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 February 16, 2017 | |
Avon Reports Fourth-Quarter and Full-Year 2016 Results |
• | Revenue declined 7% to $5.7 Billion; Increased 2% in constant dollars |
• | Active Representatives and Ending Representatives, both from Reportable Segments, declined 1% and were relatively unchanged, respectively |
• | Operating Margin increased 290 bps to 5.6%; Adjusted1 Operating Margin increased 80 bps to 6.5% |
• | Diluted Loss Per Share From Continuing Operations of $0.25; Adjusted Diluted Earnings Per Share From Continuing Operations of $0.04 |
• | Foreign currency negatively impacted Diluted Earnings Per Share by an estimated $0.27 per share and Adjusted Diluted Earnings Per Share by an estimated $0.28 per share, driven in each case by the strength of the U.S. dollar against the currencies of the countries in which the Company operates |
• | The Company realized an estimated $120 Million of cost savings in year one of the Transformation Plan |
• | Debt was reduced by approximately $260 Million and the maturity profile was extended |
• | Revenue declined 2% to $1.6 Billion; Relatively unchanged in constant dollars |
• | Active Representatives from Reportable Segments declined 2% |
• | Bad Debt Expense increased 210 bps, primarily in Brazil |
• | Operating Margin increased 290 bps to 6.8%; Adjusted Operating Margin increased 130 bps to 7.3% |
• | Diluted Loss Per Share From Continuing Operations of $0.03; Adjusted Diluted Earnings Per Share From Continuing Operations of $0.01 |
• | Total revenue from reportable segments declined 7% to $5.7 billion, but increased 3% in constant dollars. |
◦ | Active Representatives declined 1%, primarily due to a decline in Asia Pacific that was partially offset by an increase in Europe, Middle East & Africa. |
◦ | Average order increased 4% due to growth in all reportable segments as the Company benefited from pricing actions. |
◦ | Ending Representatives were relatively unchanged as growth in Europe, Middle East & Africa and South Latin America was offset by a decline in Asia Pacific. |
• | Gross margin was 60.5%, up 20 basis points and Adjusted gross margin was 60.5%, down 30 basis points. These year-over-year comparisons were negatively impacted by an approximate 260 basis point impact from foreign exchange, largely offset by pricing actions and lower supply chain costs. |
• | Operating margin was 5.6%, up 290 basis points while Adjusted operating margin was 6.5%, up 80 basis points. These year-over-year comparisons benefited from the favorable net impact of price/mix, as well as continued benefits from cost savings initiatives. These benefits were partially offset by approximately 310 basis points of unfavorable impact of foreign exchange, as well as an increase in bad debt expense, primarily in Brazil. |
• | The provision for income taxes was $125 million, compared with $819 million for 2015. The 2015 tax provision was most significantly impacted by valuation allowances for U.S. deferred tax assets. On an Adjusted basis, the provision for income taxes was $166 million, compared with $161 million for 2015. The effective tax rate from continuing operations was 399.4% and on an Adjusted basis was 82.6%. |
• | Loss from continuing operations, net of tax was $93 million, or a loss of $0.25 per diluted share, compared with a loss of $797 million, or a loss of $1.81 per diluted share, for 2015. Adjusted income from continuing operations, net of tax was $35 million, or $0.04 per diluted share, compared with income of $7 million, or $0.01 per diluted share, for 2015. Earnings allocated to convertible preferred stock had a negative $0.04 impact on both Diluted earnings per share and Adjusted diluted earnings per share. The impact of the devaluation in Egypt on working capital balances had a negative $0.04 impact on both Diluted earnings per share and Adjusted diluted earnings per share. |
• | Loss from discontinued operations, net of tax was $14 million associated with the previously separated North America business, or $0.03 per diluted share, compared with a loss of $349 million, or $0.79 per diluted share, for 2015, which included $340 million associated with the estimated loss on the sale of the North America business. |
• | Foreign currency has impacted the Company’s financial results of continuing operations as shown in the table on the following page. |
Approximate Impact of Foreign Currency | |||||||||||||||
Fourth-Quarter 2016 | Full-Year 2016 | ||||||||||||||
Estimated impact ($ in millions) | Estimated impact on diluted EPS | Estimated impact ($ in millions) | Estimated impact on diluted EPS | ||||||||||||
