UNITED STATES OF AMERICA

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________

FORM 10-Q

_________________________

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2022

OR

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from              to             

Commission file number 1-4881

_________________________

AVON PRODUCTS, INC.

(Exact name of registrant as specified in its charter)

_________________________

New York	13-0544597
(State or other jurisdiction of Incorporation or organization)	(I.R.S. Employer Identification No.)

Lancaster House

Nunn Mills Road, Northampton NN1 5PA

United Kingdom

(Address of principal executive offices)

+44-1904-232425

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	None	None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒   No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Note: The registrant is a voluntary filer of reports required to be filed by certain companies under Sections 13 or 15(d) of the Securities Exchange Act of 1934.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

The number of shares of Common Stock (par value $0.01) outstanding at September 30, 2022 was 101.34.

The registrant meets the conditions sets forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format.

TABLE OF CONTENTS

 

		Page Numbers
Part I. Financial Information
Item 1.	Financial Statements (Unaudited)
	Consolidated Statements of Operations Three Months Ended September 30, 2022 and September 30, 2021	3
	Consolidated Statements of Operations Nine Months Ended September 30, 2022 and September 30, 2021	4
	Consolidated Statements of Comprehensive Income (Loss) Three Months Ended September 30, 2022 and September 30, 2021	5
	Consolidated Statements of Comprehensive Income (Loss) Nine Months Ended September 30, 2022 and September 30, 2021	6
	Consolidated Balance Sheets September 30, 2022 and December 31, 2021	7
	Consolidated Statements of Cash Flows Nine Months Ended September 30, 2022 and September 30, 2021	8
	Consolidated Statement of Changes in Shareholders’ Deficit Nine Months Ended September 30, 2022 and September 30, 2021	10
	Notes to Consolidated Financial Statements	12 - 25
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33 - 38
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	52
Item 4.	Controls and Procedures	52
Part II. Other Information
Item 1.	Legal Proceedings	53
Item 1A.	Risk Factors	53
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54
Item 5.	Other Information	54
Item 6.	Exhibits	55
	Signature	56

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AVON PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended
(In millions)	September 30, 2022		September 30, 2021
Product sales	$	627.8	$	728.7
Other revenue	30.4		33.1
Revenue from affiliates of Natura &Co	5.7		6.5
Total revenue	663.9		768.3
Costs, expenses and other:
Cost of sales	(290.0)		(316.5)
Cost of sales from affiliates of Natura &Co	(5.7)		(4.8)
Selling, general and administrative expenses	(417.5)		(465.9)
Operating loss	(49.3)		(18.9)
Interest expense	(11.1)		(21.1)
Interest expense on Loan from affiliates of Natura &Co	(28.4)		(16.2)
Interest income	5.7		.3
Interest income from affiliates of Natura &Co	1.4		.8
Other income (expense), net	(5.7)		.7
Gain on sale of business/assets	—		8.3
Total other expenses	(38.1)		(27.2)
Loss from continuing operations, before income taxes	(87.4)		(46.1)
Income taxes	(22.1)		10.4
Loss from continuing operations, net of tax	(109.5)		(35.7)
(Loss) income from discontinued operations, net of tax	(14.5)		(7.4)
Net loss	(124.0)		(43.1)
Net (income) loss attributable to noncontrolling interests	(.1)		.6
Net loss attributable to Avon	$	(124.1)	$	(42.5)

The accompanying notes are an integral part of these statements.

3

AVON PRODUCTS, INC.

AVON PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Nine Months Ended
(In millions)	September 30, 2022		September 30, 2021
Product sales	$	1,906.1	$	2,443.9
Other revenue	117.0		122.9
Revenue from affiliates of Natura &Co	17.3		22.9
Total revenue	2,040.4		2,589.7
Costs, expenses and other:
Cost of sales	(879.3)		(1,091.6)
Cost of sales from affiliates of Natura &Co	(17.7)		(20.1)
Selling, general and administrative expenses	(1,284.1)		(1,553.1)
Operating loss	(140.7)		(75.1)
Interest expense	(32.9)		(52.6)
Interest expense on Loan from affiliates of Natura &Co	(63.6)		(34.7)
Loss on extinguishment of debt	(15.7)		—
Interest income	7.2		.4
Interest income from affiliates of Natura &Co	3.0		.8
Other income (expense), net	5.2		4.3
Gain on sale of business/assets	—		9.8
Total other expenses	(96.8)		(72.0)
Loss from continuing operations, before income taxes	(237.5)		(147.1)
Income taxes	(23.3)		(15.5)
Loss from continuing operations, net of tax	(260.8)		(162.6)
(Loss) income from discontinued operations, net of tax	(35.2)		(6.5)
Net loss	(296.0)		(169.1)
Net (income) loss attributable to noncontrolling interests	(.2)		1.4
Net loss attributable to Avon	$	(296.2)	$	(167.7)

The accompanying notes are an integral part of these statements.

4

AVON PRODUCTS, INC.

AVON PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Three Months Ended
(In millions)	September 30, 2022		September 30, 2021
Net loss	$	(124.0)	$	(43.1)
Other comprehensive income (loss):
Foreign currency translation adjustments	44.6		(5.7)
Unrealized loss on revaluation of long-term intercompany balances	(18.2)		(3.8)
Change in unrealized loss on cash flow hedges	.3		—
Adjustments and amortization of net actuarial loss and prior service cost, net of taxes of $0.2 and $0.2	1.2		.7
Total other comprehensive income (loss), net of income taxes	27.9		(8.8)
Comprehensive loss	(96.1)		(51.9)
Less: comprehensive (income) loss attributable to noncontrolling interests	(.4)		.9
Comprehensive loss attributable to Avon	$	(96.5)	$	(51.0)

The accompanying notes are an integral part of these statements.

5

AVON PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Nine Months Ended
(In millions)	September 30, 2022		September 30, 2021
Net loss	$	(296.0)	$	(169.1)
Other comprehensive income (loss):
Foreign currency translation adjustments	125.9		(1.4)
Unrealized loss on revaluation of long-term intercompany balances	(34.9)		(21.7)
Change in unrealized loss on cash flow hedges	1.1		—
Adjustments and amortization of net actuarial loss and prior service cost, net of taxes of $0.5 and $0.6	3.7		3.2
Total other comprehensive income (loss), net of income taxes	95.8		(19.9)
Comprehensive loss	(200.2)		(189.0)
Less: comprehensive (income) loss attributable to noncontrolling interests	(.6)		1.6
Comprehensive loss attributable to Avon	$	(200.8)	$	(187.4)

The accompanying notes are an integral part of these statements.

6

AVON PRODUCTS, INC.

CONSOLIDATED BALANCE SHEETS

December 31, 2021 (Audited) and September 30, 2022 (Unaudited)

(In millions)	September 30, 2022		December 31, 2021
Assets
Current Assets
Cash and cash equivalents	$	216.7	$	251.5
Accounts receivable, net	194.4		198.7
Receivables from affiliates of Natura &Co	45.0		34.1
Loans to affiliates of Natura &Co	47.9		46.6
Inventories	390.4		384.1
Prepaid expenses and other	145.1		165.6
Assets held for sale	7.9		2.8
Total current assets	1,047.4		1,083.4
Property, plant and equipment, at cost	851.7		942.5
Less accumulated depreciation	(527.5)		(578.8)
Property, plant and equipment, net	324.2		363.7
Right-of-use assets	93.3		111.1
Goodwill	62.5		72.1
Deferred tax asset	54.6		121.4
Loans to affiliates of Natura &Co	51.3		46.7
Other assets	461.3		509.4
Total assets	$	2,094.6	$	2,307.8
Liabilities and Shareholders’ Deficit
Current Liabilities
Debt maturing within one year	$	116.0	$	32.6
Loans from affiliates of Natura &Co	274.1		371.7
Accounts payable	442.3		522.8
Payables to affiliates of Natura &Co	51.4		29.4
Accrued compensation	61.3		81.5
Other accrued liabilities	239.5		273.4
Sales taxes and taxes other than income	78.3		66.8
Income taxes	1.6		11.6
Current liabilities of discontinued operations	46.8		31.7
Total current liabilities	1,311.3		1,421.5
Long-term debt	214.7		676.0
Loans from affiliates of Natura &Co	1,375.1		736.3
Long-term operating lease liability	72.9		87.5
Employee benefit plans	81.5		84.6
Long-term income taxes	25.9		81.5
Other liabilities	63.1		75.1
Total liabilities	3,144.5		3,162.5
Shareholders’ Deficit
Additional paid-in capital	636.3		631.2
Retained losses	(700.4)		(404.2)
Accumulated other comprehensive loss	(989.0)		(1,085.5)
Total Avon shareholders’ deficit	(1,053.1)		(858.5)
Noncontrolling interests	3.2		3.8
Total shareholders’ deficit	(1,049.9)		(854.7)
Total liabilities and shareholders’ deficit	$	2,094.6	$	2,307.8

The accompanying notes are an integral part of these statements.

7

AVON PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended
(In millions)	September 30, 2022		September 30, 2021
Cash Flows from Operating Activities
Net loss	$	(296.0)	$	(169.1)
Loss from discontinued operations, net of tax	(35.2)		(6.5)
Loss from continuing operations, net of tax	(260.8)		(162.6)
Adjustments to reconcile net loss from continuing operations to net cash used by operating activities:
Depreciation	31.5		39.6
Amortization	15.1		17.6
Provision for doubtful accounts	39.6		48.5
Provision for obsolescence	20.5		20.3
Share-based compensation	5.0		7.7
Foreign exchange (gains) losses	6.0		(1.2)
Deferred income taxes	3.3		(10.5)
Costs associated with debt issue / repayment	15.0		—
Impairment loss on assets	—		1.0
Gain on sale of business / assets	—		(8.3)
Other	4.1		(.9)
Changes in assets and liabilities:
Accounts receivable	(57.4)		(51.2)
Inventories	(51.5)		(76.4)
Prepaid expenses and other	(4.3)		6.1
Accounts payable and accrued liabilities	(10.6)		(80.9)
Income and other taxes	10.5		(8.8)
Noncurrent assets and liabilities	11.0		(38.2)
Net cash used by operating activities of continuing operations	(223.0)		(298.2)
Cash Flows from Investing Activities
Capital expenditures	(40.5)		(48.2)
Disposal of assets	3.4		2.3
Net proceeds from sale of business / assets	—		13.9
Net cash used by investing activities of continuing operations(1)	(37.1)		(32.0)
Cash Flows from Financing Activities
Debt, net (maturities of three months or less)	135.0		(5.0)
Proceeds from debt from affiliates of Natura & Co	863.5		269.9
Repayment of debt	(733.2)		(57.5)
Repayment of debt to affiliates of Natura &Co	(52.8)		(31.7)
Repayment of debt by affiliates of Natura &Co	40.6		49.8
Costs associated with debt issue / repayment	(15.0)		—
Settlement of derivative contracts	12.0		(3.9)
Repayment of monetization of COFINS tax credits	—		(15.5)
Net cash provided by financing activities of continuing operations(1)	250.1		206.1
Cash Flows from Discontinued Operations
Net cash used by operating activities of discontinued operations	(20.0)		(7.5)
Net cash used by discontinued operations	(20.0)		(7.5)
Effect of exchange rate changes on cash and cash equivalents, and restricted cash	(4.8)		(16.5)
Net decrease in cash and cash equivalents, and restricted cash	(34.8)		(148.1)
Cash and cash equivalents, and restricted cash at beginning of period	251.5		373.4
Cash and cash equivalents, and restricted cash at end of period	$	216.7	$	225.3

The accompanying notes are an integral part of these statements.

(1) On July 1, 2021, the Company sold Avon Luxembourg Holdings S.à.r.l. ("Avon Luxembourg"), including our Mexican business, to a subsidiary of Natura &Co Holding for $150, with the proceeds used to repay maturing loans of $150 borrowed

8

under the Natura Revolving Credit Facility (as defined in Note 15 Debt). Under the terms of the transaction and the associated Direction and Settlement Agreement, no cash flows in either investing or financing activities arose as a result of the transaction.

9

AVON PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT

(Unaudited)

(In millions)	Common Stock			Additional		Retained		Accumulated Other		Noncontrolling
	Shares	Amount		Paid-In Capital		Losses		Comprehensive Loss		Interests		Total
Balances at December 31, 2021	—	$	—	$	631.2	$	(404.2)	$	(1,085.5)	$	3.8	$	(854.7)
Net (loss) income	—	—		—		(97.2)		—		.2		(97.0)
Other comprehensive income	—	—		—		—		52.3		(.1)		52.2
Exercise/ vesting/ expense of share-based compensation	—	—		2.4		—		—		—		2.4
Balances at March 31, 2022(1)	—	$	—	$	633.6	$	(501.4)	$	(1,033.2)	$	3.9	$	(897.1)
Net loss	—	—		—		(74.9)		—		(.1)		(75.0)
Other comprehensive income	—	—		—		—		15.9		(.3)		15.6
Exercise/ vesting/ expense of share-based compensation	—	—		.6		—		—		—		.6
Balances at June 30, 2022 (1)	—	$	—	$	634.2	$	(576.3)	$	(1,017.3)	$	3.5	$	(955.9)
Net (loss) income	—	—		—		(124.1)		—		.1		(124.0)
Other comprehensive income (loss)	—	—		—		—		28.3		(.4)		27.9
Exercise/ vesting/ expense of share-based compensation	—	—		2.1		—		—		—		2.1
Balances at September 30, 2022 (1)	—	$	—	$	636.3	$	(700.4)	$	(989.0)	$	3.2	$	(1,049.9)

(1) The number of shares of Common Stock (par value $0.01 per share) outstanding at September 30, 2022 was 101.34.

