||
THREE MONTHS ENDED JUNE 30, 2015 | |||||||||||||||
REGIONAL RESULTS | |||||||||||||||
Revenue | Active Representatives | Average Order C$ | Units Sold | Price/ Mix C$ | |||||||||||
US$ | C$ | ||||||||||||||
Revenue & Drivers | % var. vs 2Q14 | % var. vs 2Q14 | % var. vs 2Q14 | % var. vs 2Q14 | % var. vs 2Q14 | % var. vs 2Q14 | |||||||||
Europe, Middle East & Africa | $ | 530.1 | (17)% | 5% | 6% | (1)% | 3% | 2% | |||||||
South Latin America | 607.5 | (22) | (1) | (3) | 2 | (7) | 6 | ||||||||
North Latin America | 236.0 | (9) | 3 | 2 | 1 | 3 | — | ||||||||
Asia Pacific | 158.0 | (8) | (4) | (5) | 1 | (7) | 3 | ||||||||
Total from Reportable Segments | 1,531.6 | (17) | 1 | — | 1 | (2) | 3 | ||||||||
Other operating segments and business activities | 33.3 | (16) | 67 | (13) | 80 | (28) | 95 | ||||||||
Total | $ | 1,564.9 | (17)% | 3% | (1)% | 4% | (3)% | 6% |
Operating Profit/Margin | 2015 Operating Profit (Loss) US$ | 2015 Operating Margin US$ | Change in US$ vs 2014 | Change in C$ vs 2014 | |||||||
Europe, Middle East & Africa | $ | 73.2 | 13.8 | % | (460) bps | (440) bps | |||||
South Latin America | 69.2 | 11.4 | (430) | (430) | |||||||
North Latin America | 31.6 | 13.4 | 40 | 70 | |||||||
Asia Pacific | 16.5 | 10.4 | 580 | 600 | |||||||
Total from Reportable Segments | 190.5 | 12.4 | (290) | (250) | |||||||
Other operating segments and business activities | 4.9 | 14.7 | 1500 | 1860 | |||||||
Unallocated Global Expenses | (96.6 | ) | — | — | — | ||||||
Adjusted Total | $ | 98.8 | 6.3 | % | (310) bps | (110) bps | |||||
CTI restructuring initiatives | (2.9 | ) | |||||||||
Venezuelan special items | (6.2 | ) | |||||||||
GAAP Total | $ | 89.7 | 5.7 | % | (20) bps | ||||||
THREE MONTHS ENDED SEPTEMBER 30, 2015 | |||||||||||||||
REGIONAL RESULTS | |||||||||||||||
Revenue | Active Representatives | Average Order C$ | Units Sold | Price/ Mix C$ | |||||||||||
US$ | C$ | ||||||||||||||
Revenue & Drivers | % var. vs 3Q14 | % var. vs 3Q14 | % var. vs 3Q14 | % var. vs 3Q14 | % var. vs 3Q14 | % var. vs 3Q14 | |||||||||
Europe, Middle East & Africa | $ | 497.5 | (17)% | 6% | 5% | 1% | 1% | 5% | |||||||
South Latin America | 570.8 | (29) | (3) | — | (3) | (5) | 2 | ||||||||
North Latin America | 209.7 | (13) | 2 | (2) | 4 | (4) | 6 | ||||||||
Asia Pacific | 145.8 | (16) | (8) | (2) | (6) | (10) | 2 | ||||||||
Total from Reportable Segments | 1,423.8 | (22) | — | 1 | (1) | (4) | 4 | ||||||||
Other operating segments and business activities | 12.4 | (69) | 12 | (26) | 38 | (48) | 60 | ||||||||
Total | $ | 1,436.2 | (23)% | 1% | —% | 1% | (4)% | 5% |
Operating Profit/Margin | 2015 Operating Profit (Loss) US$ | 2015 Operating Margin US$ | Change in US$ vs 2014 | Change in C$ vs 2014 | |||||||
Europe, Middle East & Africa | $ | 69.5 | 14.0 | % | 20 bps | 50 bps | |||||
South Latin America | 52.8 | 9.3 | (1060) | (1030) | |||||||
North Latin America | 17.9 | 8.5 | (170) | (130) | |||||||
Asia Pacific | 15.5 | 10.6 | 140 | 160 | |||||||
Total from Reportable Segments | 155.7 | 10.9 | (470) | (430) | |||||||
Other operating segments and business activities | 3.3 | 25.6 | 2120 | 2320 | |||||||
Unallocated Global Expenses | (103.7 | ) | — | — | — | ||||||
Adjusted Total | $ | 55.3 | 3.9 | % | (690) bps | (470) bps | |||||
CTI restructuring initiatives | 1.9 | ||||||||||
Venezuelan special items | (5.7 | ) | |||||||||
Pension Settlement Agreement | (6.2 | ) | |||||||||
GAAP Total | $ | 45.3 | 3.2 | % | (730) bps | ||||||
THREE MONTHS ENDED DECEMBER 31, 2015 | |||||||||||||||
REGIONAL RESULTS | |||||||||||||||
Revenue | Active Representatives | Average Order C$ | Units Sold | Price/ Mix C$ | |||||||||||