Year-on-Year impact on Reported (GAAP) results: | |||||||||||||||
Total revenue | (2) pts | (9) pts | |||||||||||||
Operating profit - transaction | $ | (15 | ) | $ | (0.02 | ) | $ | (165 | ) | $ | (0.24 | ) | |||
Operating profit - translation | — | — | (60 | ) | (0.09 | ) | |||||||||
Total operating profit | $ | (15 | ) | $ | (0.02 | ) | $ | (225 | ) | $ | (0.33 | ) | |||
Operating margin | (100) bps | (310) bps | |||||||||||||
Revaluation of working capital | $ | 2 | $ | — | $ | 35 | $ | 0.05 | |||||||
Diluted EPS | $ | (0.02 | ) | $ | (0.27 | ) | |||||||||
Year-on-Year impact on Adjusted (Non-GAAP) results: | |||||||||||||||
Adjusted operating profit - transaction | $ | (15 | ) | $ | (0.02 | ) | $ | (165 | ) | $ | (0.24 | ) | |||
Adjusted operating profit - translation | — | — | (65 | ) | (0.10 | ) | |||||||||
Total Adjusted operating profit | $ | (15 | ) | $ | (0.02 | ) | $ | (230 | ) | $ | (0.34 | ) | |||
Adjusted operating margin | (100) bps | (310) bps | |||||||||||||
Revaluation of working capital | $ | 2 | $ | — | $ | 40 | $ | 0.06 | |||||||
Adjusted diluted EPS | $ | (0.02 | ) | $ | (0.28 | ) | |||||||||
Amounts in the table above may not necessarily sum because the computations are made independently. |
• | 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 costs to implement restructuring within operating profit of approximately $77 million before tax (approximately $64 million after tax), primarily related to employee-related costs as part of the previously announced Transformation Plan. |
• | The Company settled claims relating to professional services that had been provided to the Company prior to 2013 in connection with a previously disclosed legal matter. The proceeds, net of legal fees, of approximately $27 million were recognized as a reduction of selling, general and administrative expenses. |
• | The Company recorded a net income tax benefit that included an approximate $29 million benefit recognized as a result of the implementation of foreign tax planning strategies, an approximate $7 million benefit recognized primarily as a result of a release of a valuation allowance associated with Russia and a non-cash income tax charge of approximately $9 million associated with valuation allowances to adjust certain non-U.S. deferred tax assets to an amount that is "more likely than not" to be realized. |
• | The Company recorded a net gain on extinguishment of debt of approximately $1 million related to debt repayments through cash tender offers, open market repurchases and make-whole prepayments. |
TWELVE MONTHS ENDED DECEMBER 31, 2016 | |||||||||||||||||
SEGMENT RESULTS | |||||||||||||||||
Revenue | Active Representatives | Average Order C$ | Units Sold | Price/ Mix C$ | Ending Representatives | ||||||||||||
US $ | C$ | ||||||||||||||||
Revenue & Drivers | % var. vs FY15 | % var. vs FY15 | % var. vs FY15 | % var. vs FY15 | % var. vs FY15 | % var. vs FY15 | % var. vs FY15 | ||||||||||
Europe, Middle East & Africa | $ | 2,138.2 | (4)% | 4% | 3% | 1% | (1)% | 5% | 3% | ||||||||
South Latin America | 2,145.9 | (7) | 5 | (1) | 6 | (5) | 10 | 1 | |||||||||
North Latin America | 829.9 | (8) | 3 | — | 3 | (6) | 9 | (1) | |||||||||
Asia Pacific | 556.0 | (11) | (7) | (10) | 3 | (6) | (1) | (11) | |||||||||
Total from reportable segments | 5,670.0 | (7) | 3 | (1) | 4 | (4) | 7 | — | |||||||||
Other operating segments and business activities | 47.7 | (50) | (38) | (85) | * | (88) | * | (100) | |||||||||
Total revenue | $ | 5,717.7 | (7)% | 2% | (2)% | 4% | (4)% | 6% | (2)% |
Operating Profit/Margin | 2016 Operating Profit US$ | 2016 Operating Margin US$ | Change in US$ vs FY15 | Change in C$ vs FY15 | |||||||
Segment profit/margin | |||||||||||
Europe, Middle East & Africa | $ | 329.9 | 15.4 | % | 140 bps | 130 bps | |||||
South Latin America | 200.5 | 9.3 | (100) | (80) | |||||||
North Latin America | 114.4 | 13.8 | 190 | 220 | |||||||
Asia Pacific | 59.9 | 10.8 | (20) | 10 | |||||||
Total from reportable segments | 704.7 | 12.4 | 40 | 60 | |||||||
Other operating segments and business activities | 6.0 | ||||||||||
Unallocated global expenses | (338.6 | ) | |||||||||
CTI restructuring initiatives | (77.4 | ) | |||||||||
Legal settlement | 27.2 | ||||||||||
Operating profit | $ | 321.9 | 5.6 | % | 290 bps | 180 bps |
• | Europe, Middle East & Africa revenue was down 4%, or up 4% in constant dollars. Constant-dollar revenue was impacted by increases in Active Representatives and average order. |
◦ | Russia revenue was relatively unchanged, or up 9% in constant dollars, primarily due to an increase in Active Representatives and, to a lesser extent, higher average order. |