10

AVON PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT

(Unaudited)

(In millions)	Common Stock			Additional		Retained		Accumulated Other		Noncontrolling
	Shares	Amount		Paid-In Capital		Losses		Comprehensive Loss		Interests		Total
Balances at December 31, 2020	—	$	—	$	622.8	$	(360.5)	$	(1,133.8)	$	4.3	$	(867.2)
Net loss	—	—		—		(63.6)		—		(.3)		(63.9)
Other comprehensive loss	—	—		—		—		(43.3)		—		(43.3)
Exercise/ vesting/ expense of share-based compensation	—	—		.6		—		—		—		.6
Balances at March 31, 2021(1)	—	$	—	$	623.4	$	(424.1)	$	(1,177.1)	$	4.0	$	(973.8)
Net loss	—	—		—		(61.6)		—		(.5)		(62.1)
Other comprehensive income	—	—		—		—		32.1		.1		32.2
Exercise/ vesting/ expense of share-based compensation	—	—		4.2		—		—		—		4.2
Balances at June 30, 2021 (1)	—	$	—	$	627.6	$	(485.7)	$	(1,145.0)	$	3.6	$	(999.5)
Sale of Avon Luxembourg (2)	—	—		—		148.4		—		—		148.4
Net loss	—	—		—		(42.5)		—		(.6)		(43.1)
Other comprehensive loss	—	—		—		—		(8.5)		(.3)		(8.8)
Exercise/ vesting/ expense of share-based compensation	—	—		4.5		—		—		—		4.5
Balances at September 30, 2021 (1)	—	$	—	$	632.1	$	(379.8)	$	(1,153.5)	$	2.7	$	(898.5)

(1) The number of shares of Common Stock (par value $0.01 per share) outstanding at September 30, 2021 was 101.34.

(2) On July 1, 2021, the Company sold Avon Luxembourg and its subsidiaries, including our Mexican business, to a subsidiary of Natura &Co Holding S.A. for $150. The sale was accounted for as a transaction under common control in accordance with ASC805 - Business Combinations, with the resulting gain of $148, representing the difference between the proceeds, the net assets of Avon Luxembourg on the date of sale, and the cumulative foreign currency translation adjustment, taken directly to Retained Earnings.

The accompanying notes are an integral part of these statements.

11

1. 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 2021 Annual Report on Form 10-K ("2021 Form 10-K") in preparing these unaudited interim Consolidated Financial Statements, other than those impacted by new accounting standards as described below. On January 3, 2020, the Company completed the Agreement and Plan of Mergers with Natura Cosméticos S.A., a Brazilian corporation (sociedade anônima) ("Natura Cosméticos"), Natura &Co Holding S.A., a Brazilian corporation (sociedade anônima) ("Natura &Co Holding" or "Natura &Co), and two subsidiaries of Natura &Co Holding pursuant to which, in a series of transactions (the "Transaction"). Upon the consummation of the Transaction, the Company became a wholly owned subsidiary of Natura &Co Holding; and Avon's common stock ceased to be traded on the NYSE. The Company files these unaudited interim Consolidated Financial Statements with the SEC as a voluntary filer to comply with the terms of certain debt instruments. For additional information, see Note 17, Agreement and Plan of Mergers with Natura Cosméticos contained in our 2021 Form 10-K.

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 2021 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:

•the effects of significant, unusual or extraordinary pretax and income tax items, if any;

•the impact of changes in tax legislation, 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.

Sale of Avon Luxembourg

On July 1, 2021, the Company sold Avon Luxembourg, including our Mexican business, to a subsidiary of Natura &Co Holding for $150, with the proceeds used to repay maturing loans of $150 borrowed under the Natura Revolving Credit Facility.

The sale was accounted for as a transaction under common control in accordance with ASC805 - Business Combinations, with the resulting gain of $148, representing the difference between the proceeds, the net assets of Avon Luxembourg on the date of sale, and the cumulative foreign currency translation adjustment, taken directly to Retained Earnings. This has been treated as a non cash flow item in the Consolidated Statements of Cash Flows. For additional information, see the Consolidated Statements of Changes in Shareholders' Deficit and the Consolidated Statements of Cash Flows.

COVID-19, Russia-Ukraine war and going concern

In 2021 and 2022, the economic disruption caused by the COVID-19 pandemic has resulted in inflationary pressures on the cost of certain raw materials used in the production of essential items due to the increased demand for these inputs worldwide. These inflationary pressures have been compounded in 2022 by the ongoing war between Russia and Ukraine, and by disruptions in global supply chains and climate events that hit electricity generation globally, among other events. Moreover, novel strains and variants of COVID-19 emerged in 2021 against which existing vaccines and acquired immunity may not be fully effective, and the rollout of vaccination programs worldwide have compromised the ability of certain countries to effectively contain the spread and the toll of the virus. While some restrictions have been lifted in the markets in which we operate, they may be reimplemented if contagion levels increase, which could suppress economic activity.

As a result, we continue to closely monitor the evolution and impacts of the pandemic and the war in the markets in which we operate, especially with regards to supply chain impacts on availability of raw materials as well as inflationary costs and

12

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in millions, except per share data)

potential gas shortages, as well as the impacts on consumer trends and demands due to restrictions. We continuously analyze the situation and act to minimize impacts on the operations and on the equity and financial position of the Company, with the objective of implementing appropriate measures, ensuring the continuity of operations, hedge cash, improve liquidity and promote the health and safety of all.

In view of this scenario, we review the recoverability expectations of our financial and non-financial assets in the preparation of these financial statements, considering the most recent information available and reflected in the Company’s business plans. In addition, we also consider possible effects on the financial statements including revenues and the continued transition to the digital environment, allowances for doubtful accounts receivable, impairment of non-financial assets, leases, liquidity and capital resources and going concern.

As of the date of this report, we are unable to estimate the longer-term economic impact of the ongoing Russia-Ukraine war and of the COVID-19 pandemic on our business. We will continue to review our revenue, investments, expenses and cash outflows, as well as adjusting our relationships with suppliers. Furthermore, the actions outlined above are continuously being re-evaluated in light of global developments relating to the Russia-Ukraine war and the COVID-19 pandemic.

See also “Item 1A. Risk Factors—The COVID-19 pandemic is adversely affecting, and is expected to continue to adversely affect, our operations, manufacturing, supply chains and distribution systems, and we have experienced and expect to continue to experience unpredictable negative effects associated with the pandemic" included in Item 1A of our 2021 Annual Report.

Going Concern

Considering the uncertain nature of any possible future COVID-19 impacts which are beyond the Company’s control and the ongoing war between Russia and Ukraine, we have observed some negative impacts on revenue in 2022, which will, in turn, result in lower cash generation from activities. If the downturn is deeper or for longer than we anticipate, the Company could take certain further actions to ease the pressure of certain cash outflows, such as reducing discretionary expenditure, selling non-core assets, accessing government pandemic initiatives or arranging borrowing facilities with third-party banks and affiliate companies.

The Company has received an irrevocable commitment from Natura &Co Holding that it will provide sufficient financial support if and when needed to enable the Company to meet its obligations as they come due in the normal course of business. This commitment is effective through to March 31, 2024, a period of more than 12 months from the date of issuance of the Consolidated Financial Statements.

Turkish Currency

During the quarter ended March 31, 2022, published official exchange rates for Turkey indicated that the three-year cumulative inflation rate has exceeded 100%. As a result, we concluded that Turkey has become a highly inflationary economy. From April 1, 2022, we have applied inflationary accounting for our Turkish subsidiary. As such, the functional currency for Turkey has changed to the U.S. dollar, which is the consolidated group's reporting currency.

As a result of highly inflationary accounting for our Turkish subsidiary, the most significant impacts in our Consolidated Statement of Operations, are in cost of sales, primarily due to inventory being accounted for at its historical dollar cost, and in other (expense) income, net, primarily associated with the net monetary position of Turkey. However, these impacts are not considered material to our Consolidated Income Statements.

Accounting Standards Implemented

ASU 2021-08, Business Combinations (Topic 805)

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination. ASU 2021-08 will be effective for our fiscal year beginning after December 15, 2022. The adoption is not expected to have a material impact on our Consolidated Financial Statements.

13

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in millions, except per share data)

2. DISCONTINUED OPERATIONS, ASSETS AND LIABILITIES HELD FOR SALE AND DIVESTITURES

Discontinued Operations

On March 1, 2016, the Company completed the separation of the North America business, which represented the Company’s operations in the United States, Canada and Puerto Rico, from the Company into New Avon Company, formerly New Avon, LLC ("New Avon"), a privately held company majority-owned and managed by Cerberus NA Investor LLC (an affiliate of Cerberus). From that date, the resolution of contingent liabilities and corresponding costs relating to Avon’s ownership and operation of the North America business prior to its separation from the Company into New Avon have been treated as discontinued operations.

The major classes of financial statement components comprising the loss on discontinued operations, net of tax for New Avon during the three and nine-month periods ended September 30, 2022 and 2021, respectively, are shown below:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Selling, general and administrative expenses	$	(14.5)	$	(7.4)	$	(35.2)	$	(6.5)
Operating (loss) income	$	(14.5)	$	(7.4)	$	(35.2)	$	(6.5)
(Loss) income from discontinued operations, net of tax	$	(14.5)	$	(7.4)	$	(35.2)	$	(6.5)

Assets and Liabilities Held for Sale

The major classes of assets comprising held for sale assets on the Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 are shown in the following table:

	September 30, 2022		December 31, 2021
Current held for sale assets
Property, Plant & Equipment (net)	7.9		2.8
	$	7.9	$	2.8

At September 30, 2022, assets held for sale included one property in the Avon International segment. At December 31, 2021, assets held for sale included one property in the Avon Latin America Segment.

Divestitures

There were no divestitures during the quarter ended September 30, 2022. The divestitures below took place during 2021.

Disposal of Avon Beauty Arabia in Saudi Arabia

On December 23, 2021, the Company completed the sale of its 51% share of the business and assets of Avon Beauty Arabia in exchange for converting the business to a distributorship model together with the write off of a $3.9 loan balance. In the fourth quarter of 2021 we recognized a loss of $1.1 before and after tax, which is reported separately in the Consolidated Statements of Operations representing the difference between the write off of the loan balance, the carrying value of the business and assets of the Avon Beauty Arabia on the date of sale, and associated disposal costs.

Disposal of Cosmetics Manufacturing Operations in India

On November 17, 2021, the Company completed the sale of the business and assets of the Cosmetics Manufacturing Operation in India for a total selling price of $2.9, the proceeds of which are presented as investing activities in the Consolidated Statement of Cash Flows. In the fourth quarter of 2021 we recognized a gain of $1.1 before and after tax, which is reported separately in the Consolidated Statements of Operations representing the difference between the proceeds, the carrying value of the business and assets of the Cosmetics Manufacturing Operation in India on the date of sale, and associated disposal costs.

Sale of Spanish Distribution Center

In September 2021, the Company completed the sale of its Spanish Distribution Center for a total selling price of $14.7, the proceeds of which are presented as investing activities in the Consolidated Statement of Cash Flows. In the quarter ended September 30, 2021 the Company recognized a gain of $8.3 before and $6.2 after tax, which is reported separately in the

14

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in millions, except per share data)

Consolidated Statements of Operations representing the result of the proceeds plus the carrying value of the branch of the Spanish Distribution Center on the date of sale, less associated disposal costs.

Sale of Avon Luxembourg

On July 1, 2021, the Company sold Avon Luxembourg, including the Company's Mexican business, to a subsidiary of Natura &Co Holding for $150, with the proceeds used to repay maturing loans of $150 borrowed under the Natura Revolving Credit Facility. The sale was accounted for as a transaction under common control in accordance with ASC805 - Business Combinations, with the resulting gain of $148, representing the difference between the proceeds, the net assets of Avon Luxembourg on the date of sale and the cumulative foreign currency translation adjustment, taken directly to Retained Earnings. For additional information, see the Consolidated Statements of Changes in Shareholders' Deficit.

Sale of a Branch of the Italian Business

In June 2021, the Company completed the sale of a branch of its Italian business for a total selling price of $1.7, the proceeds of which will be received in installments between October 2021 and December 2026, and will be presented as investing activities in the Consolidated Statement of Cash Flows. In the quarter ended June 30, 2021, we recorded a gain of $1.4 before and after tax, which is reported separately in the Consolidated Statements of Operations representing the difference between the proceeds and the carrying value of this branch of our Italian business on the date of sale.

3. RELATED PARTY TRANSACTIONS

On January 3, 2020, the Company became a wholly owned subsidiary of Natura &Co Holding. From this point, Natura &Co Holding, its subsidiaries and affiliates became related parties of the Company. On July 1, 2021, the Company sold Avon Luxembourg, including our Mexican business, to a subsidiary of Natura &Co Holding. As a result, beginning on July 1, 2021, transactions and balances between Avon International and Avon Luxembourg are no longer eliminated upon consolidation and instead are treated as transactions and balances with Related Parties.

The following tables present the related party transactions with Natura &Co and its affiliates and the Instituto Avon in Brazil. There are no other related party transactions.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Statement of Operations Data
Revenue from affiliates of Natura &Co(2)(1)	$	5.7	$	6.5	$	17.3	$	22.9
Cost of sales from affiliates of Natura &Co(2)(1)	$	(5.7)	$	(4.1)	$	(17.7)	$	(19.4)
Gross profit from affiliates of Natura &Co(2)(1)	$	—	$	2.4	$	(.4)	$	3.5
Interest expense on Loan from affiliates of Natura &Co(4)	$	(25.8)	$	(16.2)	$	(61.0)	$	(34.7)
Interest income on Loan to affiliates of Natura &Co(5)	$	1.0	$	.8	$	2.6	$	.8

	September 30, 2022		December 31, 2021
Balance Sheet Data
Trade Receivables due from affiliates of Natura &Co(1)	$	29.1	$	32.7
Derivative Receivables due from affiliates of Natura &Co(7)	$	6.3	$	—
Other receivables due from affiliates of Natura &Co(6)	$	9.6	$	1.4
Loans to affiliates of Natura &Co maturing within one year(6)	$	47.9	$	46.6
Loans to affiliates of Natura &Co maturing after one year(6)	$	51.3	$	46.7
Trade Payables due to affiliates of Natura &Co(6)	$	(35.3)	$	(24.5)
Derivative Payables due to affiliates of Natura &Co(6)	$	(7.8)	$	—
Other payables due to affiliates of Natura &Co(3)	$	(8.3)	$	(4.9)
Loans from affiliates of Natura &Co maturing within one year(4)	$	(274.1)	$	(371.7)
Loans from affiliates of Natura &Co maturing after one year(4)	$	(1,375.1)	$	(736.3)
Investments in affiliates of Natura &Co(5)	$	.1	$	.1

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AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in millions, except per share data)

(1) During the second quarter of 2020, the Company entered into manufacturing agreements with affiliates of Natura &Co Holding. The Company recorded revenue from related party of $5.7 and $4.5 associated with these agreements during the three months ended September 30, 2022 and 2021, respectively. The Company recorded gross profit from related party of nil and $.4 associated with these agreements during the three months ended September 30, 2022 and 2021, respectively. The Company recorded revenue from related party of $17.3 and $20.9 associated with these agreements during the nine months ended September 30, 2022 and 2021, respectively. The Company recorded gross loss from related party of $.4 and gross profit of $1.5 associated with these agreements during the nine months ended September 30, 2022 and 2021, respectively. Trade receivables due from affiliates of Natura &Co primarily relate to these manufacturing agreements.

