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/ Laura Barbrook | ||||||||||||||
Name: Laura Barbrook | |||||||||||||||
Title: Vice President and Corporate Controller - Principal Accounting Officer |
Exhibit | ||
No. | Description | |
99.1 | ||
Avon Reports Second-Quarter 2018 Results |
• | Total Reportable Segment Revenue decreased 3% to $1.3 billion, or increased 2% in constant dollars1, both including a 4% reporting benefit due to the impact of adopting the new revenue recognition standard required by generally accepted accounting principles in the United States ("GAAP") |
• | The Brazil truckers' strike reduced Revenue and constant dollar Revenue by approximately 1% |
• | Active Representatives and Ending Representatives, both from Reportable Segments, each declined 4%, or each declined approximately 3%, excluding the Brazil truckers' strike |
• | Operating Margin increased 160 bps to 3.9% and Adjusted Operating Margin increased 60 bps to 5.7%, both including a decline of approximately 10 bps due to the impact of the new revenue recognition standard |
• | Diluted Loss Per Share From Continuing Operations ("Diluted Loss Per Share") of $0.09 and Adjusted Diluted Loss Per Share From Continuing Operations ("Adjusted Diluted Loss Per Share") of $0.03, both including a negligible benefit due to the impact of the new revenue recognition standard |
• | Total revenue for Avon Products, Inc. decreased 3% to $1.4 billion, or increased 1% in constant dollars, both including a benefit of approximately 4% due to the impact of adopting the new revenue recognition standard and both including an approximate 1% unfavorable impact from the Brazil truckers' strike. |
• | From reportable segments: |
◦ | Total revenue decreased 3% to $1.3 billion, or increased 2% in constant dollars, both including a benefit of approximately 4% due to the impact of adopting the new revenue recognition standard and both including an approximate 1% unfavorable impact from the Brazil truckers' strike. |
◦ | Active Representatives declined 4% driven by decreases in South Latin America, primarily Brazil, Europe, Middle East & Africa and North Latin America, or declined approximately 3% excluding the Brazil truckers' strike. |
◦ | Ending Representatives declined 4% with decreases reported in all segments. |
◦ | Average order in constant dollars increased 6%, including a benefit of approximately 4% due to the impact of adopting the new revenue recognition standard. Growth in South Latin America, North Latin America and Asia Pacific was offset by a decline in Europe, Middle East & Africa. |
• | Gross margin and Adjusted gross margin each decreased 230 basis points to 60.1%, including a decline of approximately 330 basis points due to the impact of adopting the new revenue recognition standard. Gross margin and Adjusted gross margin were favorably impacted by non-recurring Brazil net tax recoveries and the net impact of price/mix, partially offset by higher supply chain costs. |
• | Operating margin was 3.9% in the quarter, up 160 basis points, while Adjusted operating margin was 5.7%, up 60 basis points, both including a decline of approximately 10 basis points due to the implementation of the new revenue recognition standard. The Operating margin year-over-year comparison was favorably impacted by a loss contingency recorded in the prior year related to a non-U.S. pension plan. Both the Operating margin and Adjusted operating margin year-over-year comparisons were favorably impacted by non-recurring Brazil net tax recoveries. |
• | The provision for income taxes was $37 million, compared with $34 million for second-quarter 2017. On an Adjusted basis, the provision for income taxes was $31 million, compared with $34 million for second-quarter 2017. |
