AVON PRODUCTS, INC. 
By NEW YORK, Feb. 13, 2014 /PRNewswire/ -- Avon Products, Inc. (NYSE: AVP) today reported fourth-quarter and full-year 2013 results. "Looking back at 2013, we made progress addressing tough legacy issues, identifying and beginning to resolve operational challenges, and rebuilding our management team. Although the second half of the year was impacted by both execution and macro-economic factors, I'm pleased that we are making headway toward our financial goals and Avon's return to profitable growth," said Sheri McCoy, Chief Executive Officer, Avon Products, Inc. "While much work remains to be done, we continue to make progress toward building a better, simpler and more stable business."
Full-Year 2013 Results (compared with full-year 2012)
Total revenue of $10.0 billion decreased 6%, or 1% in constant dollars. Total units decreased 5% and price/mix increased 4%. Active Representatives² were down 2% while average order increased 1%.
Total Beauty sales declined 7%, or 2% in constant dollars. Fashion & Home sales declined 4%, or were up 1% in constant dollars.
Operating profit was $427 million and operating margin was 4.3%, down 70 basis points from 2012. Adjusted operating profit was $791 million, and Adjusted operating margin was 7.9%, up 130 basis points from 2012.
Full-year effective tax rate from continuing operations was 100.6%, compared with 78.2% in 2012. Full-year Adjusted effective tax rate was 30.3%, compared with 35.0% in 2012.
Full-year net loss from continuing operations was $1 million, or $0.01 per diluted share, compared with net income from continuing operations of $93 million, or $0.20 per diluted share, in 2012. Adjusted net income from continuing operations was $451 million, or $1.02 per share, compared with $373 million, or $0.84 per share, in 2012.
Cash flow from operations was $540 million for the twelve months ended December 31, 2013, $4 million lower than in the same period in 2012. Cash from operations was unfavorably impacted by the make-whole premiums of approximately $90 million paid in connection with the prepayment of the Company's private notes and 2014 notes, higher contribution to the U.K. pension plan, as well as higher payments for employee incentive compensation. Partially offsetting these unfavorable impacts was improved Adjusted operating profit. The overall net cash used in the twelve months ended December 31, 2013 was $102 million, compared with net cash used of $36 million for the same period in 2012. The increase is primarily due to the paydown of the Company's debt, which was partially offset by lower dividends paid.
Avon's net debt (total debt less cash) as of December 31, 2013 was $1.6 billion, down $376 million from December 31, 2012. For the twelve months ended December 31, 2013, the Company reduced the overall debt balance by $475 million.
Adjustments to Full-Year 2013 GAAP Results to Arrive at Adjusted Results
During 2013, the following items had a significant impact on the financial results:
-- The Company recorded non-cash impairment charges within operating profit
of $159 million pre-tax. This included a charge of $117 million pre-tax
related to the Service Model Transformation ("SMT") project, as a result
of the Company's decision to halt further roll-out of the SMT project
beyond the pilot market of Canada in the fourth quarter. In addition,
during the third quarter, the Company recorded a non-cash impairment
charge of $42 million pre-tax, and a valuation allowance for deferred
tax assets related to the China business of $9 million. These items had
a negative impact of $0.28 per diluted share.
-- The Company recorded a loss on extinguishment of debt in the first and
second quarters of approximately $86 million pre-tax, or $0.12 per
diluted share, associated with the prepayment of the $535 million
outstanding principal of the Company's private notes and the $500
million outstanding principal of the Company's 2014 notes, including
make-whole premiums, and the repayment of $380 million of the
outstanding term loan principal.
-- The Company recorded an aggregate accrual related to the previously
disclosed government Foreign Corrupt Practices Act ("FCPA")
investigations of $89 million, or $0.20 per diluted share, within
operating profit, of which $12 million was recorded in the second
quarter. Based on the status of the Company's current settlement
negotiations with the DOJ and the staff of the SEC, including the level
of monetary penalties being discussed, an additional $77 million was
recorded in the fourth quarter, and the Company estimates the aggregate
amount of any potential settlements with the government could exceed
this accrual by up to approximately $43 million. There can be no
assurance that the Company's efforts to reach settlements with the
government will be successful or, if they are, what the timing or terms
of such settlements will be.
-- The Company recorded costs to implement ("CTI") restructuring within
operating profit of approximately $66 million pre-tax, or $0.09 per
diluted share.
-- As a result of the 32% devaluation of Venezuelan currency, during the
first quarter, the Company recorded a one-time charge of $34 million in
other expense, net, and $17 million in income taxes, primarily
reflecting the write-down of monetary net assets and deferred tax
benefits, respectively. In addition, as a result of using the U.S.
historic dollar cost basis of non-monetary assets, such as inventory,
full-year 2013 operating profit was negatively impacted by approximately
$50 million. During the fourth quarter, the Company also recorded a
valuation allowance for deferred tax assets related to Venezuela of $42
million. These items had a negative impact of $0.32 per diluted share.
Fourth-Quarter 2013 (compared with fourth-quarter 2012)
For the fourth quarter of 2013, total revenue of $2.7 billion decreased 10%, or 4% in constant dollars. Total units decreased 10% and price/mix was up 6% during the quarter. Active Representatives were down 5% while average order increased 1%.
Beauty sales declined 11%, or 4% in constant dollars. Fashion & Home sales declined 8%, or 2% in constant dollars.
Fourth-quarter 2013 gross margin was 61.0%. Gross margin included a $5 million charge associated with highly inflationary accounting for the 32% devaluation of Venezuelan currency that occurred in the first quarter of 2013. Adjusted gross margin was 61.2%, 140 basis points higher than the prior-year quarter, primarily driven by the favorable net impact of mix and pricing, largely due to inflationary pricing in Latin America. This benefit was partially offset by unfavorable foreign exchange.
Operating loss was $17 million and operating margin was (0.6)% in the quarter. Operating loss was unfavorably impacted by a non-cash impairment charge related to the SMT project, an accrual related to the government FCPA investigations and CTI restructuring. Adjusted operating profit was $219 million and Adjusted operating margin was 8.2%, down 100 basis points from the fourth quarter of 2012. The decline in Adjusted operating margin was driven by the impact of the revenue decline with respect to fixed expenses. Higher transportation costs, bad debt expense and net brochure costs, primarily in Latin America, were also factors. Additionally, unfavorable foreign exchange negatively impacted Adjusted operating margin. These items were partially offset by the improvement in gross margin.
Fourth-quarter 2013's effective tax rate from continuing operations was (55.5)%, compared with 117.1% in the fourth quarter of 2012. The Adjusted effective tax rate was 21.6% in the fourth quarter of 2013, compared with 37.1% in the fourth quarter of 2012. The lower rate is due to the Company's geographic mix of earnings for the year and the lower cost to repatriate foreign earnings.
