x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
¨ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
New York | 13-0544597 | |
(State or other jurisdiction of Incorporation or organization) | (I.R.S. Employer Identification No.) |
Large accelerated filer | x | Accelerated filer | ¨ | |
Non-accelerated filer | ¨ (do not check if a smaller reporting company) | Smaller reporting company | ¨ | |
Emerging growth company | ¨ |
Three Months Ended | |||||||
(In millions, except per share data) | June 30, 2018 | June 30, 2017 | |||||
Net sales | $ | 1,268.8 | $ | 1,353.5 | |||
Other revenue | 83.1 | 42.4 | |||||
Total revenue | 1,351.9 | 1,395.9 | |||||
Costs, expenses and other: | |||||||
Cost of sales | 539.7 | 525.0 | |||||
Selling, general and administrative expenses | 759.2 | 838.2 | |||||
Operating profit | 53.0 | 32.7 | |||||
Interest expense | 34.5 | 36.1 | |||||
Loss on extinguishment of debt | 2.9 | — | |||||
Interest income | (3.5 | ) | (3.1 | ) | |||
Other expense, net | 19.4 | 11.9 | |||||
Total other expenses | 53.3 | 44.9 | |||||
Loss before income taxes | (0.3 | ) | (12.2 | ) | |||
Income taxes | (36.7 | ) | (33.6 | ) | |||
Net loss | (37.0 | ) | (45.8 | ) | |||
Net loss attributable to noncontrolling interests | 0.9 | 0.3 | |||||
Net loss attributable to Avon | $ | (36.1 | ) | $ | (45.5 | ) | |
Loss per share: | |||||||
Basic attributable to Avon | $ | (0.09 | ) | $ | (0.12 | ) | |
Diluted attributable to Avon | (0.09 | ) | (0.12 | ) |
Six Months Ended | |||||||
(In millions, except per share data) | June 30, 2018 | June 30, 2017 | |||||
Net sales | $ | 2,578.4 | $ | 2,651.6 | |||
Other revenue | 167.0 | 77.4 | |||||
Total revenue | 2,745.4 | 2,729.0 | |||||
Costs, expenses and other: | |||||||
Cost of sales | 1,119.4 | 1,042.1 | |||||
Selling, general and administrative expenses | 1,528.1 | 1,624.4 | |||||
Operating profit | 97.9 | 62.5 | |||||
Interest expense | 70.7 | 71.2 | |||||
Loss on extinguishment of debt | 2.9 | — | |||||
Interest income | (7.7 | ) | (7.8 | ) | |||
Other expense, net | 21.9 | 18.0 | |||||
Total other expenses | 87.8 | 81.4 | |||||
Income (loss), before income taxes | 10.1 | (18.9 | ) | ||||
Income taxes | (68.2 | ) | (63.4 | ) | |||
Net loss | (58.1 | ) | (82.3 | ) | |||
Net loss attributable to noncontrolling interests | 1.7 | 0.3 | |||||
Net loss attributable to Avon | (56.4 | ) | $ | (82.0 | ) | ||
Loss per share: | |||||||
Basic attributable to Avon | (0.15 | ) | (0.21 | ) | |||
Diluted attributable to Avon | (0.15 | ) | (0.21 | ) |
Three Months Ended | |||||||
(In millions) | June 30, 2018 | June 30, 2017 | |||||
Net loss | $ | (37.0 | ) | $ | (45.8 | ) | |
Other comprehensive income: | |||||||
Foreign currency translation adjustments | (126.6 | ) | 9.5 | ||||
Adjustments of and amortization of net actuarial loss and prior service cost, net of taxes of $0.1 and $0.0 | 2.8 | 3.1 | |||||
Other comprehensive income related to New Avon investment, net of taxes of $0.0 | — | 0.1 | |||||
Total other comprehensive (loss) income, net of income taxes | (123.8 | ) | 12.7 | ||||
Comprehensive loss | (160.8 | ) | (33.1 | ) | |||
Less: comprehensive loss attributable to noncontrolling interests | (1.2 | ) | (0.2 | ) | |||
Comprehensive loss attributable to Avon | $ | (159.6 | ) | $ | (32.9 | ) |
Six Months Ended | |||||||
(In millions) | June 30, 2018 | June 30, 2017 | |||||
Net loss | $ | (58.1 | ) | $ | (82.3 | ) | |
Other comprehensive income: | |||||||
Foreign currency translation adjustments | (93.9 | ) | 71.5 | ||||
Adjustments of and amortization of net actuarial loss and prior service cost, net of taxes of $0.3 and $0.0 | 5.7 | 6.2 | |||||
Other comprehensive income related to New Avon investment, net of taxes of $0.0 | — | 1.2 | |||||
Total other comprehensive (loss) income, net of income taxes | (88.2 | ) | 78.9 | ||||
Comprehensive loss | (146.3 | ) | (3.4 | ) | |||
Less: comprehensive loss attributable to noncontrolling interests | (1.8 | ) | (0.1 | ) | |||
Comprehensive loss attributable to Avon | $ | (144.5 | ) | $ | (3.3 | ) |
(In millions) | June 30, 2018 | December 31, 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 | |||||
Commitments and contingencies (Note 7) | |||||||
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 | |||||||
(In millions) | June 30, 2018 | June 30, 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 |
• | the effects of significant, unusual or extraordinary pretax and income tax items, if any; |
• | withholding taxes recognized associated with cash repatriations; and |
• | the impact of loss-making subsidiaries for which we cannot recognize an income tax benefit and subsidiaries for which an effective tax rate cannot be reliably estimated. |
Three Months Ended June 30, 2018 | ||||||||||||||||||||||||||||
Reportable segments | ||||||||||||||||||||||||||||
Europe, Middle East & Africa | South Latin America | North Latin America | Asia Pacific | Total reportable segments | Other operating segments and business activities | Total | ||||||||||||||||||||||
Beauty: | ||||||||||||||||||||||||||||
Skincare | $ | 154.4 | $ | 143.9 | $ | 43.8 | $ | 30.3 | $ | 372.4 | $ | 2.3 | $ | 374.7 | ||||||||||||||
Fragrance | 143.8 | 131.5 | 52.4 | 20.1 | 347.8 | 0.7 | 348.5 | |||||||||||||||||||||
Color | 98.1 | 80.6 | 20.8 | 12.9 | 212.4 | 1.4 | 213.8 | |||||||||||||||||||||
Total Beauty | 396.3 | 356.0 | 117.0 | 63.3 | 932.6 | 4.4 | 937.0 | |||||||||||||||||||||
Fashion & Home: | ||||||||||||||||||||||||||||
Fashion | 72.9 | 49.9 | 22.5 | 40.7 | 185.8 | 1.3 | 187.1 | |||||||||||||||||||||
Home | 7.6 | 72.5 | 56.6 | 7.5 | 144.3 | .4 | 144.7 | |||||||||||||||||||||
Total Fashion & Home | 80.5 | 122.4 | 79.1 | 48.2 | 330.1 | 1.7 | 331.8 | |||||||||||||||||||||
Net sales | 476.8 | 478.4 | 196.1 | 111.5 | 1,262.7 | 6.1 | 1,268.8 | |||||||||||||||||||||
Representative fees | 23.7 | 35.2 | 11.2 | 1.5 | 71.6 | 0.5 | 72.1 | |||||||||||||||||||||
Other | 0.2 | 2.6 | — | 0.1 | 2.9 | 8.1 | 11.0 | |||||||||||||||||||||
Other revenue | 23.9 | 37.8 | 11.2 | 1.6 | 74.5 | 8.6 | 83.1 | |||||||||||||||||||||
Total revenue | $ | 500.7 | $ | 516.1 | $ | 207.3 | $ | 113.1 | $ | 1,337.2 | $ | 14.7 | $ | 1,351.9 |
Six Months Ended June 30, 2018 | ||||||||||||||||||||||||||||
Reportable segments | ||||||||||||||||||||||||||||
Europe, Middle East & Africa | South Latin America | North Latin America | Asia Pacific | Total reportable segments | Other operating segments and business activities | Total | ||||||||||||||||||||||
Beauty: | ||||||||||||||||||||||||||||
Skincare | $ | 323.8 | $ | 285.7 | $ | 90.5 | $ | 61.6 | $ | 761.5 | $ | 7.0 | $ | 768.5 | ||||||||||||||
Fragrance | 307.0 | 250.0 | 106.0 | 38.7 | 701.8 | 2.9 | 704.7 | |||||||||||||||||||||
Color | 218.8 | 161.5 | 41.6 | 26.1 | 448.1 | 4.7 | 452.8 | |||||||||||||||||||||
Total Beauty | 849.6 | 697.2 | 238.1 | 126.4 | 1,911.4 | 14.6 | 1,926.0 | |||||||||||||||||||||
Fashion & Home: | ||||||||||||||||||||||||||||
Fashion | 152.6 | 96.4 | 45.1 | 80.4 | 374.5 | 3.0 | 377.5 | |||||||||||||||||||||
Home | 16.9 | 144.4 | 97.9 | 14.5 | 273.6 | 1.3 | 274.9 | |||||||||||||||||||||
Total Fashion & Home | 169.5 | 240.8 | 143.0 | 94.9 | 648.1 | 4.3 | 652.4 | |||||||||||||||||||||
Net sales | 1,019.1 | 938.0 | 381.1 | 221.3 | 2,559.5 | 18.9 | 2,578.4 | |||||||||||||||||||||
Representative fees | 49.7 | 71.5 | 21.8 | 3.1 | 146.1 | 1.9 | 148.0 | |||||||||||||||||||||
Other | 0.3 | 3.7 | — | 0.1 | 4.1 | 14.9 | 19.0 | |||||||||||||||||||||
Other revenue | 50.0 | 75.2 | 21.8 | 3.2 | 150.2 | 16.8 | 167.0 | |||||||||||||||||||||
Total revenue | $ | 1,069.1 | $ | 1,013.2 | $ | 402.9 | $ | 224.5 | $ | 2,709.7 | $ | 35.7 | $ | 2,745.4 |
June 30, 2018 | ||||
Accounts receivable, net of allowances of $108.5 | $ | 386.4 | ||
Contract liabilities | $ | 70.3 |
• | 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 Other Comprehensive Income | Per consolidated financial statements | Adjustments | Balances excluding the impact of adopting ASC 606 | |||||||
Net loss | (37.0 | ) | $ | (2.1 | ) | $ | (39.1 | ) | ||
Other comprehensive income: | ||||||||||
Total other comprehensive income, net of income taxes | (123.8 | ) | (2.0 | ) | (125.8 | ) | ||||
Comprehensive loss | (160.8 | ) | (4.1 | ) | (164.9 | ) | ||||
Comprehensive loss attributable to Avon | (159.6 | ) | (4.1 | ) | (163.7 | ) |
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 | $ | 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 Statements of Other Comprehensive Income | Per consolidated financial statements | Adjustments | Balances excluding the impact of adopting ASC 606 | ||||||||
Net loss | $ | (58.1 | ) | $ | (17.4 | ) | $ | (75.5 | ) | ||
Other comprehensive income: | |||||||||||
Total other comprehensive income, net of income taxes | (88.2 | ) | (1.3 | ) | (89.5 | ) | |||||
Comprehensive loss | (146.3 | ) | (18.7 | ) | (165.0 | ) | |||||
Comprehensive loss attributable to Avon | (144.5 | ) | (18.7 | ) | (163.2 | ) |
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 | ) |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(Shares in millions) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Numerator attributable to Avon: | ||||||||||||||||
Net loss attributable to Avon | $ | (36.1 | ) | $ | (45.5 | ) | $ | (56.4 | ) | $ | (82.0 | ) | ||||
Less: Loss allocated to participating securities | (.4 | ) | (.6 | ) | (.6 | ) | (1.0 | ) | ||||||||
Less: Earnings allocated to convertible preferred stock | 6.0 | 5.7 | 12.0 | 11.4 | ||||||||||||
Loss allocated to common shareholders | (41.7 | ) | (50.6 | ) | (67.8 | ) | (92.4 | ) | ||||||||
Denominator: | ||||||||||||||||
Basic EPS weighted-average shares outstanding | 442.2 | 439.9 | 441.5 | 439.3 | ||||||||||||
Diluted effect of assumed conversion of stock options | — | — | — | — | ||||||||||||
Diluted effect of assumed conversion of preferred stock | — | — | — | — | ||||||||||||
Diluted EPS adjusted weighted-average shares outstanding | 442.2 | 439.9 | 441.5 | 439.3 | ||||||||||||
Loss per Common Share attributable to Avon: | ||||||||||||||||
Basic | $ | (.09 | ) | $ | (.12 | ) | $ | (.15 | ) | $ | (.21 | ) | ||||
Diluted | (.09 | ) | (.12 | ) | (.15 | ) | (.21 | ) |
Six Months Ended June 30, | ||||||||
2018 | 2017 | |||||||
Total revenue | $ | 320.1 | $ | 361.8 | ||||
Gross profit | 186.6 | 225.6 | ||||||
Net loss | (42.3 | ) | (49.4 | ) |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Statement of Operations Data | ||||||||||||||||
Revenue from sale of product to New Avon(1) | $ | 7.1 | $ | 9.6 | $ | 13.0 | $ | 17.6 | ||||||||
Gross profit from sale of product to New Avon(1) | $ | .4 | $ | .7 | $ | .7 | $ | 1.3 | ||||||||
Cost of sales for purchases from New Avon(2) | $ | .7 | $ | 1.3 | $ | 1.2 | $ | 2.1 | ||||||||
Selling, general and administrative expenses related to New Avon: | ||||||||||||||||
Transition services, intellectual property, technical support and innovation and subleases(3) | $ | (.5 | ) | $ | (7.2 | ) | $ | (3.7 | ) | $ | (15.1 | ) | ||||
Project management team(4) | .2 | $ | .8 | $ | .8 | $ | 1.6 | |||||||||
Net reduction of selling, general and administrative expenses | $ | (.3 | ) | $ | (6.4 | ) | $ | (2.9 | ) | $ | (13.5 | ) | ||||
Interest income from Instituto Avon(5) | $ | — | $ | — | $ | — | $ | — |
June 30, 2018 | December 31, 2017 | |||||||
Balance Sheet Data | ||||||||
Inventories(6) | $ | .4 | $ | .4 | ||||
Receivables due from New Avon(7) | $ | 6.7 | $ | 9.8 | ||||
Receivables due from Instituto Avon(5) | $ | 3.6 | $ | — | ||||
Payables due to New Avon(8) | $ | .3 | $ | .2 | ||||
Payables due to an affiliate of Cerberus(9) | $ | .4 | $ | .4 |
Components of Inventories | June 30, 2018 | December 31, 2017 | ||||||
Raw materials | $ | 191.3 | $ | 190.6 | ||||
Finished goods | 470.9 | 407.6 | ||||||
Total | $ | 662.2 | $ | 598.2 |
Three Months Ended June 30, | ||||||||||||||||||||||||
Pension Benefits | ||||||||||||||||||||||||
Net Periodic Benefit Costs | U.S. Plans | Non-U.S. Plans | Postretirement Benefits | |||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | |||||||||||||||||||
Service cost | $ | .9 | $ | 1.3 | $ | 1.2 | $ | 1.2 | $ | — | $ | — | ||||||||||||
Interest cost | .6 | .8 | 4.0 | 4.4 | .3 | .3 | ||||||||||||||||||
Expected return on plan assets | (.8 | ) | (.8 | ) | (8.2 | ) | (6.9 | ) | — | — | ||||||||||||||
Amortization of prior service credit | — | — | — | (.1 | ) | (.1 | ) | (.1 | ) | |||||||||||||||
Amortization of net actuarial losses | 1.3 | 1.3 | 1.8 | 2.0 | — | .1 | ||||||||||||||||||
Net periodic benefit costs(1) | $ | 2.0 | $ | 2.6 | $ | (1.2 | ) | $ | .6 | $ | .2 | $ | .3 |
Six Months Ended June 30, | ||||||||||||||||||||||||
Pension Benefits | ||||||||||||||||||||||||
Net Periodic Benefit Costs | U.S. Plans | Non-U.S. Plans | Postretirement Benefits | |||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | |||||||||||||||||||
Service cost | $ | 1.8 | $ | 2.7 | $ | 2.4 | $ | 2.4 | $ | .1 | $ | — | ||||||||||||
Interest cost | 1.2 | 1.5 | 8.2 | 8.8 | .6 | .7 | ||||||||||||||||||
Expected return on plan assets | (1.6 | ) | (1.6 | ) | (16.6 | ) | (13.6 | ) | — | — | ||||||||||||||
Amortization of prior service credit | — | — | — | (.1 | ) | (.2 | ) | (.2 | ) | |||||||||||||||
Amortization of net actuarial losses | 2.6 | 2.5 | 3.6 | 3.8 | — | .1 | ||||||||||||||||||
Net periodic benefit costs(1) | $ | 4.0 | $ | 5.1 | $ | (2.4 | ) | $ | 1.3 | $ | .5 | $ | .6 |
Three Months Ended June 30, 2018 | Foreign Currency Translation Adjustments | Net Investment Hedges | Pension and Postretirement Benefits | Investment in New Avon | Total | |||||||||||||||
Balance at March 31, 2018 | $ | (797.3 | ) | $ | (4.3 | ) | $ | (92.8 | ) | $ | 3.4 | $ | (891.0 | ) | ||||||
Other comprehensive income other than reclassifications | (126.2 | ) | — | — | — | (126.2 | ) | |||||||||||||
Reclassifications into earnings: | ||||||||||||||||||||
Amortization of net actuarial loss and prior service cost, net of tax of $.1(1) | — | — | 2.8 | — | 2.8 | |||||||||||||||
Total reclassifications into earnings | — | — | 2.8 | — | 2.8 | |||||||||||||||
Balance at June 30, 2018 | $ | (923.5 | ) | $ | (4.3 | ) | $ | (90.0 | ) | $ | 3.4 | $ | (1,014.4 | ) |
Three Months Ended June 30, 2017: | Foreign Currency Translation Adjustments | Net Investment Hedges | Pension and Postretirement Benefits | Investment in New Avon | Total | |||||||||||||||
Balance at March 31, 2017 | $ | (849.0 | ) | $ | (4.3 | ) | $ | (117.1 | ) | $ | 3.3 | $ | (967.1 | ) | ||||||
Other comprehensive income other than reclassifications | 9.3 | — | — | .1 | 9.4 | |||||||||||||||
Reclassifications into earnings: | ||||||||||||||||||||
Amortization of net actuarial loss and prior service cost, net of tax of $0.0(1) | — | — | 3.1 | — | 3.1 | |||||||||||||||
Total reclassifications into earnings | — | — | 3.1 | — | 3.1 | |||||||||||||||
Balance at June 30, 2017 | $ | (839.7 | ) | $ | (4.3 | ) | $ | (114.0 | ) | $ | 3.4 | $ | (954.6 | ) |
Six Months Ended June 30, 2018: | Foreign Currency Translation Adjustments | Net Investment Hedges | Pension and Postretirement Benefits | Investment in New Avon | Total | |||||||||||||||
Balance at December 31, 2017 | $ | (829.6 | ) | $ | (4.3 | ) | $ | (95.7 | ) | $ | 3.4 | $ | (926.2 | ) | ||||||
Other comprehensive income other than reclassifications | (93.9 | ) | — | — | — | (93.9 | ) | |||||||||||||
Reclassifications into earnings: | ||||||||||||||||||||
Amortization of net actuarial loss and prior service cost, net of tax of $0.3(1) | — | — | 5.7 | — | 5.7 | |||||||||||||||
Total reclassifications into earnings | — | — | 5.7 | — | 5.7 | |||||||||||||||
Balance at June 30, 2018 | $ | (923.5 | ) | $ | (4.3 | ) | $ | (90.0 | ) | $ | 3.4 | $ | (1,014.4 | ) |
Six Months Ended June 30, 2017: | Foreign Currency Translation Adjustments | Net Investment Hedges | Pension and Postretirement Benefits | Investment in New Avon | Total | |||||||||||||||
Balance at December 31, 2016 | $ | (910.9 | ) | $ | (4.3 | ) | $ | (120.2 | ) | $ | 2.2 | $ | (1,033.2 | ) | ||||||
Other comprehensive income other than reclassifications | 71.2 | — | — | 1.2 | 72.4 | |||||||||||||||
Reclassifications into earnings: | ||||||||||||||||||||
Amortization of net actuarial loss and prior service cost, net of tax of $0.0(1) | — | — | 6.2 | — | 6.2 | |||||||||||||||
Total reclassifications into earnings | — | — | 6.2 | — | 6.2 | |||||||||||||||
Balance at June 30, 2017 | $ | (839.7 | ) | $ | (4.3 | ) | $ | (114.0 | ) | $ | 3.4 | $ | (954.6 | ) |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
Total Revenue | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Europe, Middle East & Africa | $ | 500.7 | $ | 494.6 | $ | 1,069.1 | $ | 1,002.1 | ||||||||
South Latin America | 516.1 | 558.1 | 1,013.2 | 1,057.3 | ||||||||||||
North Latin America | 207.3 | 207.8 | 402.9 | 401.0 | ||||||||||||
Asia Pacific | 113.1 | 113.9 | 224.5 | 227.3 | ||||||||||||
Total revenue from reportable segments | 1,337.2 | 1,374.4 | 2,709.7 | 2,687.7 | ||||||||||||
Other operating segments and business activities | 14.7 | 21.5 | 35.7 | 41.3 | ||||||||||||
Total revenue | $ | 1,351.9 | $ | 1,395.9 | $ | 2,745.4 | $ | 2,729.0 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
Operating Profit | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Segment Profit | ||||||||||||||||
Europe, Middle East & Africa | $ | 74.4 | $ | 80.8 | $ | 148.8 | $ | 154.3 | ||||||||
South Latin America | 55.2 | 45.7 | 82.4 | 59.4 | ||||||||||||
North Latin America | 19.0 | 18.2 | 39.8 | 39.6 | ||||||||||||
Asia Pacific | 7.3 | 10.2 | 17.7 | 23.5 | ||||||||||||
Total profit from reportable segments | $ | 155.9 | $ | 154.9 | $ | 288.7 | $ | 276.8 | ||||||||
Other operating segments and business activities | (.6 | ) | (.3 | ) | 1.6 | .6 | ||||||||||
Unallocated global expenses | (78.6 | ) | (83.3 | ) | (157.8 | ) | (166.4 | ) | ||||||||
CTI restructuring initiatives | (23.7 | ) | (20.4 | ) | (34.6 | ) | (30.3 | ) | ||||||||
Loss contingency | — | (18.2 | ) | — | (18.2 | ) | ||||||||||
Operating profit | $ | 53.0 | $ | 32.7 | $ | 97.9 | $ | 62.5 |
Components of Prepaid Expenses and Other | June 30, 2018 | December 31, 2017 | ||||||
Prepaid taxes and tax refunds receivable | $ | 113.3 | $ | 111.6 | ||||
Receivables other than trade | 54.8 | 67.2 | ||||||
Prepaid brochure costs, paper and other literature(1) | 13.9 | 64.8 | ||||||
Judicial deposit for Brazil IPI tax on cosmetics (Note 7) | 65.0 | — | ||||||
Other | 43.9 | 52.8 | ||||||
Prepaid expenses and other | $ | 290.9 | $ | 296.4 |
Components of Other Assets | June 30, 2018 | December 31, 2017 | ||||||
Deferred tax assets | $ | 199.8 | $ | 203.8 | ||||
Net overfunded pension plans | 90.6 | 82.0 | ||||||
Capitalized software | 81.8 | 85.2 | ||||||
Judicial deposits other than Brazil IPI tax (see below) | 71.7 | 82.2 | ||||||
Judicial deposit for Brazil IPI tax on cosmetics (Note 7) | — | 73.8 | ||||||
Long-term receivables | 71.1 | 75.6 | ||||||
Trust assets associated with supplemental benefit plans | 37.4 | 37.1 | ||||||
Tooling (plates and molds associated with our beauty products) | 10.2 | 12.5 | ||||||
Other | 11.3 | 14.0 | ||||||
Other assets | $ | 573.9 | $ | 666.2 |
• | net charges of $17.3 and $25.5, respectively, for employee-related costs, including severance benefits; |
• | implementation costs of $4.7 and $5.7, respectively, primarily related to professional service fees; |
• | accelerated depreciation of $.9 and $1.6, respectively; |
• | inventory write-offs of $.4 and $1.1, respectively; |
• | foreign currency translation adjustment charges of $.7 and $.7, respectively; and |
• | contract termination and other net charges of $.5 and $.7, respectively. |
• | net charges of $9.5, and $17.1, respectively, for employee-related costs, including severance benefits; |
• | contract termination and other net charges of $10.8 and $12.2, respectively, associated with vacating our previous corporate headquarters; |
• | implementation costs of $.2 and $.7, respectively, primarily related to professional service fees; and |
• | accelerated depreciation of $.5 and $1.0, respectively. |
Employee-Related Costs | Inventory Write-offs | Contract Terminations/Other | Foreign Currency Translation Adjustment | Total | ||||||||||||||||
Balance at December 31, 2017 | $ | 41.2 | $ | — | $ | 8.0 | $ | — | $ | 49.2 | ||||||||||
2018 charges | 30.1 | 1.1 | 1.4 | .7 | 33.3 | |||||||||||||||
Adjustments | (4.6 | ) | — | (0.7 | ) | — | (5.3 | ) | ||||||||||||
Cash payments | (13.3 | ) | — | (3.8 | ) | — | (17.1 | ) | ||||||||||||
Non-cash write-offs | — | (1.1 | ) | — | (.7 | ) | (1.8 | ) | ||||||||||||
Foreign exchange | (2.0 | ) | — | — | — | (2.0 | ) | |||||||||||||
Balance at June 30, 2018 | $ | 51.4 | $ | — | $ | 4.9 | $ | — | $ | 56.3 |
Employee- Related Costs | Inventory Write-offs | Foreign Currency Translation Adjustment Write-offs | Contract Terminations/Other | Total | ||||||||||||||||
Charges incurred to-date | $ | 136.5 | $ | 2.0 | $ | 3.4 | $ | 36.7 | $ | 178.6 | ||||||||||
Estimated charges to be incurred on approved initiatives | 6.6 | — | — | 6.8 | 13.4 | |||||||||||||||
Total expected charges on approved initiatives | $ | 143.1 | $ | 2.0 | $ | 3.4 | $ | 43.5 | $ | 192.0 |
Europe, Middle East & Africa | South Latin America | North Latin America | Asia Pacific | Global & Other Operating Segments | Total | |||||||||||||||||||
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 | ||||||||||||||||
First quarter 2018 | 3.2 | 5.3 | 0.6 | — | — | 9.1 | ||||||||||||||||||
Second quarter 2018 | 4.7 | (.1 | ) | — | — | 14.3 | 18.9 | |||||||||||||||||
Charges incurred to-date | 39.7 | 24.0 | 4.4 | 8.6 | 101.9 | 178.6 | ||||||||||||||||||
Estimated charges to be incurred on approved initiatives | .5 | — | — | 6.5 | 6.4 | 13.4 | ||||||||||||||||||
Total expected charges on approved initiatives | $ | 40.2 | $ | 24.0 | $ | 4.4 | $ | 15.1 | $ | 108.3 | $ | 192.0 |
Europe, Middle East & Africa | South Latin America | Asia Pacific | Total | |||||||||||||
Net balance at December 31, 2017 | $ | 20.4 | $ | 72.7 | $ | 2.6 | $ | 95.7 | ||||||||
Changes during the period ended June 30, 2018: | ||||||||||||||||
Foreign exchange | (1.7 | ) | .9 | — | (.8 | ) | ||||||||||
Net balance at June 30, 2018 | $ | 18.7 | $ | 73.6 | $ | 2.6 | $ | 94.9 |
June 30, 2018 | December 31, 2017 | ||||||||||||||
Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||
Available-for-sale securities | $ | 3.7 | $ | 3.7 | $ | 3.7 | $ | 3.7 | |||||||
Debt maturing within one year(1) | (12.0 | ) | (12.0 | ) | (25.7 | ) | (25.7 | ) | |||||||
Long-term debt(1) | (1,630.3 | ) | (1,502.3 | ) | (1,872.2 | ) | (1,718.6 | ) | |||||||
Foreign exchange forward contracts | (.6 | ) | (.6 | ) | — | — |
• | Available-for-sale securities - The fair values of these investments were the quoted market prices for issues listed on securities exchanges. |
• | Debt maturing within one year and long-term debt - The fair values of our debt and other financing were determined using Level 2 inputs based on indicative market prices. |
• | Foreign exchange forward contracts - The fair values of forward contracts were estimated based on quoted forward foreign exchange prices at the reporting date. |
Asset | Liability | ||||||||
Balance Sheet Classification | Fair Value | Balance Sheet Classification | Fair Value | ||||||
Derivatives not designated as hedges: | |||||||||
Foreign exchange forward contracts | Prepaid expenses and other | $ | .5 | Accounts payable | $ | 1.1 | |||
Total derivatives not designated as hedges | $ | .5 | $ | 1.1 | |||||
Total derivatives | $ | .5 | $ | 1.1 |
Asset | Liability | ||||||||
Balance Sheet Classification | Fair Value | Balance Sheet Classification | Fair Value | ||||||
Derivatives not designated as hedges: | |||||||||
Foreign exchange forward contracts | Prepaid expenses and other | $ | .2 | Accounts payable | $ | .2 | |||
Total derivatives not designated as hedges | $ | .2 | $ | .2 | |||||
Total derivatives | $ | .2 | $ | .2 |
• | Certain of our sales incentives and prospective discounts are now considered to be a separate deliverable, thus initially revenue is deferred generally until delivery of the incentive prize to the Representative or future discounts are realized, and at that time the associated cost is recognized in cost of sales. Historically, the cost of sales incentives was recognized in SG&A over the period that the sales incentive was earned; and |