(2) The Company is party to a license agreement with Avon Mexico, whereby Avon Mexico pays the Company a variable royalty. The Company recorded revenue and gross profit from related party of nil associated with these agreements during the three months ended September 30, 2022, respectively. The Company recorded revenue and gross profit of $2 and $2, respectively, from related parties associated with these agreements during the three months ended September 30, 2021. The Company recorded revenue and gross profit from related party of nil associated with these agreements during the nine months ended September 30, 2022, respectively. The Company recorded revenue and gross profit of $2 and $2, respectively, from related parties associated with these agreements during the nine months ended September 30, 2021.

(3) The amount payable to Natura &Co mainly relates to the vesting and settlement of share-based compensation awards denominated in Natura &Co American Depository Receipts including the 2018 and 2019 long-term employee incentive program which vested and were automatically exercised in March 2021 and March 2022, respectively.

(4) Loans from affiliates of Natura &Co Holding at September 30, 2022 of $1,649.2 include $633.0 outstanding under a Promissory Note with Avon Beauty Limited with a maturity date of December 6, 2028, $405 outstanding under a Promissory Note with Avon Products, Inc. with a maturity date of May 17, 2029 and $337.4 outstanding under two Promissory Notes with Avon Cosmetics Limited with maturity dates of May 17, 2029 and June 28, 2029. In addition, loans from affiliates of Natura &Co Holding at September 30, 2022 of $1,649.2 includes a number of intercompany loans between Natura &Co Luxembourg, Natura Cosméticos and Avon Products, Inc. and its affiliates. Loans from affiliates of Natura &Co Holding at December 31, 2021 of $1,108.0 include $736.3 outstanding under a Promissory Note with Avon Beauty Limited and $207.3 outstanding under a Promissory Note with an affiliate of the Company. In addition loans from affiliates of Natura &Co Holding at December 31, 2021 include $164.4 of intercompany loans between Avon Luxembourg and Avon Products, Inc. affiliates that, following the sale of Avon Luxembourg to a subsidiary of Natura &Co Holding on July 1, 2021, were redesignated as loans from affiliates of Natura & Co Holding.

(5) During the second quarter of 2021, Avon Cosméticos LTDA., made an investment of R$.5 in Natura &Co Pay Holding Financeira S.A., representing a 10% holding in the company. This is presented in other assets in our Consolidated Balance Sheets.

(6) On July 1, 2021, the Company sold Avon Luxembourg, including our Mexican business, to a subsidiary of Natura &Co Holding. As a result, transactions and balances between Avon International and Avon Luxembourg are no longer eliminated upon consolidation and instead are treated as transactions and balances with Related Parties.

(7) During the nine-month period ended September 30, 2022, the Company entered into foreign exchange forward contracts with Natura &Co Luxembourg, a subsidiary of Natura &Co Holding, to manage a portion of its foreign currency exchange rate exposures. At September 30, 2022, we had outstanding related party foreign exchange forward contracts with notional amounts totaling approximately $555 for various currencies for up to 12 months, of which $135 were designated as cash flow hedges. In addition we had $6.3 of Accounts Receivable and $7.8 of Accounts Payable recorded in our Consolidated Balance Sheets associated with these transactions, all of which are expected to be reclassified into earnings within the next 12 months.

4. REVENUE

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:

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AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in millions, except per share data)

	Three Months Ended September 30, 2022
	Avon International		Avon Latin America		Total reportable segments		Affiliates of Natura&Co		Total
Beauty:
Skincare	$	107.3	$	108.9	$	216.2	$	—	$	216.2
Fragrance	101.2		89.2		190.4		—		190.4
Color	41.6		52.8		94.4		—		94.4
Total Beauty	250.1		250.9		501.0		—		501.0
Fashion & Home:
Fashion	40.9		22.8		63.7		—		63.7
Home	11.6		61.6		73.2		—		73.2
Total Fashion & Home	52.5		84.4		136.9		—		136.9
Certain Brazil indirect taxes*	—		(10.1)		(10.1)		—		(10.1)
Product sales	302.6		325.2		627.8		—		627.8
Representative fees	12.3		18.0		30.3		—		30.3
Other	—		.1		.1		5.7		5.8
Other revenue	12.3		18.1		30.4		5.7		36.1
Total revenue	$	314.9	$	343.3	$	658.2	$	5.7	$	663.9

	Three Months Ended September 30, 2021
	Avon International		Avon Latin America		Total reportable segments		Affiliates of Natura&Co		Total
Beauty:
Skincare	$	134.2	$	109.6	$	243.8	$	—	$	243.8
Fragrance	118.3		85.2		203.5		—		203.5
Color	52.7		44.3		97.0		—		97.0
Total Beauty	305.2		239.1		544.3		—		544.3
Fashion & Home:							—
Fashion	56.3		33.3		89.6		—		89.6
Home	15.3		67.1		82.4		—		82.4
Total Fashion & Home	71.6		100.4		172.0		—		172.0
Certain Brazil indirect taxes*	—		12.4		12.4		—		12.4
Product sales	376.8		351.9		728.7		—		728.7
Representative fees	15.8		17.1		32.9		—		32.9
Other	—		.2		.2		6.5		6.7
Other revenue	15.8		17.3		33.1		6.5		39.6
Total revenue	$	392.6	$	369.2	$	761.8	$	6.5	$	768.3

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AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in millions, except per share data)

	Nine Months Ended September 30, 2022
	Avon International		Avon Latin America		Total reportable segments		Affiliates of Natura&Co		Total
Beauty:
Skincare	$	336.3	$	306.9	$	643.2	$	—	$	643.2
Fragrance	302.1		262.1		564.2		—		564.2
Color	140.5		138.1		278.6		—		278.6
Total Beauty	778.9		707.1		1,486.0		—		1,486.0
Fashion & Home:							—
Fashion	145.8		72.3		218.1		—		218.1
Home	36.5		175.6		212.1		—		212.1
Total Fashion & Home	182.3		247.9		430.2		—		430.2
Certain Brazil indirect taxes*	—		(10.1)		(10.1)		—		(10.1)
Product sales	961.2		944.9		1,906.1		—		1,906.1
Representative fees	64.5		52.0		116.5		—		116.5
Other	.1		.4		.5		17.3		17.8
Other revenue	64.6		52.4		117.0		17.3		134.3
Total revenue	$	1,025.8	$	997.3	$	2,023.1	$	17.3	$	2,040.4

	Nine Months Ended September 30, 2021
	Avon International		Avon Latin America		Total reportable segments		Affiliates of Natura&Co		Total
Beauty:
Skincare	$	426.5	$	370.6	$	797.1	$	—	$	797.1
Fragrance	352.7		293.3		646.0		—		646.0
Color	175.1		145.0		320.1		—		320.1
Total Beauty	954.3		808.9		1,763.2		—		1,763.2
Fashion & Home:							—
Fashion	188.7		133.3		322.0		—		322.0
Home	46.7		290.2		336.9		—		336.9
Total Fashion & Home	235.4		423.5		658.9		—		658.9
Certain Brazil indirect taxes*	—		21.8		21.8		—		21.8
Product sales	1,189.7		1,254.2		2,443.9		—		2,443.9
Representative fees	50.1		72.3		122.4		—		122.4
Other	.1		.4		.5		22.9		23.4
Other revenue	50.2		72.7		122.9		22.9		145.8
Total revenue	$	1,239.9	$	1,326.9	$	2,566.8	$	22.9	$	2,589.7

*The three month periods ended September 30, 2022 and September 30, 2021 include certain Brazil indirect taxes which resulted in an approximate cost of $10 and benefit of $12, respectively. The nine month periods ended September 30, 2022 and September 30, 2021 include the impact of certain Brazil indirect taxes which resulted in an approximate cost of $10 and benefit of $22, respectively. All amounts were recorded as product sales in our Consolidated Income Statements. See Note 10, Supplemental Balance Sheet Information, to the Consolidated Financial Statements contained herein for further information.

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AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in millions, except per share data)

** In June 2022, an Avon subsidiary concluded the negotiation of a settlement agreement to resolve a breach of contract dispute in Japan. As a result, Avon received cash compensation of $27.0 million, $3.3 million of which related to the settlement of historically recognized revenues. The remaining $23.7 million was recognized as revenue in the quarter ended June 30, 2022.

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, changing trends, the impact of COVID-19 and the ongoing war between Russia and Ukraine. 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 September 30, 2022 and December 31, 2021:

	September 30, 2022		December 31, 2021
Accounts receivable, net of allowances of $41.9 and $37.0	$	194.4	$	198.7
Contract liabilities	$	37.4	$	37.1

The contract liability balances relate to certain material rights (loyalty points, status program and prospective discounts). During the nine months ended September 30, 2022, we recognized $27.7 of revenue related to the contract liability balance in relation to the nine-month period ended September 30, 2022, as the result of performance obligations satisfied. In addition, we deferred an additional $31 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. The remaining movement in the contract liability balance is attributable to foreign exchange differences arising on the translation of the balance as at September 30, 2022 as compared with December 31, 2021, and to the sale of Avon Luxembourg.

5. INVENTORIES

Components of Inventories	September 30, 2022		December 31, 2021
Raw materials	$	100.2	$	103.4
Finished goods	290.2		280.7
Total	$	390.4	$	384.1

6. LEASES

We have operating and finance leases for corporate and market offices, warehouses, automotive and other equipment. Our sublease portfolio consists of the sublease of our previous principal executive office located at 777 Third Avenue, New York, NY.

The table below shows the sublease income recorded in the Consolidated Statement of Operations incurred during the three months ended September 30, 2022 and 2021:

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AVON PRODUCTS, INC.

		Three Months Ended September 30,		Nine Months Ended September 30,
Lease Costs	Classification	2022	2021	2022	2021
Sublease income	Selling, general and administrative expenses	3.7	3.6	11.2	10.9

7. CONTINGENCIES

Brazilian Tax Assessments

Tax on Manufactured Products – minimum pricing rules

In December 2021, October 2017 and June 2022, our Brazilian subsidiary, Avon Industrial LTDA (Avon Brazil Manufacturing), received excise tax ("IPI") assessments notices for the years 2008, 2014 and 2018.

As in prior IPI cases that have been resolved in Avon’s favor, the assessments assert that the establishment in 1995 of separate manufacturing and distribution companies in Brazil was done without a valid business purpose, and that Avon Brazil Manufacturing did not observe minimum pricing rules to define the taxable basis of the tax on manufactured products. 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 assessments are unfounded.

These matters are being contested at the administrative court, where proceedings are currently in progress. As of September 30, 2022, the total disputed amount classified as a remote risk of loss was $457. As of December 31, 2021, the total disputed amount of $360 was classified as a reasonably possible risk of loss. The change in classification was a result of enactment of new legislation in Brazil in July 2022, whilst the change in the total amount was largely due to the new assessment received in June 2022 and movements in foreign exchange rates.

Tax on Manufactured Products – Decree equated certain commercial companies (not subject to IPI taxation) to industrial companies (IPI taxpayers)

In May 2015, an executive decree established the levy of IPI on the sales of cosmetic products by Avon Brazil. Avon Brazil filed an objection to this levy on the basis that it is not constitutional since this tax is already paid by Avon Brazil Manufacturing. In December 2016, Avon Brazil received a favorable decision from the Federal District Court regarding this objection. This decision has been appealed by the Federal Tax Authority. As of September 30, 2022 and December 31, 2021, the total amount under discussion classified as a reasonably possible risk of loss was $280 and $243, respectively, with the increase being largely a result of higher interest and taxes due, and movements in foreign exchange rates.

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 co-defendants 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. As of September 30, 2022 and December 31, 2021, there were 211 and 151 individual cases pending against the Company, respectively. During the three months ended September 30, 2022, 38 new cases were filed and 5 cases were dismissed, settled or otherwise resolved. The value of the settlements was not material, either individually or in the aggregate, to the Company’s results of operations for the three months ended September 30, 2022. Additional similar cases arising out of the use of the Company’s talc products are reasonably anticipated.

We believe that the claims asserted against us in these cases 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 enforceable against the Company. However, nationwide trial results in similar cases filed against other manufacturers of cosmetic talc products have ranged from outright dismissals to very large jury awards of both compensatory and punitive damages. Given the inherent uncertainties of litigation, we cannot predict the outcome of all individual cases pending against the Company, and we are only able to make a specific estimate for a small number of individual cases that have advanced to the later stages of legal proceedings. For the remaining cases, we provide an estimate of exposure on an aggregated and ongoing basis, which takes into account the historical outcomes of all cases we have resolved to date. Any adverse outcomes, either in an individual case or in the aggregate, could be material. Future costs to litigate these cases, which we expense as incurred, are not known but may be significant, though some costs will be covered by insurance.

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AVON PRODUCTS, INC.

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 cases at September 30, 2022 and December 31, 2021 was approximately $10.6 and $11, respectively. Accordingly, we have recognized a liability for this amount.

Brazilian Financial Indemnities

As of September 30, 2022 and December 31, 2021, the Company has issued a number of guarantees totaling $184 and $157, respectively, which it could be required to make in the event of adverse judgments in a number of lawsuits in Brazil.

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 September 30, 2022 is not expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows.