Fourth-quarter 2013's net loss from continuing operations was $68 million, or $0.16 per diluted share, compared with a net loss from continuing operations of $36 million, or $0.08 per diluted share, in the fourth quarter of 2012. Fourth-quarter 2013's Adjusted net income from continuing operations was $151 million, or $0.34 per diluted share, compared with $154 million, or $0.36 per diluted share, in the fourth quarter of 2012.
Adjustments to Fourth-Quarter GAAP Results to Arrive at Adjusted Results
During the fourth quarter of 2013, the following items had a significant impact on the financial results:
-- The Company recorded a non-cash impairment charge within operating
profit of $117 million pre-tax, or $0.17 per diluted share, related to
the SMT project.
-- The Company recorded an additional accrual related to the previously
disclosed government FCPA investigations within operating profit of $77
million, or $0.18 per diluted share. As a result, the aggregate accrual
for these matters at December 31, 2013 was $89 million.
-- The Company recorded CTI restructuring within operating profit of
approximately $37 million pre-tax, or $0.05 per diluted share, comprised
primarily of employee-related costs associated with the elimination of
approximately 650 positions.
-- As a result of the 32% devaluation of Venezuelan currency, and using the
U.S. historic dollar cost basis of non-monetary assets, such as
inventory, fourth-quarter 2013 operating profit was negatively impacted
by approximately $5 million. In addition, the Company recorded a
valuation allowance for deferred tax assets related to Venezuela of $42
million. These items had a negative impact of $0.11 per diluted share.
Fourth-Quarter 2013 Regional Highlights (compared with fourth-quarter 2012)
Latin America
-------------
$ in millions Fourth-Quarter
2013 FY 2013
--------------- -------
% var. vs % var. vs
4Q12 FY12
---- ----
Total revenue $1,236.3 (7)% $4,840.5 (3)%
C$ revenue 4% 6%
Change in Active Representatives (4)% -%
Change in units sold (6)% (3)%
Operating profit 107.7 (21)% 478.6 8%
Adjusted operating profit 118.8 (17)% 536.6 16%
Operating margin 8.7% (150) bps 9.9% 100 bps
Adjusted operating margin 9.6% (120) bps 11.1% 180 bps
Fourth-Quarter 2013 Discussion
-- Fourth-quarter constant-dollar revenue growth was primarily due to
higher average order, which was partially offset by a decrease in Active
Representatives. Higher average order benefited from pricing, including
inflationary impacts, primarily in Argentina and Venezuela.
-- Brazil revenue was down 3%, or up 6% in constant dollars, primarily due
to higher average order, largely due to benefits from continued strength
in Fashion & Home and pricing.
-- Mexico revenue was down 15% in both reported and constant dollars,
primarily driven by a decrease in Active Representatives and lower
average order. The business was negatively impacted by executional
challenges, coupled with the weaker economy.
-- Venezuela revenue was down 12%, or up 29% in constant dollars, due to
higher average order, partially offset by a decrease in Active
Representatives. Average order benefited from the inflationary impact on
pricing, which was partially offset by a decrease in units sold. The
decline in Active Representatives was partially due to continued
economic and political instability.
-- The decline in Adjusted operating margin was primarily due to higher
Representative and sales leader investments, net brochure costs and bad
debt expense. In addition, foreign exchange unfavorably impacted
Adjusted operating margin. These impacts were partially offset by higher
gross margin, primarily due to the favorable net impact of mix and
pricing.
Europe, Middle East & Africa
----------------------------
$ in millions Fourth-Quarter
2013 FY 2013
--------------- -------
% var. vs % var. vs
4Q12 FY12
---- ----
Total revenue $867.7 (4) % $2,898.4 (1)%
C$ revenue (2)% 2%
Change in Active Representatives (1)% 1%
Change in units sold (7)% -%
Operating profit 129.8 (1)% 406.7 30%
Adjusted operating profit 135.0 3% 424.4 31%
Operating margin 15.0% 50 bps 14.0% 330 bps
Adjusted operating margin 15.6% 110 bps 14.6% 350 bps
Fourth-Quarter 2013 Discussion
-- Fourth-quarter constant-dollar revenue decline was due to both lower
average order and a decrease in Active Representatives. Units declined
due to merchandising and reduced discounting in several markets.
-- Russia revenue was down 7%, or 3% in constant dollars, due to a decrease
in Active Representatives and lower average order.
-- U.K. revenue was down 5% in both reported and constant dollars,
primarily due to a decrease in Active Representatives.
-- Turkey revenue was down 9%, or up 3% in constant dollars, primarily due
to higher average order.
-- South Africa revenue was down 12%, or up 2% in constant dollars,
primarily due to an increase in Active Representatives, which was
partially offset by lower average order.
-- Adjusted operating margin increased primarily due to higher gross
margin, which benefited from supply chain actions to reduce material and
overhead costs.
North America
-------------
$ in millions Fourth-Quarter
2013 FY 2013
--------------- -------
% var. vs % var. vs
4Q12 FY12
---- ----
Total revenue $370.8 (21)% $1,458.2 (17)%
C$ revenue (20)% (16)%
Change in Active Representatives (17)% (15)%
Change in units sold (27)% (17)%
Operating loss (6.6) * (60.1) *
Adjusted operating loss (4.4) * (47.6) *
Operating margin (1.8)% (190) bps (4.1)% (380) bps
Adjusted operating margin (1.2)% (540) bps (3.3)% (480) bps
* Calculation not meaningful
Note: In the second quarter of 2013, Silpada was classified within discontinued operations. Accordingly, the amounts for
North America exclude the results of Silpada for all periods presented.
Fourth-Quarter 2013 Discussion
-- Fourth-quarter constant-dollar revenue decline was due to a decrease in
Active Representatives and lower average order. The business continues
to be impacted by executional challenges.
-- North America Beauty sales declined 25%, driven primarily by skincare
and personal care, on both a reported and constant-dollar basis. Fashion
& Home sales declined 16%, or 15% in constant dollars.
-- The decline in Adjusted operating margin was primarily due to the impact
of the revenue decline with respect to fixed expenses. In addition,
increased transportation cost per unit as a result of lower volume also
contributed to the operating margin decline. These items were partially
offset by lower net brochure costs and bad debt expense, as well as
benefits resulting from the Company's cost-savings initiatives.