◦ | U.K. revenue was down 12%, or relatively unchanged in constant dollars, as higher average order was offset by a decline in Active Representatives. |
• | South Latin America revenue was down 7%, or up 5% in constant dollars, driven primarily by higher average order, partially offset by a decrease in Active Representatives. Constant-dollar revenue was negatively impacted by an estimated 1 point due to MVA taxes in Brazil, which are additional VAT-like state taxes that went into effect in various jurisdictions in Brazil in late |
◦ | Brazil revenue was down 3%, or up 2% in constant dollars, primarily driven by higher average order. MVA taxes (discussed above) negatively impacted Brazil’s constant-dollar revenue growth by an estimated 3 points. Constant-dollar revenue was also negatively impacted by an estimated 3 points from the impact of the IPI tax discussed above. |
• | North Latin America revenue was down 8%, or up 3% in constant dollars. Constant-dollar revenue benefited from higher average order. |
◦ | Mexico revenue was down 11%, or up 5% in constant dollars, primarily driven by higher average order. |
• | Asia Pacific revenue was down 11%, and down 7% in constant dollars. Modest constant-dollar growth in the Philippines was not enough to offset declines in other markets. The segment's constant-dollar revenue decline was driven by a decrease in Active Representatives, partially offset by higher average order. |
◦ | Philippines revenue was down 3%, or up 2% in constant dollars, as higher average order was partially offset by a decline in Active Representatives driven by a reduction in the number of sales campaigns. |
• | Net cash provided by operating activities of continuing operations was $128 million for the twelve months ended December 31, 2016, compared with $91 million for the same period in 2015. Cash provided by operating activities during 2016 was favorably impacted by lower operating tax payments, primarily in Brazil, higher cash-related earnings, and net proceeds related to settling claims related to professional services. The impact of these items was offset by the timing of payments, primarily for inventory, increased levels of accounts receivable, primarily in Brazil, and a contribution to the U.S. pension plan. When comparing the year-over-year cash provided by 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 in 2015, which did not recur in 2016. |
• | For the twelve months ended December 31, 2016, there was $83 million of net cash used by investing activities of continuing operations, compared with net cash provided of $143 million in the same period in 2015. Cash provided by investing activities of continuing operations in 2015 included net proceeds of $208 million on the sale of Liz Earle. |
• | Net cash provided by financing activities of continuing operations was $137 million for the twelve months ended December 31, 2016, a $568 million increase over the prior year, primarily due to: |
◦ | net proceeds from Senior Secured Notes issued in 2016; |
◦ | the issuance of Series C Convertible Preferred Stock; |
◦ | the suspension of the common stock dividend; and |
◦ | the prepayment of the Company's 2.375% Notes in 2015; partially offset by |
◦ | payments for the August 2016 cash tender offers of debt; |
◦ | payments for the October and December 2016 debt repurchases; and |
◦ | the prepayment of the remaining principal amount of the Company's 4.20% Notes and 5.75% Notes. |
• | Total revenue for Avon Products, Inc. declined 2% to $1.6 billion, but was relatively unchanged in constant dollars. |
• | Total revenue from reportable segments declined 2% to $1.6 billion, but was relatively unchanged in constant dollars. |
◦ | Active Representatives declined 2%, primarily due to decreases in Asia Pacific and Europe, Middle East & Africa. |
◦ | Average order increased 2% as growth in South Latin America, Asia Pacific and North Latin America was partially offset by a decline in Europe, Middle East & Africa. |
◦ | Ending Representatives were relatively unchanged as growth in Europe, Middle East & Africa and South Latin America was offset by a decline in Asia Pacific. |
• | Gross margin was 60.3%, up 160 basis points while Adjusted gross margin was 60.3%, up 150 basis points. These year-over-year comparisons were positively impacted by pricing, partially offset by an approximate 80 basis point unfavorable impact from foreign exchange. |
• | Operating margin was 6.8% in the quarter, up 290 basis points while Adjusted operating margin was 7.3%, up 130 basis points. These year-over-year comparisons benefited from the favorable net impact of price/mix, continued benefits from cost |