8. 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 nine months ended September 30, 2022 and 2021:

Three Months Ended September 30, 2022	Foreign Currency Translation Adjustments		Net Investment Hedges		Cash Flow Hedges		Pension and Postretirement Benefits		Total
Balance at June 30, 2022	$	(997.2)	$	(4.3)	$	.7	$	(16.5)	$	(1,017.3)
Other comprehensive income other than reclassifications	26.8		—		.3		—		27.1
Reclassifications into earnings:
Amortization of net actuarial loss and prior service cost, net of tax of $0.2(1)	—		—		—		1.2		1.2
Total reclassifications into earnings	—		—		—		1.2		1.2
Balance at September 30, 2022	$	(970.4)	$	(4.3)	$	1.0	$	(15.3)	$	(989.0)

Three Months Ended September 30, 2021	Foreign Currency Translation Adjustments		Net Investment Hedges		Pension and Postretirement Benefits		Total
Balance at June 30, 2021	$	(1,051.9)	$	(4.3)	$	(88.8)	$	(1,145.0)
Other comprehensive loss other than reclassifications	(9.2)		—		—		(9.2)
Sale of Avon Luxembourg	.1		—		(.1)		—
Reclassifications into earnings:
Amortization of net actuarial loss and prior service cost, net of tax of $0.2(1)	—		—		.7		.7
Total reclassifications into earnings	—		—		.7		.7
Balance at September 30, 2021	$	(1,061.0)	$	(4.3)	$	(88.2)	$	(1,153.5)

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AVON PRODUCTS, INC.

Nine Months Ended September 30, 2022	Foreign Currency Translation Adjustments		Net Investment Hedges		Cash Flow Hedges		Pension and Postretirement Benefits		Total
Balance at December 31, 2021	$	(1,062.2)	$	(4.3)	$	—	$	(19.0)	$	(1,085.5)
Other comprehensive income other than reclassifications	91.8		—		1.0		—		92.8
Reclassifications into earnings:
Amortization of net actuarial loss and prior service cost, net of tax of $0.5(1)	—		—		—		3.7		3.7
Total reclassifications into earnings	—		—		—		3.7		3.7
Balance at September 30, 2022	$	(970.4)	$	(4.3)	$	1.0	$	(15.3)	$	(989.0)

Nine Months Ended September 30, 2021	Foreign Currency Translation Adjustments		Net Investment Hedges		Pension and Postretirement Benefits		Total
Balance at December 31, 2020	$	(1,038.2)	$	(4.3)	$	(91.3)	$	(1,133.8)
Other comprehensive loss other than reclassifications	(22.9)		—		—		(22.9)
Sale of Avon Luxembourg	.1		—		(.1)		—
Reclassifications into earnings:
Amortization of net actuarial loss and prior service cost, net of tax of $0.6(1)	—		—		3.2		3.2
Total reclassifications into earnings	—		—		3.2		3.2
Balance at September 30, 2021	$	(1,061.0)	$	(4.3)	$	(88.2)	$	(1,153.5)

For further details on Other Comprehensive income, (loss) other than reclassifications see the Consolidated Statements of Comprehensive Income (Loss).

(1) Gross amount reclassified to other income (expense), net in our Consolidated Statements of Operations, and related taxes reclassified to income taxes in our Consolidated Statements of Operations.

Foreign exchange net losses of $5.3 and $4.5 for the three months ended September 30, 2022 and 2021, respectively, and foreign exchange net losses of $12.5 and $4.6 for the nine months ended September 30, 2022 and 2021, 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 Income (Loss).

9. SEGMENT INFORMATION

We have identified two reportable segments based on geographic operations: Avon International and Avon Latin America.

We determine segment profit by deducting the related costs and expenses from segment revenue. Segment profit includes an allocation of central expenses to the extent they support the operating activity of the segment. Segment profit excludes certain costs to implement ("CTI") restructuring initiatives, certain significant asset impairment charges, and other expenses, 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:

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	Three Months Ended September 30,				Nine Months Ended September 30,
Total Revenue	2022		2021		2022		2021
Avon International**	$	314.9	$	392.6	$	1,025.8	$	1,239.9
Avon Latin America*	343.3		369.2		997.3		1,326.9
Total revenue from reportable segments*(1)	658.2		761.8		2,023.1		2,566.8
Revenue from affiliates to Natura &Co	5.7		6.5		17.3		22.9
Total revenue*(1)(4)	663.9		768.3		2,040.4		2,589.7

	Three Months Ended September 30,				Nine Months Ended September 30,
Operating Loss	2022		2021		2022		2021
Segment profit/(loss)
Avon International**	$	5.2	$	2.0	$	29.2	$	(4.4)
Avon Latin America*	(26.7)		(4.1)		(103.6)		8.9
Total profit (loss) from reportable segments*(2)(4)	$	(21.5)	$	(2.1)	$	(74.4)	$	4.5
Unallocated global expenses(3)	(4.9)		(4.2)		(17.1)		(17.1)
Certain Brazil taxes*(5)	—		(1.7)		—		(1.7)
CTI restructuring initiatives	(22.9)		(10.9)		(49.2)		(60.8)
Operating loss*(4)	$	(49.3)	$	(18.9)	$	(140.7)	$	(75.1)

*The three month periods ended September 30, 2022 and September 30, 2021 include certain Brazil indirect taxes which resulted in an approximate cost of $10 and benefit of $12, respectively. The nine month periods ended September 30, 2022 and September 30, 2021 include the impact of certain Brazil indirect taxes which resulted in an approximate cost of $10 and benefit of $22, respectively. All amounts were recorded as product sales in our Consolidated Income Statements. See Note 10, Supplemental Balance Sheet Information, to the Consolidated Financial Statements contained herein for further information.

** In June 2022, an Avon subsidiary concluded the negotiation of a settlement agreement to resolve a breach of contract dispute in Japan. As a result, Avon received cash compensation of $27.0 million, $3.3 million of which related to the settlement of historically recognized revenues. The remaining $23.7 million was recognized as revenue in the quarter ended June 30, 2022.

(1)Total revenue also includes revenue from other business activities of $.1 and $.2 for the three months ended September 30, 2022 and 2021, and $.4 and $4.5 for the nine months ended September 30, 2022 and 2021, respectively, allocated to Avon International and Avon Latin America segments. Other business activities 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.

(2)Total profit (loss) from reportable segments also includes profit from other business activities and central expenses allocated to Avon International and Avon Latin America segments. Other business activities of $.2 and $.2 for the three months ended September 30, 2022 and 2021, and $.4 and $.6 for the nine months ended September 30, 2022 and 2021 respectively, include profit 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. Central expenses of $26.9 and $56.2 for the three months ended September 30, 2022 and 2021, and $83.2 and $172.2 for the nine months ended September 30, 2022 and 2021 respectively, include corporate general and administrative expenses allocated to Avon International and Avon Latin America to the extent they support the operating activity of the segment.

(3)For the three and nine months ended September 30, 2022 and 2021, unallocated global expenses primarily include stewardship and other expenses not directly attributable to reportable segments.

(4)On July 1, 2021, the Company sold Avon Luxembourg, including our Mexican business, to a subsidiary of Natura &Co Holding. As a result, from the same date, the results of Avon Luxembourg are no longer included within Avon's consolidated results. The nine-month period ended September 30, 2021 includes the results of Avon Luxembourg for the period from January 1 to June 30, 2021.

(5)The three- and nine-month periods ended September 30, 2022 include the impact of certain Brazil taxes in the amount of nil. The three- and nine-month periods ended September 30, 2021 includes the impact of certain Brazil taxes in the amount of approximately $2 and $2, respectively which were recorded in selling, general and administrative expenses, net.

AVON PRODUCTS, INC.

10. SUPPLEMENTAL BALANCE SHEET INFORMATION

At September 30, 2022 and December 31, 2021, prepaid expenses and other included the following:

Components of Prepaid Expenses and Other	September 30, 2022		December 31, 2021
Prepaid taxes and tax refunds receivable	$	70.6	$	84.0
Receivables other than trade	22.4		27.8
Prepaid brochure costs, paper and other literature	9.4		8.3
Other	42.7		45.5
Prepaid expenses and other	$	145.1	$	165.6

At September 30, 2022 and December 31, 2021, other assets included the following:

Components of Other Assets	September 30, 2022		December 31, 2021
Net overfunded pension plans	$	136.0	$	162.5
Capitalized software	65.3		74.9
Judicial deposits	27.1		47.2
Long-term receivables including Taxes	192.5		180.2
Trust assets associated with supplemental benefit plans	28.4		30.4
Other	12.0		14.2
Other assets	$	461.3	$	509.4

Prepaid taxes and tax refunds receivable and long-term receivables include approximately $130 and $128 related to certain Brazil indirect taxes as of September 30, 2022 and December 31, 2021, respectively. During the second quarter of 2021, the Brazilian Supreme Federal Court ruled on a Motion of Clarification which supported the recognition of additional receivable balances related to certain Brazil indirect taxes.

11. RESTRUCTURING INITIATIVES

Natura &Co - Avon Integration

Subsequent to the merger of Natura and Avon in January 2020, an integration plan (the "Avon Integration") was established to create the right global infrastructure to support the future ambitions of the Natura &Co Group while also identifying synergies and opportunities to leverage our combined strength, scale and reach. Synergies will be derived mainly from procurement, manufacturing/distribution and administrative, as well as top-line synergies, primarily between Avon LATAM and Natura &Co Latin America.

Open Up Avon, Open Up & Grow and Transformation Plan

In January 2016, we initiated a transformation plan (the "Transformation Plan"), in order to enable us to achieve our long-term goals of mid-single-digit Constant $ revenue growth and low double-digit operating margin. There are no further restructuring actions to be taken associated with our Transformation Plan as, beginning in the third quarter of 2018, all new restructuring actions approved operate under our new Open Up Avon plan described below.

In September 2018, we initiated a new strategy in order to return Avon to growth ("Open Up Avon"). The Open Up Avon strategy was integral to our ability to return Avon to growth, built around the necessity of incorporating new approaches to various elements of our business, including increased utilization of third-party providers in manufacturing and technology, a more fit-for-purpose asset base, and a focus on enabling our Representatives to more easily interact with the company and achieve relevant earnings. In January 2019, we announced significant advancements in this strategy, including a structural reset of inventory processes and a reduction in global workforce.

In May 2020, the new leadership of Avon International refreshed our strategy ("Open Up & Grow") which aims to return Avon International to growth over the next three years. Open Up & Grow replaces and builds on the success of the Open Up Avon strategy, launched in 2018, to strengthen competitiveness through enhancing the representative experience, improving brand position and relevance, accelerating digital expansion and improving costs. Over the next three years, savings are expected to continue to be achieved through restructuring actions (that may continue to result in charges related to severance, contract terminations and asset write-offs), as well as other cost-savings strategies that would not result in restructuring charges.

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CTI Restructuring Initiatives - Three Months Ended September 30, 2022 and 2021

During the three months ended September 30, 2022, we recorded net CTI of $22.9, of which $7.1 related to Avon Integration, and net CTI $16.4 related to Open Up & Grow and a net benefit of $.6 related to the Transformation Plan, in our Consolidated Statements of Operations. During the three months ended September 30, 2021, we recorded CTI of $2.6 of which $3.1 related to Avon Integration, and a net benefit of $.4 related to Open Up & Grow, and a net benefit of $.1 related to the Transformation Plan, in our Consolidated Statements of Operations.

During the nine months ended September 30, 2022, we recorded implementation costs in our Consolidated Statement of Operations of $49.2, of which $20.4 related to Avon Integration, $29.3 related to Open Up & Grow and a net benefit of $(.5) related to the Transformation Plan. During the nine months ended September 30, 2021, we recorded costs to implement of $51.0 of which $13.0 related to Avon Integration, $38.6 related to Open Up & Grow, and a net benefit of $.6 related to the Transformation Plan, in our Consolidated Statements of Operations.

The costs during the three and nine months ended September 30, 2022 and 2021 consisted of the following:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
CTI recorded in operating profit - COGS
Inventory write-off	(.1)		—		(.1)		.2
	(.1)		—		(.1)		.2
CTI recorded in operating profit - SG&A
Net charges for employee-related costs, including severance benefits	16.6		3.1		28.2		33.5
Implementation costs, primarily related to professional service fees	4.9		3.3		16.6		13.5
Dual running costs	.2		.2		1.0		.8
Contract termination and other net benefits	1.2		2.8		3.4		10.2
Impairment of other assets	—		1.0		—		1.0
Accelerated depreciation	—		.1		—		.3
Variable lease charges	—		.4		—		1.3
	22.9		10.9		49.2		60.6
CTI recorded in operating profit	22.8		10.9		49.1		60.8
CTI recorded in other (expense) income
(Gain) loss on sale of business / assets	.1		(8.3)		.1		(9.8)
Total CTI	$	22.9	$	2.6	$	49.2	$	51.0
Avon Integration	$	7.1	$	3.1	$	20.4	$	13.0
Open Up & Grow	$	16.4	$	(.4)	$	29.3	$	38.6
Transformation Plan	$	(.6)	$	(.1)	$	(.5)	$	(.6)

The following liability balances include restructuring costs such as employee-related costs, inventory and asset write-offs, foreign currency translation write-offs and contract terminations, and do not include other CTI restructuring initiatives such as professional services fees, dual running costs which are clearly identifiable and directly associated with exit activity such as people cost to perform knowledge transfer or rental costs for building being exited once the new building has become fully operational, accelerated depreciation and gain on sale of business.

The liability balance included in other accrued liabilities in our Consolidated Balance Sheet for the restructuring actions associated with Avon Integration at September 30, 2022 and December 31, 2021 is $0.2 and $1.7, respectively, related to employee-related costs.

The liability balance included in other accrued liabilities in our Consolidated Balance Sheet for the restructuring actions associated with Open Up & Grow at September 30, 2022 is as follows:

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AVON PRODUCTS, INC.