• | Fees paid by Representatives to the Company for brochures, late payments and payment processing are now reflected as revenue, rather than reflected as a reduction of SG&A. The associated cost for brochures that are sold is now recognized in cost of sales rather than in SG&A. Further, the fees and costs associated with brochures are now recognized upon delivery to the Representatives, rather than recognized over the campaign length. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
2018 | 2017 | %/Basis Point Change | 2018 | 2017 | %/Basis Point Change | |||||||||||||||||
Select Consolidated Financial Information | ||||||||||||||||||||||
Total revenue | $ | 1,351.9 | $ | 1,395.9 | (3 | )% | $ | 2,745.4 | $ | 2,729.0 | 1 | % | ||||||||||
Cost of sales | 539.7 | 525.0 | 3 | % | 1,119.4 | 1,042.1 | 7 | % | ||||||||||||||
Selling, general and administrative expenses | 759.2 | 838.2 | (9 | )% | 1,528.1 | 1,624.4 | (6 | )% | ||||||||||||||
Operating profit | 53.0 | 32.7 | 62 | % | 97.9 | 62.5 | 57 | % | ||||||||||||||
Interest expense | 34.5 | 36.1 | (4 | )% | 70.7 | 71.2 | (1 | )% | ||||||||||||||
Interest income | (3.5 | ) | (3.1 | ) | 13 | % | (7.7 | ) | (7.8 | ) | (1 | )% | ||||||||||
Other expense, net | 19.4 | 11.9 | 63 | % | 21.9 | 18.0 | 22 | % | ||||||||||||||
Income (loss) before taxes | (0.3 | ) | (12.2 | ) | * | 10.1 | (18.9 | ) | * | |||||||||||||
Net loss attributable to Avon | $ | (36.1 | ) | $ | (45.5 | ) | 21 | % | $ | (56.4 | ) | $ | (82.0 | ) | 31 | % | ||||||
Diluted loss per share attributable to Avon | $ | (.09 | ) | $ | (.12 | ) | 25 | % | $ | (.15 | ) | $ | (.21 | ) | 29 | % | ||||||
Advertising expenses(1) | $ | 31.9 | $ | 33.3 | (4 | )% | $ | 61.1 | $ | 63.4 | (4 | )% | ||||||||||
Reconciliation of Non-GAAP Financial Measures | ||||||||||||||||||||||
Gross margin | 60.1 | % | 62.4 | % | (230 | ) | 59.2 | % | 61.8 | % | (260 | ) | ||||||||||
CTI restructuring | — | % | — | % | — | — | % | — | % | — | ||||||||||||
Adjusted gross margin | 60.1 | % | 62.4 | % | (230 | ) | 59.2 | % | 61.8 | % | (260 | ) | ||||||||||
Selling, general and administrative expenses as a % of total revenue | 56.2 | % | 60.1 | % | (390 | ) | 55.7 | % | 59.5 | % | (380 | ) | ||||||||||
CTI restructuring | (1.8 | ) | (1.5 | ) | 20 | % | (1.2 | ) | (1.1 | ) | 9 | % | ||||||||||
Loss contingency | — | (1.3 | ) | (100 | )% | — | (.7 | ) | (100 | )% | ||||||||||||
Adjusted selling, general and administrative expenses as a % of total revenue | 54.4 | % | 57.3 | % | (290 | ) | 54.4 | % | 57.7 | % | (330 | ) | ||||||||||
Operating profit | $ | 53.0 | $ | 32.7 | 62 | % | $ | 97.9 | $ | 62.5 | 57 | % | ||||||||||
CTI restructuring | 23.7 | 20.3 | 17 | % | 34.6 | 30.3 | 14 | % | ||||||||||||||
Loss contingency | — | 18.2 | (100 | )% | — | 18.2 | (100 | )% | ||||||||||||||
Adjusted operating profit | $ | 76.7 | $ | 71.2 | 8 | % | $ | 132.5 | $ | 111.0 | 19 | % | ||||||||||
Operating margin | 3.9 | % | 2.3 | % | 160 | 3.6 | % | 2.3 | % | 130 | ||||||||||||
CTI restructuring | 1.8 | 1.5 | 20 | % | 1.2 | 1.1 | 9 | % | ||||||||||||||
Loss contingency | — | 1.3 | (100 | )% | — | .7 | (100 | )% | ||||||||||||||
Adjusted operating margin | 5.7 | % | 5.1 | % | 60 | 4.8 | % | 4.1 | % | 70 | ||||||||||||
Change in Constant $ Adjusted operating margin(2) | ||||||||||||||||||||||
Income (loss) before taxes | $ | (0.3 | ) | $ | (12.2 | ) | (98 | )% | $ | 10.1 | $ | (18.9 | ) | (153 | )% | |||||||
CTI restructuring | 23.7 | 20.3 | 17 | % | 34.6 | 30.3 | 14 | % | ||||||||||||||
Loss contingency | $ | — | $ | 18.2 | (100 | )% | $ | — | $ | 18.2 | (100 | )% | ||||||||||
Adjusted income before taxes | $ | 23.4 | $ | 26.3 | (11 | )% | $ | 44.7 | $ | 29.6 | 51 | % | ||||||||||
Income taxes | (36.7 | ) | (33.6 | ) | 9 | % | (68.2 | ) | (63.4 | ) | 8 | % | ||||||||||
CTI restructuring | — | (0.8 | ) | (100 | )% | (2.1 | ) | (1.8 | ) | 17 | % | |||||||||||
Special tax items | 5.5 | — | — | 14.7 | — | 100.0 | ||||||||||||||||
Adjusted income taxes | $ | (31.2 | ) | $ | (34.4 | ) | (9 | )% | $ | (55.6 | ) | $ | (65.2 | ) | (15 | )% | ||||||
Effective tax rate | (12,233.3 | )% | (275.4 | )% | * | 675.2 | % | (335.4 | )% | * | ||||||||||||
Adjusted effective tax rate | 133.3 | % | 130.8 | % | 250 | 124.4 | % | 220.3 | % | * | ||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
2018 | 2017 | %/Basis Point Change | 2018 | 2017 | %/Basis Point Change | |||||||||||||||||
Performance Metrics | ||||||||||||||||||||||
Change in Active Representatives | (4 | )% | (4 | )% | ||||||||||||||||||
Change in units sold | (5 | )% | (4 | )% | ||||||||||||||||||
Change in Ending Representatives | (4 | )% | (4 | )% |
(1) | Advertising expenses are recorded in selling, general and administrative expenses. |
(2) | Change in Constant $ Adjusted operating margin for all years presented is calculated using the current-year Constant $ rates. |
• | Certain of our sales incentives and prospective discounts are now considered to be a separate deliverable, thus initially revenue is deferred generally until delivery of the incentive prize to the Representative or future discounts are realized, and at that time the associated cost is recognized in cost of sales. Historically, the cost of sales incentives was recognized in SG&A over the period that the sales incentive was earned; and |
• | Fees paid by Representatives to the Company for brochures, late payments and payment processing are now reflected as revenue, rather than reflected as a reduction of SG&A. The associated cost for brochures that are sold is now recognized in cost of sales rather than in SG&A. Further, the fees and costs associated with brochures are now recognized upon delivery to the Representatives, rather than recognized over the campaign length. |
Three Months Ended June 30, | % Change | ||||||||||||
2018 | 2017 | US$ | Constant $ | ||||||||||
Beauty: | |||||||||||||
Skincare | $ | 372.4 | $ | 396.3 | (6 | )% | (2 | )% | |||||
Fragrance | 347.8 | 366.7 | (5 | ) | — | ||||||||
Color | 212.4 | 234.1 | (9 | ) | (5 | ) | |||||||
Total Beauty | 932.6 | 997.1 | (6 | ) | (2 | ) | |||||||
Fashion & Home: | |||||||||||||
Fashion | 185.9 | 200.8 | (7 | ) | (5 | ) | |||||||
Home | 144.3 | 145.5 | (1 | ) | 7 | ||||||||
Total Fashion & Home | 330.2 | 346.3 | (5 | ) | — | ||||||||
Net sales from reportable segments | $ | 1,262.8 | $ | 1,343.4 | (6 | ) | (2 | ) | |||||
Net sales from Other operating segments and business activities | 6.0 | 10.1 | (41 | ) | (32 | ) | |||||||
Net sales | $ | 1,268.8 | $ | 1,353.5 | (6 | ) | 1 |
• | an increase of 70 basis points due to non-recurring net tax recoveries in Brazil; and |
• | an increase of 40 basis points due to the favorable net impact of mix and pricing, driven by inflationary pricing in Argentina. |
• | a decrease of 30 basis points due to higher supply chain costs, driven by higher material costs primarily in South Latin America, partially offset by Europe, Middle East and Africa. |
• | an increase of 50 basis points from higher transportation costs, primarily in Brazil relating to inefficiencies caused by the national transportation strike, in the United Kingdom due to increased flexibility in order processing, further increases in delivery rates in Russia and an increase in fuel prices in Mexico; |
• | an increase of 40 basis points from higher net brochure cost, primarily in Brazil, and to a lesser extent, in the United Kingdom and South Africa; and |
• | a decrease of 60 basis points due to lower Representative, sales leader and field expense, primarily in South Latin America and North Latin America in line with sales performance. |
• | foreign currency transaction losses (classified within cost of sales, and SG&A in our Consolidated Statements of Operations), which had an unfavorable impact to operating profit and Adjusted operating profit of approximately $5, or approximately 30 basis points to operating margin and Adjusted operating margin; |
• | foreign currency translation, which had an unfavorable impact to operating profit and Adjusted operating profit of approximately $5, or approximately 20 basis points to operating margin and Adjusted operating margin; and |
• | higher foreign exchange net losses on our working capital (classified within other expense, net in our Consolidated Statements of Operations) as compared to the prior year, resulting in an unfavorable impact of approximately $15 before tax on both a reported and Adjusted basis. |
Six Months Ended June 30, | % Change | ||||||||||||
2,018 | 2017 | US$ | Constant $ | ||||||||||
Beauty: | |||||||||||||
Skincare | $ | 761.5 | $ | 778.0 | (2 | )% | (2 | )% | |||||
Fragrance | 701.8 | 708.7 | (1 | ) | 1 | ||||||||
Color | 448.1 | 473.3 | (5 | ) | (5 | ) | |||||||
Total Beauty | 1,911.4 | 1,960.0 | (2 | ) | (2 | ) | |||||||
Fashion & Home: | |||||||||||||
Fashion | 374.5 | 392.7 | (5 | ) | (5 | ) | |||||||
Home | 273.7 | 278.6 | (2 | ) | 2 | ||||||||
Total Fashion & Home | 648.2 | 671.3 | (3 | ) | (2 | ) | |||||||
Net sales from reportable segments | $ | 2,559.6 | $ | 2,631.3 | (3 | ) | (2 | ) | |||||
Net sales from Other operating segments and business activities | 185.8 | 97.7 | 90 | (15 | ) | ||||||||
Net sales | $ | 2,745.4 | $ | 2,729.0 | 1 | 2 |
• | an increase of 30 basis points due to non-recurring net tax recoveries in Brazil; |
• | an increase of 60 basis points due to the favorable net impact of mix and pricing, driven by inflationary pricing in Argentina; |
• | a decrease of 50 basis points due to higher supply chain costs, driven by higher material costs primarily in South Latin America. |
• | an increase of 30 basis points due to the impact higher net brochure expense primarily in Brazil, and to a lesser extent, in the United Kingdom and South Africa. |
• | a decrease of 50 basis points from lower bad debt expense, primarily in Brazil, as the prior-year period was impacted by lower than anticipated collection of receivables; |
• | foreign currency transaction gains (classified within cost of sales, and selling, general and administrative expenses), which had an unfavorable impact to operating profit and Adjusted operating profit of an estimated $10, or approximately 30 basis points to operating margin and Adjusted operating margin; |
• | foreign currency translation, which had an immaterial net impact to operating profit and Adjusted operating profit; and |
• | foreign exchange net losses on our working capital (classified within other expense, net) as compared to net gains in the prior year, resulting in a year-over-year unfavorable impact of approximately $15 before tax on both a reported and Adjusted basis. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||
%/Basis Point Change | %/ Basis Point Change | ||||||||||||||||||||||||||
2018 | 2017 | US$ | Constant $ | 2018 | 2017 | US$ | Constant $ | ||||||||||||||||||||
Total revenue | $ | 500.7 | $ | 494.6 | 1 | % | — | % | $ | 1,069.1 | $ | 1,002.1 | 7 | % | 1 | % | |||||||||||
Segment profit | 74.4 | 80.8 | (8 | )% | (9 | )% | 148.8 | 154.3 | (4 | )% | (9 | )% | |||||||||||||||
Segment margin | 14.9 | % | 16.3 | % | (140 | ) | (150 | ) | 13.9 | % | 15.4 | % | (150 | ) | (160 | ) | |||||||||||
Change in Active Representatives | (3 | )% | (2 | )% | |||||||||||||||||||||||
Change in units sold | (3 | )% | (1 | )% | |||||||||||||||||||||||
Change in Ending Representatives | (2 | )% | (2 | )% |
• | a decline of 60 basis points from higher advertising expense, primarily due to increased investment in the United Kingdom and Russia; |
• | a decline of 50 basis points due to higher net brochure cost, primarily in the United Kingdom and in South Africa; |
• | a decline of 50 basis points due to higher transportation costs, primarily in the United Kingdom, primarily relating to increased flexibility in order processing in the United Kingdom and further increases in delivery rates in Russia; |
• | a decline of 30 basis points from higher variable distribution cost, primarily relating to increased flexibility in order processing in the United Kingdom; and |
• | a benefit of 90 basis points due to higher gross margin primarily due to lower supply chain costs driven by material costs. |
• | a decline of 60 basis points due to lower gross margin primarily caused by 70 basis points from the unfavorable impact of foreign currency transaction net losses; |
• | a decline of 50 basis points from higher transportation costs, driven by further increases in delivery rates in Russia and increased flexibility in order processing in the United Kingdom; |
• | a decline of 30 basis points due to the higher Representative, sales leader and field expense in Russia and Turkey, driven by increased investment and higher pay-outs to the field compared to the prior-year period; and |
• | a decline of 20 basis points from higher advertising expense, primarily due to increased investment in the United Kingdom and Russia. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||
%/Basis Point Change | %/Basis Point Change | ||||||||||||||||||||||||||
2018 | 2017 | US$ | Constant $ | 2018 | 2017 | US$ | Constant $ | ||||||||||||||||||||
Total revenue | $ | 516.1 | $ | 558.1 | (8 | )% | 3 | % | $ | 1,013.2 | $ | 1,057.3 | (4 | )% | 4 | % | |||||||||||
Segment profit | 55.2 | 45.7 | 21 | % | 32 | % | 82.4 | 59.4 | 39 | % | 51 | % | |||||||||||||||
Segment margin | 10.7 | % | 8.2 | % | 250 | 230 | 8.1 | % | 5.6 | % | 250 | 260 | |||||||||||||||
Change in Active Representatives | (5 | )% | (6 | )% | |||||||||||||||||||||||
Change in units sold | (6 | )% | (6 | )% | |||||||||||||||||||||||
Change in Ending Representatives | (4 | )% | (4 | )% |
• | a benefit of 240 basis points due to higher gross margin primarily caused by 170 basis points due to non-recurring net tax recoveries in Brazil and 120 basis points from the favorable net impact of mix and pricing, partially offset by 70 basis points due to higher supply chain costs driven by higher material costs; |
• | a benefit of 90 basis points due to lower Representative, sales leader and field expense, in line with sales performance; |
• | a benefit of 60 basis points from lower bad debt expense, primarily in Brazil, as the prior-year period was impacted by lower than anticipated collection of receivables; |
• | a decline of 70 basis points primarily related to higher transportation costs in Brazil, primarily driven by inefficiencies caused by the national transportation strike; and |
• | a decline of 40 basis points due to higher net brochure cost, primarily due to an increase in brochure volumes in Brazil. |
• | a benefit of 210 basis points due to higher gross margin including 90 basis points due to non-recurring net tax recoveries in Brazil, 110 basis points from the favorable net impact of mix and pricing and 40 basis points from the favorable impact of foreign currency net gains. These items were partially offset by 60 basis points due to higher supply chain costs driven by higher material costs; |
• | a benefit of 150 basis points from lower net bad debt expense, primarily in Brazil, as the prior-year period was impacted by lower than anticipated collection of receivables; |
• | a decline of 70 basis points due to higher transportation costs in Brazil, primarily driven by inefficiencies caused by the national transportation strike, and the unfavorable impact of declining revenue with respect to transportation costs; and |
• | a decline of 70 basis points due to higher net brochure cost, primarily due to an increase in brochure volumes in Brazil. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||
%/Basis Point Change | %/Basis Point Change | ||||||||||||||||||||||||||
2018 | 2017 | US$ | Constant $ | 2018 | 2017 | US$ | Constant $ | ||||||||||||||||||||
Total revenue | $ | 207.3 | $ | 207.8 | — | % | 3 | % | $ | 402.9 | $ | 401.0 | — | % | — | % | |||||||||||
Segment profit | 19.0 | 18.2 | 4 | % | 9 | % | 39.8 | 39.6 | 1 | % | (1 | )% | |||||||||||||||
Segment margin | 9.2 | % | 8.8 | % | 40 | 50 | 9.9 | % | 9.9 | % | — | — | |||||||||||||||
Change in Active Representatives | (5 | )% | (6 | )% | |||||||||||||||||||||||
Change in units sold | (6 | )% | (8 | )% | |||||||||||||||||||||||
Change in Ending Representatives | (8 | )% | (8 | )% |
• | a net decline of 170 basis points due to higher fixed expenses, primarily related to personnel cost; |
• | a decline of 70 basis points due to increased net bad debt expense primarily driven by lower payments in Mexico and political unrest in Nicaragua; |
• | a decline of 40 basis points due to higher transportation costs, primarily related to an increase in fuel prices in Mexico; |
• | a benefit of 210 basis points due to lower Representative, sales leader and field expense in line with sales performance; and |
• | a benefit of 60 basis points from lower advertising expense as compared to the prior-year period. |
• | a net decline of 190 basis points primarily due to higher fixed expenses, primarily related to personnel cost and the impact of the Constant $ revenue decline causing deleverage of our fixed expenses; |
• | a decline of 60 basis points primarily due to an increase in fuel prices in Mexico; |
• | a benefit of 120 basis points due to lower Representative, sales leader and field expense in line with sales performance; and |
• | a benefit of 40 basis points from lower advertising expense as compared to the prior-year period. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||
%/Basis Point Change | %/Basis Point Change | ||||||||||||||||||||||||||
2018 | 2017 | US$ | Constant $ | 2018 | 2017 | US$ | Constant $ | ||||||||||||||||||||
Total revenue | $ | 113.1 | $ | 113.9 | (1 | )% | 1 | % | $ | 224.5 | $ | 227.3 | (1 | )% | (1 | )% | |||||||||||
Segment profit | 7.3 | 10.2 | (28 | )% | (21 | )% | 17.7 | 23.5 | (25 | )% | (19 | )% | |||||||||||||||
Segment margin | 6.5 | % | 9.0 | % | (250 | ) | (200 | ) | 7.9 | % | 10.3 | % | (240 | ) | (180 | ) | |||||||||||
Change in Active Representatives | (1 | )% | (1 | )% | |||||||||||||||||||||||
Change in units sold | — | % | (3 | )% | |||||||||||||||||||||||
Change in Ending Representatives | (4 | )% | (4 | )% |
• | a decline of 90 basis points from lower gross margin, primarily due to higher logistics cost in the Philippines to address service disruptions caused by the inventory system implementation earlier in the year; |
• | a decline of 50 basis points due to higher fixed expenses primarily relating to the impairment of the inventory system implemented in the Philippines; and |
• | a decline of 30 basis points due to higher advertising expense, primarily in China, related to celebrity and digital advertising to support growth. |
• | a decline of 70 basis points related to higher Representative, sales leader and field expense, primarily due to investments in store upgrades and e-commerce in China; |
• | a decline of 60 basis points primarily relating to the impairment of the inventory system implemented in the Philippines; |
• | a decline of 50 basis points due to higher advertising expense, primarily in the Philippines, related to television advertising associated with our Color category, and in China, related to celebrity and digital advertising to support growth; and |
• | a benefit of 30 basis points due to higher gross margin caused by 160 basis points from benefits in supply chain costs due to lower obsolescence and overhead costs, partially offset by 100 basis points due to higher logistics cost in the Philippines to address service disruptions caused by the inventory system implementation earlier in the year. |
• | 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/or realize the projected benefits (in the amounts and time schedules we expect) from, our transformation plan, stabilization strategies, cost savings initiatives, restructuring 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 including e-commerce, 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; |
• | our ability to achieve the anticipated benefits of our strategic partnership with Cerberus Capital Management, L.P.; |
• | our broad-based geographic portfolio, which is heavily weighted towards emerging markets, a general economic downturn, a recession globally or in one or more of our geographic regions or markets, such as Brazil, Mexico or Russia, or sudden disruption in business conditions, and the ability to withstand an economic downturn, recession, cost inflation, commodity cost pressures, economic or political instability (including fluctuations in foreign exchange rates), competitive or other market pressures or conditions; |
• | the effect of economic factors, including inflation and fluctuations in interest rates and foreign currency exchange rates; as well as the designation of Argentina as a highly inflationary economy, and the potential effect of such factors on our business, results of operations and financial condition; |
• | the possibility of business disruption in connection with our transformation plan, stabilization strategies, cost savings initiatives, or restructuring and other initiatives; |
• | our ability to reverse declining revenue, to improve margins and net income, or to achieve profitable growth, particularly in our largest markets and developing and emerging markets, such as Brazil, 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 enhance our sales leadership programs, 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 and segmentation programs and technology tools and enablers, to invest in the direct-selling channel, to offer a more social selling experience, 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, such as in Russia and Ukraine or elsewhere, and any potential sanctions, restrictions or responses to such conditions imposed by other markets in which we operate; |
• | developments in or consequences of any investigations and compliance reviews, and any litigation related thereto, including the investigations and compliance reviews of Foreign Corrupt Practices Act and related United States ("U.S.") and foreign law matters, as well as any disruption or adverse consequences resulting from such investigations, reviews, related actions or litigation; |
• | the effect of political, legal, tax, including changes in tax rates, and other regulatory risks imposed on us abroad and in the U.S., our operations or the Representatives, including foreign exchange, pricing, data privacy or other restrictions, the adoption, interpretation and enforcement of foreign laws, including in jurisdictions such as Brazil and Russia, 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; |
• | competitive uncertainties in our markets, including competition from companies in the consumer packaged goods industry, some of which are larger than we are and have greater resources; |
• | the impact of the adverse effect of volatile 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, and any cyber security breaches, including any security breach of our systems or those of a third-party provider that results in the theft, transfer or unauthorized disclosure of Representative, customer, employee or Company information or compliance with information security and privacy laws and regulations in the event of such an incident which could disrupt business operations, result in the loss of critical and confidential information, and adversely impact our reputation and results of operations, and related costs to address such malicious intentional acts and to implement adequate preventative measures against cyber security breaches; |
• | our ability to comply with various data privacy laws affecting the markets in which we do business; |
• | the risk of product or ingredient shortages resulting from our concentration of sourcing in fewer suppliers; |
• | any changes to our credit ratings and the impact of such changes on our financing costs, rates, terms, debt service obligations, access to lending sources and working capital needs; |
• | the impact of our indebtedness, our access to cash and financing, and our ability to secure financing or financing at attractive rates and terms and conditions; |
• | the impact of our business results (including the impact of any adverse foreign exchange movements and significant restructuring charges), on our ability to comply with certain covenants in our revolving credit facility; |
• | our ability to successfully identify new business opportunities, strategic alliances and strategic alternatives and identify and analyze alliance candidates, secure financing on favorable terms and negotiate and consummate alliances; |