• | The provision for income taxes was $53 million, compared with $22 million for 2015. On an Adjusted basis, the provision for income taxes was $44 million, compared with $40 million for 2015. The effective tax rate from continuing operations in the quarter was 122.7% and on an Adjusted basis was 83.0%. |
• | Loss from continuing operations, net of tax was $10 million, or a loss of $0.03 per diluted share, compared with a loss of $15 million, or a loss of $0.04 per diluted share, for the fourth quarter of 2015. Adjusted income from continuing operations, net of tax was $9 million, or $0.01 per diluted share, compared with income of $1 million, or $0.00 per diluted share, for the fourth quarter of 2015. Earnings allocated to convertible preferred stock had a negative $0.01 impact on both Diluted earnings per share and Adjusted diluted earnings per share. The impact of the devaluation in Egypt on working capital balances had a negative $0.04 impact on both Diluted earnings per share and Adjusted diluted earnings per share. |
• | Loss from discontinued operations, net of tax was $1 million associated with the previously separated North America business, or $0.00 per diluted share, compared with a loss of $317 million, or $0.72 per diluted share, for the fourth quarter of 2015, which included $340 million associated with the estimated loss on the sale of the North America business. |
• | The Company recorded a non-cash income tax charge of approximately $9 million associated with valuation allowances to adjust certain non-U.S. deferred tax assets to an amount that is "more likely than not" to be realized. |
• | The Company recorded costs to implement restructuring within operating profit of approximately $7 million before and after tax, primarily related to the previously announced Transformation Plan. |
• | The Company recorded a net loss on extinguishment of debt of approximately $3 million related to debt repayments through make-whole prepayments and open market repurchases. |
THREE MONTHS ENDED DECEMBER 31, 2016 | ||||||||||||||||||||||||
SEGMENT RESULTS | ||||||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||
Revenue | Active Representatives | Average Order C$ | Units Sold | Price/ Mix C$ | Ending Representatives | |||||||||||||||||||
US$ | C$ | |||||||||||||||||||||||
Revenue & Drivers | % var. vs 4Q15 | % var. vs 4Q15 | % var. vs 4Q15 | % var. vs 4Q15 | % var. vs 4Q15 | % var. vs 4Q15 | % var. vs 4Q15 | |||||||||||||||||
Europe, Middle East & Africa | $ | 620.5 | (7 | )% | (3 | )% | (2 | )% | (1 | )% | (8 | )% | 5 | % | 3 | % | ||||||||
South Latin America | 589.0 | 9 | 6 | (1 | ) | 7 | (8 | ) | 14 | 1 | ||||||||||||||
North Latin America | 204.1 | (10 | ) | 1 | — | 1 | (9 | ) | 10 | (1 | ) | |||||||||||||
Asia Pacific | 144.5 | (9 | ) | (6 | ) | (9 | ) | 3 | (5 | ) | (1 | ) | (11 | ) | ||||||||||
Total from reportable segments | 1,558.1 | (2 | ) | — | (2 | ) | 2 | (8 | ) | 8 | — | |||||||||||||
Other operating segments and business activities | 10.0 | (25 | ) | 19 | (100 | ) | * | (100 | ) | * | (100 | ) | ||||||||||||
Total revenue | $ | 1,568.1 | (2 | )% | — | % | (3 | )% | 3 | % | (8 | )% | 8 | % | (2 | )% |
Operating Profit/Margin | 2016 Operating Profit US$ | 2016 Operating Margin US$ | Change in US$ vs 4Q15 | Change in C$ vs 4Q15 | |||||||
Segment profit/margin | |||||||||||
Europe, Middle East & Africa | $ | 111.6 | 18.0 | % | 240 bps | 170 bps | |||||
South Latin America | 42.6 | 7.2 | (190) | (120) | |||||||
North Latin America | 29.4 | 14.4 | 150 | 190 | |||||||
Asia Pacific | 17.7 | 12.2 | 310 | 330 | |||||||
Total from reportable segments | 201.3 | 12.9 | 50 | 80 | |||||||
Other operating segments and business activities | 1.9 | ||||||||||
Unallocated global expenses | (89.0 | ) | |||||||||
CTI restructuring initiatives | (7.2 | ) | |||||||||
Operating profit | $ | 107.0 | 6.8 | % | 290 bps | 330 bps | |||||
• | Europe, Middle East & Africa revenue was down 7%, or 3% in constant dollars. Constant-dollar revenue was impacted by declines in Active Representatives and average order. |
◦ | Russia revenue was up 2%, or down 3% in constant dollars, driven by declines in average order and Active Representatives. |
◦ | U.K. revenue was down 20%, or 3% in constant dollars, due to a decline in Active Representatives. |
• | South Latin America revenue was up 9%, or 6% in constant dollars, driven primarily by higher average order, partially offset by a decrease in Active Representatives. Argentina contributed approximately 3 points to this constant-dollar revenue growth, primarily due to inflationary pricing. |