	Employee-Related Costs		Inventory/Assets Write-offs		Contract Terminations/Other		Total
Balance at December 31, 2021	$	14.0	$	—	$	1.2	$	15.2
2022 charges	18.3		(.1)		2.3		20.5
Cash payments	(12.6)		—		(2.6)		(15.2)
Foreign exchange	(1.3)		.1		(.1)		(1.3)
Balance at September 30, 2022	$	18.4	$	—	$	.8	$	19.2

The liability balance included in other accrued liabilities in our Consolidated Balance Sheet for the restructuring actions associated with our Transformation Plan at September 30, 2022 and December 31, 2021 is $1.2 and $1.5, respectively, related to employee-related costs.

The majority of cash payments, if applicable, associated with the year-end liability are expected to be made during 2022.

The following table presents the restructuring charges incurred to date under Avon Integration and Open Up & Grow (formerly Open Up Avon) along with the estimated charges expected to be incurred on approved initiatives under the plans:

	Employee- Related Costs		Inventory/ Asset Write-offs		Contract Terminations/Other		Foreign Currency Translation Adjustment Write-offs		Total
Avon Integration
Charges incurred to date	$	22.4	$	—	$	1.3	$	—	$	23.7
Estimated charges to be incurred on approved initiatives	—		—		—		—		—
Total expected charges on approved initiatives	$	22.4	$	—	$	1.3	$	—	$	23.7
Open Up & Grow
Charges incurred to date	$	134.1	$	107.3	$	18.2	$	(10.9)	$	248.7
Estimated charges to be incurred on approved initiatives	—		—		.3		—		.3
Total expected charges on approved initiatives	$	134.1	$	107.3	$	18.5	$	(10.9)	$	249.0

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

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AVON PRODUCTS, INC.

	Avon International		Avon Latin America		Total
Avon Integration
2020	$	6.2	$	4.6	$	10.8
2021	(1.2)		3.0		$	1.8
First quarter 2022	.1		1.5		1.6
Second quarter 2022	.2		6.0		6.2
Third quarter 2022	.1		3.2		3.3
Charges incurred to date	5.4		18.3		23.7
Estimated charges to be incurred on approved initiatives	—		—		—
Total expected charges on approved initiatives	$	5.4	$	18.3	$	23.7
Open Up & Grow
2018	$	52.8	$	64.3	$	117.1
2019	34.7		36.9		71.6
2020	3.2		(.8)		2.4
2021	36.9		.2		37.1
First quarter 2022	2.7		—		2.7
Second quarter 2022	3.2		—		3.2
Third quarter 2022	14.7		(.1)		14.6
Charges incurred to date	148.2		100.5		248.7
Estimated charges to be incurred on approved initiatives	.3		—		.3
Total expected charges on approved initiatives	$	148.5	$	100.5	$	249.0

The charges above are not included in segment profit (loss), as this excludes CTI restructuring initiatives. The amounts shown in the tables above as charges incurred 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.

12. GOODWILL

	Avon International		Avon Latin America		Total
Net balance at December 31, 2021	$	17.6	$	54.5	$	72.1
Changes during the period ended September 30, 2022:
Foreign exchange	(2.2)		(7.4)		(9.6)
Net balance at September 30, 2022	$	15.4	$	47.1	$	62.5

13. FAIR VALUE

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of September 30, 2022:

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AVON PRODUCTS, INC.

	Level 1		Level 2		Total
Assets:
Foreign exchange forward contracts	$	—	$	.9	$	.9
Total	$	—	$	.9	$	.9
Liabilities:
Foreign exchange forward contracts	$	—	$	—	$	—
Total	$	—	$	—	$	—

The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2021:

	Level 1		Level 2		Total
Liabilities:
Foreign exchange forward contracts	$	—	$	2.7	$	2.7
Total	$	—	$	2.7	$	2.7

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, debt maturing within one year 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 September 30, 2022 and December 31, 2021, respectively, consisted of the following:

	September 30, 2022		December 31, 2021
	Carrying Amount	Fair Value	Carrying Amount	Fair Value
Loans to affiliates of Natura &Co maturing within one year	47.9	47.9	46.6	46.6
Loans to affiliates of Natura &Co maturing after one year	51.3	51.3	46.7	46.7
Debt maturing within one year	(116.0)	(116.0)	(32.6)	(32.6)
Loans from affiliates of Natura &Co maturing within one year	(274.1)	(274.1)	(371.7)	(371.7)
Long-term debt(1)	(214.9)	(206.5)	(676.0)	(754.2)
Loans from affiliates of Natura &Co maturing after one year	(1,375.1)	(1,375.1)	(736.3)	(736.3)
Foreign exchange forward contracts	.9	.9	(2.7)	(2.7)

(1) The carrying value of long-term debt is presented net-of-debt issuance costs and includes any related discount or premium, as applicable.

The methods and assumptions used to estimate fair value are as follows:

•Available-for-sale securities - The fair values of these investments were the quoted market prices for issues listed on securities exchanges.

•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.

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AVON PRODUCTS, INC.

14. 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. 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 Transaction.

Derivatives are recognized in the Consolidated Balance Sheets at their fair values. The following table presents the fair value of derivative instruments at September 30, 2022:

	Asset			Liability
	Balance Sheet Classification	Fair Value		Balance Sheet Classification	Fair Value
Derivatives designated as hedges:
Foreign exchange forward contracts	Prepaid expenses and other	$	2.4	Accounts payable	$	1.2
Derivatives not designated as hedges:
Foreign exchange forward contracts	Prepaid expenses and other	$	4.8	Accounts payable	$	6.9
Total derivatives		$	7.2		$	8.1

Derivatives are recognized in the Consolidated Balance Sheets at their fair values. The following table presents the fair value of derivative instruments at December 31, 2021:

	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	$	—	Accounts payable	$	2.7
Total derivatives		$	—		$	2.7

Interest Rate Risk

Approximately 35% and 5% of our debt portfolio at September 30, 2022 and December 31, 2021, respectively, was exposed to floating interest rates, which relates to our short-term debt portfolio.

Foreign Currency Risk

We may use foreign exchange forward contracts to manage a portion of our foreign currency exchange rate exposures. At September 30, 2022, we had outstanding third-party foreign exchange forward contracts with notional amounts totaling approximately $45 for various currencies, all of which were designated as cash flow hedges.

During the nine-month period ended September 30, 2022, the Company entered into foreign exchange forward contracts with Natura &Co Luxembourg, a subsidiary of Natura &Co Holding, to manage a portion of its foreign currency exchange rate exposures. At September 30, 2022, we had outstanding related party foreign exchange forward contracts with notional amounts totaling approximately $555 for various currencies for up to 12 months, of which $135 were designated as cash flow hedges. In addition we had $6.3 Accounts Receivable and $7.8 Accounts Payable recorded in our Consolidated Balance Sheets associated with these transactions, all of which are expected to be reclassified into earnings within the next 12 months.

We may use foreign exchange forward contracts to manage foreign currency exposure of certain balance sheet items. The change in fair value of these items is immediately recognized in earnings and substantially offsets the foreign currency

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AVON PRODUCTS, INC.

translation impact recognized in earnings relating to the associated balance sheet items. During the three months ended September 30, 2022 and 2021, we recorded a gain of $24.0 and $2.8, respectively, in other (expense) income, net in our Consolidated Statements of Operations related to these undesignated foreign exchange forward contracts. During the nine months ended September 30, 2022 and 2021, we recorded a gain of $36.3 and $1.5, respectively, in other (expense) income, net in our Consolidated Statements of Operations related to these undesignated foreign exchange forward contracts.

15. DEBT

Natura Revolving Credit Facility

In May 2020, the Company’s subsidiary, Avon Luxembourg entered into a revolving credit facility agreement with Natura &Co International S.à r.l., a subsidiary of Natura &Co Holding and an affiliate of the Company (the "Natura Revolving Credit Facility"), in the initial amount of $100, increased to $250 in March 2021, which could be used for working capital and other general corporate purposes. Borrowings under this Facility bore interest at a rate per annum of LIBOR plus a margin determined on an arm's length basis, and the Facility was to mature on May 31, 2022. On July 1, 2021, the Company sold Avon Luxembourg to a subsidiary of Natura &Co Holding and therefore the Company no longer has access to this facility.

Other Loans from Affiliates of Natura &Co

In November 2020, Avon International Operations, Inc. ("AIO") entered into a Promissory Note with a subsidiary of Natura &Co Holding and an affiliate of the Company in the amount of $960. The Promissory Note bears interest at a rate per annum of 3.13% and matures on November 2, 2022. On July 1, 2021, as part of the sale of Avon Luxembourg to a subsidiary of Natura &Co Holding, the $960 loan was partially repaid with the proceeds from a loan maturing in 2028. The loan was fully repaid in the quarter ended June 30, 2022 as part of a refinancing and the subsequent repurchase of Unsecured Notes (see below). As at September 30, 2022, $633 was outstanding under the loan maturing in 2028 which is between Avon Beauty Limited and a subsidiary of Natura &Co Holding. Avon Beauty Limited is a subsidiary of Avon Cosmetics Limited.

In May 2022, Avon Products, Inc and Avon Cosmetics Limited entered into Promissory Notes with a subsidiary of Natura &Co Holding in the amount of $405 and $215 respectively. The Promissory Notes bear interest at a rate per annum of 6.71% and mature on May 17, 2029. In addition, in June 2022 Avon Cosmetics Limited entered into an additional Promissory Note with a subsidiary of Natura &Co Holding in the amount of $115. This Promissory Note bears interest at a rate per annum of 6.51% and matures on June 28, 2029.

In addition, loans from affiliates of Natura &Co Holding at September 30, 2022 of $1,649.2 includes a number of intercompany loans between Natura &Co Luxembourg, Natura Cosméticos and Avon Products, Inc. affiliates.

Other Short-Term Financing

In addition, at September 30, 2022 and 2021, we utilized approximately $116 and $36, respectively, of short-term financing from third-party banks across multiple markets.

Unsecured Notes

In March 2013, we issued a series of unsecured notes (the "2013 Notes"). As of September 30, 2022, following the repurchase of the 5% Notes due March 15, 2023 (see below), $216.1 aggregate principal amount of 6.95% Notes due March 15, 2043 remained outstanding.

In May 2022, we repurchased $461.9 of our 5% Notes due 15 March, 2023. The aggregate repurchase price was equal to the principal amount of the notes, plus a premium of $15.0 and accrued interest of $5.4. In connection with the repurchase, we incurred a loss on extinguishment of debt of $15.7 before tax in the quarter ended June 30, 2022 consisting of the $15.0 premium paid for the repurchase and $.7 for the write-off of debt issuance costs and discounts related to the initial issuance of the notes that were repurchased.

Interest on the 2013 Notes is payable semiannually on March 15 and September 15 of each year. 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 or decrease by .25% for each one-notch movement below investment grade on each of the 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.

For a more detailed description of the Company’s debt agreements, refer to Note 7, Debt and Other Financing of our Annual Report on Form 10-K for the year ended December 31, 2021.

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16. 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 September 30, 2022, our annual effective tax rate, excluding discrete items, is 25.9%, as compared to 32.1% as of September 30, 2021. 

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 2022 and 2021 also excludes the unfavorable impact of withholding taxes associated with certain intercompany payments, including royalties, service charges, interest and dividends, which in the aggregate are relatively consistent each year due to the need to repatriate funds to cover costs incurred in the U.S. and U.K., such as interest on debt and central expenses. Withholding taxes associated with the relatively consistent intercompany payments 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 September 30, 2022 and 2021 was $22.1 and $(10.4), respectively. Our effective tax rates for the three months ended September 30, 2022 and 2021 were (25.3)% and 22.6%, respectively. The provision for income taxes for the nine months ended September 30, 2022 and 2021 was $23.3 and $15.5, respectively. Our effective tax rates for the nine months ended September 30, 2022 and 2021 were (9.8)% and (10.5)%, respectively.

The effective tax rates for the three months ended September 30, 2022 and 2021 were impacted by CTI restructuring charges which could not all be benefited, losses which could not all be benefited, country mix of earnings and withholding taxes. The effective tax rate in the quarter ended September 30, 2022 was also unfavorably impacted by the recording of valuation allowances to adjust our non-U.S. deferred tax assets to amounts that are "more likely than not" to be realized of $22.9, largely in Brazil, which was offset by other miscellaneous net tax benefits of $1.2. The effective tax rate in the quarter ended September 30, 2021 was favorably impacted by the release of reserves for uncertain tax positions of $10.4 offset by the net recording of valuation allowances of $1.5.

The effective tax rates for the nine months ended September 30, 2022 and 2021 were impacted by CTI restructuring charges which could not all be benefited, losses which could not all be benefited, country mix of earnings and withholding taxes. The effective tax rate in the nine months ended September 30, 2022 was also unfavorably impacted by the recording of valuation allowances to adjust our non-U.S. deferred tax assets to amounts that are "more likely than not" to be realized of $26.7, largely in Brazil, and other miscellaneous net tax expense of $3.6. The effective tax rate in the nine months ended September 30, 2021 was also unfavorably impacted by the accrual of net income tax expense of approximately $.4 due to the net release of reserves for uncertain tax positions of $7.8, the net recording of valuation allowances of $7.5, and miscellaneous income tax expense of approximately $.7.

In prior years, we had previously recorded valuation allowances against certain deferred tax assets associated with the U.S. and various foreign jurisdictions. We intend to continue maintaining these valuation allowances on our deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of any such valuation allowance release is subject to change depending on the basis of the level of profitability that we are able to achieve. The Company continuously monitors its operational and capital structure changes, business performance, tax planning actions and tax planning strategies that could potentially allow for the recognition of deferred tax assets which are currently subject to a valuation allowance. There is the possibility that in the foreseeable future, certain deferred tax assets could be recognized, related to improvements in actual and/or expected operating results.

Further, the Company continuously assesses available positive and negative evidence to estimate whether sufficient future taxable income will be generated to utilize our existing deferred tax assets that are not subject to a valuation allowance. The Company continuously monitors the performance of entities and assesses the need for any further valuation allowances based on market performance and executability of tax planning actions and opportunities (including corporate restructuring). Should macroeconomic and sociopolitical conditions change, or our business operations not improve, or tax planning actions and opportunities not be implemented, up to approximately $54 of the Company's net deferred tax assets could potentially need to be offset with the recording of a valuation allowance in the future.