Asia Pacific
------------
$ in millions Fourth-Quarter
2013 FY 2013
--------------- -------
% var. vs % var. vs
4Q12 FY12
---- ----
Total revenue $192.4 (22)% $757.9 (16)%
C$ revenue (18)% (15)%
Change in Active Representatives(1) (19)% (10)%
Change in units sold (18)% (16)%
Operating profit(loss) 0.1 * (12.1) *
Adjusted operating profit 4.0 (82)% 35.0 (48)%
Operating margin 0.1% (350) bps (1.6)% (220) bps
Adjusted operating margin 2.1% (670) bps 4.6% (290) bps
(1) Excludes China
* Calculation not meaningful
Fourth-Quarter 2013 Discussion
-- Fourth-quarter constant-dollar revenue decline was driven by the
unfavorable results of China and a decrease in Active Representatives in
the other Asia Pacific markets. The region's revenue was also negatively
impacted by approximately one point as a result of the Company's
decision to exit the South Korea and Vietnam markets.
-- Revenue in the Philippines was down 9%, or 4% in constant dollars, which
includes approximately two points due to the significant typhoon. The
revenue decline was primarily due to a decrease in Active
Representatives, partially offset by higher average order.
-- Revenue in China was down 48%, or 50% in constant dollars, primarily due
to declines in unit sales. Revenue was negatively impacted by a decline
in the number of beauty boutiques as well as the Company's continued
actions intended to reduce inventory levels held by beauty boutiques.
-- The decline in Adjusted operating margin was primarily due to lower
gross margin, as well as the impact of the revenue decline with respect
to fixed expenses. The gross margin decline was primarily due to the
unfavorable net impact of mix and pricing, higher obsolescence costs and
the impact of lower unit volume. These were partially offset by benefits
resulting from the Company's cost-savings initiatives.
Global Expenses
---------------
$ in millions Fourth-
Quarter 2013 FY 2013
------------- -------
% var. vs % var. vs
4Q12 FY12
---- ----
Total global expenses 368.2 93% 824.3 17%
Adjusted total global
expenses 154.1 (11)% 595.8 (10)%
Allocated to segments (120.0) (6)% (438.4) (8)%
Adjusted net global
expenses 34.1 (26)% 157.4 (16)%
------------------- ---- ---- ----- ----
Fourth-Quarter 2013 Discussion
-- Adjusted total global expenses decreased, primarily due to lower
professional and related fees associated with the FCPA matters.
Avon will conduct a conference call at 9:00 A.M. today to discuss the quarterly and full-year results. The dial-in number for the call is (800) 843-2086 in the U.S. or (706) 643-1815 from non-U.S. locations (conference ID number: 33982530). The call will be webcast live at www.avoninvestor.com and can be accessed or downloaded from that site for a period of one year.
Avon, the company for women, is a leading global beauty company, with $10 billion in annual revenue. As one of the world's largest direct sellers, Avon is sold through more than 6 million active independent Avon Sales Representatives. Avon products are available in over 100 countries, and the product line includes color cosmetics, skincare, fragrance, fashion and home products, featuring such well-recognized brand names as Avon Color, ANEW, Skin-So-Soft, Advance Techniques, and mark. Learn more about Avon and its products at www.avoncompany.com.
Footnotes
(1 )"Adjusted" items refer to financial results presented in accordance with U.S. GAAP that have been adjusted to exclude certain costs as described below, under "Non-GAAP Financial Measures." We also refer to Adjusted financial measures as Constant $ items, which are Non-GAAP financial measures as described below under "Non-GAAP Financial Measures."
(2 )In the first quarter of 2013, we renamed our "Growth in Active Representatives" performance metric as "Change in Active Representatives." In addition, we revised the definition of this metric to exclude China. As previously disclosed, our business in China is predominantly retail, and as a result, we do not believe including China within the Change in Active Representatives calculation provides for a relevant indicator of underlying business trends. There were no changes to the underlying calculation other than the exclusion of China.
Non-GAAP Financial Measures
To supplement our financial results presented in accordance with generally accepted accounting principles in the United States ("GAAP"), we disclose operating results that have been adjusted to exclude the impact of changes due to the translation of foreign currencies into U.S. dollars, including changes in: revenue, operating profit, Adjusted operating profit, operating margin and Adjusted operating margin. We also refer to these adjusted financial measures as Constant $ items, which are Non-GAAP financial measures. We believe these measures provide investors an additional perspective on trends. To exclude the impact of changes due to the translation of foreign currencies into U.S. dollars, we calculate current-year results and prior-year results at a constant exchange rate. Currency impact is determined as the difference between actual growth rates and constant-currency growth rates.
We also present gross margin, selling, general and administrative expenses as a percentage of revenue, total and net global expenses, operating profit, operating margin, income from continuing operations, earnings per share from continuing operations and effective tax rate on a Non-GAAP basis. The discussion of our segments presents operating profit and operating margin on a Non-GAAP basis. We refer to these Non-GAAP financial measures as "Adjusted." We have provided a quantitative reconciliation of the difference between the Non-GAAP financial measures and the financial measures calculated and reported in accordance with GAAP. The Company uses the Non-GAAP financial measures to evaluate its operating performance and believes that it is meaningful for investors to be made aware of, on a period-to-period basis, the impacts of 1) costs to implement ("CTI") restructuring initiatives, 2) costs and charges related to Venezuela being designated as a highly inflationary economy and the subsequent devaluation of its currency in February 2013, a valuation allowance for deferred tax assets related to Venezuela and the benefit related to the release of a provision associated with the excess cost of acquiring U.S. dollars in Venezuela ("Venezuelan special items"), 3) the total $89 million accrual for the potential settlements related to the FCPA investigations ("FCPA accrual"), 4) the goodwill and intangible asset impairment charges and a valuation allowance for deferred tax assets related to the China business, as well as the capitalized software impairment charge related to the SMT project ("Asset impairment and other charges"), 5) costs and charges related to the extinguishment of debt ("Loss on extinguishment of debt") and 6) the additional provision for income taxes as we are no longer asserting that the undistributed earnings of foreign subsidiaries are indefinitely reinvested ("Special tax items"). The Company believes investors find the Non-GAAP information helpful in understanding the ongoing performance of operations separate from items that may have a disproportionate positive or negative impact on the Company's financial results in any particular period.
The Venezuelan special items include the impact on the Consolidated Statements of Income in 2013, caused by the devaluation of Venezuelan currency on monetary assets and liabilities, such as cash, receivables and payables; deferred tax assets and liabilities; and non-monetary assets, such as inventory and prepaid expenses. For non-monetary assets, the Venezuelan special items include the earnings impact caused by the difference between the historical cost of the assets at the previous official exchange rate of 4.30 and the revised official exchange rate of 6.30. The Venezuelan special items also include the impact on the Consolidated Statements of Income caused by a valuation allowance for deferred tax assets related to Venezuela recorded in the fourth quarter of 2013, as well as the release of a provision in the fourth quarter of 2012 associated with the excess cost of acquiring U.S. dollars in Venezuela at the regulated market rate as compared with the official exchange rate.