• | Net loss was $37 million, including a benefit of approximately $2 million due to the impact of the new revenue recognition standard, compared with a loss of $46 million for second-quarter 2017. Adjusted net loss was $8 million, including a benefit of approximately $2 million due to the impact of the new revenue recognition standard, compared with a loss of $8 million for second-quarter 2017. |
• | Diluted loss per share was $0.09, including a negligible benefit due to the impact of the new revenue recognition standard, compared with a Diluted loss per share of $0.12 for second-quarter 2017. Adjusted diluted loss per share was $0.03, including a negligible benefit due to the impact of the new revenue recognition standard, compared with an Adjusted diluted loss per share of $0.03 for second-quarter 2017. |
• | The Company recorded costs to implement ("CTI") restructuring within operating profit of approximately $24 million (before and after tax), primarily related to the Transformation Plan. |
• | The Company recorded one-time tax reserves of approximately $6 million associated with its uncertain tax positions. |
THREE MONTHS ENDED JUNE 30, 2018 | ||||||||||||||||||||||||
SEGMENT RESULTS | ||||||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||
Revenue | Active Representatives | Average Order C$ | Units Sold | Price/ Mix C$ | Ending Representatives | |||||||||||||||||||
US$ | C$ | |||||||||||||||||||||||
Revenue & Drivers | % var. vs 2Q17 | % var. vs 2Q17 | % var. vs 2Q17 | % var. vs 2Q17 | % var. vs 2Q17 | % var. vs 2Q17 | % var. vs 2Q17 | |||||||||||||||||
Europe, Middle East & Africa | $ | 500.7 | 1 | % | — | % | (3 | )% | 3 | % | (3 | )% | 3 | % | (2 | )% | ||||||||
South Latin America | 516.1 | (8 | )% | 3 | % | (5 | )% | 8 | % | (6 | )% | 9 | % | (4 | )% | |||||||||
North Latin America | 207.3 | — | % | 3 | % | (5 | )% | 8 | % | (6 | )% | 9 | % | (8 | )% | |||||||||
Asia Pacific | 113.1 | (1 | )% | 1 | % | (1 | )% | 2 | % | — | % | 1 | % | (4 | )% | |||||||||
Total from reportable segments | 1,337.2 | (3 | )% | 2 | % | (4 | )% | 6 | % | (4 | )% | 6 | % | (4 | )% | |||||||||
Other operating segments and business activities | 14.7 | (32 | )% | (32 | )% | (70 | )% | * | (33 | )% | 1 | % | — | % | ||||||||||
Total Avon | $ | 1,351.9 | (3 | )% | 1 | % | (4 | )% | 5 | % | (5 | )% | 6 | % | (4 | )% |
Operating Profit/Margin | 2018 Operating Profit US$ | 2018 Operating Margin US$ | Change in US$ vs 2Q17 | Change in C$ vs 2Q17 | ||||||
Segment profit/margin | ||||||||||
Europe, Middle East & Africa | $ | 74.4 | 14.9% | (140) bps | (150) bps | |||||
South Latin America | 55.2 | 10.7 | 250 | 230 | ||||||
North Latin America | 19.0 | 9.2 | 40 | 50 | ||||||
Asia Pacific | 7.3 | 6.5 | (250) | (200) | ||||||
Total from reportable segments | 155.9 | 11.7 | 40 | 20 | ||||||
Other operating segments and business activities | (0.6 | ) | ||||||||
Unallocated global expenses | (78.6 | ) | ||||||||
CTI restructuring initiatives | (23.7 | ) | ||||||||
Total Avon | $ | 53.0 | 3.9% | 160 bps | 180 bps | |||||
• | Europe, Middle East & Africa revenue was up 1%, or relatively unchanged in constant dollars, both including a benefit of approximately 3% due to the impact of adopting the new revenue recognition standard. Revenue and constant-dollar revenue were impacted by a decrease in Active Representatives. |
◦ | Russia revenue was down 5%, or up 3% in constant dollars, both including a benefit of approximately 4% due to the impact of adopting the new revenue recognition standard. Revenue and constant-dollar revenue were impacted by a decrease in Active Representatives, partially offset by higher average order. |
◦ | U.K. revenue was down 3%, or 9% in constant dollars, both including a benefit of approximately 4% due to the impact of adopting the new revenue recognition standard. Revenue and constant-dollar revenue were impacted by a decrease in Active Representatives, partially offset by higher average order. |