US$ | C$ | ||||||||||||||
Revenue & Drivers | % var. vs 4Q14 | % var. vs 4Q14 | % var. vs 4Q14 | % var. vs 4Q14 | % var. vs 4Q14 | % var. vs 4Q14 | |||||||||
Europe, Middle East & Africa | $ | 669.4 | (10)% | 10% | 8% | 2% | 7% | 3% | |||||||
South Latin America | 540.4 | (30) | (5) | 1 | (6) | (7) | 2 | ||||||||
North Latin America | 226.0 | (9) | 5 | 1 | 4 | 1 | 4 | ||||||||
Asia Pacific | 158.1 | (16) | (8) | — | (8) | (7) | (1) | ||||||||
Total from Reportable Segments | 1,593.9 | (19) | 1 | 3 | (2) | (1) | 2 | ||||||||
Other operating segments and business activities | 13.4 | (75) | (3) | (39) | 36 | (64) | 61 | ||||||||
Total | $ | 1,607.3 | (20)% | 1% | 2% | (1)% | (2)% | 3% |
Operating Profit/Margin | 2015 Operating Profit (Loss) US$ | 2015 Operating Margin US$ | Change in US$ vs 2014 | Change in C$ vs 2014 | |||||||
Europe, Middle East & Africa | $ | 104.6 | 15.6 | % | (270) bps | (270) bps | |||||
South Latin America | 49.2 | 9.1 | (430) | (440) | |||||||
North Latin America | 29.1 | 12.9 | (150) | (130) | |||||||
Asia Pacific | 14.4 | 9.1 | (160) | (120) | |||||||
Total from Reportable Segments | 197.3 | 12.4 | (270) | (280) | |||||||
Other operating segments and business activities | 3.7 | 27.8 | 1630 | 1510 | |||||||
Unallocated Global Expenses | (104.2 | ) | — | — | — | ||||||
Adjusted Total | $ | 96.8 | 6.0 | % | (420) bps | (260) bps | |||||
CTI restructuring initiatives | (20.9 | ) | |||||||||
Venezuelan special items | (1.9 | ) | |||||||||
Pension Settlement Agreement | (1.1 | ) | |||||||||
Asset impairment and other charges | (6.9 | ) | |||||||||
Other items | (3.1 | ) | |||||||||
GAAP Total | $ | 62.9 | 3.9 | % | (480) bps | ||||||
TWELVE MONTHS ENDED DECEMBER 31, 2015 | |||||||||||||||
REGIONAL RESULTS | |||||||||||||||
Revenue | Active Representatives | Average Order C$ | Units Sold | Price/ Mix C$ | |||||||||||
US$ | C$ | ||||||||||||||
Revenue & Drivers | % var. vs FY14 | % var. vs FY14 | % var. vs FY14 | % var. vs FY14 | % var. vs FY14 | % var. vs FY14 | |||||||||
Europe, Middle East & Africa | $ | 2,229.2 | (15)% | 8% | 7% | 1% | 5% | 3% | |||||||
South Latin America | 2,309.6 | (24) | (2) | (1) | (1) | (5) | 3 | ||||||||
North Latin America | 901.0 | (10) | 2 | 1 | 1 | (1) | 3 | ||||||||
Asia Pacific | 626.0 | (11) | (5) | (2) | (3) | (7) | 2 | ||||||||
Total from Reportable Segments | 6,065.8 | (17) | 2 | 1 | 1 | (1) | 3 | ||||||||
Other operating segments and business activities | 94.7 | (68) | 23 | (25) | 48 | (44) | 67 | ||||||||
Total | $ | 6,160.5 | (19)% | 2% | 1% | 1% | (2)% | 4% |
Operating Profit/Margin | 2015 Operating Profit (Loss) US$ | 2015 Operating Margin US$ | Change in US$ vs 2014 | Change in C$ vs 2014 | |||||||
Europe, Middle East & Africa | $ | 311.2 | 14.0 | % | (250) bps | (230) bps | |||||
South Latin America | 238.9 | 10.3 | (510) | (500) | |||||||
North Latin America | 107.2 | 11.9 | (90) | (60) | |||||||
Asia Pacific | 68.6 | 11.0 | 250 | 260 | |||||||
Total from Reportable Segments | 725.9 | 12.0 | (280) | (250) | |||||||
Other operating segments and business activities | 17.0 | 18.0 | 970 | 1620 | |||||||
Unallocated Global Expenses | (391.3 | ) | — | — | — | ||||||
Adjusted Total | $ | 351.6 | 5.7 | % | (360) bps | (180) bps | |||||
CTI restructuring initiatives | (49.1 | ) | |||||||||
Venezuelan special items | (120.2 | ) | |||||||||
Pension Settlement Agreement | (7.3 | ) | |||||||||
Asset impairment and other charges | (6.9 | ) | |||||||||
Other items | (3.1 | ) | |||||||||
GAAP Total | $ | 165.0 | 2.7 | % | (300) bps | ||||||
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