• | 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, including in connection with the separation of the North America business; |
• | our ability to repurchase the series C preferred stock in connection with a change of control; and |
• | the risk of an adverse outcome in any material pending and future litigation or with respect to the legal status of Representatives. |
Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program | ||||||||
4/1 - 4/30/18 | 120,511 | (1) | 2.77 | * | * | ||||||
5/1 - 5/31/18 | 48,667 | (1) | $ | 2.65 | * | * | |||||
6/1 - 6/30/18 | 9,089 | 2.69 | * | * | |||||||
Total | 178,267 | $ | 2.73 | * | * |
* | These amounts are not applicable as the Company does not have a share repurchase program in effect. |
(1) | All shares were repurchased by the Company in connection with employee elections to use shares to pay withholding taxes upon the vesting of their restricted stock units and performance restricted stock units. |
10.1 | |
10.2 | |
10.3 | |
10.4 | |
31.1 | |
31.2 | |
32.1 | |
32.2 | |
101 | The following materials formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Statements of Operations, (ii) Consolidated Statements of Comprehensive Loss, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements |
AVON PRODUCTS, INC. | ||
(Registrant) | ||
Date: | August 3, 2018 | /s/ Laura Barbrook |
Laura Barbrook | ||
Vice President and Corporate | ||
Controller - Principal Accounting Officer | ||
Signed both on behalf of the | ||
registrant and as chief | ||
accounting officer. |
1. | Grant of Performance Contingent Restricted Stock Unit Award. The PRSUs are being awarded to you hereunder outside of the Company’s 2016 Omnibus Incentive Plan (the “Plan”). Notwithstanding that this award is made outside of the Plan, except as otherwise expressly provided in this Agreement and other than as to the Share limitations of Section 5 of the Plan, this Agreement will be interpreted in a manner consistent with the terms of the Plan and all such terms will be deemed to be incorporated into and made a part of this Agreement. All capitalized terms used in this Agreement shall have the meaning set forth in the Plan, unless otherwise defined herein. |
2. | Nature of PRSUs; Issuance of Shares. The PRSUs represent a right to receive Shares on the Settlement Date (as defined below) but do not represent a current interest in the Shares. If all the terms and conditions hereof and of the Plan are met, then you shall be issued Shares on the Settlement Date. Notwithstanding the foregoing, the Company reserves the right to determine to settle all or a portion of your vested PRSUs in cash, in lieu of Shares. Any such cash payment will equal (x) the Fair Market Value of a Share as of the Settlement Date multiplied by (y) the number of vested PRSUs the Company determines to settle in cash. |
1. | Restrictions on Transfer of PRSUs. The PRSUs may not be sold, tendered, assigned, transferred, pledged or otherwise encumbered. |
5. | Recoupment. Except where void by law and unless otherwise determined by the Committee, the PRSUs, and any Shares or cash issued upon settlement of any vested PRSUs, are subject to forfeiture and/or recoupment in the event that you have engaged in misconduct, including: (x) a serious violation of the Company’s Code of Conduct; or (y) a violation of law within |
8. | Responsibility for Taxes. |
9. | U.S. Internal Revenue Code Section 409A. If you are subject to U.S. Internal Revenue Code Section 409A (“Section 409A”), then the following provisions shall apply: |
10. | United Kingdom Specific Provisions. The following provisions apply to you as a resident of the United Kingdom. Please appreciate that the information contained in this Section 12 is general in nature and may not apply to your particular situation, and the Company is not in a position to assure you of any particular result. Accordingly, you are advised to seek appropriate professional advice as to how the relevant laws of your home country may apply to your situation. You further understand and agree that if you are a citizen or resident of a country other than the one in which you are currently working, or if your employment transfers after the grant of the PRSUs, or if you are considered a resident of another country for local law purposes, the information contained herein may not apply to you, and the Company shall, in its discretion, determine to what extent the terms and conditions contained herein shall apply, or determine that other terms and conditions are necessary or advisable in order to comply with local law or to facilitate the administration of this Agreement. |
AVON PRODUCTS, INC. | GRANTEE | |
/s/ Susan Ormiston Susan Ormiston, Senior Vice President, Human Resources and Chief Human Resources Officer | /s/ Jan Zijderveld Jan Zijderveld |
1. | Grant of Option. The Option is being awarded to you hereunder outside of the Company’s 2016 Omnibus Incentive Plan (the “Plan”). Notwithstanding that this award is made outside of the Plan, except as otherwise expressly provided in this Agreement and other than as to the Share limitations of Section 5 of the Plan, this Agreement will be interpreted in a manner consistent with the terms of the Plan and all such terms will be deemed to be incorporated into and made a part of this Agreement. All capitalized terms used in this Agreement shall have the meaning set forth in the Plan, unless otherwise defined herein. |
2. | Exercise of Option. |
1. | Expiration of Option. |
4. | Recoupment. Except where void by law and unless otherwise determined by the Committee, the Option, and the Shares issued to you in connection with the exercise of the Option hereunder, are subject to forfeiture and/or recoupment in the event that you have engaged in misconduct, including: (x) a serious violation of the Company’s Code of Conduct; or (y) a violation of law within the scope of employment with the Company and its Subsidiaries. The Option and any Shares issued to you in connection with the exercise of the Option hereunder are also subject to the Company’s Compensation Recoupment Policy. |
7. | Responsibility for Taxes. By accepting this grant, you hereby irrevocably elect to satisfy any taxes and social insurance contribution withholding required to be withheld by the Company or its Subsidiaries on the date of grant, vesting or exercise of the Option or delivery or sale of any Shares hereunder or on any earlier date on which such taxes or social insurance contribution withholding may be due (“Tax Liability”) by authorizing the Company and any of its Subsidiaries to withhold a sufficient number of Shares that would otherwise be deliverable to you upon exercise of the Option. If, for any reason, the Shares that would otherwise be deliverable to you upon exercise of the Option would be insufficient to satisfy the Tax Liability, the Company and any of its Subsidiaries are authorized to withhold an amount from your wages or other compensation sufficient to satisfy the Tax Liability. Furthermore, you agree to pay the Company or its Subsidiaries any amount of the Tax Liability that cannot be satisfied through one of the foregoing methods. |
8. | United Kingdom Specific Provisions. The following provisions apply to you as a resident of the United Kingdom. Please appreciate that the information contained in this Section 10 is general in nature and may not apply to your particular situation, and the Company is not in a position to assure you of any particular result. Accordingly, you are advised to seek appropriate professional advice as to how the relevant laws of your home country may apply to your situation. You further understand and agree that if you are a citizen or resident of a country other than the one in which you are currently working, or if your employment transfers after the grant of the Option, or if you are considered a resident of another country for local law purposes, the information contained herein may not apply to you, and the Company shall, in its discretion, determine to what extent the terms and conditions contained herein shall apply, or determine that other terms and conditions are necessary or advisable in order to comply with local law or to facilitate the administration of this Agreement. |
AVON PRODUCTS, INC. | OPTIONEE |
/s/ Susan Ormiston Susan Ormiston, Senior Vice President, Human Resources and Chief Human Resources Officer | /s/ Jan Zijderveld Jan Zijderveld |
1. | Grant of Performance-Contingent Restricted Stock Unit Award. The target number of PRSUs granted hereunder is 600,000. The actual number of PRSUs that are delivered to you will depend on the satisfaction of the service-vesting and performance-vesting conditions described below. Each PRSU represents the right to receive one share of Stock (“Share”), upon satisfaction of the vesting and other terms and conditions of this Agreement. The PRSUs are being awarded to you hereunder outside of the Company’s 2016 Omnibus Incentive Plan (the “Plan”). Notwithstanding that this award is made outside of the Plan, except as otherwise expressly provided in this Agreement and other than as to the Share limitations of Section 5 of the Plan, this Agreement will be interpreted in a manner consistent with the terms of the Plan and all such terms will be deemed to be incorporated into and made a part of this Agreement. All capitalized terms used in this Agreement shall have the meaning set forth in the Plan, unless otherwise defined herein. |
1. | Restrictions on Transfer of PRSUs. The PRSUs may not be sold, tendered, assigned, transferred, pledged or otherwise encumbered. |
(i) | One-third of the target number of PRSUs granted hereunder shall be allocated to each Performance Period (i.e., 200,000 target PRSUs shall be allocated to 2018; 200,000 target PRSUs shall be allocated to 2019; and 200,000 target PRSUs shall be allocated to 2020). You will have an opportunity to earn up to 150% of the target PRSUs allocated to each Performance Period, based on achievement of the Performance Objectives relating to such Performance Period. |
(ii) | In the first quarter of each Performance Period, the Committee will establish the Performance Objectives for that Performance Period. You will be issued a Grant Notification for each of 2018, 2019 and 2020, which will set forth the Performance Objectives for that Performance Period. |
(iii) | The determination of achievement of the Performance Objectives for any Performance Period shall be subject to the Committee’s certification of such results. |
5. | Recoupment. Except where void by law and unless otherwise determined by the Committee, the PRSUs, and any Shares or cash issued upon settlement of any vested PRSUs, are subject to forfeiture and/or recoupment in the event that you have engaged in misconduct, including: (x) a serious violation of the Company’s Code of Conduct; or (y) a violation of law within the scope of your employment with the Company and its Subsidiaries. All PRSUs hereunder are also subject to the Company’s Compensation Recoupment Policy. |
8. | Responsibility for Taxes. |
9. | U.S. Internal Revenue Code Section 409A. If you are subject to U.S. Internal Revenue Code Section 409A (“Section 409A”), then the following provisions shall apply: |
AVON PRODUCTS, INC. | GRANTEE | |
/s/ Susan Ormiston Susan Ormiston, Senior Vice President, Human Resources and Chief Human Resources Officer | /s/ Jan Zijderveld Jan Zijderveld |
1. | Last Day of Active Employment |
2. | Salary Continuation |
(a) | The first tranche (“Tranche A”) will be equal to the 409A Limit, payable over the Salary Continuation Period in substantially equal, bi-weekly installments (less applicable deductions) on each of Avon’s regular payroll dates (it being understood that the first of such installments shall not be made unless and until this Agreement becomes effective and irrevocable (by your not revoking it within seven days of your signature) in accordance with Paragraph 25). |
(b) | The second tranche (“Tranche B”) will be equal to the remaining amount of salary continuation owed to you under this Agreement in excess of the 409A Limit, payable from the first administratively feasible Avon regular payroll date that occurs in the seventh (7th) month following the Separation Date through the end of the Salary Continuation Period, in substantially equal, bi-weekly installments (less applicable deductions) on each of Avon’s regular payroll dates. |
3. | Retirement Plans |
a. | Avon Products, Inc. Personal Retirement Account Plan (“PRA”) |
b. | Benefit Restoration Plan of Avon Products, Inc. (the “Restoration Plan”) |
4. | Avon Personal Savings Account Plan: With respect to the Avon Personal Savings Account Plan (the “PSA”), also known as the 401(k) Plan, you are considered a terminated employee on the Separation Date. Even if you enter into this Agreement and are eligible for the Severance Benefits, you will not be entitled to participate in the PSA during the Salary Continuation Period. Upon the Separation Date, you may take a distribution of your benefits immediately. You may roll over the contents of your PSA account into an Individual Retirement Account or other tax-deferred savings account in accordance with the PSA and applicable tax rules. Please consult with your accountant or tax advisor before doing so. Any outstanding PSA loans you may have are payable within three (3) months after your Separation Date if you do not make arrangements to continue to make regular loan repayments after the Separation Date through the PSA third party administrator, Empower Retirement. You should contact Empower Retirement if you have an outstanding plan loan. |
5. | Cash Incentive Award |
6. | Equity Awards |
7. | Career Transition and Development Services |
8. | Health and Welfare Plans |
9. | Perquisites |
a. | Executive Health Exam |
b. | Repatriation Benefits |
c. | Other Perquisites |
10. | Your Obligations to Avon |
a. | Confidentiality: You agree to keep and hold in strict trust all Confidential Information (defined below) that you obtained or generated during or as a result of your employment at Avon. You promise not to knowingly use, disclose, copy, distribute or reverse-engineer, directly or through persons interposed, without Avon’s prior written consent (which may only be provided by the Chairman of the Board of Directors of Avon (the “Chairman”)), as and from this date, and at any time, Avon’s Confidential Information. For this purpose, “Confidential Information” means any secret, confidential, and/or proprietary information or knowledge relating to Avon or related to any of Avon’s affiliated companies, and/or their respective businesses, agents, employees, customers and independent sales representatives, that is not generally known to the public. Such Confidential Information includes, but is not limited to, financial information and projections, marketing information and plans, product formulations, samples, processes, production methods, intellectual property and trade secrets, data, know-how, sales, market development programs and plans, and other types of information not generally known to the public, including non-public unpublished or pending patent applications and all related patent rights, techniques, formulae, processes, discoveries, improvements, ideas, conceptions, compilations of data, and developments, whether or not patentable and whether or not copyrightable. Notwithstanding your confidentiality obligations, you are permitted to disclose Confidential Information that is required to be disclosed by you pursuant to judicial order or other legal mandate, provided that you have given Avon prompt notice of the disclosure requirement, and that you fully cooperate with any efforts by Avon to obtain and comply with any protective order imposed on such disclosure. |
b. | Use of Confidential Information: You agree that you will not use Avon’s Confidential Information in connection with any publicity, advertising, endorsement or other promotion. You further agree not to use Avon’s trademarks, logos, service marks or other intellectual property in any form of advertising, publicity or release without Avon’s prior written approval. You understand that nothing in this Agreement shall be construed to prevent lawful communications regarding working conditions, or other terms and conditions of employment protected under Section 7 of the National Labor Relations Act or applicable state law. |
c. | Non-solicitation: You will not, without Avon’s prior written consent (which may only be provided by the Chairman), during the Salary Continuation Period, directly or indirectly, or your own behalf or in the service of or on behalf of others, hire, solicit, attempt to hire or aid in the solicitation of, any employee of Avon or an affiliated company, including any solicitation or recruitment of such employee to take him or her away from or to leave his or her Avon (or affiliated company’s) employment to work for any other employer or other entity. |
d. | Non-competition: Notwithstanding anything else in this Agreement, you will not, during the Salary Continuation Period, without Avon’s prior written consent (which may only be provided by the Chairman), directly or indirectly, or your own behalf or in the service of or on behalf of others, accept employment with, or act as a consultant or independent contractor to, any company engaged in the direct selling business or beauty business within or without the United States including, but not limited to, the following: Amway Corp./Alticor Inc., Amore Pacific, Arabela, Arbonne, Beiersdorf (Nivea), COTY, De Millus S.A., Ebel Int’l/Belcorp Corp., Elizabeth Arden, Faberlic, Herbalife Ltd., Inter Parfums, Jequiti, Lady Racine/LR Health & Beauty Systems GmbH, LG Health & Household, L’Occitane, L’Oréal Group/Cosmair Inc., Mary Kay Inc., Mistine/Better Way (Thailand) Co. Ltd., Natura Cosmetics S.A., Neways Int’l, NuSkin Enterprises Inc., O Boticário, Oriflame Cosmetics S.A., Origami Owl, Reckitt Benckiser PLC, Revlon Inc., Rodan & Fields, Shaklee Corp., Shiseido, Stella & Dot, Silpada, The Body Shop Int’l PLC, The Estée Lauder Companies Inc., The Procter & Gamble Company, Tupperware Corp., Unilever Group (N.V. and PLC), Vorwerk & Co. KG/Jafra Worldwide Holdings (Lux) S.à.R.L. Inc., Yanbal Int’l (Yanbal, Unique), Younique or any of their affiliates. |
e. | Cooperation: By signing this Agreement, you are agreeing that you may be reasonably requested from time to time by Avon: (x) to advise and consult on matters within or related to your expertise and knowledge in connection with the business of Avon; (y) to make yourself available to Avon to respond to requests for information concerning matters involving facts or events relating to Avon; and (z) to assist with pending and future litigation, investigations, arbitrations, and/or other dispute resolution matters. You will receive reimbursement for reasonable out-of-pocket expenses incurred in connection with such assistance. In addition, if you provide such post-termination assistance after the Salary Continuation Period ends, you will be paid for your time expended at the Company’s request on such matters at an hourly rate equal to your weekly rate of base salary in effect at the time of your termination, divided by 40 hours, subject to your submission to the Company of your monthly invoices. For the avoidance of doubt, with respect to any post-termination cooperation you may provide under this section, you will not be an employee of, but rather an independent contractor to, the Company, and you will not be credited with compensation, service or age credit for purposes of eligibility, vesting or benefit accrual under any employee benefit plan of Avon (including the long-term incentive plan). |
f. | By signing this Agreement, you acknowledge that you understand that violations of any of the preceding covenants are material and that any violations may result in a forfeiture, at Avon’s sole discretion, of your benefits and payments under this Agreement (including salary continuation, whether or not already paid), but do not relieve you of your continuing obligations under this Agreement. You agree that Avon’s remedies at law for any breach by you of the preceding covenants will be inadequate and that Avon will also have the right to obtain immediate injunctive relief, without a bond, so as to prevent any continued breach of any of these covenants, in |
g. | By signing this Agreement, to the fullest extent allowed by law, you agree not to commence, join, participate in, or assist any lawsuit, action, investigation or proceeding arising from or relating to any act or omission by any of the “Avon Released Parties” (as that term is defined in Paragraph 18 below) unless you are compelled by law to do so and you also agree not to recover or seek to recover any damages, backpay or other monetary relief as part of any action or class action brought by any other individual, the EEOC, or any other civil rights or governmental agency. |
11. | E-Mail and Voicemail: You acknowledge and understand that your access to Avon’s e-mail and voicemail, as well as other communication systems, will be discontinued as of the Separation Date. |
12. | Return of Avon Property: On or before the Separation Date, you agree to promptly deliver to Avon, and not keep in your possession, duplicate, or deliver to any other person or entity, any and all property (whether in hard copy, physical form, or electronic form) that belongs to Avon or any of its affiliated companies, including, without limitation, automobiles, computer hardware and software, cell phones, Blackberrys, iPhones, Androids, other smartphones, iPads, other tablets, thumb drives, other electronic equipment, keys, credit cards, identification cards, records, files, data, and other documents and information, including any and all copies of the foregoing. |
13. | Entire Agreement and Amendments to Agreement: You acknowledge that the only consideration for your execution and non-revocation of this Agreement (which includes a general release of claims) are the benefits which are expressly stated in this document. All other promises or agreements of any kind, including but not limited to, your offer letter dated as of April 4, 2012, the Assignment Letter and the Retirement Letter, that have been made by or between the parties or by any other person or entity whatsoever that are related to the subject matter of this Agreement are superseded, revoked and cancelled by this Agreement, except as specifically provided for in this Agreement; provided, that any arbitration, nondisclosure, intellectual property protection, non-solicit, non-compete or classified information provisions and/or agreements with the Company continue to apply in accordance with their terms (and the greater protection to Avon applies in the event of any conflict between this Agreement and such other agreements) and any plans (such as the PRA), equity award agreements, or policies that are referenced in this Agreement as continuing to be applicable (including, without limitation, the Company’s “Associate Arbitration Policy”) are not superseded and will remain in effect. In addition, any compensation recoupment provisions, practices or policies, including the Company’s Amended & Restated Compensation Recoupment Policy, will continue to apply, as applicable. Also, your entitlement to be indemnified for acts and omissions to act occurring while an officer, director or employee and for coverage as an insured under applicable directors and officers liability insurance continues to apply. You agree that this Agreement may not be changed orally, by email, or by any other form of electronic communication, but only by a written agreement signed by both you and an authorized representative of Avon. |
14. | Severability: You agree that the provisions of this Agreement are severable. If a provision or any part of a provision is held to be invalid under any law or ruling, all of the remaining provisions of this Agreement will remain in full force and effect and be enforceable to the extent allowed by law. If any restriction contained in this Agreement is held to be excessively broad as to duration, activity, or scope, then you agree that such restriction may be construed, “blue-penciled” or judicially modified so as to be limited or reduced to the extent required to be enforceable under applicable law. |