• | South Latin America revenue was down 8%, or up 3% in constant dollars, both including a benefit of approximately 5% due to the impact of adopting the new revenue recognition standard. Revenue and constant-dollar revenue were impacted by a decrease in Active Representatives, partially offset by higher average order. Revenue and constant-dollar revenue were primarily impacted by a decline in Brazil, partially offset by growth in Argentina, driven by inflationary pricing. |
◦ | Brazil revenue was down 13%, or 2% in constant dollars, both including a benefit of approximately 9% due to the impact of adopting the new revenue recognition standard. Revenue and constant-dollar revenue were impacted by a decrease in Active Representatives, as well as lower average order. |
◦ | Brazil suffered an outsized impact from the trucking strike in the second quarter, which resulted in lower sales, slower cash collection, higher inventory levels and loss of Representatives. The Company is taking corrective actions to re-energize the market including implementing new Representative training programs, implementing Sales Leader and Top Seller incentives, and launching relevant product offerings supported by an increased media investment of $10 million in the second half of 2018. |
• | North Latin America revenue was relatively unchanged, or up 3% in constant dollars, both including a benefit of approximately 5% due to the impact of adopting the new revenue recognition standard. Revenue and constant-dollar revenue were impacted by a decrease in Active Representatives, partially offset by higher average order. |
◦ | Mexico revenue was up 2%, or up 6% in constant dollars, both including a benefit of approximately 6% due to the impact of adopting the new revenue recognition standard. Revenue and constant-dollar revenue were impacted by higher average order, offset by a decrease in Active Representatives. |
• | Asia Pacific revenue was down 1%, or up 1% in constant dollars, both including a benefit of approximately 1% due to the impact of adopting the new revenue recognition standard. Revenue and constant-dollar revenue were impacted by higher average order, offset by a decrease in Active Representatives. |
◦ | Philippines revenue was down 3%, or up 2% in constant dollars, both including a benefit of approximately 2% due to the impact of adopting the new revenue recognition standard. Revenue and constant-dollar revenue were impacted by an increase in Active Representatives, offset by lower average order. |
• | Net cash used by operating activities of continuing operations was $107 million for the six months ended June 30, 2018, compared with net cash provided by operating activities of continuing operations of $11 million in the same period in 2017. The approximate $118 million increased use of net cash from continuing operating activities was primarily due to higher inventory purchases, the timing of payments, the costs associated with the prepayment of the Company's 6.5% Notes in the second quarter of 2018, and a $10 million contribution to the U.S. pension plan, partially offset by lower net receivables. |
• | Net cash used by investing activities of continuing operations was $50 million for the six months ended June 30, 2018, compared with $40 million in the same period in 2017. The approximate $10 million increased use of net cash from continuing investing activities was primarily due to higher capital expenditures. |
• | Net cash used by financing activities of continuing operations was $252 million for the six months ended June 30, 2018, compared with $13 million in the same period in 2017. The approximate $239 million increased use of net cash from continuing financing activities was primarily due to the prepayment of the Company's 6.5% Notes in the second quarter of 2018. |
Contacts: | |
INVESTORS: | MEDIA: |
Avon Investor Relations | Avon Corporate Relations |
Connie Weaver | Chris Wermann |