◦ | Brazil revenue was up 27%, or 7% in constant dollars, primarily driven by higher average order. |
• | North Latin America revenue was down 10%, or up 1% in constant dollars. Constant-dollar revenue primarily benefited from higher average order. |
◦ | Mexico revenue was down 14%, or up 2% in constant dollars, primarily driven by higher average order, partially offset by a decline in Active Representatives. |
• | Asia Pacific revenue was down 9%, and down 6% in constant dollars. Modest constant-dollar growth in the Philippines was not enough to offset declines in other markets. The segment's constant-dollar revenue decline was driven by a decrease in Active Representatives, partially offset by higher average order. |
◦ | Philippines revenue was down 3%, or up 1% in constant dollars, as higher average order was partially offset by a decline in Active Representatives. |
Contacts: | |
INVESTORS: | MEDIA: |
Avon Investor Relations | Brunswick Group |
Gina Grant | Claudia Gray |
(212) 282-5320 | (212) 333-3810 |
ICR, Inc. | |
Allison Malkin/Caitlin Morahan | |
(203) 682-8200 |
Three Months Ended | Percent Change | Twelve Months Ended | Percent Change | |||||||||||||||||||
December 31 | December 31 | |||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||||
Net sales | $ | 1,531.8 | $ | 1,585.8 | (3 | )% | $ | 5,578.8 | $ | 6,076.5 | (8 | )% | ||||||||||
Other revenue | 36.3 | 21.5 | 138.9 | 84.0 | ||||||||||||||||||
Total revenue | 1,568.1 | 1,607.3 | (2 | )% | 5,717.7 | 6,160.5 | (7 | )% | ||||||||||||||
Cost of sales | 622.3 | 663.7 | 2,257.0 | 2,445.4 | ||||||||||||||||||
Selling, general and administrative expenses | 838.8 | 873.8 | 3,138.8 | 3,543.2 | ||||||||||||||||||
Impairment of goodwill | — | 6.9 | — | 6.9 | ||||||||||||||||||
Operating profit | 107.0 | 62.9 | 70 | % | 321.9 | 165.0 | 95 | % | ||||||||||||||
Interest expense | 36.3 | 32.3 | 136.6 | 120.5 | ||||||||||||||||||
Loss (gain) on extinguishment of debt | 2.8 | — | (1.1 | ) | 5.5 | |||||||||||||||||
Interest income | (3.0 | ) | (2.8 | ) | (15.8 | ) | (12.5 | ) | ||||||||||||||
Other expense, net | 28.1 | 26.2 | 171.0 | 73.7 | ||||||||||||||||||
Gain on sale of business | — | — | — | (44.9 | ) | |||||||||||||||||
Total other expenses | 64.2 | 55.7 | 290.7 | 142.3 | ||||||||||||||||||
Income from continuing operations, before taxes | 42.8 | 7.2 | * | 31.2 | 22.7 | 37 | % | |||||||||||||||
Income taxes | (52.5 | ) | (22.0 | ) | (124.6 | ) | (819.2 | ) | ||||||||||||||
Loss from continuing operations, net of tax | (9.7 | ) | (14.8 | ) | 34 | % | (93.4 | ) | (796.5 | ) | 88 | % | ||||||||||
Loss from discontinued operations, net of tax | (1.1 | ) | (317.1 | ) | (14.0 | ) | (349.1 | ) | ||||||||||||||
Net loss | (10.8 | ) | (331.9 | ) | (107.4 | ) | (1,145.6 | ) | ||||||||||||||
Net loss (income) attributable to noncontrolling interests | 0.1 | (1.5 | ) | (0.2 | ) | (3.3 | ) | |||||||||||||||
Net loss attributable to Avon | $ | (10.7 | ) | $ | (333.4 | ) | 97 | % | $ | (107.6 | ) | $ | (1,148.9 | ) | 91 | % | ||||||
Loss per share:(1) | ||||||||||||||||||||||
Basic | ||||||||||||||||||||||
Basic EPS from continuing operations | $ | (0.03 | ) | $ | (0.04 | ) | 14 | % | $ | (0.25 | ) | $ | (1.81 | ) | 86 | % | ||||||
Basic EPS from discontinued operations | — | (0.72 | ) | (0.03 | ) | (0.79 | ) | |||||||||||||||
Basic EPS attributable to Avon | $ | (0.04 | ) | $ | (0.76 | ) | 95 | % | $ | (0.29 | ) | $ | (2.60 | ) | 89 | % | ||||||
Diluted | ||||||||||||||||||||||
Diluted EPS from continuing operations | $ | (0.03 | ) | $ | (0.04 | ) | 14 | % | $ | (0.25 | ) | $ | (1.81 | ) | 86 | % | ||||||
Diluted EPS from discontinued operations | — | (0.72 | ) | (0.03 | ) | (0.79 | ) | |||||||||||||||
Diluted EPS attributable to Avon | $ | (0.04 | ) | $ | (0.76 | ) | 95 | % | $ | (0.29 | ) | $ | (2.60 | ) | 89 | % | ||||||
Weighted-average shares outstanding: | ||||||||||||||||||||||
Basic | 437.6 | 435.4 | 437.0 | 435.2 | ||||||||||||||||||
Diluted | 437.7 | 435.4 | 437.0 | 435.2 | ||||||||||||||||||
* 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 and earnings allocated to convertible preferred stock. Net loss allocable to common shares used in the basic and diluted loss per share calculation was ($16.2) and ($329.8) for the three months ended December 31, 2016 and 2015, respectively. Net loss allocable to common shares used in the basic and diluted loss per share calculation was ($124.6) and ($1,133.2) for the twelve months ended December 31, 2016 and 2015, respectively. |
December 31 | December 31 | |||||||
2016 | 2015 | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 654.4 | $ | 686.9 | ||||