The Asset impairment and other charges include the impact on the Consolidated Statements of Income caused by the goodwill and intangible asset impairment charges and a valuation allowance for deferred tax assets related to the China business in the third quarter of 2013, and the goodwill impairment charge related to the China business in the third quarter of 2012. The Asset impairment and other charges also include the impact on the Consolidated Statements of Income caused by the capitalized software impairment charge related to the SMT project in the fourth quarter of 2013.
The Loss on extinguishment of debt includes the impact on the Consolidated Statements of Income in the first quarter of 2013, caused by the make-whole premium and the write-off of debt issuance costs associated with the prepayment of the Company's private notes, as well as the write-off of debt issuance costs associated with the early repayment of $380 million of the outstanding principal amount of the term loan agreement. The Loss on extinguishment of debt also includes the impact on the Consolidated Statements of Income in the second quarter of 2013, caused by the make-whole premium and the write-off of debt issuance costs and discounts, partially offset by a deferred gain associated with the January 2013 interest rate swap agreement termination, associated with the prepayment of the Company's 2014 notes.
The Special tax items include the impact on the Consolidated Statements of Income in 2012, caused by an additional provision for income taxes as we no longer asserted that the undistributed earnings of foreign subsidiaries are indefinitely reinvested. During the fourth quarter of 2012, we determined that the Company may repatriate offshore cash to meet certain domestic funding needs.
These Non-GAAP measures should not be considered in isolation, or as a substitute for, or superior to, financial measures calculated in accordance with GAAP.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Statements in this release that are not historical facts or information may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "estimate," "plan," "believe," "may," "intend," "potential," "can," "could," "will" and similar expressions, or the negative of those expressions, may identify forward-looking statements. They include, among other things, statements regarding our anticipated or expected results, future financial performance, various strategies and initiatives (including our stabilization strategies, cost savings initiatives, multi-year restructuring programs and other initiatives and related actions), costs and cost savings, competitive advantages, impairments, the impact of currency devaluations and other laws and regulations, government investigations, internal investigations and compliance reviews, results of litigation, contingencies, taxes and tax rates, potential acquisitions or divestitures, liquidity, cash flow, uses of cash and financing, hedging and risk management strategies, pension, postretirement and incentive compensation plans, supply chain and the legal status of our Representatives. Such forward-looking statements are based on management's reasonable current assumptions, expectations, plans and forecasts regarding the Company's current or future results and future business and economic conditions more generally. Such forward-looking statements involve risks, uncertainties and other factors, which may cause the actual results, levels of activity, performance or achievement of Avon to be materially different from any future results expressed or implied by such forward-looking statements, and there can be no assurance that actual results will not differ materially from management's expectations. Such factors include, among others, the following:
-- our ability to improve our financial and operational performance and
execute fully our global business strategy, including our ability to
implement the key initiatives of, and realize the projected benefits (in
the amounts and time schedules we expect) from, our stabilization
strategies, cost savings initiatives, multi-year restructuring programs
and other initiatives, product mix and pricing strategies, enterprise
resource planning, customer service initiatives, sales and operation
planning process, outsourcing strategies, Internet platform and
technology strategies, marketing and advertising strategies, information
technology and related system enhancements and cash management, tax,
foreign currency hedging and risk management strategies, and any plans
to invest these projected benefits ahead of future growth;
-- the possibility of business disruption in connection with our
stabilization strategies, cost savings initiatives, multi-year
restructuring programs, or other initiatives;
-- our ability to reverse declining revenue, margins and net income,
particularly in North America, and to achieve profitable growth,
particularly in our largest markets such as Brazil and developing and
emerging markets such as Mexico and Russia;
-- our ability to improve working capital and effectively manage doubtful
accounts and inventory and implement initiatives to reduce inventory
levels, including the potential impact on cash flows and obsolescence;
-- our ability to reverse declines in Active Representatives, to implement
our sales Leadership program globally, to generate Representative
activity, to increase the number of consumers served per Representative
and their engagement online, to enhance branding and the Representative
and consumer experience and increase Representative productivity through
field activation programs and technology tools and enablers, to invest
in the direct-selling channel, and to compete with other direct-selling
organizations to recruit, retain and service Representatives and to
continue to innovate the direct-selling model;
-- general economic and business conditions in our markets, including
social, economic and political uncertainties in the international
markets in our portfolio;
-- the effect of economic factors, including inflation and fluctuations in
interest rates and currency exchange rates, as well as the designation
of Venezuela as a highly inflationary economy and the devaluation of its
currency, foreign exchange restrictions, particularly currency
restrictions in Venezuela and Argentina, and the potential effect of
such factors on our business, results of operations and financial
condition;
-- any developments in or consequences of investigations and compliance
reviews, and any litigation related thereto, including the ongoing
investigations and compliance reviews of FCPA and related United States
("U.S.") and foreign law matters in China and additional countries, as
well as any disruption or adverse consequences resulting from such
investigations, reviews, related actions or litigation, including our
ability to reach a settlement with the SEC and the DOJ with regard to
the ongoing FCPA investigations or, if we are able to reach a
settlement, the timing or terms of such settlement, or if we are unable
to reach a settlement, the outcome of any subsequent litigation with the
government which could have a material adverse effect;
-- a general economic downturn, a recession globally or in one or more of
our geographic regions, or sudden disruption in business conditions, and
the ability of our broad-based geographic portfolio to withstand an
economic downturn, recession, cost inflation, commodity cost pressures,
economic or political instability, competitive or other market pressures
or conditions;
-- the effect of political, legal, tax and regulatory risks imposed on us
in the U.S. and abroad, our operations or our Representatives, including
foreign exchange or other restrictions, adoption, interpretation and
enforcement of foreign laws, including in jurisdictions such as Brazil,
Russia, Venezuela and Argentina, and any changes thereto, as well as
reviews and investigations by government regulators that have occurred
or may occur from time to time, including, for example, local regulatory
scrutiny in China;
-- the impact of changes in tax rates on the value of our deferred tax
assets, and declining earnings, including the amount of any domestic
source loss and the type, jurisdiction and timing of any foreign source
income, on our ability to realize foreign tax credits in the U.S.;
-- competitive uncertainties in our markets, including competition from
companies in the cosmetics, fragrances, skincare and toiletries
industry, some of which are larger than we are and have greater
resources;
-- the impact of the typically seasonal nature of our business, adverse
effect of rising energy, commodity and raw material prices, changes in
market trends, purchasing habits of our consumers and changes in
consumer preferences, particularly given the global nature of our
business and the conduct of our business in primarily one channel;
-- our ability to attract and retain key personnel;
-- other sudden disruption in business operations beyond our control as a
result of events such as acts of terrorism or war, natural disasters,
pandemic situations, large-scale power outages and similar events;
-- key information technology systems, process or site outages and
disruptions;
-- the risk of product or ingredient shortages resulting from our
concentration of sourcing in fewer suppliers;
-- the impact of any significant restructuring charges or significant legal
or regulatory settlements on our ability to comply with certain
covenants in our debt instruments;
-- any changes to our credit ratings and the impact of such changes on our
financing costs, rates, terms, debt service obligations and access to
lending sources;
-- the impact of our indebtedness, our access to cash and financing, and
our ability to secure financing or financing at attractive rates;
-- the impact of possible pension funding obligations, increased pension
expense and any changes in pension regulations or interpretations
thereof on our cash flow and results of operations;
-- our ability to successfully identify new business opportunities,
strategic alliances and strategic alternatives and identify and analyze
acquisition candidates, secure financing on favorable terms and
negotiate and consummate acquisitions, as well as to successfully
integrate or manage any acquired business;
-- disruption in our supply chain or manufacturing and distribution
operations;
-- the quality, safety and efficacy of our products;
-- the success of our research and development activities;
-- our ability to protect our intellectual property rights; and
-- the risk of an adverse outcome in any material pending and future
litigations or with respect to the legal status of Representatives.