or | or |
Gina Grant | Brunswick Group |
(212) 282-5320 | Patricia Graue |
(212) 333-3810 |
Three Months Ended | Percent Change | Six Months Ended | Percent Change | |||||||||||||||||||
June 30 | June 30 | |||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||||
Net sales | $ | 1,268.8 | $ | 1,353.5 | (6 | )% | $ | 2,578.4 | $ | 2,651.6 | (3 | )% | ||||||||||
Other revenue | 83.1 | 42.4 | 167.0 | 77.4 | ||||||||||||||||||
Total revenue | 1,351.9 | 1,395.9 | (3 | )% | 2,745.4 | 2,729.0 | 1 | % | ||||||||||||||
Cost of sales | 539.7 | 525.0 | 1,119.4 | 1,042.1 | ||||||||||||||||||
Selling, general and administrative expenses | 759.2 | 838.2 | 1,528.1 | 1,624.4 | ||||||||||||||||||
Operating profit | 53.0 | 32.7 | 62 | % | 97.9 | 62.5 | 57 | % | ||||||||||||||
Interest expense | 34.5 | 36.1 | 70.7 | 71.2 | ||||||||||||||||||
Loss on extinguishment of debt | 2.9 | — | 2.9 | — | ||||||||||||||||||
Interest income | (3.5 | ) | (3.1 | ) | (7.7 | ) | (7.8 | ) | ||||||||||||||
Other expense, net | 19.4 | 11.9 | 21.9 | 18.0 | ||||||||||||||||||
Total other expenses | 53.3 | 44.9 | 87.8 | 81.4 | ||||||||||||||||||
(Loss) Income before income taxes | (0.3 | ) | (12.2 | ) | * | 10.1 | (18.9 | ) | * | |||||||||||||
Income taxes | (36.7 | ) | (33.6 | ) | (68.2 | ) | (63.4 | ) | ||||||||||||||
Loss from continuing operations, net of tax | (37.0 | ) | (45.8 | ) | * | (58.1 | ) | (82.3 | ) | 29 | % | |||||||||||
— | — | — | — | |||||||||||||||||||
Net loss | (37.0 | ) | (45.8 | ) | 19 | % | (58.1 | ) | (82.3 | ) | 29 | % | ||||||||||
Net loss attributable to noncontrolling interests | 0.9 | 0.3 | 1.7 | 0.3 | ||||||||||||||||||
Net loss attributable to Avon | $ | (36.1 | ) | $ | (45.5 | ) | 21 | % | $ | (56.4 | ) | $ | (82.0 | ) | 31 | % | ||||||
Loss per share:(1) | ||||||||||||||||||||||
Basic | ||||||||||||||||||||||
Basic EPS from continuing operations | $ | (0.09 | ) | $ | (0.12 | ) | 25 | % | $ | (0.15 | ) | $ | (0.21 | ) | 29 | % | ||||||
Diluted | ||||||||||||||||||||||
Diluted EPS from continuing operations | $ | (0.09 | ) | $ | (0.12 | ) | 25 | % | $ | (0.15 | ) | $ | (0.21 | ) | 29 | % | ||||||
Weighted-average shares outstanding: | ||||||||||||||||||||||
Basic | 442.2 | 439.9 | 441.5 | 439.3 | ||||||||||||||||||
Diluted | 442.2 | 439.9 | 441.5 | 439.3 | ||||||||||||||||||
* 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 ($41.7) and ($50.6) for the three months ended June 30, 2018 and 2017, respectively. Net loss allocable to common shares used in the basic and diluted loss per share calculation was ($67.8) and ($92.4) for the six months ended June 30, 2018 and 2017, respectively. |
June 30, | December 31, | |||||||
2018 | 2017 | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 443.9 | $ | 881.5 | ||||
Accounts receivable, net | 386.4 | 457.2 | ||||||
Inventories | 662.2 | 598.2 | ||||||
Prepaid expenses and other | 290.9 | 296.4 | ||||||
Total current assets | 1,783.4 | 2,233.3 | ||||||
Property, plant and equipment, at cost | 1,402.9 | 1,481.9 | ||||||
Less accumulated depreciation | (768.7 | ) | (779.2 | ) | ||||
Property, plant and equipment, net | 634.2 | 702.7 | ||||||
Goodwill | 94.9 | 95.7 | ||||||
Other assets | 573.9 | 666.2 | ||||||
Total assets | $ | 3,086.4 | $ | 3,697.9 | ||||
Liabilities, Series C Convertible Preferred Stock and Shareholders’ Deficit | ||||||||
Current Liabilities | ||||||||
Debt maturing within one year | $ | 12.0 | $ | 25.7 | ||||
Accounts payable | 729.5 | 832.2 | ||||||
Accrued compensation | 109.2 | 130.3 | ||||||
Other accrued liabilities | 400.9 | 405.6 | ||||||
Sales taxes and taxes other than income | 123.4 | 153.0 | ||||||
Income taxes | 8.6 | 12.8 | ||||||
Total current liabilities | 1,383.6 | 1,559.6 | ||||||
Long-term debt | 1,630.3 | 1,872.2 | ||||||
Employee benefit plans | 134.2 | 150.6 | ||||||
Long-term income taxes | 97.6 | 84.9 | ||||||
