RESTRUCTURING INITIATIVES

3 Months Ended

Mar. 31, 2020

Restructuring and Related Activities [Abstract]

Transformation Plan and Open Up Avon

Open Up Avon and 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 $ revenue growth and low double-digit operating margin. 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 below.

In September 2018, we initiated a new strategy in order to return Avon to growth ("Open Up Avon"). The Open Up Avon strategy is integral to our ability to return Avon to growth, built around the necessity of incorporating new approaches to various elements of our business, including increased utilization of third-party providers in manufacturing and technology, a more fit for purpose asset base, and a focus on enabling our Representatives to more easily interact with the company and achieve relevant earnings. These savings have been and are expected to continue to be achieved through restructuring actions (that have may continue to 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.

Costs to Implement Restructuring Initiatives - Three Months Ended March 31, 2020 and 2019

During the three months ended March 31, 2020, we recorded net costs to implement of $1.8, of which $4.9 related to Open Up Avon and a benefit of $3.1 related to the Transformation Plan, in our Consolidated Statements of Operations. During the three months ended March 31, 2019, we recorded costs to implement of $43.2 of which $45.1 related to Open Up Avon, a net benefit of $2.0 related to the Transformation Plan, and $.1 related to other restructuring initiatives, in our Consolidated Statements of Operations.

The costs during the three months ended March 31, 2020 and 2019 consisted of the following:


	Three Months Ended March 31,
	2020		2019
CTI recorded in operating profit - COGS
Manufacturing asset write-offs	$	—	$	3.8
Inventory write-off	(.1)		.5
	(0.1)		4.3

CTI recorded in operating profit - SG&A
Net charges for employee-related costs, including severance benefits	(2.3)		35.3
Implementation costs, primarily related to professional service fees	(.5)		8.7
Dual running costs	.6		1.8
Contract termination and other net benefits	2.5		3.3
Impairment of other assets	.7		—
Accelerated depreciation	.4		.1
Variable lease charges	.5		—
	1.9		49.2

CTI recorded in operating profit	1.8		53.5

CTI recorded in other (expense) income
Gain on sale of business / assets	—		(10.3)

Total CTI	$	1.8	$	43.2

Open Up Avon	$	4.9	$	45.1
Transformation Plan	$	(3.1)	$	(2.0)
Other	$	—	$	.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 Balance Sheet for the restructuring actions associated with Open Up Avon at March 31, 2020 is as follows:


	Employee-Related Costs		Inventory/Assets Write-offs		Contract Terminations/Other		Total
Balance at December 31, 2019	$	17.8	$	—	$	6.4	$	24.2
2020 charges	1.8		.6		1.9		4.3
Adjustments	(1.1)		—		.4		(.7)
Cash payments	(3.3)		—		(5.8)		(9.1)
Non-cash write-offs	—		(.6)		—		(.6)
Foreign exchange	(.6)		—		(.1)		(.7)
Balance at March 31, 2020	$	14.6	$	—	$	2.8	$	17.4

The liability balance included in other accrued liabilities in our Consolidated Balance Sheet for the restructuring actions associated with our Transformation Plan as of March 31, 2020 is as follows:


	Employee-Related Costs		Contract Terminations/Other		Total
Balance at December 31, 2019	$	8.4	$	1.5	$	9.9
2020 charges	(0.1)		.2		.1
Adjustments	(2.9)		—		(2.9)
Cash payments	(2.4)		(1.4)		(3.8)
Foreign exchange	(.1)		(.1)		(.2)
Balance at March 31, 2020	$	2.9	$	.2	$	3.1

The majority of cash payments, if applicable, associated with the year-end liability are expected to be made during 2020.

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	$	84.3	$	108.1	$	10.8	$	(10.9)	$	192.3
Estimated charges to be incurred on approved initiatives	—		—		2.9		—		2.9
Total expected charges on approved initiatives	$	84.3	$	108.1	$	13.7	$	(10.9)	$	195.2

Transformation Plan
Charges incurred to-date	$	124.1	$	2.5	$	41.1	$	3.4	$	171.1
Estimated charges to be incurred on approved initiatives	—		—		—		—		—
Total expected charges on approved initiatives	$	124.1	$	2.5	$	41.1	$	3.4	$	171.1

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:


	Avon International*		Avon Latin America*		Global & Other Operating Segments		Total
Open Up Avon
2018	$	46.6	$	64.3	$	6.2	$	117.1
2019	19.4		36.9		15.3		71.6
First quarter 2020	3.5		(.1)		.2		3.6
Charges incurred to-date	69.5		101.1		21.7		192.3
Estimated charges to be incurred on approved initiatives	2.9		—		—		2.9
Total expected charges on approved initiatives	$	72.4	$	101.1	$	21.7	$	195.2

Transformation Plan
2015	$	—	$	—	$	21.4	$	21.4
2016	40.0		17.6		16.8		74.4
2017	.4		5.0		49.4		54.8
2018	5.6		4.7		13.4		23.7
2019	(1.3)		.6		.3		(.4)
First quarter 2020	.1		.1		(3.0)		(2.8)
Charges incurred to-date	44.8		28.0		98.3		171.1
Estimated charges to be incurred on approved initiatives	—		—		—		—
Total expected charges on approved initiatives	$	44.8	$	28.0	$	98.3	$	171.1

*In January 2020 the Company became a fully owned subsidiary of Natura &Co. As a result of this transaction, the Company has updated its reportable segments to align with Natura &Co operations. Previously reported segment information has been recast throughout the financial statements, as applicable, for all periods presented to reflect the changes in the Company’s reportable segments. Refer to Note 10, Segment Information, to the Consolidated Financial Statements contained herein for more information.

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.