Accounts receivable, net | 458.9 | 443.0 | ||||||
Inventories | 586.4 | 624.0 | ||||||
Prepaid expenses and other | 291.3 | 296.1 | ||||||
Current assets of discontinued operations | 1.3 | 291.1 | ||||||
Total current assets | 1,992.3 | 2,341.1 | ||||||
Property, plant and equipment, at cost | 1,424.1 | 1,495.7 | ||||||
Less accumulated depreciation | (712.8 | ) | (728.8 | ) | ||||
Property, plant and equipment, net | 711.3 | 766.9 | ||||||
Goodwill | 93.6 | 92.3 | ||||||
Other assets | 621.7 | 490.0 | ||||||
Noncurrent assets of discontinued operations | — | 180.1 | ||||||
Total assets | $ | 3,418.9 | $ | 3,870.4 | ||||
Liabilities and Shareholders’ Deficit | ||||||||
Current Liabilities | ||||||||
Debt maturing within one year | $ | 18.1 | $ | 55.2 | ||||
Accounts payable | 768.1 | 774.2 | ||||||
Accrued compensation | 129.2 | 157.6 | ||||||
Other accrued liabilities | 401.9 | 419.6 | ||||||
Sales and taxes other than income | 147.0 | 174.9 | ||||||
Income taxes | 10.7 | 23.9 | ||||||
Payable to discontinued operations | — | 100.0 | ||||||
Current liabilities of discontinued operations | 10.7 | 489.7 | ||||||
Total current liabilities | 1,485.7 | 2,195.1 | ||||||
Long-term debt | 1,875.8 | 2,150.5 | ||||||
Employee benefit plans | 164.5 | 177.5 | ||||||
Long-term income taxes | 78.6 | 65.1 | ||||||
Other liabilities | 205.8 | 78.4 | ||||||
Noncurrent liabilities of discontinued operations | — | 260.2 | ||||||
Total liabilities | 3,810.4 | 4,926.8 | ||||||
Series C convertible preferred stock | 444.7 | — | ||||||
Shareholders’ Deficit | ||||||||
Common stock | 188.8 | 187.9 | ||||||
Additional paid-in capital | 2,273.9 | 2,254.0 | ||||||
Retained earnings | 2,322.2 | 2,448.1 | ||||||
Accumulated other comprehensive loss | (1,033.2 | ) | (1,366.2 | ) | ||||
Treasury stock, at cost | (4,599.7 | ) | (4,594.1 | ) | ||||
Total Avon shareholders’ deficit | (848.0 | ) | (1,070.3 | ) | ||||
Noncontrolling interests | 11.8 | 13.9 | ||||||
Total shareholders’ deficit | (836.2 | ) | (1,056.4 | ) | ||||
Total liabilities, series C convertible preferred stock and shareholders’ deficit | $ | 3,418.9 | $ | 3,870.4 | ||||
Twelve Months Ended | ||||||||
December 31 | ||||||||
2016 | 2015 | |||||||
Cash Flows from Operating Activities | ||||||||
Net loss | $ | (107.4 | ) | $ | (1,145.6 | ) | ||
Loss from discontinued operations, net of tax | 14.0 | 349.1 | ||||||
Loss from continuing operations, net of tax | $ | (93.4 | ) | $ | (796.5 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Depreciation | 83.3 | 94.0 | ||||||
Amortization | 30.6 | 32.1 | ||||||
Provision for doubtful accounts | 190.5 | 144.1 | ||||||
Provision for obsolescence | 36.5 | 45.4 | ||||||
Share-based compensation | 24.0 | 51.2 | ||||||
Foreign exchange losses | 6.1 | 44.3 | ||||||
Deferred income taxes | (8.5 | ) | 644.6 | |||||
Charge for Venezuelan monetary assets and liabilities | — | (4.2 | ) | |||||
Charge for Venezuelan non-monetary assets | — | 101.7 | ||||||
Loss on deconsolidation of Venezuela | 120.5 | — | ||||||
Pre-tax gain on sale of business | — | (44.9 | ) | |||||
Impairment of goodwill | — | 6.9 | ||||||
Other | (3.3 | ) | 11.6 | |||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | (216.6 | ) | (184.7 | ) | ||||
Inventories | (28.6 | ) | (106.6 | ) | ||||
Prepaid expenses and other | 16.8 | 8.7 | ||||||
Accounts payable and accrued liabilities | (17.6 | ) | 80.4 | |||||
Income and other taxes | (4.7 | ) | 50.7 | |||||
Noncurrent assets and liabilities | (7.6 | ) | (87.4 | ) | ||||
Net cash provided by operating activities of continuing operations | 128.0 | 91.4 | ||||||
Cash Flows from Investing Activities | ||||||||
Capital expenditures | (93.0 | ) | (92.4 | ) | ||||
Disposal of assets | 13.3 | 8.2 | ||||||
Net proceeds from sale of business | — | 208.3 | ||||||
Purchases of investments | — | (35.3 | ) | |||||
Net proceeds from sale of investments | — | 53.7 | ||||||
Reduction of cash due to Venezuela deconsolidation | (4.5 | ) | — | |||||
Other investing activities | 1.5 | — | ||||||
Net cash (used) provided by investing activities of continuing operations | (82.7 | ) | 142.5 | |||||
Cash Flows from Financing Activities | ||||||||
Cash dividends | — | (108.8 | ) | |||||
Debt, net (maturities of three months or less) | (36.4 | ) | (59.1 | ) | ||||
Proceeds from debt | 508.7 | 7.6 | ||||||
Repayment of debt | (733.0 | ) | (261.2 | ) | ||||
Repurchase of common stock | (5.6 | ) | (3.1 | ) | ||||
Net proceeds from the sale of Series C convertible preferred stock | 426.3 | — | ||||||
Other financing activities | (23.0 | ) | (5.9 | ) | ||||