Long-term sales taxes and taxes other than income | 191.1 | 193.1 | ||||||
Other liabilities | 80.3 | 84.4 | ||||||
Total liabilities | 3,517.1 | 3,944.8 | ||||||
Series C convertible preferred stock | 479.8 | 467.8 | ||||||
Shareholders’ Deficit | ||||||||
Common stock | 190.3 | 189.7 | ||||||
Additional paid-in capital | 2,297.5 | 2,291.2 | ||||||
Retained earnings | 2,210.0 | 2,320.3 | ||||||
Accumulated other comprehensive loss | (1,014.4 | ) | (926.2 | ) | ||||
Treasury stock, at cost | (4,602.3 | ) | (4,600.0 | ) | ||||
Total Avon shareholders’ deficit | (918.9 | ) | (725.0 | ) | ||||
Noncontrolling interests | 8.4 | 10.3 | ||||||
Total shareholders’ deficit | (910.5 | ) | (714.7 | ) | ||||
Total liabilities, series C convertible preferred stock and shareholders’ deficit | $ | 3,086.4 | $ | 3,697.9 | ||||
Six Months Ended | ||||||||
June 30 | ||||||||
2018 | 2017 | |||||||
Cash Flows from Operating Activities | ||||||||
Net loss | $ | (58.1 | ) | $ | (82.3 | ) | ||
Adjustments to reconcile net loss to net cash (used) provided by operating activities: | ||||||||
Depreciation | 41.6 | 41.7 | ||||||
Amortization | 13.8 | 15.0 | ||||||
Provision for doubtful accounts | 86.2 | 113.0 | ||||||
Provision for obsolescence | 13.3 | 16.5 | ||||||
Share-based compensation | 7.5 | 16.2 | ||||||
Foreign exchange losses | 13.5 | 8.5 | ||||||
Deferred income taxes | (0.2 | ) | 12.0 | |||||
Other | 3.2 | 16.1 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | (50.0 | ) | (92.0 | ) | ||||
Inventories | (99.7 | ) | (36.1 | ) | ||||
Prepaid expenses and other | 1.7 | 14.2 | ||||||
Accounts payable and accrued liabilities | (76.6 | ) | (53.2 | ) | ||||
Income and other taxes | (0.3 | ) | (5.0 | ) | ||||
Noncurrent assets and liabilities | (2.6 | ) | 26.6 | |||||
Net cash (used) provided by operating activities of continuing operations | (106.7 | ) | 11.2 | |||||
Cash Flows from Investing Activities | ||||||||
Capital expenditures | (48.0 | ) | (43.0 | ) | ||||
Disposal of assets | 1.4 | 2.7 | ||||||
Other investing activities | (3.3 | ) | (0.1 | ) | ||||
Net cash used by investing activities of continuing operations | (49.9 | ) | (40.4 | ) | ||||
Cash Flows from Financing Activities | ||||||||
Debt, net (maturities of three months or less) | (10.4 | ) | (4.4 | ) | ||||
Repayment of debt | (238.6 | ) | (2.0 | ) | ||||
Repurchase of common stock | (3.2 | ) | (6.4 | ) | ||||
Other financing activities | (0.1 | ) | (0.2 | ) | ||||
Net cash used by financing activities of continuing operations | (252.3 | ) | (13.0 | ) | ||||
Cash Flows from Discontinued Operations | ||||||||
Net cash used by operating activities of discontinued operations | — | (6.4 | ) | |||||
Net cash used by discontinued operations | — | (6.4 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents | (28.7 | ) | 28.0 | |||||
Net decrease in cash and cash equivalents | (437.6 | ) | (20.6 | ) | ||||
Cash and cash equivalents at beginning of year | 881.5 | 654.4 | ||||||
Cash and cash equivalents at end of period | $ | 443.9 | $ | 633.8 |
CATEGORY SALES FROM REPORTABLE SEGMENTS (US$) | ||||||||||||||||
Consolidated | ||||||||||||||||
Reported | Excluding the impact of adopting ASC 606 | |||||||||||||||
Three Months Ended June 30 | US$ | C$ | US$ | C$ | ||||||||||||
2018 | 2017 | % var. vs 2Q17 | % var. vs 2Q17 | % var. vs 2Q17 | % var. vs 2Q17 | |||||||||||
Beauty: | ||||||||||||||||
Skincare | $ | 372.4 | $ | 396.3 | (6)% | (2)% | (7)% | (3)% | ||||||||
Fragrance | 347.8 | 366.7 | (5) | — | (6) | (1) | ||||||||||
Color | 212.4 | 234.1 | (9) | (5) | (10) | (6) | ||||||||||
Total Beauty | 932.6 | 997.1 | (6) | (2) | (7) | (3) | ||||||||||
Fashion & Home: | ||||||||||||||||
Fashion (jewelry/watches/apparel/ footwear/accessories/children's) | 185.9 | 200.8 | (7) | (5) | (8) | (6) | ||||||||||
Home (gift & decorative products/housewares/ entertainment & leisure/children's/nutrition) | 144.3 | 145.5 | (1) | 7 | (1) | 6 | ||||||||||