17. SUBSEQUENT EVENTS

On November 3, 2022, the board of directors of Avon Products, Inc. (“Avon”) approved a plan to relocate its research and development facilities to Brazil and Poland, two of its largest markets, by the end of its fiscal quarter ending June 30, 2024, in

31

AVON PRODUCTS, INC.

order to further deliver its Global Innovation Program and realize cost efficiencies. As a result, Avon will close its research and development facility in Suffern, New York. The closure of the Suffern facility is expected to be completed by the end of Avon’s fiscal quarter ending June 30, 2024.

Avon is currently assessing the costs associated with the closure of its research and development facility in Suffern and the relocation of research and development activities to Brazil and Poland. Avon expects to incur non-recurring restructuring costs in connection with the closure and relocation in the amount of approximately $39 million, to be incurred in the fiscal years ending December 31, 2022, 2023, 2024 and 2025 and capital expenditures relating to the infrastructure and facilities in Brazil and Poland totaling approximately $10 million, to be incurred in the fiscal years ending December 31, 2022 and 2023, amounts of which will be compensated with a reduction in recurring costs as a result of the restructuring. Avon is also performing an impairment analysis over fixed assets and, as a result, expects to record a potential impairment charge in the range of $35.0 million to $40.0 million.

The restructuring costs and impairment charges described above are preliminary estimates and actual amounts may be materially different from these estimates. Avon may also incur additional charges, non-cash costs, future cash expenditures or impairments not currently contemplated due to events that may occur as a result of, or that are associated with, the Suffern facility closure and the relocation of its research and development facilities to Brazil and Poland.

On November 7, 2022, the Company’s subsidiary, Avon Cosmetics Limited entered into a two-year committed intercompany multi-currency revolving credit facility with Natura &Co Luxembourg Holdings S.à r.l, a subsidiary of Natura &Co Holding and an affiliate of the Company, in the amount of $300. Borrowings under this facility will be used to reduce short-term financing from third-party banks and will bear interest at a rate per annum of 3% plus applicable currency benchmark rate.

32

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(U.S. dollars in millions, except per share data)

When used in this report, the terms "Avon," "Company," "we," "our" or "us" mean, unless the context otherwise indicates, Avon Products, Inc. and its majority, wholly owned and controlled subsidiaries.

When used in this report, the term "Constant $" means translated at a constant rate to allow comparisons between periods without the impact of movements in foreign exchange rates.

OVERVIEW

We are a global manufacturer and marketer of beauty and related products. We are a fully owned direct subsidiary of Natura &Co Holding following the consummation of the Merger Agreement with Natura Cosméticos, Natura &Co Holding and two subsidiaries of Natura &Co Holding (the "Transaction") on January 3, 2020.

Our business is conducted primarily in the direct-selling channel, with a strategy to expand to omni-channel. During 2021, we had sales operations in 54 countries and territories, and distributed products in 24 more. As at December 31, 2021 we had sales operations in 52 countries and territories. All of our consolidated revenue is derived from operations of subsidiaries outside of the United States ("U.S."). Our reportable segments are based on geographic operations in two regions, Avon International and Avon Latin America. Our product categories are Beauty and Fashion & Home. Beauty consists of skincare, fragrance and color (cosmetics). Fashion & Home consists of fashion apparel, accessories, housewares and leisure products. Sales are made to the ultimate consumer principally through direct selling by Representatives, who are independent contractors and not our employees.

During the nine months ended September 30, 2022, revenue decreased 21% compared to the prior-year period, favorably impacted by the recognition of revenue associated with a settlement agreement to resolve a breach of contract dispute in the current year period and unfavorably impacted by the recognition of certain Brazil indirect taxes in the both the current and prior-year periods.

Excluding these items, Adjusted revenue decreased 21% unfavorably impacted by foreign exchange variations, primarily driven by the weakening of the U.S. dollar relative to the Brazilian real, offset by the strengthening of the U.S. dollar relative to the Turkish lira, Pound Sterling, Polish zloty, Philippine peso, Chilean peso, Colombian peso and the Argentinian peso.

On a Constant $ basis, Adjusted revenue decreased 15% driven by declines of 10% in Avon International and 21% in Avon Latin America, mostly as a result of (i) the sale of Avon Luxembourg on July 1, 2021, (ii) decreases in Active Representatives in most markets and (iii) the impact of the ongoing war between Ukraine and Russia. During the nine months ended September 30, 2022, revenues from Russia and Ukraine represented approximately 7% of total revenue compared to approximately 8% for the nine months ended September 30, 2021.

Constant $ Adjusted revenue excluding the impact of the sale of Avon Luxembourg decreased 6% as increases in Average Representative Sales were more than offset by a 13% decrease in Active Representatives.

Units sold decreased 23% (14% decrease excluding the impact of the sale of Avon Luxembourg) driven by decreases in both Avon International and Avon Latin America.

See "Segment Review" in this Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") for additional information related to changes in revenue by segment.

COVID-19, Russia-Ukraine war and going concern

In 2021 and 2022, the economic disruption caused by the COVID-19 pandemic has resulted in inflationary pressures on the cost of certain raw materials used in the production of essential items due to the increased demand for these inputs worldwide. These inflationary pressures have been compounded in 2022 by the ongoing war between Russia and Ukraine, and by disruptions in global supply chains and climate events that hit electricity generation globally, among other events. Moreover, novel strains and variants of COVID-19 emerged in 2021 against which existing vaccines and acquired immunity may not be fully effective, and the rollout of vaccination programs worldwide have compromised the ability of certain countries to effectively contain the spread and the toll of the virus. While some restrictions have been lifted in the markets in which we operate, they may be reimplemented if contagion levels increase, which could suppress economic activity.

As a result, we continue to closely monitor the evolution and impacts of the pandemic and the war in the markets in which we operate, especially with regards to supply chain impacts on availability of raw materials as well as inflationary costs and potential gas shortages, as well as the impacts on consumer trends and demands due to restrictions. We continuously analyze the situation and act to minimize impacts on the operations and on the equity and financial position of the Company, with the

33

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(U.S. dollars in millions, except per share data)

objective of implementing appropriate measures, ensuring the continuity of operations, hedge cash, improve liquidity and promote the health and safety of all.

In view of this scenario, we review the recoverability expectations of our financial and non-financial assets in the preparation of these financial statements, considering the most recent information available and reflected in the Company’s business plans. In addition, we also consider possible effects on the financial statements including revenues and the continued transition to the digital environment, allowances for doubtful accounts receivable, impairment of non-financial assets, leases, liquidity and capital resources and going concern.

As of the date of this report, we are unable to estimate the longer-term economic impact of the ongoing Russia-Ukraine war and of the COVID-19 pandemic on our business. We will continue to review our revenue, investments, expenses and cash outflows, as well as adjusting our relationships with suppliers. Furthermore, the actions outlined above are continuously being re-evaluated in light of global developments relating to the Russia-Ukraine war and the COVID-19 pandemic.

The Company has received an irrevocable commitment from Natura &Co Holding that it will provide sufficient financial support if and when needed to enable the Company to meet its obligations as they come due in the normal course of business. This commitment is effective through to March 31, 2024, a period of more than 12 months from the date of issuance of the Consolidated Financial Statements.

See also “Item 1A. Risk Factors—The COVID-19 pandemic is adversely affecting, and is expected to continue to adversely affect, our operations, manufacturing, supply chains and distribution systems, and we have experienced and expect to continue to experience unpredictable negative effects associated with the pandemic" included in Item 1A of our 2021 Annual Report.

Natura &Co - Avon Integration

Subsequent to the merger of Natura and Avon in January 2020, an integration plan (the "Avon Integration") was established to create the right global infrastructure to support the future ambitions of the Natura &Co Group while also identifying synergies and opportunities to leverage our combined strength, scale and reach. Synergies will be derived mainly from procurement, manufacturing/distribution and administrative, as well as top-line synergies, primarily between Avon LATAM and Natura &Co Latin America.

Open Up Avon, Open Up & Grow

In May 2020, the new leadership of Avon refreshed our strategy ("Open Up & Grow") which has aims to return Avon to growth over three years. Open Up & Grow replaces and builds on the success of the Open Up Avon strategy, launched in 2018 to strengthen competitiveness through enhancing the representative experience, improving brand position and relevance, accelerating digital expansion and improving costs. Over the three years, savings are expected to continue to be achieved through restructuring actions (that may continue to result in charges related to severance, contract terminations and asset write-offs), as well as other cost-savings strategies that would not result in restructuring charges.

Turkish Currency

During the quarter ended March 31, 2022, published official exchange rates for Turkey indicated that the three-year cumulative inflation rate has exceeded 100%. As a result, we concluded that Turkey has become a highly inflationary economy. From April 1, 2022, we have applied inflationary accounting for our Turkish subsidiary. As such, the functional currency for Turkey has changed to the U.S. dollar, which is the consolidated group's reporting currency.

As a result of highly inflationary accounting for our Turkish subsidiary, the most significant impacts in our Consolidated Statement of Operations, are in cost of sales, primarily due to inventory being accounted for at its historical dollar cost, and in other (expense) income, net, primarily associated with the net monetary position of Turkey. However, these impacts are not considered material to our Consolidated Income Statements.

Sale of Avon Luxembourg

On July 1, 2021, the Company sold Avon Luxembourg, including our Mexican business, to a subsidiary of Natura &Co Holding for $150. The sale was accounted for as a transaction under common control in accordance with ASC805 - Business Combinations, with the resulting gain of $148 representing the difference between the proceeds, the net assets of Avon Luxembourg on the date of sale, and the cumulative foreign currency translation adjustment, taken directly to Retained Earnings. For additional information, see the Consolidated Statements of Changes in Shareholders' Deficit.

Relocation of the subsidiary Avon Products Inc research and development facility

34

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(U.S. dollars in millions, except per share data)

On November 3, 2022, the board of directors of Avon Products, Inc. (“Avon”) approved a plan to relocate its research and development facilities to Brazil and Poland, two of its largest markets, by the end of its fiscal quarter ending June 30, 2024, in order to further deliver its Global Innovation Program and realize cost efficiencies. As a result, Avon will close its research and development facility in Suffern, New York. The closure of the Suffern facility is expected to be completed by the end of Avon’s fiscal quarter ending June 30, 2024.

See Note 17, Subsequent Events, to the Consolidated Financial Statements contained herein for further information.

NEW ACCOUNTING STANDARDS

Information relating to new accounting standards is included in Note 1, Accounting Policies, to the Consolidated Financial Statements included herein.

RESULTS OF OPERATIONS—THE THREE MONTHS ENDED SEPTEMBER 30, 2022 AS COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2021

Non-GAAP Financial Measures

To supplement our financial results presented in accordance with accounting principles generally accepted in the United States ("GAAP"), we disclose operating results that have been adjusted to exclude the impact of changes due to the translation of foreign currencies into U.S. dollars, including changes in: revenue, Adjusted revenue, operating profit, Adjusted operating profit, operating margin and Adjusted operating margin. We also refer to these adjusted financial measures as Constant $ items, which are Non-GAAP financial measures. We believe these measures provide investors an additional perspective on trends and underlying business results. To exclude the impact of changes due to the translation of foreign currencies into U.S. dollars, we calculate current-year results and prior-year results at constant exchange rates, which are updated on an annual basis as part of our budgeting process. Foreign currency impact is determined as the difference between actual growth rates and Constant $ growth rates.

We also present gross margin, SG&A as a percentage of revenue, operating profit, operating margin and income (loss) before taxes on a Non-GAAP basis. We refer to these Non-GAAP financial measures as "Adjusted." We have provided a quantitative reconciliation of the difference between the Non-GAAP financial measures and the financial measures calculated and reported in accordance with GAAP. See "Reconciliation of Non-GAAP Financial Measures" within "Results of Operations" in this MD&A for this quantitative reconciliation.

The Company uses the Non-GAAP financial measures to evaluate its operating performance. These Non-GAAP measures should not be considered in isolation, or as a substitute for, or superior to, financial measures calculated in accordance with GAAP. The Company believes investors find the Non-GAAP information helpful in understanding the ongoing performance of operations separate from items that may have a disproportionate positive or negative impact on the Company's financial results in any particular period.

The Company believes that it is meaningful for investors to be made aware of the impacts of 1) CTI restructuring initiatives; 2) costs associated with the early termination of debt; 3) certain Brazil indirect taxes and 4) the settlement agreement to resolve a breach of contract dispute.

1)    CTI restructuring initiatives include the impact on the Consolidated Statements of Operations for all periods presented of net charges incurred on approved restructuring initiatives. See Note 11, Restructuring Initiatives, to the Consolidated Financial Statements contained herein for further information.

2)    During the second quarter of 2022, the Company incurred costs of $15.7 associated with the early repayment of the $461.9 aggregate principal of the 5% Notes due in March 2023, in May 2022.

3)    The three and nine-month periods ended September 30, 2022 include the impact of certain Brazil indirect taxes of approximately $17, which were recorded in product sales, SG&A and interest income. The three and nine month periods ended September 30, 2021 include the impact of certain Brazil indirect taxes of approximately $12 and $24 respectively, which were recorded in product sales, SG&A, other income and interest income.

4)     In June 2022, an Avon subsidiary concluded the negotiation of a settlement agreement to resolve a breach of contract dispute in Japan. As a result, Avon received cash compensation in the amount of $27.0 million of which $3.3 million related to the settlement of historically recognized revenues and the remaining $23.7 million was recognized as revenue in the quarter ended June 30, 2022.

35

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(U.S. dollars in millions, except per share data)

Sale of Avon Luxembourg

On July 1, 2021, the Company sold Avon Luxembourg, including our Mexican business, to a subsidiary of Natura &Co Holding for $150. The sale did not qualify for accounting as a discontinued operation in accordance with ASC805 - Business Combinations on the basis that it did not represent a strategic shift having a major effect on the Company's operations and, as a consequence, the results of operations in prior periods include the results of Avon Luxembourg and its subsidiaries. While not a non-GAAP measure, in order to better evaluate the ongoing operating performance of the remaining group, the tables below also identify the prior period impacts of the sale of Avon Luxembourg and its subsidiaries, including our Mexican business.