15. | Voluntary Nature: You are not required to enter into this Agreement. Any election to do so by you is completely voluntary. By signing this Agreement, you warrant and represent that you have read this entire Agreement, that you have had an opportunity to consult fully with an attorney, and that you fully understand the meaning and intent of this Agreement. Further, you knowingly and voluntarily, of your own free will, without any duress, being fully informed, and after due deliberation, accept its terms and sign below as your own free act. You understand that as a result of executing this Agreement, you will not have the right to assert that Avon or any other Avon Released Party (as defined in this Agreement in Paragraph 18 below) unlawfully terminated your employment or violated any of your rights in connection with your employment. |
16. | Governing Law: You agree that this Agreement (which includes a general release of claims) will be governed by and construed in accordance with the laws of the State of New York, without regard to its conflict of laws principles, and federal law where applicable. Any legal action to enforce this Agreement, by either party, shall be subject to arbitration in accordance with Avon’s “Associate Arbitration Policy”. To the extent that Avon is seeking equitable relief to enforce your obligations under this Agreement, Avon may seek such relief as provided in the Paragraph 10 entitled Your Obligations to Avon in any federal, state or local court in any jurisdiction. |
17. | Election Not to Accept the Severance Benefits: Should you elect not to enter into this Agreement and reject the Severance Benefits, you will be provided only with the basic severance as defined under the Severance Plan (two weeks of base salary, less applicable withholdings) and continued coverage under certain Avon benefit plans during that two week period (or, for some plans, until the last day of the month in which such payments end, in accordance with the terms of such plans (which control in the event of any discrepancy herein)). Following this two-week salary continuation period, you will be notified by a separate letter of your right to elect continued group health plan coverage, at your own expense, under COBRA, as applicable. |
18. | General Release of Claims |
• | All Claims arising from your employment relationship with Avon and the termination of such relationship; |
• | All Claims arising under any federal, state, or local constitution, statute, rule, or regulation, or principle of contract law or common law; |
• | All Claims for breach of contract, wrongful discharge, tort, breach of common-law duty, or breach of fiduciary duty; |
• | All Claims for violation of laws prohibiting any form of employment discrimination or other unlawful employment practice, including without limitation, as applicable: |
◦ | The Worker Adjustment and Retraining Notification Act of 1988, as amended, 29 U.S.C. §§ 2101 et seq.; |
◦ | Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. §§ 2000e et seq.; |
◦ | The Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. §§ 621 et seq. (the “ADEA”); |
◦ | The Americans with Disabilities Act of 1990, as amended, 42 U.S.C. §§ 12101 et seq.; |
◦ | The Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. §§ 1001 et seq.; |
◦ | The Family and Medical Leave Act of 1993, as amended, 29 U.S.C. §§ 2601 et seq.; |
◦ | The Genetic Information Nondiscrimination Act of 2008, as amended, 42 U.S.C. §§ 2000ff et seq.; |
◦ | The National Labor Relations Act of 1935, as amended, 29 U.S.C. §§ 151 et seq. (the “NLRA”); |
◦ | the Fair Credit Reporting Act, as amended, 15 U.S.C. §§ 1681 et seq.; |
◦ | “Whistleblower” laws (other than as provided for in Paragraph 20 herein) and laws protecting “whistleblowers” from retaliation; |
◦ | The New York State Human Rights Law, as amended, N.Y. Exec. Law §§ 290 et seq.; the New York State Worker Adjustment and Retraining Notification Act, as amended, N.Y. Labor Law §§ 860 et seq.; Article 6 of the New York Labor Law, as amended, N.Y. Labor Law §§ 190 et seq.; the New York Nondiscrimination for Legal Actions Law, as amended, N.Y. Labor Law § 201-d; the New York State Fair Credit Reporting Act, as amended, N.Y. Gen. Bus. Law §§ 380 et seq.; Article 23-A of the New York State Corrections Law, as amended, N.Y. Correc. Law §§ 750 et seq.; the New York City Human Rights Law, as amended, N.Y.C. Admin. Code §§ 8-101 et seq.; the New York City Earned Sick Time Act, as amended, N.Y.C. Admin. Code §§ 20-911 et seq.; the New York City Stop |
◦ | Any other state’s and local government’s human rights laws, anti-discrimination laws, and “plant closing”/mini-WARN Act laws; |
◦ | Anti-retaliation laws, including without limitation retaliation claims under the New York State Workers’ Compensation Law, as amended, N.Y. Workers’ Comp. Law § 120, and the New York State Disability Benefits Law, as amended, N.Y. Workers’ Comp. Law § 241; |
◦ | Any law of England and Wales, including, but not limited to the Employment Rights Act 1996, the Working Time Regulations 1998, the Equality Act 2010, the Human Rights Act 1998, the Data Protection Act 1998 and the Protection of Harassment Act 1997; and |
◦ | Any other federal, state, or local constitution, statute, rule, or regulation; |
19. | Additional Representations |
a. | You acknowledge that you have been paid in full (or will be paid in full pursuant to the Company’s normal payroll practice policy) for all hours that you have worked for Avon, that you have properly reported all hours worked, and that other than what is provided for in this Agreement (and under the terms and conditions of the employee benefit plans and equity agreements and plans referenced herein), you have no other rights to any other compensation or benefits. |
b. | You further acknowledge that you have not been denied any leave requested under the Family and Medical Leave Act (“FMLA”) or applicable state leave laws and that, to the extent applicable, you have been returned to your job, or an equivalent position, following any FMLA or state leave taken pursuant to the FMLA or state laws. |
c. | You acknowledge, understand and agree that you have reported (or will timely report for occurrences that occur after the date that you sign this Agreement) to Avon any work related injury or illness that occurred up to and including the Separation Date. |
d. | You acknowledge and certify that you have complied with Avon’s Code of Conduct and its principles. |
e. | You acknowledge and agree that you have no additional employment rights against any of the Avon Released Parties as a result of your international assignment. |
20. | Reservation of Certain Rights |
21. | Compliance with Laws/Tax Treatment: Avon will comply with all payroll/tax withholding requirements and will include in income these benefits as required by law. Avon cannot guarantee the tax treatment of any of these benefits and makes no representation regarding the tax treatment. |
22. | Internal Revenue Code Section 409A: The parties hereto have a made a good faith effort to comply with current guidance under Section 409A. The intent of the parties hereto is that payments and benefits under this Agreement comply with or be exempt from Section 409A and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith, including, without limitation, that references to “termination of employment” and like terms, with respect to payments and benefits that are provided under a “nonqualified deferred compensation plan” (as defined in Section 409A) that is not exempt from Section 409A, will be interpreted to mean “separation from service” (as defined in Section 409A). In the event that amendments to this Agreement are necessary in order to comply with Section 409A or to minimize or eliminate any income inclusion and penalties under Section 409A (e.g., under any document or operational correction program), Avon and you agree to negotiate in good faith the applicable terms of such amendments and to implement such negotiated amendments, on a prospective and/or retroactive basis, as needed. To the extent that any amount payable or benefit to be provided under this Agreement constitutes an amount payable or benefit to be provided under a “nonqualified deferred compensation plan” (as defined in Section 409A) that is not exempt from Section 409A, and such amount or benefit is payable or to be provided as a result of a “separation from service” (as defined in Section 409A), and you are a specified employee (as defined in Section 409A and determined pursuant to procedures adopted by Avon from time to time) on your |
23. | Advice of Counsel: You acknowledge that you have been and are hereby advised by Avon to consult with an attorney about this Agreement and its General Release of Claims prior to signing and you represent that you did so to the extent that you deemed appropriate or you knowingly and voluntarily waived your right to do so. You represent and warrant that you fully understand the terms of this Agreement and its General Release of Claims , and you knowingly and voluntarily, of your own free will, without any duress, being fully informed, and after due deliberation, accept its terms and sign below as your own free act. You understand that, as a result of signing this Agreement you will not have the right to assert that Avon or any other Avon Released Party unlawfully terminated your employment or violated any of your rights in connection with your employment. |
24. | Challenge to the Validity of the Agreement and Communication with Government Agency: Nothing in this Agreement: (x) limits or affects your right to challenge the validity of the General Release of Claims under the ADEA or the Older Workers Benefit Protection Act; or (y) precludes you from filing an administrative charge or otherwise communicating with any federal, state or local government office, official or agency. However, you promise and agree never to seek or accept any damages or other legal remedies, or any equitable remedies or relief (including, without limitation, relief that would provide you with reinstatement to employment with Avon), and hereby waive any right to recovery of any such damages, remedies or other relief for you personally with respect to any claim released by Paragraph 18, regardless of whether another person or entity or you initiate the underlying action related to the Claim. You also promise and agree not to voluntarily offer to be a witness and/or voluntarily provide evidence in support of any lawsuit brought by a third party (excluding governmental agencies) against Avon or the Avon Released Parties (as defined in the General Release of Claims above). |
25. | Permissible Time to Sign Agreement. In order to receive the Severance Benefits, you must sign and return this Agreement no earlier than the Separation Date and no later than thirty (30) days following the Separation Date. If you do not sign and return the Agreement within this time period, then the offer of the Severance Benefits described herein will expire and you will not be entitled to any Severance Benefits. As long as you sign and return this Agreement within this time period, you will have seven (7) days immediately after the date of your signature to revoke your decision by delivering, within the seven (7) day period, written notice of revocation to Avon’s Senior Vice President, General Counsel. If you timely sign and return this Agreement and do not revoke it, then this Agreement will become effective on the eighth (8th) day immediately following the date of your signature. |
/s/ Jan Zijderveld |
Jan Zijderveld |
Chief Executive Officer |
/s/ James Wilson |
James Wilson |
Executive Vice President and |
Chief Financial Officer |
/s/ Jan Zijderveld |
Jan Zijderveld |
Chief Executive Officer |
August 3, 2018 |
/s/ James Wilson |
James Wilson |
Executive Vice President and |
Chief Financial Officer |
August 3, 2018 |
Document and Entity Information |
6 Months Ended |
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Jun. 30, 2018
shares
| |
DEI [Abstract] | |
Entity Registrant Name | AVON PRODUCTS INC |
Entity Central Index Key | 0000008868 |
Current Fiscal Year End Date | --12-31 |
Entity Filer Category | Large Accelerated Filer |
Document Type | 10-Q |
Document Period End Date | Jun. 30, 2018 |
Document Fiscal Year Focus | 2018 |
Document Fiscal Period Focus | Q2 |
Amendment Flag | false |
Entity Common Stock, Shares Outstanding | 442,344,872 |
Consolidated Statements of Operations - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Revenue | $ 1,351.9 | $ 1,395.9 | $ 2,745.4 | $ 2,729.0 |
Costs, expenses and other: | ||||
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 | 97.9 | 62.5 |
Interest expense | 34.5 | 36.1 | 70.7 | 71.2 |
Loss on extinguishment of debt | 2.9 | 0.0 | 2.9 | 0.0 |
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 before income taxes | (0.3) | (12.2) | 10.1 | (18.9) |
Income taxes | (36.7) | (33.6) | (68.2) | (63.4) |
Net loss | (37.0) | (45.8) | (58.1) | (82.3) |
Net loss attributable to noncontrolling interests | 0.9 | 0.3 | 1.7 | 0.3 |
Net loss attributable to Avon | $ (36.1) | $ (45.5) | $ (56.4) | $ (82.0) |
Loss per share: | ||||
Basic attributable to Avon (in dollars per share) | $ (0.09) | $ (0.12) | $ (0.15) | $ (0.21) |
Diluted attributable to Avon (in dollars per share) | $ (0.09) | $ (0.12) | $ (0.15) | $ (0.21) |
Net sales | ||||
Revenue | $ 1,268.8 | $ 1,353.5 | $ 2,578.4 | $ 2,651.6 |
Other revenue | ||||
Revenue | $ 83.1 | $ 42.4 | $ 167.0 | $ 77.4 |
Consolidated Statements of Comprehensive Income - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net loss | $ (37.0) | $ (45.8) | $ (58.1) | $ (82.3) |
Other comprehensive income: | ||||
Foreign currency translation adjustments | (126.6) | 9.5 | (93.9) | 71.5 |
Adjustments of and amortization of net actuarial loss and prior service cost, net of taxes of $0.1 and $0.0 | 2.8 | 3.1 | 5.7 | 6.2 |
Other comprehensive income related to New Avon investment, net of taxes of $0.0 | 0.0 | 0.1 | 0.0 | 1.2 |
Total other comprehensive (loss) income, net of income taxes | (123.8) | 12.7 | (88.2) | 78.9 |
Comprehensive loss | (160.8) | (33.1) | (146.3) | (3.4) |
Less: comprehensive loss attributable to noncontrolling interests | (1.2) | (0.2) | (1.8) | (0.1) |
Comprehensive loss attributable to Avon | $ (159.6) | $ (32.9) | $ (144.5) | $ (3.3) |
Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Statement of Comprehensive Income [Abstract] | ||||
Adjustment of and amortization of net actuarial loss and prior service cost, taxes | $ 0.1 | $ 0.0 | $ 0.3 | $ 0.0 |
Other comprehensive income, equity method investment, tax | $ 0.0 | $ 0.0 |
ACCOUNTING POLICIES |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCOUNTING POLICIES | ACCOUNTING POLICIES Basis of Presentation We prepare our unaudited interim Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States ("GAAP"). We consistently applied the accounting policies described in our 2017 Annual Report on Form 10-K ("2017 Form 10-K") in preparing these unaudited interim Consolidated Financial Statements, other than those impacted by new accounting standards as described below. In our opinion, the unaudited interim Consolidated Financial Statements reflect all adjustments of a normal recurring nature that are necessary for a fair statement of the results for the interim periods presented. Results for interim periods are not necessarily indicative of results for a full year. You should read these unaudited interim Consolidated Financial Statements in conjunction with our Consolidated Financial Statements contained in our 2017 Form 10-K. When used in this report, the terms "Avon," "Company," "we" or "us" mean Avon Products, Inc. For interim Consolidated Financial Statements purposes, we generally provide for accruals under our various employee benefit plans for each quarter based on one quarter of the estimated annual expense, and adjust these accruals as estimates are refined. In addition, our income tax provision is determined using an estimate of our consolidated annual effective tax rate, adjusted in the current period for discrete income tax items including:
Revenue Nature of goods and services We are a global manufacturer and marketer of beauty and related products. Our product categories are Beauty and Fashion & Home. Beauty consists of skincare, fragrance and color (cosmetics). Fashion & Home consists of fashion jewelry, watches, apparel, footwear, accessories, gift and decorative products, housewares, entertainment and leisure products, children’s products and nutritional products. Our business is conducted primarily in one channel - direct selling. Our reportable segments are based on geographic operations in four regions: Europe, Middle East & Africa; South Latin America; North Latin America; and Asia Pacific. We primarily sell our products to the ultimate consumer through the direct selling channel principally through Representatives, who are independent contractors and not our employees. Revenue recognition Revenue is recognized when control of a product or service is transferred to a customer, which is generally the Representative. Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties, such as Value Added Taxes (“VAT”) collected for taxing authorities. Principal revenue streams and significant judgments Our principal revenue streams can be distinguished into: i) the sale of Beauty and Fashion & Home products to Representatives (recorded in net sales); ii) Representative fees, primarily for the sale of brochures to Representatives and fulfillment activities related to the contract, which include fees for shipping and handling (recorded in other revenue); and iii) other, which includes the sale of products to New Avon and royalties from the licensing of our name and products (recorded in other revenue). i) Sale of Beauty and Fashion & Home products to Representatives We generate the majority of our revenue through the sale of Beauty and Fashion & Home products. A Representative contacts her customers directly, selling primarily through our brochure, which highlights new products and special promotions (or incentives) for each sales campaign. In this sense, the Representative, together with the brochure, are the "store" through which our products are sold. A brochure introducing a new sales campaign is typically generated every three to four weeks. A purchase order is processed and the products are picked at a distribution center and delivered to the Representative usually through a combination of local and national delivery companies. Generally, the Representative then delivers the merchandise and collects payment from the customer for her or his own account. A Representative generally receives a refund of the price the Representative paid for a product if the Representative chooses to return it. A Representative Agreement, which outlines the basic terms of the agreement between Avon and the Representative, combined with a purchase order, constitutes a contract for the purposes of Accounting Standards Codification Topic ("ASC 606"), Revenue from Contracts with Customers. We account for individual products and services separately in the contract if they are distinct (i.e., if a product or service is separately identifiable from the other items in the contract and if a Representative can benefit from the product or service on its own or with other resources that are readily available). This revenue is recognized at a point in time, when control of a product is transferred to a Representative. In addition, we offer incentives to Representatives to support sales growth. Certain of these sales incentives are distinct promises to a Representative, and therefore are a separate performance obligation. As a result, revenue is allocated to the performance obligation for sales incentives and is deferred on the balance sheet until the associated performance obligations are satisfied. Typically included within a contract is variable consideration, such as sales returns and late payment fees. Revenue is only recorded to the extent it is probable that it will not be reversed, and therefore revenue is adjusted for variable consideration. Variable consideration is generally estimated using the expected value method, which considers possible outcomes weighted by their probability. Specifically for sales returns, a refund liability will be recorded for the estimated cash to be refunded for the products expected to be returned, and a returns asset will be recorded for the products which we expect to be returned and re-sold, each of these based on historical experience. Sales returns are estimated and updated at the end of each month. The measurement of the returns asset and the refund liability is updated at the end of each month for changes in expectations regarding the amount of salvageable returns, reconditioning costs and any additional decreases in the value of the returned products. Late payment fees are recorded when the uncertainty associated with collecting such fees are resolved (i.e., when collected). The Representative generally receives a credit period of one sales campaign if they meet certain criteria; however, the specific credit terms are outlined in the Representative Agreement. Generally, the Representative remits payment during each sales campaign, which relates to the prior campaign cycle. The Representative is generally precluded from submitting an order for the current sales campaign until the accounts receivable balance past due for prior campaigns is paid; however, there are circumstances where the Representative fails to make the required payment. Our contracts with Representatives often include multiple promises to transfer products and/or services to the Representative, and determining which of these products and/or services are considered distinct performance obligations that should be accounted for separately may require significant judgment. In addition, in assessing the recognition of revenue for the following performance obligations, management has exercised significant judgment in the following areas: estimation of variable consideration and the stand-alone selling prices ("SSP") of promised goods or services in order to determine and allocate the transaction price. Performance obligation - Avon products The Representative purchases Avon products through a purchase order. We recognize revenue for Avon products in net sales in our Consolidated Statements of Operations when the Representative obtains control of the products, which occurs upon delivery of the product to the Representative. Transaction price is the amount we expect to receive in exchange for those products adjusted for variable consideration as discussed above and the estimated SSP of other performance obligations as discussed below. Performance obligation - Sales incentives Types of sales incentives include status programs, loyalty points, prospective discounts, and gift with purchase, among others. A Representative is eligible for certain status programs if specified sales levels are met. Status programs offer additional benefits such as free or discounted products and services. Loyalty points offer the option to redeem for additional Avon or other products or services. Prospective discounts are offered in some countries when certain sales levels are reached in a given time period. The revenue attributable to the prospective discount performance obligation is for the option to purchase additional product at a discounted amount. Certain benefits within status programs, loyalty points, prospective discounts and certain other sales incentives constitute a material right and, therefore, a distinct performance obligation in the contract with the Representative. Transaction price is allocated to the material right (performance obligation) based on estimated SSP and is deferred on the balance sheet until the associated performance obligations are satisfied. The cost of sales incentives is presented in inventories in our Consolidated Balance Sheets. We recognize revenue allocated to the material right in net sales in our Consolidated Statements of Operations at the point in time that the Representative receives the benefits of the material right or obtains control of the products, which occurs upon delivery to the Representative or upon expiration of the material right. For sales incentives that are delivered with the associated products order (such as gift with purchase), no deferral is required. SSP represents the estimated market value, or the estimated amount that could be charged for that material right when the entity sells it separately in similar circumstances to similar customers. Judgment is required to determine the SSP for each distinct performance obligation. In instances where SSP is not directly observable, such as when we do not sell the product or service separately, including for certain sales incentives, we determine the SSP using information that may include market prices and other observable inputs. ii) Representative fees, primarily for the sale of brochures to Representatives and fulfillment activities related to the contract ("Representative fees") The purchase order in the contract with the Representative explicitly identifies activities that we will perform. This includes fees that we charge Representatives, primarily for the sale of brochures to Representatives and fulfillment activities, and also includes late payment fees (discussed above). Brochures represent promotional materials that are given directly by the Representatives to their customers as a marketing activity. Under ASC 606, brochures that are sold by Avon to Representatives through purchase orders represent separate performance obligations in the contract as these are promises made between Avon and the Representative. Although the brochures are used similar to marketing materials, the Representative generally orders and pays for the brochures, and we allocate consideration for purposes of revenue recognition. The revenue associated with brochures that are sold to Representatives is recognized in other revenue and the related cost is recognized in cost of sales in our Consolidated Statements of Operations. We recognize revenue when the Representative obtains control of the brochures, which occurs upon delivery to the Representative. When brochures are given away for free to Representatives as promotional items, the cost is recognized in selling, general and administrative expenses in our Consolidated Statements of Operations. We often charge the Representative for shipping and handling (including order processing) and payment processing activities on the invoice, and such activities are considered to be fulfillment costs. The consideration received represents part of the transaction price in the contract that is allocated to the performance obligations in the contract. We recognize revenue for fulfillment activities in other revenue in our Consolidated Statements of Operations when the Representative obtains control of the associated products, which occurs upon delivery of the products to the Representative. The cost of these activities is recognized in selling, general and administrative expenses in our Consolidated Statements of Operations. iii) Other revenue We also recognize revenue from the sale of products to New Avon LLC ("New Avon"), as part of a manufacturing and supply agreement, since the separation of the Company's North America business into New Avon on March 1, 2016, and royalties from the licensing of our name and products, in other revenue in our Consolidated Statements of Operations. Disaggregation of revenue In the following table, revenue is disaggregated by product or service type. All revenue is recognized at a point in time, when control of a product is transferred to a customer:
Contract balances The timing of revenue recognition generally is different from the timing of a promise made to a Representative. As a result, we have contract liabilities, which primarily relate to the advance consideration received from Representatives prior to transfer of the related good or service for material rights, such as loyalty points and status programs, and are primarily classified within other accrued liabilities (with the long-term portion in other liabilities) in our Consolidated Balance Sheets. Generally, we record accounts receivable when we invoice a Representative. In addition, we record an estimate of an allowance for doubtful accounts on receivable balances based on an analysis of historical data and current circumstances, including seasonality and changing trends. The allowance for doubtful accounts is reviewed for adequacy, at a minimum, on a quarterly basis. We generally have no detailed information concerning, or any communication with, any ultimate consumer of our products beyond the Representative. We have no legal recourse against the ultimate consumer for the collection of any accounts receivable balances due from the Representative to us. If the financial condition of the Representatives were to deteriorate, resulting in their inability to make payments, additional allowances may be required. The following table provides information about receivables and contract liabilities from contracts with customers at June 30, 2018:
At January 1, 2018 and June 30, 2018 we had a contract liability of $91.8 and $70.3 , respectively, relating to certain material rights (loyalty points, status program and prospective discounts). During the six months ended June 30, 2018, we recognized $80.8 of revenue related to the contract liability balance at January 1, 2018, as the result of performance obligations satisfied. In addition, we deferred an additional $59.7 related to certain material rights granted during the period, for which the performance obligations are not yet satisfied. Of the amount deferred during the period, substantially all will be recognized within a year, with the significant majority to be captured within a quarter; therefore, the contract liability at June 30, 2018 will primarily be recognized in the remainder of 2018. The remaining movement in the contract liability balance is attributable to foreign exchange differences arising on the translation of the balance as at June 30, 2018 as compared with December 31, 2017. Contract costs Incremental costs to obtain contracts, such as bonuses or commissions, are recognized as an asset if the entity expects to recover them. However, ASC 340-40, Other Assets and Deferred Costs, offers a practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less. We elected the practical expedient and expense costs to obtain contracts when incurred because our amortization period is one year or less. Costs to fulfill contracts with Representatives are comprised of shipping and handling (including order processing) and payment processing services, which are expensed as incurred. The fees for these services are included in the transaction price. Changes in accounting policies Except for the changes below, we have consistently applied the accounting policies to all periods presented in these consolidated financial statements. We adopted ASC 606 with a date of the initial application of January 1, 2018, as a cumulative-effect adjustment to retained earnings. Therefore, the comparative information for prior periods has not been adjusted and continues to be reported under ASC 605, Revenue Recognition. We applied ASC 606 to all outstanding contracts at January 1, 2018. We recorded a cumulative-effect adjustment upon adoption of the new revenue recognition standard as of January 1, 2018 comprised of the following:
This cumulative-effect adjustment impacting our Consolidated Balance Sheets is primarily driven by sales incentives and brochures. The other changes resulting from the new revenue recognition standard were not material. The details of the significant changes to our accounting policy for revenue recognition and the quantitative impact of the changes on our Consolidated Financial Statements are set out below. Performance obligations - Avon products We recognize revenue for Avon products in net sales in our Consolidated Statements of Operations when the Representative obtains control of the products, which occurs upon delivery of the product to the Representative. Transaction price is the amount we expect to receive in exchange for those products adjusted for variable consideration, such as sales returns and past due fees, and the estimated SSP of other performance obligations, such as sales incentives. Revenue allocated to the material right (performance obligation) for sales incentives is deferred on the balance sheet until the associated performance obligations are satisfied. Under our historical accounting, we recognized revenue for Avon products in net sales in our Consolidated Statements of Operations upon delivery of the product to the Representative. Revenue was adjusted for expected sales returns. Performance obligations/ material rights - sales incentives Certain benefits within status programs, loyalty points, prospective discounts and certain other sales incentives constitute a material right and, therefore, a distinct performance obligation in the contract with the Representative. Transaction price is allocated to the material right based on estimated SSP and is deferred on the balance sheet until the associated performance obligations are satisfied. The cost of sales incentives is presented in inventories in our Consolidated Balance Sheets. We recognize revenue allocated to the material right in net sales and the associated cost of sales incentives is recognized in cost of sales in our Consolidated Statements of Operations, at the point in time that the Representative receives the benefits of the material right or obtains control of the products, which occurs upon delivery to the Representative or upon expiration of the material right. For sales incentives that are delivered with the associated products order (such as gift with purchase), no deferral is required. Under our historical accounting, the cost of sales incentives was generally presented in other accrued liabilities and prepaid expenses and other in our Consolidated Balance Sheets and recognized in selling, general and administrative expenses in our Consolidated Statements of Operations over the period that the sales incentive was earned. Representative fees, primarily for the sale of brochures to Representatives and fulfillment activities related to the contract This includes fees that we charge Representatives, primarily for the sale of brochures to Representatives and fulfillment activities, and also includes late payment fees. Brochures - Brochures represent promotional materials that are given directly by the Representatives to their customers as a marketing activity. Under ASC 606, brochures that are sold by Avon to Representatives through purchase orders represent separate performance obligations in the contract as these are promises made between Avon and the Representative. Although the brochures are used similar to marketing materials, the Representative generally orders and pays for the brochures, and Avon allocates consideration for purposes of revenue recognition. The revenue associated with brochures that are sold to Representatives is recognized in other revenue and the related cost is recognized in cost of sales in our Consolidated Statements of Operations. We recognize revenue when the Representative obtains control of the brochures, which occurs upon delivery to the Representative. When brochures are given away for free to Representatives as promotional items, the cost is recognized in selling, general and administrative expenses in our Consolidated Statements of Operations. Under our historical accounting, all brochure costs were initially deferred to prepaid expenses and other in our Consolidated Balance Sheets and were charged to selling, general, and administrative expenses in our Consolidated Statements of Operations over the campaign length. In addition, fees charged to Representatives for brochures were initially deferred and presented as a reduction of prepaid expenses and other in our Consolidated Balance Sheets, and were recorded as a reduction of selling, general, and administrative expenses in our Consolidated Statements of Operations over the campaign length. Fulfillment activities and late payment fees - We often charge the Representative for shipping and handling (including order processing) and payment processing activities on the invoice, and such activities are considered to be fulfillment costs. The consideration received represents part of the transaction price in the contract that is allocated to the performance obligations in the contract. We recognize revenue for fulfillment activities in other revenue in our Consolidated Statements of Operations when the Representative obtains control of the associated products, which occurs upon delivery of the products to the Representative. The cost of these activities is recognized in selling, general and administrative expenses in our Consolidated Statements of Operations. Late payment fees are recorded in other revenue in our Consolidated Statements of Operations when collected. Under our historical accounting, revenue for shipping and handling (including order processing) activities was recorded in other revenue in our Consolidated Statements of Operations. However, the revenue for payment processing activities and late payment fees were recognized as a reduction of selling, general, and administrative expenses in our Consolidated Statements of Operations. The cost of these activities was recognized in selling, general and administrative expenses in our Consolidated Statements of Operations. Impacts on consolidated financial statements The following tables summarize the impacts of adopting ASC 606 on the Company's consolidated financial statements for the three months ended June 30, 2018:
(1) Primarily relates to net impact of the timing of recognition of sales incentives. (2) Relates to Representative fees (primarily brochure fees, late payment fees and certain other fees), which were reclassified from SG&A. Brochure fees were also impacted by the timing of recognition. (3) Primarily relates to the cost of sales incentives and the cost of brochures paid for by Representatives, both of which were reclassified from SG&A and were also impacted by the timing of recognition. (4) Relates to the cost of sales incentives, which were reclassified to cost of sales and were also impacted by the timing of recognition. This was partially offset by Representative fees, which were reclassified to other revenue.
The following tables summarize the impacts of adopting ASC 606 on the Company's consolidated financial statements for the six months ended June 30, 2018:
(1) Primarily relates to net impact of the timing of recognition of sales incentives. (2) Relates to Representative fees (primarily brochure fees, late payment fees and certain other fees), which were reclassified from SG&A. Brochure fees were also impacted by the timing of recognition. (3) Primarily relates to the cost of sales incentives and the cost of brochures paid for by Representatives, both of which were reclassified from SG&A and were also impacted by the timing of recognition. (4) Relates to the cost of sales incentives, which were reclassified to cost of sales and were also impacted by the timing of recognition. This was partially offset by Representative fees, which were reclassified to other revenue.
(1) Relates to sales returns, which were reclassified from a reduction of accounts receivable to a refund liability (within other accrued liabilities) and a returns asset (within prepaid expenses and other). (2) Primarily relates to sales incentives and brochures, both of which were reclassified from prepaid expenses and other to inventories, and were also impacted by the timing of recognition. In addition, prepaid expenses and other was impacted by the timing of recognition of brochures, as well as the reclassification of sales returns (described above). (3) Relates to deferred tax assets associated with the cumulative-effect adjustment. (4) Primarily relates to the contract liability for sales incentives, which is partially offset by the lower accrual for sales incentives. In addition, other accrued liabilities was impacted by the reclassification of sales returns (described above). (5) Relates to the $41.1 cumulative-effect adjustment upon adoption of ASC 606, partially offset by the $17.4 net loss adjustment.
Other Accounting Standards Implemented ASU 2017-07, Compensation - Retirement Benefits In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits. This new guidance requires entities to (1) disaggregate the service cost component from the other components of net periodic benefit costs and present it with other current employee compensation costs in the Consolidated Statements of Operations and (2) present the other components of net periodic benefit costs below operating profit in other expense, net. We adopted this new accounting guidance effective January 1, 2018. The new accounting guidance was applied retrospectively and increased our operating profit for the three and six months ended June 30, 2017 by $1.1 and $2.2 respectively, but had no impact on net loss. Accounting Standards to be Implemented ASU 2016-02, Leases In February 2016, the FASB issued ASU 2016-02, Leases, which requires all assets and liabilities arising from leases to be recognized in our Consolidated Balance Sheets. We intend to adopt this new accounting guidance effective January 1, 2019. While we are still evaluating the full effect that adopting this new accounting guidance will have on our Consolidated Financial Statements, we believe that it will significantly increase the assets and liabilities in our Consolidated Balance Sheets. ASU 2018-02, Income Statement - Reporting Comprehensive Income In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income, which permits entities to reclassify the disproportionate income tax effects of the 2017 enactment of U.S. tax reform legislation on items within accumulated other comprehensive income (loss) to retained earnings. These disproportionate income tax effect items are referred to as "stranded tax effects." We intend to adopt this new accounting guidance effective January 1, 2019. We are currently assessing the impact on our consolidated financial statements. ASU 2016-13, Financial Instruments - Credit Losses In January 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, which requires measurement and recognition of expected credit losses for financial assets held. We intend to adopt this new accounting guidance effective January 1, 2020. We are currently assessing the impact on our consolidated financial statements. |
EARNINGS (LOSS) PER SHARE AND SHARE REPURCHASES |
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EARNINGS (LOSS) PER SHARE AND SHARE REPURCHASES | EARNINGS (LOSS) PER SHARE AND SHARE REPURCHASES We compute earnings (loss) per share ("EPS") using the two-class method, which is an earnings (loss) allocation formula that determines earnings (loss) per share for common stock, and earnings (loss) allocated to convertible preferred stock and participating securities, as appropriate. The earnings allocated to convertible preferred stock are the larger of 1) the preferred dividends accrued in the period or 2) the percentage of earnings from continuing operations allocable to the preferred stock as if they had been converted to common stock. Our participating securities are our grants of restricted stock and restricted stock units, which contain non-forfeitable rights to dividend equivalents to the extent any dividends are declared and paid on our common stock. We compute basic EPS by dividing net income (loss) allocated to common shareholders by the weighted-average number of shares outstanding during the period. Diluted EPS is calculated to give effect to all potentially dilutive common shares that were outstanding during the period.
Amounts in the table above may not necessarily sum due to rounding. During the three months and six months ended June 30, 2018, we did not include stock options to purchase 18.5 million shares and 17.4 million shares, respectively, of Avon common stock in the calculation of diluted EPS as we had a net loss and the inclusion of these shares would decrease the net loss per share. Since the inclusion of such shares would be anti-dilutive, these are excluded from the calculation. During the three and six months ended June 30, 2017, we did not include stock options to purchase 18.1 million shares and 16.1 million shares, respectively, for the same reason. For the three and six months ended June 30, 2018 and 2017, it is more dilutive to assume the series C convertible preferred stock is not converted into common stock; therefore, the weighted-average shares outstanding were not adjusted by the as-if converted series C convertible preferred stock because the effect would be anti-dilutive as it would decrease the net loss per share. If the as-if converted series C convertible preferred stock had been dilutive, approximately 87.1 million additional shares would have been included in the diluted weighted average number of shares outstanding for the three and six months ended June 30, 2018 and 2017. See Note 4, Related Party Transactions. We purchased approximately 1.1 million shares of Avon common stock for $3.2 during the first six months of 2018, as compared to approximately 1.5 million shares of Avon common stock for $6.4 during the first six months of 2017, through acquisition of stock from employees in connection with tax payments upon the vesting of restricted stock units and performance restricted stock units. |
INVESTMENT IN NEW AVON |
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Equity Method Investments and Joint Ventures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVESTMENT IN NEW AVON | INVESTMENT IN NEW AVON In connection with the separation of the Company's North America business, which closed on March 1, 2016, the Company retained a 19.9% ownership interest in New Avon, a privately-held company that is majority-owned and managed by an affiliate of Cerberus Capital Management L.P. ("Cerberus"). The Company has accounted for its ownership interest in New Avon using the equity method of accounting, which resulted in the Company recognizing its proportionate share of New Avon's income or loss and other comprehensive income or loss. Our recorded investment balance in New Avon at June 30, 2018 and December 31, 2017 was zero. During the third quarter of 2017, the Company received a cash distribution of $22.0 from New Avon, which reduced our recorded investment balance in New Avon. During the third quarter of 2017, we recorded only $1.7 of the Company's proportionate share of the losses in New Avon, as this reduced our recorded investment balance in New Avon to zero. As a result, we have not recorded our proportionate share of New Avon's loss since the third quarter of 2017. If New Avon experiences future losses while our recorded investment balance is zero, we would not record our proportionate share of such loss. The Company's proportionate share of the losses of New Avon was $5.8 and $9.8 during the three and six months ended June 30, 2017, respectively, which was recorded within other expense, net. In addition, the Company's proportionate share of the post-separation other comprehensive income of New Avon was an immaterial amount during the three and six months ended June 30, 2017, and was recorded within other comprehensive income (loss). The Company also recorded an additional loss of $.5 within other expense, net and a benefit of $1.1 within other comprehensive income (loss), during the six months ended June 30, 2017, primarily associated with purchase accounting adjustments reported by New Avon. Summarized financial information related to New Avon is shown below:
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RELATED PARTY TRANSACTIONS |
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Related Party Transactions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RELATED PARTY TRANSACTIONS | RELATED PARTY TRANSACTIONS The following tables present the related party transactions with New Avon, affiliates of Cerberus and the Instituto Avon in Brazil. There are no other related party transactions. New Avon is majority-owned and managed by Cerberus NA. See Note 3, Investment in New Avon for further details.