Total Fashion & Home | 330.2 | 346.3 | (5) | — | (5) | (1) | ||||||||||
Net sales from reportable segments | 1,262.8 | 1,343.4 | (6) | (2) | (7) | (2) | ||||||||||
Other revenue from reportable segments | 74.4 | 31.0 | * | * | * | * | ||||||||||
Total revenue from reportable segments | 1,337.2 | 1,374.4 | (3) | 2 | (7) | (2) | ||||||||||
Total revenue from Other operating segments and business activities | 14.7 | 21.5 | (32) | (32) | (32) | (32) | ||||||||||
Total revenue | $ | 1,351.9 | $ | 1,395.9 | (3) | 1 | (7) | (3) | ||||||||
CATEGORY SALES FROM REPORTABLE SEGMENTS (US$) | ||||||||||||||||
Consolidated | ||||||||||||||||
Reported | Excluding the impact of adopting ASC 606 | |||||||||||||||
Six Months Ended June 30 | US$ | C$ | US$ | C$ | ||||||||||||
2018 | 2017 | % var. vs 1H17 | % var. vs 1H17 | % var. vs 1H17 | % var. vs 1H17 | |||||||||||
Beauty: | ||||||||||||||||
Skincare | $ | 761.5 | $ | 778.0 | (2)% | (2)% | (3)% | (3)% | ||||||||
Fragrance | 701.8 | 708.7 | (1) | 1 | (2) | (1) | ||||||||||
Color | 448.1 | 473.3 | (5) | (5) | (6) | (6) | ||||||||||
Total Beauty | 1,911.4 | 1,960.0 | (2) | (2) | (4) | (3) | ||||||||||
Fashion & Home: | ||||||||||||||||
Fashion (jewelry/watches/apparel/ footwear/accessories/children's) | 374.5 | 392.7 | (5) | (5) | (6) | (7) | ||||||||||
Home (gift & decorative products/housewares/ entertainment & leisure/children's/nutrition) | 273.7 | 278.6 | (2) | 2 | (3) | 1 | ||||||||||
Total Fashion & Home | 648.2 | 671.3 | (3) | (2) | (5) | (4) | ||||||||||
Net sales from reportable segments | 2,559.6 | 2,631.3 | (3) | (2) | (4) | (3) | ||||||||||
Other revenue from reportable segments | 150.1 | 56.4 | * | * | * | * | ||||||||||
Total revenue from reportable segments | 2,709.7 | 2,687.7 | 1 | 2 | (4) | (3) | ||||||||||
Total revenue from Other operating segments and business activities | 35.7 | 41.3 | (14) | (15) | (17) | (18) | ||||||||||
Total revenue | $ | 2,745.4 | $ | 2,729.0 | 1 | 2 | (4) | (4) | ||||||||
THREE MONTHS ENDED JUNE 30, 2018 | ||||||||||||||||
Reported (GAAP) | CTI restructuring initiatives | Special tax items | Adjusted (Non-GAAP) | |||||||||||||
Total revenue | $ | 1,351.9 | $ | — | $ | — | $ | 1,351.9 | ||||||||
Cost of sales | 539.7 | 0.5 | — | 539.2 | ||||||||||||
Selling, general and administrative expenses | 759.2 | 23.2 | — | 736.0 | ||||||||||||
Operating profit | 53.0 | 23.7 | — | 76.7 | ||||||||||||
(Loss) Income before income taxes | (0.3 | ) | 23.7 | — | 23.4 | |||||||||||
Income taxes | (36.7 | ) | — | 5.5 | (31.2 | ) | ||||||||||
Net loss | $ | (37.0 | ) | $ | 23.7 | $ | 5.5 | $ | (7.8 | ) | ||||||
Diluted EPS | $ | (0.09 | ) | $ | (0.03 | ) | ||||||||||
Gross margin | 60.1 | % | — | — | 60.1 | % | ||||||||||
SG&A as a % of revenues | 56.2 | % | (1.8 | ) | — | 54.4 | % | |||||||||
Operating margin | 3.9 | % | 1.8 | — | 5.7 | % | ||||||||||
Effective tax rate | * | * | ||||||||||||||
SIX MONTHS ENDED JUNE 30, 2018 | ||||||||||||||||
Reported (GAAP) | CTI restructuring initiatives | Special tax items | Adjusted (Non-GAAP) | |||||||||||||
Total revenue | $ | 2,745.4 | $ | — | $ | — | $ | 2,745.4 | ||||||||
Cost of sales | 1,119.4 | 1.1 | — | 1,118.3 | ||||||||||||
Selling, general and administrative expenses | 1,528.1 | 33.5 | — | 1,494.6 | ||||||||||||
Operating profit | 97.9 | 34.6 | — | 132.5 | ||||||||||||
Income before income taxes | 10.1 | 34.6 | — | 44.7 | ||||||||||||
Income taxes | (68.2 | ) | (2.1 | ) | 14.7 | (55.6 | ) | |||||||||
Net loss | $ | (58.1 | ) | $ | 32.5 | $ | 14.7 | $ | (10.9 | ) | ||||||
Diluted EPS | $ | (0.15 | ) | $ | (0.05 | ) | ||||||||||
Gross margin | 59.2 | % | — | — | 59.3 | % | ||||||||||
SG&A as a % of revenues | 55.7 | % | (1.2 | ) | — | 54.4 | % | |||||||||
Operating margin | 3.6 | % | 1.2 | — | 4.8 | % | ||||||||||
Effective tax rate | * | * | ||||||||||||||
THREE MONTHS ENDED JUNE 30, 2017 | ||||||||||||||||