Additional information identifying such factors is contained in Item 1A of our 2012 Form 10-K, as updated by our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2013, our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2013, and other reports and documents we file with the SEC. We undertake no obligation to update any such forward-looking statements.
AVON PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In millions, except per share data)
Three Months Percent Twelve Months
Ended Ended Percent
December 31 Change December 31 Change
----------- ------ ----------- ------
2013 2012 2013 2012
---- ---- ---- ----
Net sales $2,625.2 $2,913.2 (10)% $9,764.4 $10,405.3 (6)%
Other revenue 42.0 39.0 190.6 156.1
---- ---- ----- -----
Total revenue 2,667.2 2,952.2 (10)% 9,955.0 10,561.4 (6)%
Cost of sales 1,040.0 1,187.5 3,772.5 4,103.1
Selling, general and administrative expenses 1,644.4 1,551.9 5,713.2 5,889.3
Impairment of goodwill and intangible asset - - 42.1 44.0
--- --- ---- ----
Operating (loss) profit (17.2) 212.8 * 427.2 525.0 (19)%
----- ----- ----- -----
Interest expense 29.8 27.5 120.6 104.3
Loss on extinguishment of debt - - 86.0 -
Interest income (17.7) (4.6) (25.9) (15.1)
Other expense, net 14.3 (21.5) 83.9 7.1
---- ----- ---- ---
Total other expenses 26.4 1.4 264.6 96.3
---- --- ----- ----
(Loss) income from continuing operations, before taxes (43.6) 211.4 * 162.6 428.7 (62)%
Income taxes (24.1) (247.6) (163.6) (335.4)
----- ------ ----- ------
(Loss) income from continuing operations, net of tax (67.7) (36.2) (87)% (1.0) 93.3 *
Loss from discontinued operations, net of tax - (124.9) (50.9) (131.5)
--- ------ ----- ------
Net loss (67.7) (161.1) (51.9) (38.2)
Net income attributable to noncontrolling interests (1.4) (1.1) (4.5) (4.3)
---- ---- ---- ----
Net loss attributable to Avon $(69.1) $(162.2) 57% $(56.4) $(42.5) (33)%
===== ====== ===== ======
(Loss) earnings per share:(1)
Basic
Basic EPS from continuing operations $(0.16) $(0.08) (100)% $(0.01) $0.20 *
Basic EPS from discontinued operations $ - $(0.28) $(0.12) $(0.30)
Basic EPS attributable to Avon $(0.16) $(0.37) 57% $(0.13) $(0.10) (30)%
===== ====== ===== ======
Diluted
Diluted EPS from continuing operations $(0.16) $(0.08) (100)% $(0.01) $0.20 *
Diluted EPS from discontinued operations $ - $(0.28) $(0.12) $(0.30)
Diluted EPS attributable to Avon $(0.16) $(0.37) 57% $(0.13) $(0.10) (30)%
===== ====== ===== ======
Weighted-average shares outstanding:
Basic 433.6 432.1 433.4 431.9
Diluted 433.6 432.1 433.4 432.5
* 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.
Net loss
allocable
to common
shares
used in
the basic
and
diluted
loss per
share
calculation
were
($68.5)
and
($159.2)
for the
three
months
ended
December
31, 2013
and 2012,
respectively.
Net loss
allocable
to common
shares
used in
the basic
and
diluted
loss per
share
calculation
were
($55.9)
and
($42.2)
for the
twelve
months
ended
December
31, 2013
and 2012,
respectively.
AVON PRODUCTS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions)
December December
31 31
2013 2012
---- ----
Assets
Current Assets
Cash and
cash
equivalents $1,107.9 $1,206.9
Accounts
receivable,
net 676.3 752.1
Inventories 1,005.6 1,101.1
Prepaid
expenses and
other 689.3 827.0
Current assets
of
discontinued
operations - 41.8
--- ----
Total current
assets 3,479.1 3,928.9
------- -------
Property, plant
and equipment,
at cost 2,484.5 2,684.8
Less
accumulated
depreciation (1,091.2) (1,158.8)
------- -------
Property, plant
and equipment,
net 1,393.3 1,526.0
Goodwill 282.5 330.3
Other
intangible
assets, net 33.5 40.6
Other assets 1,303.9 1,407.9
Noncurrent
assets of
discontinued
operations - 148.8
--- -----
Total assets $6,492.3 $7,382.5
======== ========
Liabilities and
Shareholders'
Equity
Current
Liabilities
Debt
maturing
within one
year $188.0 $572.0
Accounts
payable 896.5 914.3
Accrued
compensation 271.2 264.7
Other accrued
liabilities 652.6 645.3
Sales and taxes
other than
income 186.8 210.6
Income taxes 45.4 73.6
Current
liabilities of
discontinued
operations - 24.1
--- ----
Total current
liabilities 2,240.5 2,704.6
------- -------
Long-term debt 2,532.7 2,623.8
Employee
benefit plans 398.0 637.6
Long-term
income taxes 53.3 52.0
Other
liabilities 140.3 131.1
Noncurrent
liabilities of
discontinued
operations - 0.1
--- ---
Total
liabilities $5,364.8 $6,149.2
======== ========
Shareholders'
Equity
Common stock $189.4 $188.3
Additional
paid-in-
capital 2,175.6 2,119.6
Retained
earnings 4,196.7 4,357.8
Accumulated
other
comprehensive
loss (870.4) (876.7)
Treasury stock,
at cost (4,581.2) (4,571.9)
------- -------
Total Avon
shareholders'
equity 1,110.1 1,217.1
------- -------
Noncontrolling
interests 17.4 16.2
---- ----
Total
shareholders'
equity $1,127.5 $1,233.3
======== ========
Total
liabilities
and
shareholders'
equity $6,492.3 $7,382.5
======== ========
AVON PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
Twelve Months
Ended
December 31
-----------
2013 2012
---- ----
Cash Flows from
Operating
Activities
Net loss $(51.9) $(38.2)
(Loss) income from
discontinued
operations, net
of tax 50.9 131.5