(1) The Company supplies product to New Avon as part of a manufacturing and supply agreement. (2) New Avon supplies product to the Company as part of the same manufacturing and supply agreement noted above. The Company purchased $.5 and $.9 from New Avon associated with this agreement during the three months ended June 30, 2018 and 2017, respectively, and recorded $.7 and $1.3 associated with these purchases within cost of sales in our Consolidated Statement of Operations during the three months ended June 30, 2018 and 2017, respectively. The Company purchased $1.2 and $1.9 from New Avon associated with this agreement during the six months ended June 30, 2018 and 2017, respectively, and recorded $1.2 and $2.1 associated with these purchases within cost of sales in our Consolidated Statement of Operations during the six months ended June 30, 2018 and 2017, respectively. (3) The Company also entered into a transition services agreement to provide certain services to New Avon, as well as an intellectual property ("IP") license agreement, an agreement for technical support and innovation and sublease for office space. In addition, New Avon performed certain services for the Company under a similar transition services agreement, which expired during the third quarter of 2017. The Company recorded a net $.5 and $7.2 reduction of selling, general and administrative expenses associated with these agreements during the three months ended June 30, 2018 and 2017, respectively, and a net $3.7 and $15.1 reduction of selling, general and administrative expenses associated with these agreements during the six months ended June 30, 2018 and 2017, respectively, which generally represents a recovery of the related costs. (4) The Company also entered into agreements with an affiliate of Cerberus, which provide for the secondment of Cerberus affiliate personnel to the Company's project management team responsible for assisting with the execution of the transformation plan (the "Transformation Plan") announced in January 2016. The Company recorded $.2 and $.8 in selling, general and administrative expenses associated with these agreements during the three months ended June 30, 2018 and 2017, respectively, and recorded $.8 and $1.6 in selling, general and administrative expenses associated with these agreements during the six months ended June 30, 2018 and 2017, respectively. See Note 11, Restructuring Initiatives for additional information related to the Transformation Plan. (5) During the second quarter of 2018, the Company entered into an agreement to loan the Instituto Avon, an independent non-government charitable organization in Brazil, $3.6 for an unsecured 5-year term at a fixed interest rate of 7% per annum, to be paid back in 5 equal annual installments. The Instituto Avon was created by an Avon subsidiary in Brazil, with board and executive team comprising of Avon Brazil management. The purpose of the loan is to provide the Instituto Avon with the means to donate funds to Fundação Pio XII (a leading cancer prevention and treatment organization in Brazil and owner of the Hospital do Câncer de Barretos), in order to invest in equipment with the objective of expanding breast cancer prevention and treatment. (6) Inventories relate to purchases from New Avon, associated with the manufacturing and supply agreement, which have not yet been sold, and were classified within inventories in our Consolidated Balance Sheets. (7) The receivables due from New Avon relate to the agreements for transition services, the IP license, technical support and innovation and subleases for office space, as well as the manufacturing and supply agreement, and were classified within prepaid expenses and other in our Consolidated Balance Sheets. (8) The payables due to New Avon relate to the manufacturing and supply agreement, and were classified within other accrued liabilities in our Consolidated Balance Sheets. (9) The payables due to an affiliate of Cerberus relate to the agreement for the project management team, and were classified within other accrued liabilities in our Consolidated Balance Sheets. In addition, the Company also issued standby letters of credit to the lessors of certain equipment, a lease for which was transferred to New Avon in connection with the separation of the Company's North America business. As of June 30, 2018, the Company has a liability of $1.4 for the estimated value of such standby letters of credit. Series C Preferred Stock On March 1, 2016, the Company issued and sold to Cerberus Investor 435,000 shares of newly issued series C preferred stock for an aggregate purchase price of $435.0. Cumulative preferred dividends accrue daily on the series C preferred stock at a rate of 1.25% per quarter. The series C preferred stock had accrued unpaid dividends of $53.5 as of June 30, 2018. There were no dividends declared in the six months ended June 30, 2018 and 2017. |
INVENTORIES |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVENTORIES | INVENTORIES
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EMPLOYEE BENEFIT PLANS |
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Retirement Benefits, Description [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EMPLOYEE BENEFIT PLANS | EMPLOYEE BENEFIT PLANS
(1) Service cost is presented in selling, general and administrative expenses in our Consolidated Statements of Operations. The components of net periodic benefit costs other than service cost are presented in other expense, net in our Consolidated Statements of Operations. During the six months ended June 30, 2018, we made approximately $11.4 and approximately $8 of contributions to the U.S. and non-U.S. defined benefit pension and postretirement benefit plans, respectively. During the remainder of 2018, we anticipate contributing approximately $0 to $4 and approximately $12 to $17 to fund our U.S. and non-U.S. defined benefit pension and postretirement benefit plans, respectively. In addition to the amounts in the tables above, during the second quarter of 2017, we recorded an $18.2 charge for a loss contingency related to a non-U.S. pension plan, for which an amendment to the plan that occurred in a prior year may not have been appropriately implemented. |
CONTINGENCIES |
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Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
CONTINGENCIES | CONTINGENCIES Settlements of FCPA Investigations As previously reported, we engaged outside counsel to conduct an internal investigation and compliance reviews focused on compliance with the Foreign Corrupt Practices Act ("FCPA") and related U.S. and foreign laws in China and additional countries. The internal investigation, which was conducted under the oversight of our Audit Committee, began in June 2008 and along with the compliance reviews, was completed in 2014. Following our voluntary reporting of the internal investigation to both the U.S. Department of Justice (the "DOJ") and the U.S. Securities and Exchange Commission (the "SEC") and our subsequent cooperation with those agencies, the United States District Court for the Southern District of New York (the "USDC") approved in December 2014 a deferred prosecution agreement (“DPA”) entered into between the Company and the DOJ related to charges of violations of the books and records and internal controls provisions of the FCPA. In addition, Avon Products (China) Co. Ltd., a subsidiary of the Company operating in China, pleaded guilty to conspiring to violate the books and records provision of the FCPA. The USDC also entered a judgment in January 2015 approving our consent agreement with the SEC (the "Consent") to settle the SEC’s complaint charging violations of the books and records and internal control provisions of the FCPA. As part of these resolutions, the Company agreed, among other things, to pay fines, disgorgement and prejudgment interest in an aggregate amount of $135 and to have a compliance monitor (the "monitor"). The monitor was replaced by the Company, which undertook self-reporting obligations for the remainder of the monitoring period. The DPA has expired, and the charges against the Company were dismissed with prejudice on February 5, 2018. The Company was subject to a continued self-monitoring period, including the filing of periodic self-monitoring reports with the SEC, until the July 2018 expiry of the monitoring period under the Consent. The Company’s final self-monitoring report and certification of completion were filed on July 9, 2018, but the SEC retains the right under the Consent to request additional compliance-related information from the Company as part of the Company's self-monitoring. Third-party costs incurred in connection with self-monitoring and compliance with the Consent have not been material to date. While we do not anticipate material costs going forward, the Company's related obligations may be costly and/or time-consuming. Brazilian Tax Assessments In 2002, our Brazilian subsidiary received an excise tax (IPI) assessment from the Brazilian tax authorities for alleged tax deficiencies during the years 1997-1998, which was officially closed in favor of Avon Brazil in July 2017. In December 2012, additional assessments were received for the year 2008 with respect to excise tax (IPI) and taxes charged on gross receipts (PIS and COFINS). In the second quarter of 2014, the PIS and COFINS assessments were officially closed in favor of Avon Brazil. As in the 2002 IPI case, the 2012 IPI assessment asserts that the establishment in 1995 of separate manufacturing and distribution companies in Brazil was done without a valid business purpose and that Avon Brazil did not observe minimum pricing rules to define the taxable basis of excise tax. The structure adopted in 1995 is comparable to that used by many other companies in Brazil. We believe that our Brazilian corporate structure is appropriate, both operationally and legally, and that the 2012 IPI assessment is unfounded. These matters are being vigorously contested. In January 2013, we filed a protest seeking a first administrative level review with respect to the 2012 IPI assessment. In July 2013, the 2012 IPI assessment was upheld at the first administrative level and we appealed this decision to the second administrative level. The 2012 IPI assessment totals approximately $303, including penalties and accrued interest. On April 18, 2018, Avon received official notification that the second administrative level has issued a partially favorable and partially unfavorable decision. In this decision, the original assessment was reduced by approximately $64 (including associated penalty and interest), subject to Federal Revenue appeal. The remaining $239 of the assessment was upheld at the second administrative level. On April 20, 2018, we appealed this decision in the third administrative level. On October 3, 2017, Avon Brazil received a new tax assessment notice regarding IPI for 2014. The 2017 IPI assessment totals approximately $232, including penalties and accrued interest. In line with the other assessments received in the past, the Brazilian tax authorities assert that the structure adopted in 2005 has no valid business purpose and that Avon Brazil did not observe minimum pricing rules to define the taxable basis of excise tax. Avon will vigorously contest this assessment, and presented the first defense on November 1, 2017. On April 2, 2018, Avon was notified of an unfavorable decision at the first administrative level. On April 27, 2018, we filed an appeal in the second administrative level. In the event that the 2012 and the 2017 IPI assessments are upheld in the third and final administrative level, it may be necessary for us to provide security to pursue further appeals in the judicial levels, which, depending on the circumstances, may result in a charge to earnings and an adverse effect on the Company's Consolidated Statements of Cash Flows. It is not possible to reasonably estimate the likelihood or potential amount of assessments that may be issued for subsequent periods (tax years up through 2010 are closed by statute). However, other similar IPI assessments involving different periods (1998-2001) have been cancelled and officially closed in our favor by the second administrative level and in July 2017 we received the official cancellation of the 2002 assessment pursuant to the favorable decision discussed above. We believe that the 2012 and the 2017 IPI assessments are unfounded, however, based on the likelihood that these will be upheld, we assess the risks as disclosed above as reasonably possible. At June 30, 2018, we have not recognized a liability for the 2012 or 2017 IPI assessments. Brazil IPI Tax on Cosmetics In May 2015, an Executive Decree on certain cosmetics went into effect in Brazil which increased the amount of IPI taxes that are to be remitted by Avon Brazil to the taxing authority on the sales of cosmetic products subject to IPI. Avon Brazil filed an objection to this IPI tax increase on the basis that it is not constitutional. In December 2016, Avon Brazil received a favorable decision from the Federal District Court regarding this objection. This decision has been appealed by the tax authorities. From May 2015 through April 2016, Avon Brazil remitted the taxes associated with this IPI tax increase into a judicial deposit which would be remitted to the taxing authorities in the event that we are not successful in our objection to the tax increase. In May 2016, Avon Brazil received a favorable preliminary decision on its objection to the tax and was granted a preliminary injunction. As a result, beginning in May 2016, Avon Brazil is no longer required to remit the taxes associated with IPI into a judicial deposit. While an increasing number of recent preliminary decisions have been in favor of the taxpayer, as of June 30, 2018, we have concluded that it is appropriate to continue to recognize the associated IPI taxes as a liability. At June 30, 2018, the liability to the taxing authorities for this IPI tax increase was approximately $191 and was classified within long-term sales taxes and taxes other than income in our Consolidated Balance Sheets, and the judicial deposit was approximately $65 and was classified within prepaid expenses and other in our Consolidated Balance Sheets. The net liability that did not have a corresponding judicial deposit was approximately $126 at June 30, 2018, and the interest associated with this net liability has been and will continue to be recognized in other expense, net. Our cash flow from operations has benefited as compared to our earnings as we have recognized the expense and associated interest related to this IPI tax in our Consolidated Statements of Operations; however, since May 2016, we have not made a corresponding cash payment into a judicial deposit based on the preliminary injunction that is still in force. On June 12, 2018, we received a decision authorizing Avon to withdraw the amount held as a judicial deposit, substituting it by letter of guarantee, which was presented; on July 30, 2018, the funds were received in our bank account. The tax authorities have presented an appeal against that decision. An unfavorable ruling to our objection of this IPI tax increase would have an adverse effect on the Company's Consolidated Statements of Cash Flows as Avon Brazil would have to remit the liability owed to the taxing authorities (including the judicial deposit that was returned to us on July 30, 2018). We are not able to reliably predict the timing of the outcome of our objection to this tax increase. Talc-Related Litigation The Company has been named a defendant in numerous personal injury lawsuits filed in U.S. courts, alleging that certain talc products the Company sold in the past were contaminated with asbestos. Many of these actions involve a number of codefendants from a variety of different industries, including manufacturers of cosmetics and manufacturers of other products that, unlike the Company’s products, were designed to contain asbestos. We believe that the claims against us are without merit. We are defending vigorously against these claims and will continue to do so. To date, there have been no findings of liability against the Company in any of these cases but we are unable to predict the ultimate outcome of each case. Additional similar cases arising out of the use of the Company's talc products are reasonably anticipated. At this time, we are unable to estimate our reasonably possible losses, if any. Also, in light of the inherent litigation uncertainties, potential costs to litigate these cases are not known, but they may be significant, though some costs will be covered by insurance. Brazilian Labor-Related Litigation On an ongoing basis, the Company is subject to numerous and diverse labor-related lawsuits filed by employees in Brazil. These cases are assessed on an aggregated and ongoing basis based on historical outcomes of similar cases. The claims made are often for significantly larger sums than have historically been paid out by the Company. Our practice continues to be to recognize a liability based on our assessment of historical payments in similar cases. Our best estimate of the probable loss for such current cases at June 30, 2018 is approximately $13 and, accordingly, we have recognized a liability for this amount. Other Matters Various other lawsuits and claims, arising in the ordinary course of business or related to businesses previously sold, are pending or threatened against Avon. In management's opinion, based on its review of the information available at this time, the total cost of resolving such other contingencies at June 30, 2018, is not expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows. |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The tables below present the changes in AOCI by component and the reclassifications out of AOCI for the three and six months ended June 30, 2018 and 2017:
(1) Gross amount reclassified to pension and postretirement expense, within other expense, net in our Consolidated Statements of Operations, and related taxes reclassified to income taxes in our Consolidated Statements of Operations. Foreign exchange net loss of $9.6 and net gain of $6.4 for the three months ended June 30, 2018 and 2017, respectively, and a foreign exchange net losses of $3.7 and net gain of $9.8 for the six months ended June 30, 2018 and 2017, respectively, resulting from the translation of actuarial losses and prior service cost recorded in AOCI, are included in foreign currency translation adjustments in our Consolidated Statements of Comprehensive Loss. |
SEGMENT INFORMATION |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT INFORMATION | SEGMENT INFORMATION We determine segment profit by deducting the related costs and expenses from segment revenue. Segment profit includes an allocation of global marketing expenses based on actual revenues. Segment profit excludes global expenses other than the allocation of marketing, costs to implement ("CTI") restructuring initiatives (see Note 11, Restructuring Initiatives), a loss contingency related to a non U.S. pension plan (see Note 6, Employee Benefit Plans), certain significant asset impairment charges, and other items, which are not allocated to a particular segment, if applicable. This is consistent with the manner in which we assess our performance and allocate resources. Summarized financial information concerning our reportable segments was as follows:
Other operating segments and business activities include markets that have been exited. Effective in the first quarter of 2018, given that we are exiting Australia and New Zealand during 2018, the results of Australia and New Zealand are now reported in Other operating segments and business activities for all periods presented, while previously the results had been reported in the Asia Pacific segment. Other operating segments and business activities also include revenue from the sale of products to New Avon since the separation of the Company's North America business into New Avon on March 1, 2016 and ongoing royalties from the licensing of our name and products. |
SUPPLEMENTAL BALANCE SHEET INFORMATION |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUPPLEMENTAL BALANCE SHEET INFORMATION | SUPPLEMENTAL BALANCE SHEET INFORMATION At June 30, 2018 and December 31, 2017, prepaid expenses and other included the following:
(1) The decrease in prepaid brochure costs, paper and other literature is primarily due to the adoption of ASC 606. Effective January 1, 2018, the costs associated with brochures that will be purchased by the Representative are presented within inventories in our Consolidated Balance Sheets, while the costs associated with brochures that will be given away for free as promotional items are reflected within prepaid expenses and other in our Consolidated Balance Sheets. Previously, the net of the costs and fees charged to Representatives for all brochures were presented within prepaid expenses and other in our Consolidated Balance Sheets. See Note 1, Accounting Policies for further details. At June 30, 2018 and December 31, 2017, other assets included the following:
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RESTRUCTURING INITIATIVES |
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Restructuring and Related Activities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RESTRUCTURING INITIATIVES | RESTRUCTURING INITIATIVES Transformation Plan In January 2016, we initiated a Transformation Plan, which included cost reduction efforts to continue to improve our cost structure and to enable us to reinvest in growth. Under this plan, we had targeted pre-tax annualized cost savings of approximately $350 after three years, with an estimated $200 from supply chain reductions and an estimated $150 from other cost reductions, which were expected to be achieved through restructuring actions, as well as other cost-savings strategies that would not result in restructuring charges. We have reinvested and continue to plan to reinvest a portion of these cost savings in growth initiatives, including media, social selling and information technology systems that will help us modernize our business. We had initiated the Transformation Plan in an attempt to enable us to achieve our long-term goals of mid-single-digit constant-dollar revenue growth and low double-digit operating margin. As part of the Transformation Plan, we identified certain actions, that we believe will reduce ongoing costs, primarily consisting of global headcount reductions relating to operating model changes, as well as the closure of Australia, New Zealand and Thailand, which were smaller, under-performing markets. The operating model changes include the streamlining of our corporate functions to align with the current and future needs of the business and an information technology infrastructure outsourcing initiative. As a result of these restructuring actions approved to-date, we have recorded total costs to implement these restructuring initiatives of $202.4 before taxes, of which $35.3 was recorded during the six months ended June 30, 2018, in our Consolidated Statements of Operations. The additional charges not yet incurred associated with the restructuring actions approved to-date of approximately $20 to $30 before taxes are expected to be recorded primarily in 2018. At this time we are unable to quantify the total costs to implement the restructuring initiatives that will be incurred through the time the Transformation Plan is fully implemented as we have not yet identified all actions to be taken. Costs to Implement Restructuring Initiatives - Three and Six Months Ended June 30, 2018 During the three and six months ended June 30, 2018, we recorded costs to implement of $24.5 and $35.3 respectively, related to the Transformation Plan, in our Consolidated Statements of Operations. The costs consisted of the following:
Of the total costs to implement during the three months ended June 30, 2018, $24.1 was recorded in selling, general and administrative expenses and $.5 was recorded in cost of sales in our Consolidated Statement of Operations. Of the total costs to implement during the six months ended June 30, 2018, $34.2 was recorded in selling, general and administrative expenses and $1.1 was recorded in cost of sales. Costs to Implement Restructuring Initiatives - Three and Six Months Ended June 30, 2017 During the three and six months ended June 30, 2017, we recorded costs to implement of $21.0 and $31.0, respectively, related to the Transformation Plan, in the Consolidated Statement of Operations. The costs consisted of the following:
Of the total costs to implement during the three months ended June 30, 2017, $21.0 was recorded in selling, general and administrative expenses. Of the total costs to implement during the six months ended June 30, 2017, $31.1 was recorded in selling, general and administrative expenses and a benefit of $.1 was recorded in cost of sales in our Consolidated Statement of Operations. The tables below include restructuring costs such as employee-related costs, inventory 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 and accelerated depreciation. The liability balance for the Transformation Plan as of June 30, 2018 is as follows:
The majority of cash payments, if applicable, associated with these charges are expected to be made during 2018. The following table presents the restructuring charges incurred to date, under the Transformation Plan, along with the estimated charges expected to be incurred on approved initiatives under the plan:
The charges, net of adjustments, of initiatives under the Transformation Plan, along with the estimated charges expected to be incurred on approved initiatives under the plan, by reportable segment are as follows:
The charges above are not included in segment profit, as this excludes costs to implement restructuring initiatives. We expect our total costs to implement restructuring on approved initiatives to be an estimated $220 to $230 before taxes under the Transformation Plan. 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. Other Restructuring Initiatives During the three and six months ended June 30, 2018, we recorded net benefits of $.8 and $.7, respectively, in selling, general and administrative expenses, in our Consolidated Statements of Operations, associated with other restructuring initiatives. During the three and six months ended June 30, 2017, we recorded net benefits of $.7 and $.7, respectively, in selling, general and administrative expenses, in our Consolidated Statements of Operations, associated with other restructuring initiatives. |
GOODWILL |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GOODWILL | GOODWILL
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FAIR VALUE |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE | FAIR VALUE Assets and Liabilities Recorded at Fair Value on a Recurring Basis The assets and liabilities measured at fair value on a recurring basis were immaterial at June 30, 2018 and December 31, 2017. Fair Value of Financial Instruments Our financial instruments include cash and cash equivalents, available-for-sale securities, short-term investments, accounts receivable, debt maturing within one year, accounts payable, long-term debt and foreign exchange forward contracts. The carrying value for cash and cash equivalents, accounts receivable, accounts payable and short-term investments approximate fair value because of the short-term nature of these instruments. The net asset (liability) amounts recorded in the balance sheet (carrying amount) and the estimated fair values of our remaining financial instruments at June 30, 2018 and December 31, 2017, respectively, consisted of the following:
(1) The carrying value of debt maturing within one year and long-term debt is presented net of debt issuance costs and includes any related discount or premium and unamortized deferred gains on terminated interest-rate swap agreements, as applicable. The methods and assumptions used to estimate fair value are as follows:
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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES We operate globally, with manufacturing and distribution facilities in various countries around the world. We may reduce our exposure to fluctuations in the fair value and cash flows associated with changes in interest rates and foreign exchange rates by creating offsetting positions, including through the use of derivative financial instruments. If we use foreign currency-rate sensitive and interest-rate sensitive instruments to hedge a certain portion of our existing and forecasted transactions, we would expect that any gain or loss in value of the hedge instruments generally would be offset by decreases or increases in the value of the underlying forecasted transactions. We do not enter into derivative financial instruments for trading or speculative purposes, nor are we a party to leveraged derivatives. The master agreements governing our derivative contracts generally contain standard provisions that could trigger early termination of the contracts in certain circumstances, including if we were to merge with another entity and the creditworthiness of the surviving entity were to be "materially weaker" than that of Avon prior to the merger. Derivatives are recognized in the Consolidated Balance Sheets at their fair values. The following table presents the fair value of derivative instruments outstanding at June 30, 2018:
The following table presents the fair value of derivative instruments outstanding at December 31, 2017:
Interest Rate Risk A portion of our borrowings is subject to interest rate risk. In the past we have used interest-rate swap agreements, which effectively converted the fixed rate on long-term debt to a floating interest rate, to manage our interest rate exposure. The agreements were designated as fair value hedges. As of June 30, 2018, we do not have any interest-rate swap agreements. Approximately 1% of our debt portfolio at June 30, 2018 and December 31, 2017, was exposed to floating interest rates. In March 2012, we terminated two of our interest-rate swap agreements previously designated as fair value hedges, with notional amounts totaling $350. As of the interest-rate swap agreements’ termination date, the aggregate favorable adjustment to the carrying value (deferred gain) of our debt was $46.1, which was amortized as a reduction of interest expense until repayment of the underlying debt obligations in June 2018, at which point the remaining unamortized balance was fully released to the Consolidated Statement of Operations. The net impact of the gain amortization was $1.3 and $6.0 for the three and six months ended June 30, 2018, respectively, and $1.2 and $2.4 for the three and six months ended June 30, 2017, respectively. At June 30, 2018, there was no unamortized deferred gain associated with the March 2012 interest-rate swap termination. Foreign Currency Risk We may use foreign exchange forward contracts to manage a portion of our foreign currency exchange rate exposures. At June 30, 2018, we had outstanding foreign exchange forward contracts with notional amounts totaling approximately $57.0 for various currencies. We may use foreign exchange forward contracts to manage foreign currency exposure of certain intercompany loans. These contracts are not designated as hedges. The change in fair value of these contracts is immediately recognized in earnings and substantially offsets the foreign currency impact recognized in earnings relating to the associated intercompany loans. During the three and six months ended June 30, 2018, we recorded a loss of $4.0 and a loss of $3.1, respectively, in other expense, net in our Consolidated Statements of Operations related to these undesignated foreign exchange forward contracts. Also during the three and six months ended June 30, 2018, we recorded a gain of $4.9 and a gain of $3.7, respectively, related to the associated intercompany loans, caused by changes in foreign currency exchange rates. During the three and six months ended June 30, 2017, we recorded gains of $1.7 and $2.2, respectively, in other expense, net in our Consolidated Statements of Operations related to these undesignated foreign exchange forward contracts. Also during the three and six months ended June 30, 2017, we recorded losses of $2.7 and $3.9, respectively, related to the associated intercompany loans, caused by changes in foreign currency exchange rates. |
DEBT |
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Jun. 30, 2018 | |
Debt Disclosure [Abstract] | |