Reported (GAAP) | CTI restructuring initiatives | Loss contingency | Adjusted (Non-GAAP) | |||||||||||||
Total revenue | $ | 1,395.9 | $ | — | $ | — | $ | 1,395.9 | ||||||||
Cost of sales | 525.0 | — | — | 525.0 | ||||||||||||
Selling, general and administrative expenses | 838.2 | 20.3 | 18.2 | 799.7 | ||||||||||||
Operating profit | 32.7 | 20.3 | 18.2 | 71.2 | ||||||||||||
(Loss) Income before income taxes | (12.2 | ) | 20.3 | 18.2 | 26.3 | |||||||||||
Income taxes | (33.6 | ) | (0.8 | ) | — | (34.4 | ) | |||||||||
Net loss | $ | (45.8 | ) | $ | 19.5 | $ | 18.2 | $ | (8.1 | ) | ||||||
Diluted EPS | $ | (0.12 | ) | $ | (0.03 | ) | ||||||||||
Gross margin | 62.4 | % | — | — | 62.4 | % | ||||||||||
SG&A as a % of revenues | 60.1 | % | (1.5 | ) | (1.3 | ) | 57.3 | % | ||||||||
Operating margin | 2.3 | % | 1.5 | 1.3 | 5.1 | % | ||||||||||
Effective tax rate | * | * | ||||||||||||||
SIX MONTHS ENDED JUNE 30, 2017 | ||||||||||||||||
Reported (GAAP) | CTI restructuring initiatives | Loss contingency | Adjusted (Non-GAAP) | |||||||||||||
Total revenue | $ | 2,729.0 | $ | — | $ | — | $ | 2,729.0 | ||||||||
Cost of sales | 1,042.1 | (0.1 | ) | — | 1,042.2 | |||||||||||
Selling, general and administrative expenses | 1,624.4 | 30.4 | 18.2 | 1,575.8 | ||||||||||||
Operating profit | 62.5 | 30.3 | 18.2 | 111.0 | ||||||||||||
(Loss) income before income taxes | (18.9 | ) | 30.3 | 18.2 | 29.6 | |||||||||||
Income taxes | (63.4 | ) | (1.8 | ) | — | (65.2 | ) | |||||||||
Net loss | $ | (82.3 | ) | $ | 28.5 | $ | 18.2 | $ | (35.6 | ) | ||||||
Diluted EPS | $ | (0.21 | ) | $ | (0.11 | ) | ||||||||||
Gross margin | 61.8 | % | — | — | 61.8 | % | ||||||||||
SG&A as a % of revenues | 59.5 | % | (1.1 | ) | (0.7 | ) | 57.7 | % | ||||||||
Operating margin | 2.3 | % | 1.1 | 0.7 | 4.1 | % | ||||||||||
Effective tax rate | * | * | ||||||||||||||
Approximate Impact of Foreign Currency | |||||||||||||||
Second-Quarter 2018 | Half Year 2018 | ||||||||||||||
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 | (4) pts | (1) pt | |||||||||||||
Operating profit - transaction | $ | (5 | ) | $ | (0.01 | ) | $ | (10 | ) | $ | (0.01 | ) | |||
Operating profit - translation | (5 | ) | (0.01 | ) | — | — | |||||||||
Total operating profit | $ | (10 | ) | $ | (0.02 | ) | $ | (10 | ) | $ | (0.01 | ) | |||
Operating margin | (60) bps | (40) bps | |||||||||||||
Revaluation of working capital | $ | (15 | ) | $ | (0.03 | ) | $ | (15 | ) | $ | (0.03 | ) | |||
Diluted EPS | $ | (0.05 | ) | $ | (0.04 | ) | |||||||||
Year-on-Year impact on Adjusted (Non-GAAP) results: | |||||||||||||||
Adjusted operating profit - transaction | $ | (5 | ) | $ | (0.01 | ) | $ | (10 | ) | $ | (0.01 | ) | |||
Adjusted operating profit - translation | (5 | ) | (0.01 | ) | — | — | |||||||||
Total Adjusted operating profit | $ | (10 | ) | $ | (0.02 | ) | $ | (10 | ) | $ | (0.01 | ) | |||
Adjusted operating margin | (50) bps | (30) bps | |||||||||||||
Revaluation of working capital | $ | (15 | ) | $ | (0.03 | ) | $ | (15 | ) | $ | (0.03 | ) | |||
Adjusted diluted EPS | $ | (0.05 | ) | $ | (0.04 | ) | |||||||||
Amounts in the table above may not necessarily sum because the computations are made independently. |
• | a reduction to retained earnings of $52.7 before taxes ($41.1 after tax), with a corresponding impact to deferred income taxes of $11.6; |
• | a reduction to prepaid expenses and other of $54.9; |
• | an increase to inventories of $39.3; and |
• | an increase to other accrued liabilities of $37.1 due to the net impact of the establishment of a contract liability of $91.8 for deferred revenue where our performance obligations are not yet satisfied, which is partially offset by a reduction in the sales incentive accrual of $54.7. |
Impact of change in revenue recognition standard | |||||||||||
