RESTRUCTURING INITIATIVES

3 Months Ended

Mar. 31, 2019

Restructuring and Related Activities [Abstract]

Transformation Plan and Open Up Avon

Open Up Avon

In September 2018, we initiated a new strategy in order to return Avon to growth ("Open Up Avon"). As one element of this plan, we are targeting annualized cost savings of approximately $400 by 2021, to be generated from efficiencies in manufacturing and sourcing, distribution, general and administrative activities, and back office functions, as well as through revenue management, interest and tax. These savings are expected to be achieved through restructuring actions (that may result in charges related to severance, contract terminations and inventory and other asset write-offs), as well as other cost-savings strategies that would not result in restructuring charges. In January 2019, we announced significant advancements in this strategy, including a structural reset of inventory processes and a reduction in global workforce. The structural reset resulted in an incremental one-off inventory obsolescence expense of $88 recognized at December 31, 2018. As a result of Open Up Avon restructuring actions approved to-date, we have recorded total costs to implement these restructuring initiatives of $188.3 before taxes, of which $45.1 was recorded during the three months ended March 31, 2019, in our Consolidated Statements of Operations.

Transformation Plan

In January 2016, we initiated a transformation plan (the "Transformation Plan"), in order to enable us to achieve our long-term goals of mid-single-digit constant-dollar ("Constant $") revenue growth and low double-digit operating margin. Under this plan, we had targeted pre-tax annualized cost savings of approximately $350 after three years, which we exceeded through restructuring actions, as well as other cost-savings strategies that did not result in restructuring charges.

As a result of these restructuring actions approved to-date, we have recorded total costs to implement these restructuring initiatives of $203.4 before taxes, of which a benefit of $2.0 was recorded during the three months ended March 31, 2019, in our Consolidated Statements of Operations. There are no further restructuring actions to be taken associated with our Transformation Plan, as beginning in the third quarter of 2018, all new restructuring actions approved operate under our new Open Up Avon plan described above.

Costs to Implement Restructuring Initiatives - Three Months Ended March 31, 2019 and 2018

During the three months ended March 31, 2019, we recorded net costs to implement of $43.2, of which $45.1 related to Open Up Avon, a net benefit of $2 related to the Transformation Plan, and $.1 related to other restructuring initiatives, in our Consolidated Statements of Operations. During the three months ended March 31, 2018, we recorded costs to implement of $10.9 related to the Transformation Plan, in our Consolidated Statements of Operations. The costs during the three months ended March 31, 2019 and 2018 consisted of the following:



	Three Months Ended March 31,
	2019			2018
CTI recorded in operating profit - COGS
Manufacturing asset write-offs	$	3.8		$	—
Inventory write-off	0.5			0.6
	4.3			0.6

CTI recorded in operating profit - SG&A
Net charges for employee-related costs, including severance benefits	35.3			8.3
Implementation costs, primarily related to professional service fees	8.7			1.1
Dual running costs	1.8			—
Contract termination and other net benefits	3.3			0.2
Accelerated depreciation	0.1			0.7
	49.2			10.3

CTI recorded in operating profit	53.5			10.9

CTI recorded in other expenses
Gain on sale of China business (relating mainly to foreign currency translation adjustment gain)	(10.3		)	—

Total CTI	$	43.2		$	10.9

Open Up Avon	$	45.1		$	—
Transformation Plan	$	(2.0	)	$	10.9
Other	$	0.1		$	—

The tables below include restructuring costs such as employee-related costs, inventory and asset write-offs, foreign currency translation write-offs and contract terminations, and do not include other costs to implement restructuring initiatives such as professional services fees, dual running costs, accelerated depreciation and gain on sale of business.