DEBT | DEBT Revolving Credit Facility In June 2015, Avon International Operations, Inc. ("AIO"), a wholly-owned domestic subsidiary of the Company, entered into a five-year $400.0 senior secured revolving credit facility (the “2015 facility”). Borrowings under the 2015 facility bear interest, at our option, at a rate per annum equal to LIBOR plus 250 basis points or a floating base rate plus 150 basis points, in each case subject to adjustment based upon a leverage-based pricing grid. In December 2017, AIO entered into an amendment to the 2015 facility, which, among other things, modified the financial covenants (interest coverage and total leverage ratios) to provide the Company additional flexibility. As of June 30, 2018, there were no amounts outstanding under the 2015 facility. The 2015 facility will terminate in June 2020; provided, however, that it shall terminate on the 91st day prior to the maturity of the 4.60% Notes (as defined below), if on such 91st day, the applicable notes are not redeemed, repaid, discharged, defeased or otherwise refinanced in full. The 2015 facility contains affirmative and negative covenants, which are customary for secured financings of this type, as well as financial covenants (interest coverage and total leverage ratios). As of June 30, 2018, we were in compliance with our interest coverage and total leverage ratios under the 2015 facility, as amended. The amount of the facility available to be drawn down on is reduced by any standby letters of credit granted by AIO, which, as of June 30, 2018, was approximately $33. As of June 30, 2018, based on then applicable interest rates, the entire amount of the remaining 2015 facility, which is approximately $367, could have been drawn down without violating any covenant. Public Notes In March 2013, we issued, in a public offering, $500.0 principal amount of 4.60% Notes due March 15, 2020 (the "4.60% Notes"), $500.0 principal amount of 5.00% Notes due March 15, 2023 (the "5.00% Notes") and $250.0 principal amount of 6.95% Notes due March 15, 2043 (the "6.95% Notes") (collectively, the "2013 Notes"). In March 2009, we issued $350.0 principal amount of 6.50% Notes due March 1, 2019 (the "6.50% Notes"). Interest on the 2013 Notes is payable semi-annually on March 15 and September 15 of each year, and interest on the 6.50% Notes are payable semi-annually on March 1 and September 1 of each year. On June 18, 2018, we prepaid the remaining principal amount of our 6.50% Notes. The prepayment price was equal to the remaining principal amount of $237.8, plus a make-whole premium of $6.2 and accrued interest of $4.6. In connection with the prepayment, we incurred a loss on extinguishment of debt of $2.9 before tax in the second quarter of 2018 consisting of the $6.2 make-whole premium, and the write-off of $.3 of debt issuance costs and discounts related to the initial issuances of the notes that were prepaid, partially offset by a write off of a deferred gain of $3.6 associated with the March 2012 interest-rate swap agreement termination (see Note 14, Derivative Instruments and Hedging Activities). The indenture governing the 2013 Notes contains interest rate adjustment provisions depending on the long-term credit ratings assigned to the 2013 Notes by S&P and Moody's. As described in the indenture, the interest rates on the 2013 Notes increase by .25% for each one-notch downgrade below investment grade on each of our long-term credit ratings assigned to the 2013 Notes by S&P or Moody's. These adjustments are limited to a total increase of 2% above the respective interest rates in effect on the date of issuance of the 2013 Notes. As a result of the long-term credit rating downgrades by S&P and Moody's since issuance of the 2013 Notes, the interest rates on these notes have increased by the maximum allowable increase. The indentures governing our outstanding notes described above contain certain customary covenants and customary events of default and cross-default provisions. Further, we would be required to make an offer to repurchase all of our outstanding notes described above at a price equal to 101% of their aggregate principal amount plus accrued and unpaid interest in the event of a change in control involving Avon and, at such time, the outstanding notes are rated below investment grade. Senior Secured Notes In August 2016, AIO issued, in a private placement exempt from registration under the Securities Act of 1933, as amended, $500.0 in aggregate principal amount of 7.875% Senior Secured Notes, which will mature on August 15, 2022 (the "Senior Secured Notes"). Interest on the Senior Secured Notes is payable semi-annually on February 15 and August 15 of each year. The indenture governing our Senior Secured Notes contains certain customary covenants and restrictions as well as customary events of default and cross-default provisions. The indenture also contains a covenant requiring AIO and its restricted subsidiaries to, at the end of each year, own at least a certain percentage of the total assets of API and its restricted subsidiaries, subject to certain qualifications. Further, we would be required to make an offer to repurchase all of our Senior Secured Notes, at a price equal to 101% of their aggregate principal amount plus accrued and unpaid interest, in the event of a change in control involving Avon. |
INCOME TAXES |
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Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES Our quarterly income tax provision is calculated using an estimated annual effective income tax approach. The quarterly effective tax rate can differ from our estimated annual effective tax rate as the Company cannot apply an effective tax rate approach for all of its operations. For those entities that can apply an effective tax rate approach, as of June 30, 2018, our annual effective tax rate, excluding discrete items, is 25.6% for 2018, as compared to 25.9% for 2017. The remaining entities, which are operations that generate pre-tax losses which cannot be tax benefited and/or have an effective tax rate which cannot be reliably estimated, have to account for their income taxes on a discrete year-to-date basis as of the end of each quarter and are excluded from the effective tax rate approach. The estimated annual effective tax rate for 2018 also excludes the unfavorable impact of withholding taxes associated with certain intercompany payments, including royalties, service charges and dividends, which in the aggregate are relatively consistent each year due to the need to repatriate funds to cover U.S.-based costs, such as interest on debt and corporate overhead. Withholding taxes are accounted for discretely and accrued in the provision for income taxes as they become due. The provision for income taxes for the three months ended June 30, 2018 and 2017 was $36.7 and $33.6, respectively. Our effective tax rates for the three months ended June 30, 2018 and 2017 were (12,233.3)% and (275.4)%, respectively. The provision for income taxes for the six months ended June 30, 2018 and 2017 was $68.2 and $63.4, respectively. Our effective tax rates for the six months ended June 30, 2018 and 2017 were 675.2% and (335.4)%, respectively. The effective tax rates in 2018 and 2017 were impacted by CTI restructuring charges, country mix of earnings and withholding taxes that are relatively consistent. The effective tax rate in 2018 was also negatively impacted by one-time tax reserves of $5.5 for the three months ended June 30, 2018 and $14.7 for the six months ended June 30, 2018 associated with our uncertain tax positions. In its initial analysis of the impacts of the Tax Cuts and Job Act (the “Act”) at year end 2017, the Company made provisional estimates that may be adjusted in future periods as required. As part of the 2017 provisional estimate, we provided for the Global Intangible Low-Taxed Income tax ("GILTI"), a US tax on certain foreign earnings, as a period cost. While still provisional, the first-quarter and second-quarter 2018 provisions for income taxes has been calculated treating GILTI as a period cost. The Act has significant complexity. Expected implementation guidance from the Internal Revenue Service, clarifications of state tax law and the information analyzed during the completion of the Company’s 2017 tax return filings could impact these provisional estimates. |
ACCOUNTING POLICIES (Policy) |
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Accounting Policies [Abstract] | |||||||||||||||||
Basis of Presentation | Basis of Presentation We prepare our unaudited interim Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States ("GAAP"). We consistently applied the accounting policies described in our 2017 Annual Report on Form 10-K ("2017 Form 10-K") in preparing these unaudited interim Consolidated Financial Statements, other than those impacted by new accounting standards as described below. In our opinion, the unaudited interim Consolidated Financial Statements reflect all adjustments of a normal recurring nature that are necessary for a fair statement of the results for the interim periods presented. Results for interim periods are not necessarily indicative of results for a full year. You should read these unaudited interim Consolidated Financial Statements in conjunction with our Consolidated Financial Statements contained in our 2017 Form 10-K. When used in this report, the terms "Avon," "Company," "we" or "us" mean Avon Products, Inc. For interim Consolidated Financial Statements purposes, we generally provide for accruals under our various employee benefit plans for each quarter based on one quarter of the estimated annual expense, and adjust these accruals as estimates are refined. In addition, our income tax provision is determined using an estimate of our consolidated annual effective tax rate, adjusted in the current period for discrete income tax items including:
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Revenue | Contract balances The timing of revenue recognition generally is different from the timing of a promise made to a Representative. As a result, we have contract liabilities, which primarily relate to the advance consideration received from Representatives prior to transfer of the related good or service for material rights, such as loyalty points and status programs, and are primarily classified within other accrued liabilities (with the long-term portion in other liabilities) in our Consolidated Balance Sheets. Generally, we record accounts receivable when we invoice a Representative. In addition, we record an estimate of an allowance for doubtful accounts on receivable balances based on an analysis of historical data and current circumstances, including seasonality and changing trends. The allowance for doubtful accounts is reviewed for adequacy, at a minimum, on a quarterly basis. We generally have no detailed information concerning, or any communication with, any ultimate consumer of our products beyond the Representative. We have no legal recourse against the ultimate consumer for the collection of any accounts receivable balances due from the Representative to us. If the financial condition of the Representatives were to deteriorate, resulting in their inability to make payments, additional allowances may be required. Revenue Nature of goods and services We are a global manufacturer and marketer of beauty and related products. Our product categories are Beauty and Fashion & Home. Beauty consists of skincare, fragrance and color (cosmetics). Fashion & Home consists of fashion jewelry, watches, apparel, footwear, accessories, gift and decorative products, housewares, entertainment and leisure products, children’s products and nutritional products. Our business is conducted primarily in one channel - direct selling. Our reportable segments are based on geographic operations in four regions: Europe, Middle East & Africa; South Latin America; North Latin America; and Asia Pacific. We primarily sell our products to the ultimate consumer through the direct selling channel principally through Representatives, who are independent contractors and not our employees. Revenue recognition Revenue is recognized when control of a product or service is transferred to a customer, which is generally the Representative. Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties, such as Value Added Taxes (“VAT”) collected for taxing authorities. Principal revenue streams and significant judgments Our principal revenue streams can be distinguished into: i) the sale of Beauty and Fashion & Home products to Representatives (recorded in net sales); ii) Representative fees, primarily for the sale of brochures to Representatives and fulfillment activities related to the contract, which include fees for shipping and handling (recorded in other revenue); and iii) other, which includes the sale of products to New Avon and royalties from the licensing of our name and products (recorded in other revenue). i) Sale of Beauty and Fashion & Home products to Representatives We generate the majority of our revenue through the sale of Beauty and Fashion & Home products. A Representative contacts her customers directly, selling primarily through our brochure, which highlights new products and special promotions (or incentives) for each sales campaign. In this sense, the Representative, together with the brochure, are the "store" through which our products are sold. A brochure introducing a new sales campaign is typically generated every three to four weeks. A purchase order is processed and the products are picked at a distribution center and delivered to the Representative usually through a combination of local and national delivery companies. Generally, the Representative then delivers the merchandise and collects payment from the customer for her or his own account. A Representative generally receives a refund of the price the Representative paid for a product if the Representative chooses to return it. A Representative Agreement, which outlines the basic terms of the agreement between Avon and the Representative, combined with a purchase order, constitutes a contract for the purposes of Accounting Standards Codification Topic ("ASC 606"), Revenue from Contracts with Customers. We account for individual products and services separately in the contract if they are distinct (i.e., if a product or service is separately identifiable from the other items in the contract and if a Representative can benefit from the product or service on its own or with other resources that are readily available). This revenue is recognized at a point in time, when control of a product is transferred to a Representative. In addition, we offer incentives to Representatives to support sales growth. Certain of these sales incentives are distinct promises to a Representative, and therefore are a separate performance obligation. As a result, revenue is allocated to the performance obligation for sales incentives and is deferred on the balance sheet until the associated performance obligations are satisfied. Typically included within a contract is variable consideration, such as sales returns and late payment fees. Revenue is only recorded to the extent it is probable that it will not be reversed, and therefore revenue is adjusted for variable consideration. Variable consideration is generally estimated using the expected value method, which considers possible outcomes weighted by their probability. Specifically for sales returns, a refund liability will be recorded for the estimated cash to be refunded for the products expected to be returned, and a returns asset will be recorded for the products which we expect to be returned and re-sold, each of these based on historical experience. Sales returns are estimated and updated at the end of each month. The measurement of the returns asset and the refund liability is updated at the end of each month for changes in expectations regarding the amount of salvageable returns, reconditioning costs and any additional decreases in the value of the returned products. Late payment fees are recorded when the uncertainty associated with collecting such fees are resolved (i.e., when collected). The Representative generally receives a credit period of one sales campaign if they meet certain criteria; however, the specific credit terms are outlined in the Representative Agreement. Generally, the Representative remits payment during each sales campaign, which relates to the prior campaign cycle. The Representative is generally precluded from submitting an order for the current sales campaign until the accounts receivable balance past due for prior campaigns is paid; however, there are circumstances where the Representative fails to make the required payment. Our contracts with Representatives often include multiple promises to transfer products and/or services to the Representative, and determining which of these products and/or services are considered distinct performance obligations that should be accounted for separately may require significant judgment. In addition, in assessing the recognition of revenue for the following performance obligations, management has exercised significant judgment in the following areas: estimation of variable consideration and the stand-alone selling prices ("SSP") of promised goods or services in order to determine and allocate the transaction price. Performance obligation - Avon products The Representative purchases Avon products through a purchase order. We recognize revenue for Avon products in net sales in our Consolidated Statements of Operations when the Representative obtains control of the products, which occurs upon delivery of the product to the Representative. Transaction price is the amount we expect to receive in exchange for those products adjusted for variable consideration as discussed above and the estimated SSP of other performance obligations as discussed below. Performance obligation - Sales incentives Types of sales incentives include status programs, loyalty points, prospective discounts, and gift with purchase, among others. A Representative is eligible for certain status programs if specified sales levels are met. Status programs offer additional benefits such as free or discounted products and services. Loyalty points offer the option to redeem for additional Avon or other products or services. Prospective discounts are offered in some countries when certain sales levels are reached in a given time period. The revenue attributable to the prospective discount performance obligation is for the option to purchase additional product at a discounted amount. Certain benefits within status programs, loyalty points, prospective discounts and certain other sales incentives constitute a material right and, therefore, a distinct performance obligation in the contract with the Representative. Transaction price is allocated to the material right (performance obligation) based on estimated SSP and is deferred on the balance sheet until the associated performance obligations are satisfied. The cost of sales incentives is presented in inventories in our Consolidated Balance Sheets. We recognize revenue allocated to the material right in net sales in our Consolidated Statements of Operations at the point in time that the Representative receives the benefits of the material right or obtains control of the products, which occurs upon delivery to the Representative or upon expiration of the material right. For sales incentives that are delivered with the associated products order (such as gift with purchase), no deferral is required. SSP represents the estimated market value, or the estimated amount that could be charged for that material right when the entity sells it separately in similar circumstances to similar customers. Judgment is required to determine the SSP for each distinct performance obligation. In instances where SSP is not directly observable, such as when we do not sell the product or service separately, including for certain sales incentives, we determine the SSP using information that may include market prices and other observable inputs. ii) Representative fees, primarily for the sale of brochures to Representatives and fulfillment activities related to the contract ("Representative fees") The purchase order in the contract with the Representative explicitly identifies activities that we will perform. This includes fees that we charge Representatives, primarily for the sale of brochures to Representatives and fulfillment activities, and also includes late payment fees (discussed above). Brochures represent promotional materials that are given directly by the Representatives to their customers as a marketing activity. Under ASC 606, brochures that are sold by Avon to Representatives through purchase orders represent separate performance obligations in the contract as these are promises made between Avon and the Representative. Although the brochures are used similar to marketing materials, the Representative generally orders and pays for the brochures, and we allocate consideration for purposes of revenue recognition. The revenue associated with brochures that are sold to Representatives is recognized in other revenue and the related cost is recognized in cost of sales in our Consolidated Statements of Operations. We recognize revenue when the Representative obtains control of the brochures, which occurs upon delivery to the Representative. When brochures are given away for free to Representatives as promotional items, the cost is recognized in selling, general and administrative expenses in our Consolidated Statements of Operations. We often charge the Representative for shipping and handling (including order processing) and payment processing activities on the invoice, and such activities are considered to be fulfillment costs. The consideration received represents part of the transaction price in the contract that is allocated to the performance obligations in the contract. We recognize revenue for fulfillment activities in other revenue in our Consolidated Statements of Operations when the Representative obtains control of the associated products, which occurs upon delivery of the products to the Representative. The cost of these activities is recognized in selling, general and administrative expenses in our Consolidated Statements of Operations. iii) Other revenue We also recognize revenue from the sale of products to New Avon LLC ("New Avon"), as part of a manufacturing and supply agreement, since the separation of the Company's North America business into New Avon on March 1, 2016, and royalties from the licensing of our name and products, in other revenue in our Consolidated Statements of Operations. Contract costs Incremental costs to obtain contracts, such as bonuses or commissions, are recognized as an asset if the entity expects to recover them. However, ASC 340-40, Other Assets and Deferred Costs, offers a practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less. We elected the practical expedient and expense costs to obtain contracts when incurred because our amortization period is one year or less. Costs to fulfill contracts with Representatives are comprised of shipping and handling (including order processing) and payment processing services, which are expensed as incurred. The fees for these services are included in the transaction price. Changes in accounting policies Except for the changes below, we have consistently applied the accounting policies to all periods presented in these consolidated financial statements. We adopted ASC 606 with a date of the initial application of January 1, 2018, as a cumulative-effect adjustment to retained earnings. Therefore, the comparative information for prior periods has not been adjusted and continues to be reported under ASC 605, Revenue Recognition. We applied ASC 606 to all outstanding contracts at January 1, 2018. We recorded a cumulative-effect adjustment upon adoption of the new revenue recognition standard as of January 1, 2018 comprised of the following:
This cumulative-effect adjustment impacting our Consolidated Balance Sheets is primarily driven by sales incentives and brochures. The other changes resulting from the new revenue recognition standard were not material. The details of the significant changes to our accounting policy for revenue recognition and the quantitative impact of the changes on our Consolidated Financial Statements are set out below. Performance obligations - Avon products We recognize revenue for Avon products in net sales in our Consolidated Statements of Operations when the Representative obtains control of the products, which occurs upon delivery of the product to the Representative. Transaction price is the amount we expect to receive in exchange for those products adjusted for variable consideration, such as sales returns and past due fees, and the estimated SSP of other performance obligations, such as sales incentives. Revenue allocated to the material right (performance obligation) for sales incentives is deferred on the balance sheet until the associated performance obligations are satisfied. Under our historical accounting, we recognized revenue for Avon products in net sales in our Consolidated Statements of Operations upon delivery of the product to the Representative. Revenue was adjusted for expected sales returns. Performance obligations/ material rights - sales incentives Certain benefits within status programs, loyalty points, prospective discounts and certain other sales incentives constitute a material right and, therefore, a distinct performance obligation in the contract with the Representative. Transaction price is allocated to the material right based on estimated SSP and is deferred on the balance sheet until the associated performance obligations are satisfied. The cost of sales incentives is presented in inventories in our Consolidated Balance Sheets. We recognize revenue allocated to the material right in net sales and the associated cost of sales incentives is recognized in cost of sales in our Consolidated Statements of Operations, at the point in time that the Representative receives the benefits of the material right or obtains control of the products, which occurs upon delivery to the Representative or upon expiration of the material right. For sales incentives that are delivered with the associated products order (such as gift with purchase), no deferral is required. Under our historical accounting, the cost of sales incentives was generally presented in other accrued liabilities and prepaid expenses and other in our Consolidated Balance Sheets and recognized in selling, general and administrative expenses in our Consolidated Statements of Operations over the period that the sales incentive was earned. Representative fees, primarily for the sale of brochures to Representatives and fulfillment activities related to the contract This includes fees that we charge Representatives, primarily for the sale of brochures to Representatives and fulfillment activities, and also includes late payment fees. Brochures - Brochures represent promotional materials that are given directly by the Representatives to their customers as a marketing activity. Under ASC 606, brochures that are sold by Avon to Representatives through purchase orders represent separate performance obligations in the contract as these are promises made between Avon and the Representative. Although the brochures are used similar to marketing materials, the Representative generally orders and pays for the brochures, and Avon allocates consideration for purposes of revenue recognition. The revenue associated with brochures that are sold to Representatives is recognized in other revenue and the related cost is recognized in cost of sales in our Consolidated Statements of Operations. We recognize revenue when the Representative obtains control of the brochures, which occurs upon delivery to the Representative. When brochures are given away for free to Representatives as promotional items, the cost is recognized in selling, general and administrative expenses in our Consolidated Statements of Operations. Under our historical accounting, all brochure costs were initially deferred to prepaid expenses and other in our Consolidated Balance Sheets and were charged to selling, general, and administrative expenses in our Consolidated Statements of Operations over the campaign length. In addition, fees charged to Representatives for brochures were initially deferred and presented as a reduction of prepaid expenses and other in our Consolidated Balance Sheets, and were recorded as a reduction of selling, general, and administrative expenses in our Consolidated Statements of Operations over the campaign length. Fulfillment activities and late payment fees - We often charge the Representative for shipping and handling (including order processing) and payment processing activities on the invoice, and such activities are considered to be fulfillment costs. The consideration received represents part of the transaction price in the contract that is allocated to the performance obligations in the contract. We recognize revenue for fulfillment activities in other revenue in our Consolidated Statements of Operations when the Representative obtains control of the associated products, which occurs upon delivery of the products to the Representative. The cost of these activities is recognized in selling, general and administrative expenses in our Consolidated Statements of Operations. Late payment fees are recorded in other revenue in our Consolidated Statements of Operations when collected. Under our historical accounting, revenue for shipping and handling (including order processing) activities was recorded in other revenue in our Consolidated Statements of Operations. However, the revenue for payment processing activities and late payment fees were recognized as a reduction of selling, general, and administrative expenses in our Consolidated Statements of Operations. The cost of these activities was recognized in selling, general and administrative expenses in our Consolidated Statements of Operations. |
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Other Accounting Standards Implemented | Other Accounting Standards Implemented ASU 2017-07, Compensation - Retirement Benefits In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits. This new guidance requires entities to (1) disaggregate the service cost component from the other components of net periodic benefit costs and present it with other current employee compensation costs in the Consolidated Statements of Operations and (2) present the other components of net periodic benefit costs below operating profit in other expense, net. We adopted this new accounting guidance effective January 1, 2018. The new accounting guidance was applied retrospectively and increased our operating profit for the three and six months ended June 30, 2017 by $1.1 and $2.2 respectively, but had no impact on net loss. Accounting Standards to be Implemented ASU 2016-02, Leases In February 2016, the FASB issued ASU 2016-02, Leases, which requires all assets and liabilities arising from leases to be recognized in our Consolidated Balance Sheets. We intend to adopt this new accounting guidance effective January 1, 2019. While we are still evaluating the full effect that adopting this new accounting guidance will have on our Consolidated Financial Statements, we believe that it will significantly increase the assets and liabilities in our Consolidated Balance Sheets. ASU 2018-02, Income Statement - Reporting Comprehensive Income In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income, which permits entities to reclassify the disproportionate income tax effects of the 2017 enactment of U.S. tax reform legislation on items within accumulated other comprehensive income (loss) to retained earnings. These disproportionate income tax effect items are referred to as "stranded tax effects." We intend to adopt this new accounting guidance effective January 1, 2019. We are currently assessing the impact on our consolidated financial statements. ASU 2016-13, Financial Instruments - Credit Losses In January 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, which requires measurement and recognition of expected credit losses for financial assets held. We intend to adopt this new accounting guidance effective January 1, 2020. We are currently assessing the impact on our consolidated financial statements. |
ACCOUNTING POLICIES (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Disaggregation of Revenue by Product or Service | In the following table, revenue is disaggregated by product or service type. All revenue is recognized at a point in time, when control of a product is transferred to a customer:
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Summary of Receivables and Contract Liabilities | The following table provides information about receivables and contract liabilities from contracts with customers at June 30, 2018:
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Summary of Impact of ASC 606 | The following tables summarize the impacts of adopting ASC 606 on the Company's consolidated financial statements for the three months ended June 30, 2018:
(1) Primarily relates to net impact of the timing of recognition of sales incentives. (2) Relates to Representative fees (primarily brochure fees, late payment fees and certain other fees), which were reclassified from SG&A. Brochure fees were also impacted by the timing of recognition. (3) Primarily relates to the cost of sales incentives and the cost of brochures paid for by Representatives, both of which were reclassified from SG&A and were also impacted by the timing of recognition. (4) Relates to the cost of sales incentives, which were reclassified to cost of sales and were also impacted by the timing of recognition. This was partially offset by Representative fees, which were reclassified to other revenue.