Line items impacted within the Consolidated Statements of Operations | Per consolidated financial statements | Adjustments | Balances excluding the impact of adopting ASC 606 | ||||||||
Revenue | |||||||||||
Net sales | $ | 1,268.8 | $ | (7.6 | ) | (1) | $ | 1,261.2 | |||
Other revenue | 83.1 | (50.5 | ) | (2) | 32.6 | ||||||
Total revenue | 1,351.9 | (58.1 | ) | 1,293.8 | |||||||
Costs and expenses | |||||||||||
Cost of sales | 539.7 | (65.6 | ) | (3) | 474.1 | ||||||
Selling, general and administrative expenses | 759.2 | 9.5 | (4) | 768.7 | |||||||
Operating profit | 53.0 | (2.0 | ) | 51.0 | |||||||
Loss before income taxes | (0.3 | ) | (2.0 | ) | (2.3 | ) | |||||
Income taxes | (36.7 | ) | (0.1 | ) | (36.8 | ) | |||||
Net loss | (37.0 | ) | (2.1 | ) | (39.1 | ) | |||||
Net loss attributable to Avon | (36.1 | ) | (2.1 | ) | (38.2 | ) |
Impact of change in revenue recognition standard | |||||||||||
Line items impacted within the Consolidated Statements of Operations | Per consolidated financial statements | Adjustments | Balances excluding the impact of adopting ASC 606 | ||||||||
Revenue | |||||||||||
Net sales | $ | 2,578.4 | $ | (33.1 | ) | (1) | $ | 2,545.3 | |||
Other revenue | 167.0 | (105.3 | ) | (2) | 61.7 | ||||||
Total revenue | 2,745.4 | (138.4 | ) | 2,607.0 | |||||||
Costs and expenses | |||||||||||
Cost of sales | 1,119.4 | (138.6 | ) | (3) | 980.8 | ||||||
Selling, general and administrative expenses | 1,528.1 | 21.3 | (4) | 1,549.4 | |||||||
Operating profit | 97.9 | (21.1 | ) | 76.8 | |||||||
Income (loss) before income taxes | 10.1 | (21.1 | ) | (11.0 | ) | ||||||
Income taxes | (68.2 | ) | 3.7 | (64.5 | ) | ||||||
Net loss | (58.1 | ) | (17.4 | ) | (75.5 | ) | |||||
Net loss attributable to Avon | (56.4 | ) | (17.4 | ) | (73.8 | ) |
Impact of change in revenue recognition standard | |||||||||||
Line items impacted within the Consolidated Balance Sheets | Per consolidated financial statements | Adjustments | Balances excluding the impact of adopting ASC 606 | ||||||||
Assets | |||||||||||
Accounts receivable, net | $ | 386.4 | $ | (6.2 | ) | (1) | $ | 380.2 | |||
Inventories | 662.2 | (40.9 | ) | (2) | 621.3 | ||||||
Prepaid expenses and other | 290.9 | 47.1 | (2) | 338.0 | |||||||
Other assets | 573.9 | (10.9 | ) | (3) | 563.0 | ||||||
Total assets | 3,086.4 | (10.9 | ) | 3,075.5 | |||||||
Liabilities, Series C Convertible Preferred Stock and Shareholders’ Deficit | |||||||||||
Other accrued liabilities | 400.9 | (28.2 | ) | (4) | 372.7 | ||||||
Income taxes | 8.6 | (3.7 | ) | 4.9 | |||||||
Total current liabilities | 1,383.6 | (31.9 | ) | 1,351.7 | |||||||
Other liabilities | 80.3 | (1.4 | ) | 78.9 | |||||||
Total liabilities | 3,517.1 | (33.3 | ) | 3,483.8 | |||||||
Retained earnings | 2,210.0 | 23.7 | (5) | 2,233.7 | |||||||
Accumulated other comprehensive loss | (1,014.4 | ) | (1.3 | ) | (1,015.7 | ) | |||||
Total Avon shareholders’ deficit | (918.9 | ) | 22.4 | (896.5 | ) | ||||||
Total shareholders’ deficit | (910.5 | ) | 22.4 | (888.1 | ) | ||||||
Total liabilities, series C convertible preferred stock and shareholders’ deficit | 3,086.4 | (10.9 | ) | 3,075.5 |
Impact of change in revenue recognition standard | |||||||||||
Line items impacted within the Consolidated Statements of Cash Flows | Per consolidated financial statements | Adjustments | Balances excluding the impact of adopting ASC 606 | ||||||||
Net loss | $ | (58.1 | ) | $ | (17.4 | ) | $ | (75.5 | ) | ||
Other | 3.2 | 1.7 | 4.9 | ||||||||
Changes in assets and liabilities: | |||||||||||
Accounts receivable | (50.0 | ) | (2.4 | ) | (52.4 | ) | |||||
Inventories | (99.7 | ) | 1.6 | (98.1 | ) | ||||||
Prepaid expenses and other | 1.7 | 4.6 | 6.3 | ||||||||
Accounts payable and accrued liabilities | (76.6 | ) | 20.3 | (56.3 | ) | ||||||
Income and other taxes | (.3 | ) | (3.7 | ) | (4.0 | ) | |||||
Noncurrent assets and liabilities | (2.6 | ) | (4.7 | ) | (7.3 | ) |
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