---- -----
(Loss) income from
continuing
operations $(1.0) $93.3
Adjustments to
reconcile net
loss to net cash
provided by
operating
activities:
Depreciation and
amortization 224.6 212.5
Provision for
doubtful accounts 239.3 250.9
Provision for
obsolescence 117.1 118.8
Share-based
compensation 43.3 41.1
Deferred income
taxes (128.6) 27.9
Impairment of
goodwill,
intangible assets
and SMT
capitalized
software 159.3 44.0
Charge for
Venezuelan
monetary assets
and liabilities 34.1 -
Other 54.5 35.3
Changes in assets
and liabilities:
Accounts
receivable (235.3) (240.9)
Inventories (78.5) (85.0)
Prepaid expenses
and other 77.7 59.1
Accounts payable
and accrued
liabilities 140.1 82.6
Income and other
taxes 3.4 (23.3)
Noncurrent assets
and liabilities (110.4) (72.3)
Net cash provided
by operating
activities of
continuing
operations 539.6 544.0
----- -----
Cash Flows from
Investing
Activities
Capital
expenditures (197.3) (228.5)
Disposal of assets 37.8 15.4
Proceeds from sale
of investments 14.3 1.2
Purchases of
investments (28.2) (1.5)
Net cash used by
investing
activities of
continuing
operations (173.4) (213.4)
------ ------
Cash Flows from
Financing
Activities
Cash dividends (106.8) (329.3)
Debt, net
(maturities of
three months or
less) (1.2) (710.5)
Proceeds from debt 1,488.2 735.8
Repayment of debt (1,942.7) (138.3)
Interest rate swap
termination 88.1 43.6
Proceeds from
exercise of stock
options 19.4 8.6
Excess tax benefit
realized from
share-based
compensation (3.5) (2.4)
Repurchase of
common stock (9.4) (8.8)
Net cash used by
financing
activities of
continuing
operations (467.9) (401.3)
------ ------
Net cash (used)
provided by
operating
activities of
discontinued
operations (4.0) 12.1
Net cash provided
(used) by
investing
activities of
discontinued
operations 84.8 (0.3)
---- ----
Net cash provided
by discontinued
operations 80.8 11.8
Effect of exchange
rate changes on
cash and
equivalents (80.8) 23.4
----- ----
Net decrease in
cash and
equivalents (101.7) (35.5)
Cash and
equivalents at
beginning of year
(1) $1,209.6 $1,245.1
Cash and
equivalents at
end of period (2) $1,107.9 $1,209.6
(1) Includes
cash and
cash
equivalents
of
discontinued
operations
of $2.7
and $6.9
at
January
1, 2013
and
2012,
respectively.
(2) Includes
cash and
cash
equivalents
of
discontinued
operations
of $2.7
at
December
31,
2012.
AVON PRODUCTS, INC.
SUPPLEMENTAL SCHEDULE
(Unaudited)
(In millions)
THREE MONTHS ENDED DECEMBER 31, 2013
------------------------------------
REGIONAL RESULTS
$ in Millions Total Revenue US$ C$ Units Sold Price/Mix
C$ Active Reps (1) Average Order C$
----------------- --- ---------- ---------- --------------
% var. vs % var. vs % var. vs % var. vs % var. vs % var. vs
4Q12 4Q12 4Q12 4Q12 4Q12 4Q12
---- ---- ---- ---- ---- ----
Latin America $1,236.3 (7)% 4% (6)% 10% (4)% 8%
Europe, Middle East & Africa 867.7 (4) (2) (7) 5 (1) (1)
North America 370.8 (21) (20) (27) 7 (17) (3)
Asia Pacific (1) 192.4 (22) (18) (18) - (19) 1
Total from operations 2,667.2 (10) (4) (10) 6 (5) 1
Global and other - - - - - - -
Total $2,667.2 (10)% (4)% (10)% 6% (5)% 1%
2013 GAAP % var. vs 4Q12 2013 GAAP 2013
Adjusted 2012 2013 2012
Operating Operating Operating Adjusted Adjusted Adjusted
Profit Margin US$ Profit
(Loss) (Loss) Operating Operating Operating
US$ US$ (2) Profit US$
(2) Margin (2) Margin (2)
--- ------ ----------- --------- ---------
Latin America $107.7 (21)% 8.7% $118.8 $143.7 9.6% 10.8%
Europe, Middle East & Africa 129.8 (1) 15.0 135.0 131.5 15.6 14.5
North America (6.6) * (1.8) (4.4) 19.7 (1.2) 4.2
Asia Pacific 0.1 * 0.1 4.0 21.8 2.1 8.8
Total from operations 231.0 (17) 8.7 253.4 316.7 9.5 10.7
Global and other (248.2) * - (34.1) (46.3) - -
Total $(17.2) * (0.6)% $219.3 $270.4 8.2% 9.2%
CATEGORY SALES (US$)
Consolidated
------------
US$ C$
---
% var. vs 4Q12 % var. vs 4Q12
----------------- --------------
Beauty (color/fragrance/skincare/personal care) $1,887.6 (11)% (4)%
Fashion (jewelry/watches/apparel/footwear/accessories/children's) 441.1 (11) (6)
Home (gift & decorative products/housewares/entertainment & leisure/children's/nutrition) 296.5 (4) 4
----- --- ---
Net sales $2,625.2 (10)% (4)%
Other revenue 42.0 8 11
---- --- ---
Total revenue $2,667.2 (10)% (4)%
Beauty Category:
Fragrance (7)% -%
Color (9) (4)
Skincare (15) (9)
Personal care (12) (7)
Fashion & Home (8) (2)
* Calculation not meaningful
(1) In the first quarter of 2013,
we revised the definition of
Active Representatives to
exclude China. As previously
disclosed, our business in
China is predominantly
retail, and as a result, we
do not believe including
China within the Change in
Active Representatives
calculation provides for a
relevant indicator of
underlying business trends.
There were no changes to the
underlying calculation other
than the exclusion of China.
(2) For a further discussion on
our Non-GAAP financial
measures, please refer to our
discussion of Non-GAAP
financial measures in this
release and reconciliations
of our Non-GAAP financial
measures to the related GAAP
financial measure in the
following supplemental
schedules.
AVON PRODUCTS, INC.
