RESTRUCTURING INITIATIVES

Transformation Plan

In January 2016, we announced a transformation plan (the "Transformation Plan"), which includes cost reduction efforts to continue to improve our cost structure and to enable us to reinvest in growth. As a result of this plan, we have targeted pre-tax annualized cost savings of approximately $350 after three years, with an estimated $200 from supply chain reductions and an estimated $150 from other cost reductions, which are expected to be achieved through restructuring actions, as well as other cost-savings strategies that will not result in restructuring charges. We plan to reinvest a portion of these cost savings in growth initiatives, including media, social selling and information technology systems that will help us modernize our business. We initiated the Transformation Plan in order to enable us to achieve our long-term goals of double-digit operating margin and mid single-digit constant-dollar revenue growth. As part of the Transformation Plan, we identified certain actions, that we believe will reduce ongoing costs, primarily consisting of global headcount reductions relating to operating model changes. These operating model changes include streamlining of our corporate functions to align with the current and future needs of the business and an information technology infrastructure outsourcing initiative.

As a result of these restructuring actions approved-to-date, we have recorded total costs to implement these restructuring initiatives of $69.9 before taxes, of which $47.5 was recorded in the first three months of 2016, in the Consolidated Statements of Operations. The additional charges not yet incurred associated with the restructuring actions approved to-date of approximately $15 to $25 before taxes are expected to be recorded primarily in 2016. At this time we are unable to quantify the total costs to implement these restructuring initiatives that will be incurred through the time the Transformation Plan is fully implemented. In connection with the restructuring actions approved to-date associated with the Transformation Plan, we expect to realize annualized savings of approximately $80 to $90 (before tax). We expect to realize approximately $25 of savings in 2016 and are expected to achieve the significant majority of the annualized savings beginning in 2017. The annualized savings represent the net reduction of expenses that will no longer be incurred by Avon.

Restructuring Charges - Three Months Ended March 31, 2016

During the three months ended March 31, 2016, we recorded costs to implement of $47.5 related to the Transformation Plan, in selling, general and administrative expenses, in the Consolidated Statement of Operations. The costs consisted of the following:


•	net charge of $47.1 primarily for employee-related costs, including severance benefits; and


•	implementation costs of $.4 primarily related to professional service fees.

The majority of cash payments, if applicable, associated with these charges are expected to be made during 2016.

The liability balance for the Transformation Plan, which primarily consists of employee-related costs, for these various restructuring initiatives as of March 31, 2016 is as follows:



	Total
Balance at 12/31/2015	$	21.4
2016 charges	53.5
Adjustments	(6.4		)
Cash payments	(3.2		)
Foreign exchange	.4
Balance at March 31, 2016	$	65.7

Employee-related charges, net of adjustments, of initiatives under the Transformation Plan along with the estimated charges expected to be incurred on approved initiatives under the plan, by reportable business segment were as follows:



	South Latin America		North Latin America		Europe, Middle East & Africa		Asia Pacific		Corporate		Total
2015	$	—	$	—	$	—	$	—	$	21.4	$	21.4
First quarter 2016	12.1		3.3		21.9		4.7		5.1		47.1
Charges incurred to date	12.1		3.3		21.9		4.7		26.5		68.5
Estimated charges to be incurred on approved initiatives	.4		—		—		2.6		7.4		10.4
Total expected charges on approved initiatives	$	12.5	$	3.3	$	21.9	$	7.3	$	33.9	$	78.9

As noted previously, we expect our total costs to implement restructuring to be approximately $85 to $95 before taxes under the Transformation Plan. The amounts shown in the tables above as charges recorded to-date relate to initiatives that have been approved and recorded in the financial statements as the costs are probable and estimable. The amounts shown in the tables above as total expected charges on approved initiatives represent charges recorded to-date plus charges yet to be recorded for approved initiatives as the relevant accounting criteria for recording an expense have not yet been met. In addition to the charges included in the tables above, we have incurred and will continue to incur other costs to implement restructuring initiatives such as professional services fees and accelerated depreciation.

Additional Restructuring Charges 2015

As a result of the then-current economic environment, including the impact of foreign currency movements and inflation on our expenses, and in an effort to continue to improve our cost structure, we identified certain actions during 2015 that we believe would reduce ongoing costs. These actions primarily consisted of global headcount reductions.

As a result of these restructuring actions, we recorded a net benefit of $0.5 before taxes, during the first three months of 2016 in selling, general and administrative expenses, in the Consolidated Statements of Operations. There are no material remaining costs for restructuring actions approved-to-date. In connection with these restructuring actions, we realized annualized savings of approximately $30 before taxes. We began to realize savings in the second quarter of 2015 and achieved the annualized savings beginning in the third quarter of 2015. The annualized savings represent the net reduction of expenses that will no longer be incurred by Avon.

Restructuring Charges – Three Months Ended March 31, 2016

The costs to implement recorded during the three months ended March 31, 2016 consisted of a benefit of $.5 for employee-related costs due to severance benefits.

Restructuring Charges – Three Months Ended March 31, 2015

The costs to implement recorded during the three months ended March 31, 2015 consisted of the following:


•	charge of $25.0 for employee-related costs due to severance benefits; and


•	implementation costs of $1.9 primarily for professional service fees associated with Corporate and Asia Pacific.

The liability balance, which primarily consists of employee-related costs, for these various restructuring initiatives as of March 31, 2016 is as follows:



	Total
Balance at 12/31/2015	$	4.0
2016 charges	—
Adjustments	(.5		)
Cash payments	(.8		)
Foreign exchange	—
Balance at March 31, 2016	$	2.7

The majority of cash payments associated with this liability are expected to be made during 2016.

The charges approved to date under these various restructuring initiatives by reportable business segment were as follows:



	South Latin America		North Latin America		Europe, Middle East & Africa		Asia Pacific			Corporate			Total
2015	$	2.7	$	.2	$	4.2	$	5.8		$	9.2		$	22.1
First Quarter 2016	—		—		—		(.1		)	(.4		)	(.5		)
Charges incurred to date	$	2.7	$	.2	$	4.2	$	5.7		$	8.8		$	21.6

In addition to the charges included in the tables above, we have incurred other costs to implement restructuring initiatives such as professional services fees.

Other Restructuring Initiatives

During the three months ended March 31, 2016, we recorded a net benefit of $.2 in selling, general and administrative expenses, in the Consolidated Statements of Operations, associated with the restructuring programs launched in 2005 and 2009 and the restructuring initiatives launched in 2012 (the "Other Restructuring Initiatives" and "$400M Cost Savings Initiative"), which are substantially complete. During the three months ended March 31, 2015, we recorded a net charge of $.3 in selling, general and administrative expenses, in the Consolidated Statements of Operations, associated with the Other Restructuring Initiatives. The liability balance associated with the Other Restructuring Initiatives, which primarily consists of employee-related costs and contract termination costs, as of March 31, 2016 is not material.