The following tables summarize the impacts of adopting ASC 606 on the Company's consolidated financial statements for the six months ended June 30, 2018:
(1) Primarily relates to net impact of the timing of recognition of sales incentives. (2) Relates to Representative fees (primarily brochure fees, late payment fees and certain other fees), which were reclassified from SG&A. Brochure fees were also impacted by the timing of recognition. (3) Primarily relates to the cost of sales incentives and the cost of brochures paid for by Representatives, both of which were reclassified from SG&A and were also impacted by the timing of recognition. (4) Relates to the cost of sales incentives, which were reclassified to cost of sales and were also impacted by the timing of recognition. This was partially offset by Representative fees, which were reclassified to other revenue.
(1) Relates to sales returns, which were reclassified from a reduction of accounts receivable to a refund liability (within other accrued liabilities) and a returns asset (within prepaid expenses and other). (2) Primarily relates to sales incentives and brochures, both of which were reclassified from prepaid expenses and other to inventories, and were also impacted by the timing of recognition. In addition, prepaid expenses and other was impacted by the timing of recognition of brochures, as well as the reclassification of sales returns (described above). (3) Relates to deferred tax assets associated with the cumulative-effect adjustment. (4) Primarily relates to the contract liability for sales incentives, which is partially offset by the lower accrual for sales incentives. In addition, other accrued liabilities was impacted by the reclassification of sales returns (described above). (5) Relates to the $41.1 cumulative-effect adjustment upon adoption of ASC 606, partially offset by the $17.4 net loss adjustment.
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EARNINGS (LOSS) PER SHARE AND SHARE REPURCHASES (Tables) |
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Basic and Diluted Earnings per Share |
Amounts in the table above may not necessarily sum due to rounding. |
INVESTMENT IN NEW AVON (Tables) |
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Equity Method Investments and Joint Ventures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summarized Financial Information related to New Avon | Summarized financial information related to New Avon is shown below:
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RELATED PARTY TRANSACTIONS (Tables) |
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Related Party Transactions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Related Party Transactions | The following tables present the related party transactions with New Avon, affiliates of Cerberus and the Instituto Avon in Brazil. There are no other related party transactions. New Avon is majority-owned and managed by Cerberus NA. See Note 3, Investment in New Avon for further details.
(1) The Company supplies product to New Avon as part of a manufacturing and supply agreement. (2) New Avon supplies product to the Company as part of the same manufacturing and supply agreement noted above. The Company purchased $.5 and $.9 from New Avon associated with this agreement during the three months ended June 30, 2018 and 2017, respectively, and recorded $.7 and $1.3 associated with these purchases within cost of sales in our Consolidated Statement of Operations during the three months ended June 30, 2018 and 2017, respectively. The Company purchased $1.2 and $1.9 from New Avon associated with this agreement during the six months ended June 30, 2018 and 2017, respectively, and recorded $1.2 and $2.1 associated with these purchases within cost of sales in our Consolidated Statement of Operations during the six months ended June 30, 2018 and 2017, respectively. (3) The Company also entered into a transition services agreement to provide certain services to New Avon, as well as an intellectual property ("IP") license agreement, an agreement for technical support and innovation and sublease for office space. In addition, New Avon performed certain services for the Company under a similar transition services agreement, which expired during the third quarter of 2017. The Company recorded a net $.5 and $7.2 reduction of selling, general and administrative expenses associated with these agreements during the three months ended June 30, 2018 and 2017, respectively, and a net $3.7 and $15.1 reduction of selling, general and administrative expenses associated with these agreements during the six months ended June 30, 2018 and 2017, respectively, which generally represents a recovery of the related costs. (4) The Company also entered into agreements with an affiliate of Cerberus, which provide for the secondment of Cerberus affiliate personnel to the Company's project management team responsible for assisting with the execution of the transformation plan (the "Transformation Plan") announced in January 2016. The Company recorded $.2 and $.8 in selling, general and administrative expenses associated with these agreements during the three months ended June 30, 2018 and 2017, respectively, and recorded $.8 and $1.6 in selling, general and administrative expenses associated with these agreements during the six months ended June 30, 2018 and 2017, respectively. See Note 11, Restructuring Initiatives for additional information related to the Transformation Plan. (5) During the second quarter of 2018, the Company entered into an agreement to loan the Instituto Avon, an independent non-government charitable organization in Brazil, $3.6 for an unsecured 5-year term at a fixed interest rate of 7% per annum, to be paid back in 5 equal annual installments. The Instituto Avon was created by an Avon subsidiary in Brazil, with board and executive team comprising of Avon Brazil management. The purpose of the loan is to provide the Instituto Avon with the means to donate funds to Fundação Pio XII (a leading cancer prevention and treatment organization in Brazil and owner of the Hospital do Câncer de Barretos), in order to invest in equipment with the objective of expanding breast cancer prevention and treatment. (6) Inventories relate to purchases from New Avon, associated with the manufacturing and supply agreement, which have not yet been sold, and were classified within inventories in our Consolidated Balance Sheets. (7) The receivables due from New Avon relate to the agreements for transition services, the IP license, technical support and innovation and subleases for office space, as well as the manufacturing and supply agreement, and were classified within prepaid expenses and other in our Consolidated Balance Sheets. (8) The payables due to New Avon relate to the manufacturing and supply agreement, and were classified within other accrued liabilities in our Consolidated Balance Sheets. (9) The payables due to an affiliate of Cerberus relate to the agreement for the project management team, and were classified within other accrued liabilities in our Consolidated Balance Sheets. |
INVENTORIES (Tables) |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Inventories |
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EMPLOYEE BENEFIT PLANS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement Benefits, Description [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Net Periodic Benefit Cost |
(1) Service cost is presented in selling, general and administrative expenses in our Consolidated Statements of Operations. The components of net periodic benefit costs other than service cost are presented in other expense, net in our Consolidated Statements of Operations. |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Amounts in Accumulated Other Comprehensive Income (Loss) | The tables below present the changes in AOCI by component and the reclassifications out of AOCI for the three and six months ended June 30, 2018 and 2017:
(1) Gross amount reclassified to pension and postretirement expense, within other expense, net in our Consolidated Statements of Operations, and related taxes reclassified to income taxes in our Consolidated Statements of Operations. |
SEGMENT INFORMATION (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summarized Financial Information of Reportable Segments | Summarized financial information concerning our reportable segments was as follows:
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SUPPLEMENTAL BALANCE SHEET INFORMATION (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Prepaid Expenses and Other | At June 30, 2018 and December 31, 2017, prepaid expenses and other included the following:
(1) The decrease in prepaid brochure costs, paper and other literature is primarily due to the adoption of ASC 606. Effective January 1, 2018, the costs associated with brochures that will be purchased by the Representative are presented within inventories in our Consolidated Balance Sheets, while the costs associated with brochures that will be given away for free as promotional items are reflected within prepaid expenses and other in our Consolidated Balance Sheets. Previously, the net of the costs and fees charged to Representatives for all brochures were presented within prepaid expenses and other in our Consolidated Balance Sheets. See Note 1, Accounting Policies for further details. |
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Components of Other Assets | At June 30, 2018 and December 31, 2017, other assets included the following:
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RESTRUCTURING INITIATIVES (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Restructuring Reserve | The liability balance for the Transformation Plan as of June 30, 2018 is as follows:
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Summary of Restructuring and Related Costs | The following table presents the restructuring charges incurred to date, under the Transformation Plan, along with the estimated charges expected to be incurred on approved initiatives under the plan:
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Schedule of Restructuring Charges Reportable by Business Segment | The charges, net of adjustments, of initiatives under the Transformation Plan, along with the estimated charges expected to be incurred on approved initiatives under the plan, by reportable segment are as follows:
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GOODWILL (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Goodwill |
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FAIR VALUE (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Carrying Value and Fair Value of Financial Instruments | The net asset (liability) amounts recorded in the balance sheet (carrying amount) and the estimated fair values of our remaining financial instruments at June 30, 2018 and December 31, 2017, respectively, consisted of the following:
(1) The carrying value of debt maturing within one year and long-term debt is presented net of debt issuance costs and includes any related discount or premium and unamortized deferred gains on terminated interest-rate swap agreements, as applicable. |
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of fair value of derivative instruments | The following table presents the fair value of derivative instruments outstanding at June 30, 2018:
The following table presents the fair value of derivative instruments outstanding at December 31, 2017:
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ACCOUNTING POLICIES - Summary of Receivables and Contract Liabilities (Details) - USD ($) $ in Millions |
Jun. 30, 2018 |
Jan. 01, 2018 |
Dec. 31, 2017 |
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Accounting Policies [Abstract] | |||
Accounts receivable, net | $ 386.4 | $ 457.2 | |
Contract liabilities | 70.3 | $ 91.8 | |
Allowance for accounts receivable | $ 108.5 |
EARNINGS (LOSS) PER SHARE AND SHARE REPURCHASES (Narrative) (Details) - USD ($) shares in Millions, $ in Millions |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Earnings Per Share [Abstract] | ||||
Stock options excluded from computation of earnings per share (in shares) | 18.5 | 18.1 | 17.4 | 16.1 |
Converted Series C Convertible Preferred Stock (in shares) | 87.1 | 87.1 | 87.1 | 87.1 |
Stock repurchased during the period (in shares) | 1.1 | 1.5 | ||
Stock repurchased during the period | $ 3.2 | $ 6.4 |
RELATED PARTY TRANSACTIONS (Details) - USD ($) |
6 Months Ended | ||
---|---|---|---|
Mar. 01, 2016 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Related Party Transaction [Line Items] | |||
Dividend rate | 1.25% | ||
Dividends | $ 0 | $ 0 | |
Equity Method Investee | |||
Related Party Transaction [Line Items] | |||
Standby letters of credit, recorded liability | 1,400,000 | ||
Series C Preferred Stock | |||
Related Party Transaction [Line Items] | |||
Shares issued (in shares) | 435,000 | ||
Shares issued | $ 435,000,000 | ||
Dividends payable | $ 53,500,000 |
INVENTORIES (Components of Inventories) (Details) - USD ($) $ in Millions |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Raw materials | $ 191.3 | $ 190.6 |
Finished goods | 470.9 | 407.6 |
Inventories | $ 662.2 | $ 598.2 |
EMPLOYEE BENEFIT PLANS (Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2017 |
Jun. 30, 2018 |
|
Domestic Plan | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Employer contribution, approximately | $ 11.4 | |
Domestic Plan | Minimum | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Estimated contributions for the remainder of fiscal year | 0.0 | |
Domestic Plan | Maximum | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Estimated contributions for the remainder of fiscal year | 4.0 | |
Foreign Plan | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Employer contribution, approximately | 8.0 | |
Loss contingency | $ 18.2 | |
Foreign Plan | Minimum | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Estimated contributions for the remainder of fiscal year | 12.0 | |
Foreign Plan | Maximum | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Estimated contributions for the remainder of fiscal year | $ 17.0 |
CONTINGENCIES (Details) - USD ($) $ in Millions |
12 Months Ended | ||||
---|---|---|---|---|---|
Dec. 31, 2014 |
Jun. 30, 2018 |
Apr. 18, 2018 |
Oct. 03, 2017 |
Jul. 31, 2013 |
|
FCPA | |||||
Loss Contingencies [Line Items] | |||||
Litigation settlement paid | $ 135 | ||||
Assessment for 2012 | |||||
Loss Contingencies [Line Items] | |||||
Assessment of contingencies, including penalties and accruing interest | $ 239 | $ 303 | |||
Assessment of contingencies, including penalties and accruing interest, adjustment | $ (64) | ||||
Assessment for 2017 | |||||
Loss Contingencies [Line Items] | |||||
Assessment of contingencies, including penalties and accruing interest | $ 232 | ||||
IPI Tax on Cosmetics | |||||
Loss Contingencies [Line Items] | |||||
Estimated litigation liability | $ 191 | ||||
Judicial deposit | 65 | ||||
Net IPI liability | 126 | ||||
Brazil labor-related | |||||
Loss Contingencies [Line Items] | |||||
Estimated litigation liability | $ 13 |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Equity [Abstract] | ||||
Foreign exchange gains (losses) | $ (9.6) | $ 6.4 | $ (3.7) | $ 9.8 |
SUPPLEMENTAL BALANCE SHEET INFORMATION (Components of Prepaid Expenses and Other) (Details) - USD ($) $ in Millions |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Prepaid taxes and tax refunds receivable | $ 113.3 | $ 111.6 |
Receivables other than trade | 54.8 | 67.2 |
Judicial deposit for Brazil IPI tax on cosmetics (Note 7) | 65.0 | 0.0 |
Prepaid brochure costs, paper and other literature | 13.9 | 64.8 |
Other | 43.9 | 52.8 |
Prepaid expenses and other | $ 290.9 | $ 296.4 |
SUPPLEMENTAL BALANCE SHEET INFORMATION (Components of Other Assets) (Details) - USD ($) $ in Millions |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Deferred tax assets | $ 199.8 | $ 203.8 |
Net overfunded pension plans | 90.6 | 82.0 |
Capitalized software | 81.8 | 85.2 |
Judicial deposits other than Brazil IPI tax (see below) | 71.7 | 82.2 |
Judicial deposit for Brazil IPI tax on cosmetics (Note 7) | 0.0 | 73.8 |
Long-term receivables | 71.1 | 75.6 |
Trust assets associated with supplemental benefit plans | 37.4 | 37.1 |
Tooling (plates and molds associated with our beauty products) | 10.2 | 12.5 |
Other | 11.3 | 14.0 |
Other assets | $ 573.9 | $ 666.2 |
GOODWILL (Schedule of Goodwill) (Details) $ in Millions |
6 Months Ended |
---|---|
Jun. 30, 2018
USD ($)
| |
Goodwill [Roll Forward] | |
Net balance at beginning | $ 95.7 |
Foreign exchange | (0.8) |
Net balance at ending | 94.9 |
Europe, Middle East & Africa | |
Goodwill [Roll Forward] | |
Net balance at beginning | 20.4 |
Foreign exchange | (1.7) |
Net balance at ending | 18.7 |
South Latin America | |
Goodwill [Roll Forward] | |
Net balance at beginning | 72.7 |
Foreign exchange | 0.9 |
Net balance at ending | 73.6 |
Asia Pacific | |
Goodwill [Roll Forward] | |
Net balance at beginning | 2.6 |
Foreign exchange | 0.0 |
Net balance at ending | $ 2.6 |
FAIR VALUE (Fair Value of Financial Instruments) (Details) - USD ($) $ in Millions |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Carrying Amount | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Available-for-sale securities | $ 3.7 | $ 3.7 |
Debt maturing within one year | (12.0) | (25.7) |
Long-term debt | (1,630.3) | (1,872.2) |
Fair Value | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Available-for-sale securities | 3.7 | 3.7 |
Debt maturing within one year | (12.0) | (25.7) |
Long-term debt | (1,502.3) | (1,718.6) |
Foreign exchange forward contracts | Carrying Amount | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Foreign exchange forward contracts | (0.6) | 0.0 |
Foreign exchange forward contracts | Fair Value | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Foreign exchange forward contracts | $ (0.6) | $ 0.0 |
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITES (Schedule of fair value of derivative instruments) (Details) - USD ($) $ in Millions |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Derivatives, Fair Value [Line Items] | ||
Derivative asset, fair value | $ 0.5 | $ 0.2 |
Derivative liability, fair value | 1.1 | 0.2 |
Derivatives not designated as hedges: | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset, fair value | 0.5 | 0.2 |
Derivative liability, fair value | 1.1 | 0.2 |
Foreign exchange forward contracts | Derivatives not designated as hedges: | Prepaid expenses and other | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset, fair value | 0.5 | 0.2 |
Foreign exchange forward contracts | Derivatives not designated as hedges: | Accounts payable | ||
Derivatives, Fair Value [Line Items] | ||
Derivative liability, fair value | $ 1.1 | $ 0.2 |
INCOME TAXES (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
Dec. 31, 2017 |
|
Income Tax Disclosure [Abstract] | |||||
Effective income tax rate, excluding discrete items | 25.60% | 25.90% | |||
Income taxes | $ 36.7 | $ 33.6 | $ 68.2 | $ 63.4 | |
Effective income tax rate | (12233.30%) | (275.40%) | 675.20% | (335.40%) | |
Effective income tax rate reconciliation, tax contingency | $ 5.5 | $ 14.7 |
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