Net cash provided (used) by financing activities of continuing operations | 137.0 | (430.5 | ) | |||||
Cash Flows from Discontinued Operations | ||||||||
Net cash (used) provided by operating activities of discontinued operations | (67.6 | ) | 20.7 | |||||
Net cash used by investing activities of discontinued operations | (94.6 | ) | (4.2 | ) | ||||
Net cash used by financing activities of discontinued operations | — | (15.0 | ) | |||||
Net cash (used) provided by discontinued operations | (162.2 | ) | 1.5 | |||||
Effect of exchange rate changes on cash and equivalents | (50.4 | ) | (80.7 | ) | ||||
Net decrease in cash and equivalents | (30.3 | ) | (275.8 | ) | ||||
Cash and equivalents at beginning of year(1) | 684.7 | 960.5 | ||||||
Cash and equivalents at end of year(2) | $ | 654.4 | $ | 684.7 |
(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, respectively. |
(2) | Includes cash and cash equivalents of discontinued operations of $(2.2) at the end of the year in 2015. |
CATEGORY SALES FROM REPORTABLE SEGMENTS (US$) | ||||||||||||
Consolidated | ||||||||||||
Three Months Ended December 31 | US$ | C$ | ||||||||||
2016 | 2015 | % var. vs 4Q15 | % var. vs 4Q15 | |||||||||
Beauty: | ||||||||||||
Skincare | $ | 429.8 | $ | 431.7 | —% | —% | ||||||
Fragrance | 447.9 | 454.7 | (1) | 1 | ||||||||
Color | 252.8 | 260.2 | (3) | (2) | ||||||||
Total Beauty | 1,130.5 | 1,146.6 | (1) | — | ||||||||
Fashion & Home: | ||||||||||||
Fashion (jewelry/watches/apparel/footwear/accessories/children's) | 234.5 | 250.0 | (6) | (2) | ||||||||
Home (gift & decorative products/housewares/entertainment & leisure/children's/nutrition) | 166.9 | 176.4 | (5) | (1) | ||||||||
Total Fashion & Home | 401.4 | 426.4 | (6) | (2) | ||||||||
Net sales from reportable segments | 1,531.9 | 1,573.0 | (3) | — | ||||||||
Other revenue from reportable segments | 26.2 | 20.9 | 25 | 27 | ||||||||
Total revenue from reportable segments | 1,558.1 | 1,593.9 | (2) | — | ||||||||
Total revenue from Other operating segments and business activities | 10.0 | 13.4 | (25) | 20 | ||||||||
Total revenue | $ | 1,568.1 | $ | 1,607.3 | (2) | — | ||||||
CATEGORY SALES FROM REPORTABLE SEGMENTS (US$) | ||||||||||||
Consolidated | ||||||||||||
Twelve Months Ended December 31 | US$ | C$ | ||||||||||
2016 | 2015 | % var. vs FY15 | % var. vs FY15 | |||||||||
Beauty: | ||||||||||||
Skincare | $ | 1,607.3 | $ | 1,734.0 | (7)% | 1% | ||||||
Fragrance | 1,514.7 | 1,616.1 | (6) | 4 | ||||||||
Color | 997.1 | 1,069.8 | (7) | 2 | ||||||||
Total Beauty | 4,119.1 | 4,419.9 | (7) | 2 | ||||||||
Fashion & Home: | ||||||||||||
Fashion (jewelry/watches/apparel/footwear/accessories/children's) | 850.4 | 904.2 | (6) | 2 | ||||||||
Home (gift & decorative products/housewares/entertainment & leisure/children's/nutrition) | 595.8 | 659.4 | (10) | 2 | ||||||||
Total Fashion & Home | 1,446.2 | 1,563.6 | (8) | 2 | ||||||||
Net sales from reportable segments | 5,565.3 | 5,983.5 | (7) | 2 | ||||||||
Other revenue from reportable segments | 104.7 | 82.3 | 27 | 37 | ||||||||
Total revenue from reportable segments | 5,670.0 | 6,065.8 | (7) | 3 | ||||||||
Total revenue from Other operating segments and business activities | 47.7 | 94.7 | (50) | (38) | ||||||||
Total revenue | $ | 5,717.7 | $ | 6,160.5 | (7) | 2 | ||||||
THREE MONTHS ENDED DECEMBER 31, 2016 | ||||||||||||||||||||
Reported (GAAP) | CTI restructuring initiatives | Other items | Special tax items | Adjusted (Non-GAAP) | ||||||||||||||||
Total revenue | $ | 1,568.1 | $ | — | $ | — | $ | — | $ | 1,568.1 | ||||||||||
Cost of sales | 622.3 | 0.3 | — | — | 622.0 | |||||||||||||||
Selling, general and administrative expenses | 838.8 | 6.9 | — | — | 831.9 | |||||||||||||||
Operating profit | 107.0 | 7.2 | — | — | 114.2 | |||||||||||||||
Income from continuing operations, before taxes | 42.8 | 7.2 | 2.8 | — | 52.8 | |||||||||||||||
Income taxes | (52.5 | ) | 0.1 | — | 8.6 | (43.8 | ) | |||||||||||||
(Loss) income from continuing operations, net of tax | $ | (9.7 | ) | $ | 7.3 | $ | 2.8 | $ | 8.6 | $ | 9.0 | |||||||||
Diluted EPS from continuing operations | $ | (0.03 | ) | $ | 0.01 | |||||||||||||||
Gross margin | 60.3 | % | — | — | — | 60.3 | % | |||||||||||||
SG&A as a % of revenues | 53.5 | % | (0.4 | ) | — | — | 53.1 | % | ||||||||||||
Operating margin | 6.8 | % | 0.5 | — | — | 7.3 | % | |||||||||||||
Effective tax rate | * | 83.0 | % | |||||||||||||||||
TWELVE MONTHS ENDED DECEMBER 31, 2016 | ||||||||||||||||||||||||||||
Reported (GAAP) | CTI restructuring initiatives | Legal settlement | Venezuelan special items | Other items | Special tax items | Adjusted (Non-GAAP) | ||||||||||||||||||||||