The liability balance included in other accrued liabilities in our Consolidated Statements of Operations for the restructuring actions associated with Open Up Avon at March 31, 2019 is as follows:



	Employee-Related Costs			Inventory/Assets Write-offs			Foreign Currency Translation Adjustment Write-offs			Contract Terminations/Other			Total
Balance at December 31, 2018	$	19.6		$	—		$	—		$	1.1		$	20.7
2019 charges	$	37.6		$	4.3		$	(10.3	)	$	3.0		34.6
Adjustments	(1.3		)	—			—			—			(1.3		)
Cash payments	(9.6		)	—			—			(0.7		)	(10.3		)
Non-cash write-offs	—			(4.3		)	10.3			—			6.0
Foreign exchange	(.8		)	—			—			—			(.8		)
Balance at March 31, 2019	$	45.5		$	—		$	—		$	3.4		$	48.9

The liability balance included in other accrued liabilities in our Consolidated Statements of Operations for the restructuring actions associated with our Transformation Plan as of March 31, 2019 is as follows:



	Employee-Related Costs			Contract Terminations/Other			Total
Balance at December 31, 2018	$	34.4		$	3.6		$	38.0
2019 charges	—			—			—
Adjustments	(1.1		)	.2			(.9		)
Cash payments	(10.8		)	(2.5		)	(13.3		)
Non-cash write-offs	—			—			—
Foreign exchange	.1			—			.1
Balance at March 31, 2019	$	22.6		$	1.3		$	23.9

The majority of cash payments, if applicable, associated with the year-end liability are expected to be made during 2019.

The following table presents the restructuring charges incurred to date, under Open Up Avon and the Transformation Plan, along with the estimated charges expected to be incurred on approved initiatives under the plans:



	Employee- Related Costs		Inventory/ Asset Write-offs		Contract Terminations/Other		Foreign Currency Translation Adjustment Write-offs			Total
Open Up Avon
Charges incurred to-date	$	62.7	$	92.6	$	5.3	$	(10.3	)	$	150.3
Estimated charges to be incurred on approved initiatives	1.0		—		—		—			1.0
Total expected charges on approved initiatives	$	63.7	$	92.6	$	5.3	$	(10.3	)	$	151.3

Transformation Plan
Charges incurred to-date	$	126.9	$	2.3	$	40.9	$	3.4		$	173.5
Estimated charges to be incurred on approved initiatives	—		—		—		—			—
Total expected charges on approved initiatives	$	126.9	$	2.3	$	40.9	$	3.4		$	173.5

The charges, net of adjustments, of initiatives under the Open Up Avon and the Transformation Plan, along with the estimated charges expected to be incurred on approved initiatives under the plans, by reportable segment are as follows:



	Europe, Middle East & Africa			South Latin America		North Latin America			Asia Pacific			Global & Other Operating Segments		Total
Open Up Avon
2018	$	32.2		$	36.4	$	27.9		$	14.4		$	6.2	$	117.1
First quarter 2019	13.5			12.7		2.9			(3.2		)	7.3		33.2
Charges incurred to-date	45.7			49.1		30.8			11.2			13.5		150.3
Estimated charges to be incurred on approved initiatives	.1			—		.4			—			.5		1.0
Total expected charges on approved initiatives	$	45.8		$	49.1	$	31.2		$	11.2		$	14.0	$	151.3

Transformation Plan
2015	$	—		$	—	$	—		$	—		$	21.4	$	21.4
2016	30.9			13.2		4.4			9.1			16.8		74.4
2017	.9			5.6		(.6		)	(.5		)	49.4		54.8
2018	5.0			4.1		.6			.6			13.4		23.7
First quarter 2019	(1.1		)	—		—			—			.3		(.8		)
Charges incurred to-date	35.7			22.9		4.4			9.2			101.3		173.5
Estimated charges to be incurred on approved initiatives	—			—		—			—			—		—
Total expected charges on approved initiatives	$	35.7		$	22.9	$	4.4		$	9.2		$	101.3	$	173.5

The charges above are not included in segment profit, as this excludes costs to implement restructuring initiatives. The amounts shown in the tables above as charges recorded to-date relate to initiatives that have been approved and recorded in the consolidated 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.