36

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(U.S. dollars in millions, except per share data)

	Three Months Ended September 30,								Nine Months Ended September 30,
	2022			2021			%/Basis Point Change		2022			2021			%/Basis Point Change
Select Consolidated Financial Information
Total revenue	$	663.9		$	768.3		(14)	%	$	2,040.4		$	2,589.7		(21)	%
Cost of sales	(290.0)			(316.5)			(8)	%	(879.3)			(1,091.6)			(19)	%
Cost of sales from affiliates of Natura &Co	(5.7)			(4.8)			19	%	(17.7)			(20.1)			(12)	%
Selling, general and administrative expenses	(417.5)			(465.9)			(10)	%	(1,284.1)			(1,553.1)			(17)	%
Operating loss	(49.3)			(18.9)			161	%	(140.7)			(75.1)			87	%
Interest expense	(11.1)			(21.1)			(47)	%	(32.9)			(52.6)			(37)	%
Interest expense on Loans from affiliates of Natura &Co	(28.4)			(16.2)			75	%	(63.6)			(34.7)			83	%
Loss on extinguishment of debt and credit facilities	—			—			*		(15.7)			—			*
Interest income	5.7			.3			1,800	%	7.2			.4			*
Interest income on Loans to affiliates of Natura &Co	1.4			.8			75	%	3.0			.8			*
Other income (expense), net	(5.7)			.7			(914)	%	5.2			4.3			21	%
Gain on sale of business / assets	—			8.3			(100)	%	—			9.8			(100)	%
Loss from continuing operations, before income taxes	(87.4)			(46.1)			90	%	(237.5)			(147.1)			61	%
Loss from continuing operations, net of tax	(109.5)			(35.7)			207	%	(260.8)			(162.6)			60	%
Net loss attributable to Avon	$	(124.1)		$	(42.5)		192	%	$	(296.2)		$	(167.7)		77	%
Advertising expenses(1)	$	(11.8)		$	(15.1)		(22)	%	$	(51.9)		$	(51.3)		1	%
Reconciliation of Non-GAAP Financial Measures
Total revenue	$	663.9		$	768.3		(14)	%	$	2,040.4		$	2,589.7		(21)	%
Settlement agreement	—			—					(23.7)			—
Certain Brazil taxes	10.1			(12.4)					10.1			(21.8)
Adjusted revenue	$	674.0		$	755.9		(11)	%	$	2,026.8		$	2,567.9		(21)	%
Avon Luxembourg	—			—			—	%	—			(249.2)			(100)	%
Adjusted revenue excluding Avon Luxembourg	$	674.0		$	755.9		(11)	%	$	2,026.8		$	2,318.7		(13)	%
Gross margin	55.5		%	58.2		%	(270)		56.0		%	57.1		%	(110)
CTI restructuring	.1			—			10		—			—			—
Settlement agreement	—			—			—		(.5)			—			(50)
Certain Brazil taxes	.7			(.7)			140		.2			(.4)			60
Adjusted gross margin	56.3		%	57.5		%	(120)		55.7		%	56.7		%	(100)
Avon Luxembourg	—		%	—		%	—		—		%	.6		%	(90)
Adjusted Gross Margin excluding Avon Luxembourg	56.3		%	57.5		%	(120)		55.7		%	57.3		%	(160)
Selling, general and administrative expenses as a % of total revenue	62.9		%	60.6		%	230		62.9		%	60.0		%	290
CTI restructuring	(3.4)			(1.4)			(200)		(2.4)			(2.3)			(10)
Settlement agreement	—			—			—		.7			—			70
Certain Brazil taxes	(1.3)			.8			(200)		(.4)			.4			(80)
Adjusted selling, general and administrative expenses as a % of total revenue	58.2		%	60.0		%	(180)		60.8		%	58.1		%	270
Avon Luxembourg	—		%	—		%	—		—		%	1.7		%	(170)

37

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(U.S. dollars in millions, except per share data)

	Three Months Ended September 30,								Nine Months Ended September 30,
	2022			2021			%/Basis Point Change		2022			2021			%/Basis Point Change
Adjusted selling, general and administrative expenses as a % of total revenue excluding Avon Luxembourg	58.2		%	60.0		%	(180)		60.8		%	59.8		%	100
Operating loss	$	(49.3)		$	(18.9)		161	%	$	(140.7)		$	(75.1)		87	%
CTI restructuring	22.9			10.9					49.2			60.8
Settlement agreement				—					(23.7)			—
Certain Brazil taxes	12.7			(10.7)					12.7			(20.1)
Adjusted operating income (loss)	$	(13.7)		$	(18.7)		(27)	%	$	(102.5)		$	(34.4)		198	%
Avon Luxembourg	—			—			—	%	—			(21.3)			(100)	%
Adjusted operating loss excluding Avon Luxembourg	$	(13.7)		$	(18.7)		(27)	%	$	(102.5)		$	(55.7)		84	%
Operating margin	(7.4)		%	(2.5)		%	(490)		(6.9)		%	(2.9)		%	(400)
CTI restructuring	3.5			1.4			210		2.4			2.3			10
Settlement agreement	—			—			—		(1.2)			—			(120)
Certain Brazil taxes	1.9			(1.4)			330		.6			(.7)			130
Adjusted operating margin	(2.0)		%	(2.5)		%	50		(5.1)		%	(1.3)		%	(380)
Sale of Avon Luxembourg	—		%	—		%	—	%	—		%	(1.1)		%	(100)	%
Adjusted operating margin excluding Avon Luxembourg	(2.0)		%	(2.5)		%	50		(5.1)		%	(2.4)		%	(270)
Change in Constant $ Adjusted operating margin(2)							(50)								(320)
Loss before taxes	$	(87.4)		$	(46.1)		90	%	$	(237.5)		$	(147.1)		61	%
CTI restructuring	22.9			2.6					49.2			51.0
Settlement agreement	—			—					(23.7)			—
Loss on early termination of debt	—			—					15.7			—
Certain Brazil taxes	16.9			(12.0)					16.9			(23.9)
Adjusted loss before taxes	$	(47.6)		$	(55.5)		(14)	%	$	(179.4)		$	(120.0)		50	%
Income taxes	$	(22.1)		$	10.4		(313)	%	$	(23.3)		$	(15.5)		50	%
Effective tax rate	(25.3)		%	22.6		%			(9.8)		%	(10.5)		%
Adjusted effective tax rate	(12.4)		%	27.5		%			(5.4)		%	(8.1)		%
Performance Metrics
Change in Active Representatives							(12)	%							(25)	%
Change in units sold							(13)	%							(26)	%

* Calculation not meaningful

Amounts in the table above may not necessarily sum due to rounding.

(1)Advertising expenses are recorded in SG&A.

(2)Change in Constant $ Adjusted operating margin for all periods presented is calculated using the current-year Constant $ rates.

38

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(U.S. dollars in millions, except per share data)

Three Months Ended September 30, 2022

Revenue

During the three months ended September 30, 2022, revenue decreased 14% compared to the prior-year period, unfavorably impacted by the recognition of certain Brazil indirect taxes in the both the current and prior-year periods.

Excluding this item, Adjusted revenue decreased 11% unfavorably impacted by foreign exchange variations, primarily driven by the weakening of the U.S. dollar relative to the Russian ruble, offset by the strengthening of the U.S. dollar relative to the Turkish lira, Pound sterling, the Philippine peso and the Argentinian peso.

On a Constant $ basis, Adjusted revenue decreased 2% driven by a decline of 8% in Avon International and a growth of 5% in Avon Latin America, resulting from (i) Average Representative Sales increases being more than offset by a 12% decrease in Active Representatives, and (ii) the impact of the ongoing war between Ukraine and Russia.

During the three months ended September 30, 2022, revenues from Russia and Ukraine represented approximately 7% of total revenue compared to approximately 9% for the three months ended September 30, 2021.

Units sold decreased 13% driven by decreases in both Avon International and Avon Latin America.

See "Segment Review" in this MD&A for additional information related to changes in revenue by segment.

Operating Margin

Operating margin decreased by 490 basis points including the impact of higher restructuring expenses in the current year period and the recognition of certain Brazil indirect taxes in the both the current and prior-year periods. Excluding these items, Adjusted operating margin decreased by 50 basis points compared to the same period of 2021, due to the decrease in gross margin being offset by lower SG&A as a percentage of total revenue.

The movements in operating margin and Adjusted operating margin are discussed further below in "Gross Margin" and "Selling, General and Administrative Expenses".

Gross Margin

Adjusted gross margin decreased 120 basis points compared to the same period of 2021 as the favorable impact of price/mix was offset by higher supply chain costs and the unfavorable impact of foreign currency transaction losses.

Selling, General and Administrative Expenses ("SG&A")

SG&A as a percentage of total revenue increased by 230 basis points including the impact of higher restructuring expenses in the current year period and the recognition of certain Brazil indirect taxes in both the current and prior-year periods. Excluding these items, Adjusted SG&A as a percentage of Adjusted revenue decreased 180 basis points, compared to the same period of 2021, was largely driven by tight cost management.

Other Expenses

Total interest income increased by approximately $6 and total interest expense increased by approximately $2 driven by higher loans from affiliates compared to the prior-year period.

Other income (expense), net, of approximately $6 represents an unfavorable impact of $6 compared to the third quarter of 2021 primarily attributable to higher foreign exchange losses in the current period.

Effective Tax Rate

The effective tax rates and Adjusted effective tax rates in 2022 and 2021 continue to be impacted by our inability to recognize additional deferred tax assets in various jurisdictions related to our current-year operating results. In addition, the effective tax rates in 2022 and 2021 continue to be impacted by withholding taxes associated with certain intercompany payments, including royalties, service charges, interest and dividends, which in the aggregate are relatively consistent each year due to the need to repatriate funds to cover U.S. and U.K.-based costs, such as interest on debt and corporate overhead, respectively.

Our effective tax rates for the three months ended September 30, 2022 and 2021 were (25.3)% and 22.6%, respectively. The effective tax rates for the three months ended September 30, 2022 and 2021 were impacted by CTI restructuring charges which could not all be benefited, losses which could not all be benefited, country mix of earnings and withholding taxes. The effective tax rate in the quarter ended September 30, 2022 was also unfavorably impacted by the recording of valuation allowances to adjust our non-U.S. deferred tax assets to amounts that are "more likely than not" to be realized of $22.9, largely in Brazil, which was offset by other miscellaneous net tax benefits of $1.2. The effective tax rate in the quarter ended September 30, 2021

39

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(U.S. dollars in millions, except per share data)

was favorably impacted by the release of reserves for uncertain tax positions of $10.4 offset by the net recording of valuation allowances of $1.5.

Our Adjusted effective tax rates for the three months ended September 30, 2022 and 2021 were (12.4)% and 27.5%, respectively. The Adjusted effective tax rates in 2022 and 2021 were impacted by losses which could not all be benefited, country mix of earnings and withholding taxes. The Adjusted effective tax rate for the third quarter of 2022 was also favorably impacted by other miscellaneous net tax benefits of $1.2. The Adjusted effective tax rate in the third quarter of 2021 was also favorably impacted by the release of reserves for uncertain tax positions of $10.4 and the release of valuation allowances of $2.4.

In prior years, we had previously recorded valuation allowances against certain deferred tax assets associated with the U.S. and various foreign jurisdictions. We intend to continue maintaining these valuation allowances on our deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of any such valuation allowance release is subject to change depending on the level of profitability that we are able to achieve. The Company continuously monitors its operational and capital structure changes, business performance, tax planning actions and tax planning strategies that could potentially allow for the recognition of deferred tax assets which are currently subject to a valuation allowance. There is the possibility that, in the foreseeable future, certain deferred tax asset could be recognized related to improvements in actual and/or expected operating results.

Further, the Company continuously assesses available positive and negative evidence to estimate whether sufficient future taxable income will be generated to utilize our existing deferred tax assets that are not subject to a valuation allowance. The Company continuously monitors the performance of entities and assesses the need for any further valuation allowances based on market performance and executability of tax planning actions and opportunities (including corporate restructuring). Should macroeconomic and sociopolitical conditions change, or our business operations not improve, or tax planning actions and opportunities not be implemented, up to approximately $54 of the Company's net deferred tax assets could potentially need to be offset with the recording of a valuation allowance in the future.

See Note 16, Income Taxes, to the Consolidated Financial Statements included herein for more information on the effective tax rate, and Note 11, Restructuring Initiatives, to the Consolidated Financial Statements included herein for more information on CTI restructuring.

Impact of Foreign Currency

As compared to the prior-year period, foreign currency has impacted our consolidated financial results in the form of:

•foreign currency transaction losses (classified within cost of sales and SG&A in our Consolidated Statements of Operations), which had an unfavorable impact on operating profit and Adjusted operating profit of approximately $15, or approximately 200 basis points to both operating margin and Adjusted operating margin;

•foreign currency translation, which had a favorable impact on operating profit and Adjusted operating profit of less than $5, or less than 50 basis points on both operating margin and Adjusted operating margin; and

•foreign exchange net losses, on our working capital (classified within other income (expense), net in our Consolidated Statements of Operations) as compared to gains in the prior year, resulting in an unfavorable impact of less than $5 before tax on both a reported and Adjusted basis.

40

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(U.S. dollars in millions, except per share data)

Nine Months Ended September 30, 2022

Revenue

During the nine months ended September 30, 2022, revenue decreased 21% compared to the prior-year period, favorably impacted by the recognition of revenue associated with a settlement agreement to resolve a breach of contract dispute in the current year period and unfavorably impacted by the recognition of certain Brazil indirect taxes in the both the current and prior-year periods.

Excluding these items, Adjusted revenue decreased 21% unfavorably impacted by foreign exchange variations, primarily driven by the weakening of the U.S. dollar relative to the Brazilian real, offset by the strengthening of the U.S. dollar relative to the Turkish lira, Pound Sterling, Polish zloty, Philippine peso, Chilean peso, Colombian peso and the Argentinian peso.