Total revenue | $ | 5,717.7 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 5,717.7 | ||||||||||||||
Cost of sales | 2,257.0 | 0.6 | — | — | — | — | 2,256.4 | |||||||||||||||||||||
Selling, general and administrative expenses | 3,138.8 | 76.8 | (27.2 | ) | — | — | — | 3,089.2 | ||||||||||||||||||||
Operating profit | 321.9 | 77.4 | (27.2 | ) | — | — | — | 372.1 | ||||||||||||||||||||
Income from continuing operations, before taxes | 31.2 | 77.4 | (27.2 | ) | 120.5 | (1.1 | ) | — | 200.8 | |||||||||||||||||||
Income taxes | (124.6 | ) | (13.5 | ) | — | — | — | (27.8 | ) | (165.9 | ) | |||||||||||||||||
(Loss) income from continuing operations, net of tax | $ | (93.4 | ) | $ | 63.9 | $ | (27.2 | ) | $ | 120.5 | $ | (1.1 | ) | $ | (27.8 | ) | $ | 34.9 | ||||||||||
Diluted EPS from continuing operations | $ | (0.25 | ) | $ | 0.04 | |||||||||||||||||||||||
Gross margin | 60.5 | % | — | — | — | — | — | 60.5 | % | |||||||||||||||||||
SG&A as a % of revenues | 54.9 | % | (1.3 | ) | 0.5 | — | — | — | 54.0 | % | ||||||||||||||||||
Operating margin | 5.6 | % | 1.4 | (0.5 | ) | — | — | — | 6.5 | % | ||||||||||||||||||
Effective tax rate | * | 82.6 | % | |||||||||||||||||||||||||
THREE MONTHS ENDED DECEMBER 31, 2015 | ||||||||||||||||||||||||||||||||
Reported (GAAP) | CTI restructuring initiatives | Venezuelan special items | Pension settlement charge | Asset impairment and other charges | Other items | Special tax items | Adjusted (Non-GAAP) | |||||||||||||||||||||||||
Total revenue | $ | 1,607.3 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1,607.3 | ||||||||||||||||
Cost of sales | 663.7 | — | 1.9 | — | — | — | — | 661.8 | ||||||||||||||||||||||||
Selling, general and administrative expenses | 873.8 | 20.9 | — | 1.1 | — | 3.1 | — | 848.7 | ||||||||||||||||||||||||
Impairment of goodwill | 6.9 | — | — | — | 6.9 | — | — | — | ||||||||||||||||||||||||
Operating profit | 62.9 | 20.9 | 1.9 | 1.1 | 6.9 | 3.1 | — | 96.8 | ||||||||||||||||||||||||
Income from continuing operations, before taxes | 7.2 | 20.9 | 1.9 | 1.1 | 6.9 | 3.1 | — | 41.1 | ||||||||||||||||||||||||
Income taxes | (22.0 | ) | 0.3 | — | — | — | — | (18.7 | ) | (40.4 | ) | |||||||||||||||||||||
(Loss) income from continuing operations, net of tax | $ | (14.8 | ) | $ | 21.2 | $ | 1.9 | $ | 1.1 | $ | 6.9 | $ | 3.1 | $ | (18.7 | ) | $ | 0.7 | ||||||||||||||
Diluted EPS from continuing operations | $ | (0.04 | ) | $ | 0.05 | $ | — | $ | — | $ | 0.01 | $ | — | $ | (0.04 | ) | $ | — | ||||||||||||||
Gross margin | 58.7 | % | — | 0.1 | — | — | — | — | 58.8 | % | ||||||||||||||||||||||
SG&A as a % of revenues | 54.4 | % | (1.3 | ) | — | (0.1 | ) | — | (0.2 | ) | — | 52.8 | % | |||||||||||||||||||
Operating margin | 3.9 | % | 1.3 | 0.1 | 0.1 | 0.4 | 0.2 | — | 6.0 | % | ||||||||||||||||||||||
Effective tax rate | * | 98.3 | % | |||||||||||||||||||||||||||||
TWELVE MONTHS ENDED DECEMBER 31, 2015 | ||||||||||||||||||||||||||||||||
Reported (GAAP) | CTI restructuring initiatives | Venezuelan special items | Pension settlement charge | Asset impairment and other charges | Other items | Special tax items | Adjusted (Non-GAAP) | |||||||||||||||||||||||||
Total revenue | $ | 6,160.5 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 6,160.5 | ||||||||||||||||
Cost of sales | 2,445.4 | — | 28.5 | — | — | — | — | 2,416.9 | ||||||||||||||||||||||||
Selling, general and administrative expenses | 3,543.2 | 49.1 | 91.7 | 7.3 | — | 3.1 | — | 3,392.0 | ||||||||||||||||||||||||
Impairment of goodwill | 6.9 | — | — | — | 6.9 | — | — | — | ||||||||||||||||||||||||
Operating profit | 165.0 | 49.1 | 120.2 | 7.3 | 6.9 | 3.1 | — | 351.6 | ||||||||||||||||||||||||
Income from continuing operations, before taxes | 22.7 | 49.1 | 116.0 | 7.3 | 6.9 | (33.8 | ) | — | 168.2 | |||||||||||||||||||||||
Income taxes | (819.2 | ) | (2.4 | ) | 0.8 | — | — | (6.7 | ) | 666.4 | (161.1 | ) | ||||||||||||||||||||
(Loss) income from continuing operations, net of tax | $ | (796.5 | ) | $ | 46.7 | $ | 116.8 | $ | 7.3 | $ | 6.9 | $ | (40.5 | ) | $ | 666.4 | $ | 7.1 | ||||||||||||||
Diluted EPS from continuing operations | $ | (1.81 | ) | $ | 0.11 | $ | 0.26 | $ | 0.02 | $ | 0.02 | $ | (0.09 | ) | $ | 1.51 | $ | 0.01 | ||||||||||||||
Gross margin | 60.3 | % | — | 0.5 | — | — | — | — | 60.8 | % | ||||||||||||||||||||||
SG&A as a % of revenues | 57.5 | % | (0.8 | ) | (1.5 | ) | (0.1 | ) | — | (0.1 | ) | — | 55.1 | % | ||||||||||||||||||
Operating margin | 2.7 | % | 0.8 | 2.0 | 0.1 | 0.1 | 0.1 | — | 5.7 | % | ||||||||||||||||||||||
Effective tax rate | * | 95.8 | % | |||||||||||||||||||||||||||||
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