SUPPLEMENTAL SCHEDULE
(Unaudited)
(In millions)
TWELVE MONTHS ENDED DECEMBER 31, 2013
-------------------------------------
REGIONAL RESULTS
$ in Millions Total Revenue US$ C$ Units sold Price/Mix
C$ Active Reps (1) Average Order C$
----------------- --- ---------- ---------- --------------
% var. vs % var. vs % var. vs % var. vs % var. vs % var. vs
FY12 FY12 FY12 FY12 FY12 FY12
---- ---- ---- ---- ---- ----
Latin America $4,840.5 (3)% 6% (3)% 9% -% 6%
Europe, Middle East & Africa 2,898.4 (1) 2 - 2 1 1
North America 1,458.2 (17) (16) (17) 1 (15) (1)
Asia Pacific (1) 757.9 (16) (15) (16) 1 (10) (5)
Total from operations 9,955.0 (6) (1) (5) 4 (2) 1
Global and other - - - - - - -
Total $9,955.0 (6)% (1)% (5)% 4% (2)% 1%
2013 GAAP % var. vs FY12 2013 GAAP 2013
Adjusted 2012 2013 2012
Operating Operating Operating Adjusted Adjusted Adjusted
Profit Margin US$ Profit
(Loss) (Loss) Operating Operating Operating
US$ US$ (2) Profit US$
(2) Margin (2) Margin (2)
--- ------ ----------- --------- ---------
Latin America $478.6 8% 9.9% $536.6 $463.5 11.1% 9.3%
Europe, Middle East & Africa 406.7 30 14.0 424.4 324.6 14.6 11.1
North America (60.1) * (4.1) (47.6) 25.8 (3.3) 1.5
Asia Pacific (12.1) * (1.6) 35.0 67.3 4.6 7.5
Total from operations 813.1 7 8.2 948.4 881.2 9.5 8.3
Global and other (385.9) (66) - (157.4) (187.5) - -
Total $427.2 (19)% 4.3% $791.0 $693.7 7.9% 6.6%
CATEGORY SALES (US$)
Consolidated
------------
US$ C$
---
% var. vs FY12 % var. vs FY12
------------------ --------------
Beauty (color/fragrance/skincare/personal care) $7,103.2 (7)% (2)%
Fashion (jewelry/watches/apparel/footwear/accessories/children's) 1,623.5 (7) (4)
Home (gift & decorative products/housewares/entertainment & leisure/children's/nutrition) 1,037.7 3 9
------- --- ---
Net sales $9,764.4 (6)% (1)%
Other revenue 190.6 22 24
----- --- ---
Total revenue $9,955.0 (6)% (1)%
Beauty Category:
Fragrance (4)% 2%
Color (6) (1)
Skincare (12) (8)
Personal care (7) (3)
Fashion & Home (4) 1
* Calculation not meaningful
(1) In the first quarter of 2013, we
revised the definition of
Active Representatives to
exclude China. As previously
disclosed, our business in
China is predominantly retail,
and as a result, we do not
believe including China within
the Change in Active
Representatives calculation
provides for a relevant
indicator of underlying
business trends. There were no
changes to the underlying
calculation other than the
exclusion of China.
(2) For a further discussion on our
Non-GAAP financial measures,
please refer to our discussion
of Non-GAAP financial measures
in this release and
reconciliations of our non-
GAAP financial measures to the
related GAAP financial measure
in the following supplemental
schedules.
AVON PRODUCTS, INC.
SUPPLEMENTAL SCHEDULE
NON-GAAP FINANCIAL MEASURES
(Unaudited)
This supplemental schedule provides adjusted Non-GAAP financial information and a quantitative reconciliation of the difference between the Non-GAAP
financial measure and the financial measure calculated and reported in accordance with GAAP.
$ in Millions (except per share data) THREE MONTHS ENDED DECEMBER 31, 2013
------------------------------------
CTI Asset
Reported restructuring Venezuelan FCPA impairment
and Adjusted
(GAAP) initiatives special
items accrual other charges (Non-GAAP)
----- ----------- -------- ------- ------------- ---------
Cost of sales $1,040.0 $ - $4.9 $ - $ - $1,035.1
Selling, general and administrative expenses 1,644.4 37.4 - 77.0 117.2 1,412.8
------- ---- --- ---- ----- -------
Operating (loss) profit (17.2) 37.4 4.9 77.0 117.2 219.3
(Loss) income from continuing operations, before taxes (43.6) 37.4 4.9 77.0 117.2 193.0
Income taxes (24.1) (16.2) 41.8 - (43.1) (41.6)
----- ----- ---- --- ----- -----
(Loss) income from continuing operations, net of tax $(67.7) $21.2 $46.7 $77.0 $74.1 $151.4
Diluted EPS from continuing operations $(0.16) $0.05 $0.11 $0.18 $0.17 $0.34
Gross margin 61.0% - 0.2 - - 61.2%
SG&A as a % of revenues 61.7% (1.4) - (2.9) (4.4) 53.0%
Operating margin (0.6)% 1.4 0.2 2.9 4.4 8.2%
Effective tax rate (55.5)% 21.6%
SEGMENT OPERATING PROFIT (LOSS)
------------------------------
Latin America $107.7 $6.2 $4.9 $ - $ - $118.8
Europe, Middle East & Africa 129.8 5.2 - - - 135.0
North America (6.6) 2.2 - - - (4.4)
Asia Pacific 0.1 3.9 - - - 4.0
Global and other (248.2) 19.9 - 77.0 117.2 (34.1)
Total $(17.2) $37.4 $4.9 $77.0 $117.2 $219.3
SEGMENT OPERATING MARGIN
------------------------
Latin America 8.7% 0.5 0.4 - - 9.6%
Europe, Middle East & Africa 15.0% 0.6 - - - 15.6%
North America (1.8)% 0.6 - - - (1.2)%
Asia Pacific 0.1% 2.0 - - - 2.1%
Global and other - - - - - -
Total (0.6)% 1.4 0.2 2.9 4.4 8.2%
Amounts in the table above may not necessarily sum because the computations are made independently.
AVON PRODUCTS, INC.
SUPPLEMENTAL SCHEDULE
NON-GAAP FINANCIAL MEASURES
(Unaudited)
This supplemental schedule provides adjusted Non-GAAP financial information and a quantitative reconciliation of the difference between the Non-GAAP financial measure and the financial measure calculated and reported in accordance with
GAAP.
