DISCONTINUED OPERATIONS

6 Months Ended

Jun. 30, 2016

Discontinued Operations and Disposal Groups [Abstract]

DISCONTINUED OPERATIONS

DISCONTINUED OPERATIONS

On December 17, 2015, the Company entered into definitive agreements with affiliates controlled by Cerberus Capital Management, L.P. ("Cerberus"). The agreements include an investment agreement providing for a $435 investment by Cleveland Apple Investor L.P. (f/k/a Cleveland Apple Investor LLC) (“Cerberus Investor”) (an affiliate of Cerberus) in the Company through the purchase of perpetual convertible preferred stock (see Note 7, Series C Convertible Preferred Stock) and a separation and investment agreement providing for the separation of the Company's North America business, which represented the Company's operations in the United States, Canada and Puerto Rico, from the Company into New Avon LLC ("New Avon") a privately-held company that is majority-owned and managed by Cleveland NA Investor LLC (“Cerberus NA”) (an affiliate of Cerberus). These transactions closed on March 1, 2016.

Cerberus NA contributed $170 of cash into New Avon in exchange for 80.1% of its ownership interests. The Company contributed the North America business, certain pension and postretirement liabilities and $100 of cash into New Avon in exchange for a 19.9% ownership interest of New Avon. The Company received $4 of cash from New Avon at closing as part of an estimate of a customary working capital adjustment.

During the fourth quarter of 2015, the Company recorded an estimated loss on sale of discontinued operations of approximately $340 before tax (approximately $340 after tax) as the carrying value exceeded the estimated fair value less costs to sell. During the three and six months ended June 30, 2016, the Company recognized additional losses on sale of approximately $1 before tax (approximately $1 after tax) and approximately $16 before tax (approximately $6 after tax), respectively. The loss on sale represented the net assets contributed into New Avon, including certain pension and postretirement benefit plan liabilities and amounts in AOCI associated with the North America business, which were primarily unrecognized losses associated with our U.S. defined benefit pension plan, and costs to sell, as compared to the implied value of our ownership interests in New Avon which was approximately $43. The ultimate loss on sale will be dependent on the finalization of the amount of pension and postretirement benefit plan liabilities contributed to New Avon and the finalization of customary working capital settlement, which are expected to be finalized in the second half of 2016.

New Avon entered into a perpetual, irrevocable royalty-free licensing agreement with the Company for the use of the Avon brand and certain other intellectual property. Avon and New Avon also entered into a transition services agreement which covers, among other things, information technology, financial services and human resources, as well as other commercial agreements, including for research and development and product supply. In addition, the Company subleases office space to New Avon. See Note 4, Related Party Transactions.

The Company accounts for its ownership interests in New Avon using the equity method of accounting, which results in the Company recognizing its proportionate share of New Avon's income or loss. The Company's proportionate share of the post-separation losses of New Avon was $.6 and $4.5 during the three and six months ended June 30, 2016, respectively, and was recorded within other expense, net.

The major classes of financial statement components comprising the loss on discontinued operations, net of tax for North America are shown below:

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Total revenue	$	—		$	258.5		$	135.2		$	500.6
Cost of sales	—			102.4			53.2			197.9
Selling, general and administrative expenses	1.2			154.0			89.0			305.3
Operating (loss) profit	(1.2		)	2.1			(7.0		)	(2.6		)
Other (expense) income items	—			(.2		)	.6			(1.4		)
Loss on sale of discontinued operations, before tax	(1.4		)	—			(16.3		)	—
(Loss) income from discontinued operations, before tax	(2.6		)	1.9			(22.7		)	(4.0		)
Income taxes	—			(1.1		)	10.5			1.0
(Loss) income from discontinued operations, net of tax	$	(2.6	)	$	.8		$	(12.2	)	$	(3.0	)