$ in Millions (except per share data) TWELVE MONTHS ENDED DECEMBER 31, 2013
-------------------------------------
CTI Asset Loss on
Reported restructuring Venezuelan FCPA impairment
and extinguishment Adjusted
(GAAP) initiatives special accrual other of debt (Non-
items charges GAAP)
----- --------- -------- ----- -------- ------- ------
Cost of sales $3,772.5 $(0.9) $44.6 $ - $ - $ - $3,728.8
Selling, general and administrative expenses 5,713.2 66.8 5.0 89.0 117.2 - 5,435.2
Impairment of goodwill and intangible asset 42.1 - - - 42.1 - -
---- --- --- --- ---- --- ---
Operating profit 427.2 65.9 49.6 89.0 159.3 - 791.0
Income from continuing operations, before taxes 162.6 65.9 83.7 89.0 159.3 86.0 646.5
Income taxes (163.6) (24.5) 58.4 - (34.8) (31.6) (196.0)
------ ----- ---- --- ----- ----- ------
(Loss) income from continuing operations, net of tax $(1.0) $41.4 $142.1 $89.0 $124.5 $54.4 $450.5
Diluted EPS from continuing operations $(0.01) $0.09 $0.32 $0.20 $0.28 $0.12 $1.02
Gross margin 62.1% - 0.4 - - - 62.5%
SG&A as a % of revenues 57.4% (0.7) (0.1) (0.9) (1.2) - 54.6%
Operating margin 4.3% 0.7 0.5 0.9 1.6 - 7.9%
Effective tax rate 100.6% 30.3%
SEGMENT OPERATING PROFIT (LOSS)
------------------------------
Latin America $478.6 $8.4 $49.6 $ - $ - $536.6
Europe, Middle East & Africa 406.7 17.7 - - - 424.4
North America (60.1) 12.5 - - - (47.6)
Asia Pacific (12.1) 5.0 - - 42.1 35.0
Global and other (385.9) 22.3 - 89.0 117.2 (157.4)
Total $427.2 $65.9 $49.6 $89.0 $159.3 $791.0
SEGMENT OPERATING MARGIN
------------------------
Latin America 9.9% 0.2 1.0 - - 11.1%
Europe, Middle East & Africa 14.0% 0.6 - - - 14.6%
North America (4.1)% 0.9 - - - (3.3)%
Asia Pacific (1.6)% 0.7 - - 5.6 4.6%
Global and other - - - - - -
Total 4.3% 0.7 0.5 0.9 1.6 7.9%
Amounts in the table above may not necessarily sum because the computations are made independently.
AVON PRODUCTS, INC.
SUPPLEMENTAL SCHEDULE
NON-GAAP FINANCIAL MEASURES
(Unaudited)
This supplemental schedule provides adjusted Non-GAAP financial information and a quantitative reconciliation of the difference between the Non-GAAP financial measure and the financial
measure calculated and reported in accordance with GAAP.
$ in Millions (except per share data) THREE MONTHS ENDED DECEMBER 31, 2012
------------------------------------
CTI
Reported restructuring Venezuelan Special Adjusted
(GAAP) initiatives special tax (Non-
items items GAAP)
----- --------- -------- ----- ------
Cost of sales $1,187.5 $1.3 $ - $ - $1,186.2
Selling, general and administrative expenses 1,551.9 56.2 - - 1,495.7
------- ---- --- --- -------
Operating profit 212.8 57.5 - - 270.3
Income from continuing operations, before taxes 211.4 57.5 (23.8) - 245.2
Income taxes (247.6) (19.8) 8.1 168.3 (91.1)
------ ----- --- ----- -----
(Loss) income from continuing operations, net of tax $(36.2) $37.7 $(15.7) $168.3 $154.1
Diluted EPS from continuing operations $(0.08) $0.09 $(0.03) $0.39 $0.36
Gross margin 59.8% - 59.8%
SG&A as a % of revenues 52.6% (1.9) 50.7%
Operating margin 7.2% 1.9 9.2%
Effective tax rate 117.1% 37.1%
SEGMENT OPERATING PROFIT
------------------------
Latin America $136.0 $7.7 $143.7
Europe, Middle East & Africa 131.4 0.1 131.5
North America 0.7 19.0 19.7
Asia Pacific 8.8 13.0 21.8
Global and other (64.1) 17.8 (46.3)
Total $212.8 $57.5 $270.3
SEGMENT OPERATING MARGIN
------------------------
Latin America 10.2% 0.6 10.8%
Europe, Middle East & Africa 14.5% - 14.5%
North America 0.1% 4.0 4.2%
Asia Pacific 3.6% 5.3 8.8%
Global and other - - -
Total 7.2% 1.9 9.2%
Amounts in the table above may not necessarily sum because the computations are made independently.
AVON PRODUCTS, INC.
SUPPLEMENTAL SCHEDULE
NON-GAAP FINANCIAL MEASURES
(Unaudited)
This supplemental schedule provides adjusted Non-GAAP financial information and a quantitative reconciliation of the difference between the Non-GAAP financial measure and the financial measure calculated and
reported in accordance with GAAP.
$ in Millions (except per share data) TWELVE MONTHS ENDED DECEMBER 31, 2012
-------------------------------------
CTI Asset
Reported restructuring impairment
and Venezuelan Special Adjusted
(GAAP) initiatives other special tax (Non-
charges items items GAAP)
----- --------- -------- -------- ----- ------
Cost of sales $4,103.1 $4.5 $ - $ - $ - $4,098.6
Selling, general and administrative expenses 5,889.3 120.1 - - - 5,769.2
Impairment of goodwill and intangible asset 44.0 - 44.0 - - -
---- --- ---- --- --- ---
Operating profit 525.0 124.7 44.0 - - 693.7
Income from continuing operations, before taxes 428.7 124.7 44.0 (23.8) - 573.6
Income taxes (335.4) (42.0) - 8.1 168.3 (201.0)
------ ----- --- --- ----- ------
Income from continuing operations, net of tax $93.3 $82.7 $44.0 $(15.7) $168.3 $372.6
Diluted EPS from continuing operations $0.20 $0.19 $0.10 $(0.04) $0.39 $0.84
Gross margin 61.2% - - 61.2%
SG&A as a % of revenues 55.8% (1.1) - 54.6%
Operating margin 5.0% 1.2 0.4 6.6%
Effective tax rate 78.2% 35.0%
SEGMENT OPERATING PROFIT (LOSS)
------------------------------
Latin America $443.9 $19.6 $ - $463.5
Europe, Middle East & Africa 312.8 11.8 - 324.6
North America (4.7) 30.5 - 25.8
Asia Pacific 5.1 18.2 44.0 67.3
Global and other (232.1) 44.6 - (187.5)
Total $525.0 $124.7 $44.0 $693.7
SEGMENT OPERATING MARGIN
------------------------
Latin America 8.9% 0.4 - 9.3%
Europe, Middle East & Africa 10.7% 0.4 - 11.1%
North America (0.3)% 1.7 - 1.5%
Asia Pacific 0.6% 2.0 4.9 7.5%
Global and other - - - -
Total 5.0% 1.2 0.4 6.6%
Amounts in the table above may not necessarily sum because the computations are made independently.
SOURCE Avon Products, Inc.