On a Constant $ basis, Adjusted revenue decreased 15% driven by declines of 10% in Avon International and 21% in Avon Latin America, mostly as a result of (i) the sale of Avon Luxembourg on July 1, 2021, (ii) decreases in Active Representatives in most markets and (iii) the impact of the ongoing war between Ukraine and Russia. During the nine months ended September 30, 2022, revenues from Russia and Ukraine represented approximately 7% of total revenue compared to approximately 8% for the nine months ended September 30, 2021.

Constant $ Adjusted revenue excluding the impact of the sale of Avon Luxembourg decreased 6% as increases in Average Representative Sales were more than offset by a 13% decrease in Active Representatives.

Units sold decreased 26% (14% decrease excluding the impact of the sale of Avon Luxembourg) driven by decreases in both Avon International and Avon Latin America.

See "Segment Review" in this MD&A for additional information related to changes in revenue by segment.

Operating Margin

Operating margin decreased by 400 basis points including the impact of lower restructuring expenses in the current year period, the recognition of revenue associated with a settlement agreement to resolve a breach of contract dispute in the current year period and the recognition of certain Brazil indirect taxes in both the current and prior-year periods. Excluding these items, Adjusted operating margin decreased by 380 basis points compared to the same period of 2021, due to the decrease in gross margin and higher SG&A as a percentage of total revenue.

The movements in operating margin and Adjusted operating margin are discussed further below in "Gross Margin" and "Selling, General and Administrative Expenses".

Gross Margin

Adjusted gross margin decreased 100 basis points, compared to the same period of 2021 as the favorable impact of price/mix was offset by higher supply chain costs and the unfavorable impact of foreign currency transaction losses.

Selling, General and Administrative Expenses ("SG&A")

SG&A as a percentage of total revenue increased by 290 basis points including the impact of lower restructuring expenses in the current year period, the recognition of revenue associated with a settlement agreement to resolve a breach of contract dispute in the current year period and the recognition of certain Brazil indirect taxes in both the current and prior-year periods. Excluding these items, Adjusted SG&A as a percentage of Adjusted revenue increased 270 basis points, compared to the same period of 2021. The increase in Constant $ Adjusted SG&A as a percentage of Adjusted revenue was largely due to the impact of our lower revenue, which resulted in a deleveraging of our fixed expenses.

Other Expenses

Total interest income increased by approximately $9 and total interest expense increased by approximately $9 driven by higher loans from affiliates compared to the prior-year period.

Loss on extinguishment of debt of $15.7 in the nine-month period ended September 30, 2022 represents the costs associated with the early repayment of the $461.9 aggregate principal of the 5% Notes due in March 2023, in May 2022.

Other income (expense), net, of approximately $5 represents a favorable impact of $1 compared to the nine-month period ended September 30, 2021 primarily attributable to higher foreign exchange gains in the current period.

41

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(U.S. dollars in millions, except per share data)

Effective Tax Rate

The effective tax rates and Adjusted effective tax rates in 2022 and 2021 continue to be impacted by our inability to recognize additional deferred tax assets in various jurisdictions related to our current-year operating results. In addition, the effective tax rates in 2022 and 2021 continue to be impacted by withholding taxes associated with certain intercompany payments, including royalties, service charges, interest and dividends, which in the aggregate are relatively consistent each year due to the need to repatriate funds to cover costs incurred in the U.S. and U.K., such as interest on debt and corporate overhead.

Our effective tax rates for the nine months ended September 30, 2022 and 2021 were (9.8)% and (10.5%), respectively. The effective tax rates for the nine months ended September 30, 2022 and 2021 were impacted by CTI restructuring charges which could not all be benefited, losses which could not all be benefited, country mix of earnings and withholding taxes. The effective tax rate in the nine months ended September 30, 2022 was also unfavorably impacted by the recording of valuation allowances to adjust our non-U.S. deferred tax assets to amounts that are "more likely than not" to be realized of $26.7, largely in Brazil, and other miscellaneous net tax expense of $3.6. The effective tax rate in the nine months ended September 30, 2021 was also unfavorably impacted by the accrual of net income tax expense of approximately $.4 due to the net release of reserves for uncertain tax positions of $7.8, the net recording of valuation allowances of $7.5, and miscellaneous income tax expense of approximately $.7.

Our Adjusted effective tax rates for the nine months ended September 30, 2022 and 2021 were (5.4)% and (8.1)%, respectively. The Adjusted effective tax rates in 2022 and 2021 were impacted by losses which could not all be benefited, country mix of earnings and withholding taxes. The Adjusted effective tax rate in the nine months ended September 30, 2022 was also unfavorably impacted by the recording of valuation allowances of $3.8 and other miscellaneous net tax expense of $3.6. The Adjusted effective tax rate in the nine months ended September, 30 2021 was also favorably impacted by the accrual of income tax benefit of $3.5 due to the net release of reserves for uncertain tax positions of $7.8, which was offset by the net recording of valuation allowances of $3.6 and miscellaneous income tax expense of $.7.

In prior years, we had previously recorded valuation allowances against certain deferred tax assets associated with the U.S. and various foreign jurisdictions. We intend to continue maintaining these valuation allowances on our deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of any such valuation allowance release is subject to change depending on the basis of the level of profitability that we are able to achieve. The Company continuously monitors its operational and capital structure changes, business performance, tax planning actions and tax planning strategies that could potentially allow for the recognition of deferred tax assets which are currently subject to a valuation allowance. There is the possibility that in the foreseeable future, certain deferred tax assets could be recognized, related to improvements in actual and/or expected operating results.

Further, the Company continuously assesses available positive and negative evidence to estimate whether sufficient future taxable income will be generated to utilize our existing deferred tax assets that are not subject to a valuation allowance. The Company continuously monitors the performance of entities and assesses the need for any further valuation allowances based on market performance and executability of tax planning actions and opportunities (including corporate restructuring). Should macroeconomic and sociopolitical conditions change, or our business operations not improve, or tax planning actions and opportunities not be implemented, up to approximately $54 of the Company's net deferred tax assets could potentially need to be offset with the recording of a valuation allowance in the future.

See Note 16, Income Taxes, to the Consolidated Financial Statements included herein for more information on the effective tax rate, and Note 11, Restructuring Initiatives, to the Consolidated Financial Statements included herein for more information on CTI restructuring.

Impact of Foreign Currency

As compared to the prior-year period, foreign currency has impacted our consolidated financial results in the form of:

•foreign currency transaction losses (classified within cost of sales and SG&A in our Consolidated Statements of Operations), which had an unfavorable impact on operating profit and Adjusted operating profit of approximately $25, or less than 100 basis points to both operating margin and Adjusted operating margin;

•foreign currency translation, which had an unfavorable impact on operating profit and Adjusted operating profit of less than $5, or less than 50 basis points on both operating margin and Adjusted operating margin; and

42

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(U.S. dollars in millions, except per share data)

•foreign exchange net gains, on our working capital (classified within other income (expense), net in our Consolidated Statements of Operations) as compared to gains in the prior year, resulting in a favorable impact of approximately $5 before tax on both a reported and Adjusted basis.

43

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(U.S. dollars in millions, except per share data)

Segment Review

We determine segment profit by deducting the related costs and expenses from segment revenue. Segment profit includes an allocation of central expenses to the extent they support the operating activity of the segment. Segment profit excludes certain CTI restructuring initiatives, certain significant asset impairment charges, and other expenses, 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. See Note 9, Segment Information, to the Consolidated Financial Statements included herein for a reconciliation of segment profit to operating profit.

Avon International

	Three Months Ended September 30,											Nine Months Ended September 30,
							%/Basis Point Change											%/Basis Point Change
	2022			2021			US$			Constant $		2022			2021			US$		Constant $
Total revenue	$	314.9		$	392.6		(20)	%		(8)	%	$	1,025.8		$	1,239.9		(17)	%	(8)	%
Settlement agreement	—			—			—	%	0	—	%	(23.7)			—			—	%	—	%
Adjusted revenue	314.9			392.6			(20)	%		(8)	%	1,002.1			1,239.9			(19)	%	(10)	%
Segment profit/(loss)	5.2			2.0			160	%		*		29.2			(4.4)			*		*
Settlement agreement	—			—			—	%		—	%	(23.7)			—			—	%	—	%
Adjusted Segment profit/(loss)	5.2			2.0			160	%		*		5.5			(4.4)			*		*
Segment margin	1.7		%	.5		%	120			30		2.8		%	(.4)		%	320		290
Settlement agreement	—		%	—		%	—			—		(2.3)		%	—		%	(230)		(240)
Adjusted segment margin	1.7		%	.5		%	120			30		.5		%	(.4)		%	90		50
Change in Active Representatives										(20)	%									(19)	%
Change in units sold										(22)	%									(19)	%

Amounts in the table above may not necessarily sum due to rounding.

Three Months Ended September 30, 2022

Total revenue decreased 20% compared to the prior-year period, unfavorably impacted by foreign exchange variations, primarily driven by the weakening of the U.S. dollar relative to the Russian ruble, offset by the strengthening of the U.S. dollar relative to the Turkish lira, Pound sterling and the Philippine peso.

On a Constant $ basis, Adjusted revenue decreased 8% driven by an increase in Average Representative Sales which was more than offset by a 20% decrease in Active Representatives across most markets in Europe, Middle East & Africa and Asia Pacific. The decrease in Revenue and Constant $ revenue was also due, in part, to the ongoing war between Ukraine and Russia which affected revenues in this region.

Segment margin increased 120 basis points, or increased 30 basis points on a Constant $ Adjusted segment margin basis, which was largely due to the decline in Constant $ Adjusted gross margin being offset by lower Constant $ Adjusted SG&A as a percentage of total revenue.

Constant $ Adjusted gross margin declined as the favorable impact of price/mix was offset by higher supply chain costs and the unfavorable impact of foreign currency transaction losses.

The decrease in Constant $ Adjusted SG&A as a percentage of Adjusted revenue was driven by tight cost management and savings in logistics costs.

Nine Months Ended September 30, 2022

Total revenue decreased 17% compared to the prior-year period, favorably impacted by the recognition of revenue associated with a settlement agreement to resolve a breach of contract dispute in the current year period. Excluding this item, Adjusted revenue decreased 19% unfavorably impacted by foreign exchange variations, primarily driven by the strengthening of the U.S. dollar relative to the Turkish lira, Pound Sterling, Polish zloty and the Philippine peso.

44

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(U.S. dollars in millions, except per share data)

On a Constant $ basis, Adjusted revenue decreased 10% driven by an increase in Average Representative Sales which was more than offset by a 19% decrease in Active Representatives across most markets in Europe, Middle East & Africa and Asia Pacific. The decrease in Revenue and Constant $ revenue was also due, in part, to the ongoing war between Ukraine and Russia which affected revenues in this region.

Segment margin increased 320 basis points, or increased 50 basis points on a Constant $ Adjusted segment margin basis as the decrease in the Constant $ Adjusted gross margin was offset by the lower Constant $ Adjusted SG&A as a percentage of total revenue.

Constant $ Adjusted gross margin declined as the favorable impact of price/mix was offset by higher supply chain costs and the unfavorable impact of foreign currency transaction losses.

The decrease in Constant $ Adjusted SG&A as a percentage of Adjusted revenue was largely due to lower sales leader and field investments as investments made during the prior-year period to support our Representatives in response to the COVID-19 pandemic were discontinued in the current year.

Avon Latin America

	Three Months Ended September 30,										Nine Months Ended September 30,
							%/Basis Point Change										%/Basis Point Change
	2022			2021			US$		Constant $		2022			2021			US$		Constant $
Total revenue	$	343.3		$	369.2		(7)	%	(2)	%	$	997.3		$	1,326.9		(25)	%	(23)	%
Certain Brazil taxes	10.1			(12.4)			*		*		10.1			(21.8)			*		*
Adjusted revenue	353.4			356.8			(1)	%	5	%	1,007.4			1,305.1			(23)	%	(21)	%
Avon Luxembourg	—			—			*		*		—			(249.2)			*		*
Adjusted revenue excluding Avon Luxembourg	353.4			356.8			(1)	%	5	%	1,007.4			1,055.9			(5)	%	(2)	%
Segment (loss)/profit	(26.7)			(4.1)			*		*		(103.6)			8.9			*		*
Certain Brazil taxes	12.7			(10.7)			*		*		12.7			(20.1)			*		*
Adjusted segment (loss)/profit	(14.0)			(14.8)			*		*		(90.9)			(11.2)			*		*
Avon Luxembourg	—			—			*		*		—			(21.4)			*		*
Adjusted segment loss excluding Avon Luxembourg	(14.0)			(14.8)			*		*		(90.9)			(32.6)			*		*
Segment margin	(7.8)		%	(1.1)		%	(670)		(513)		(10.4)		%	.7		%	(1,110)		(1,014)
Certain Brazil taxes	3.8		%	(3.0)		%	(680)		697		1.4		%	(1.6)		%	300		267
Adjusted segment margin	(4.0)		%	(4.1)		%	10		184		(9.0)		%	(.9)		%	(810)		(747)
Avon Luxembourg	—		%	—		%	—		—		—		%	(2.2)		%	220		220
Adjusted segment margin excluding Avon Luxembourg	(4.0)		%	(4.1)		%	10		184		(9.0)		%	(3.1)		%	(590)		(524)
Change in Active Representatives									(6)	%									(28)	%
Change in units sold									(6)	%									(31)	%

*Calculation not meaningful

Amounts in the table above may not necessarily sum due to rounding.

Three Months Ended September 30, 2022

Total revenue decreased 7% compared to the prior-year period, unfavorably impacted by the recognition of certain Brazilian indirect taxes in both the current and prior-year periods. Excluding this item, Adjusted revenue decreased 1%, unfavorably impacted by foreign exchange variations primarily driven by the strengthening of the U.S. dollar relative to the Argentinian peso.

45

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(U.S. dollars in millions, except per share data)

On a Constant $ basis, Adjusted revenue increased 5% as increases in Average Representative Sales more than offset by a 6% decrease in Active Representatives.

Revenue in Brazil decreased 15% compared to the prior-year period, unfavorably impacted by the recognition of certain Brazil indirect taxes in both the current and prior-year periods. Excluding this item, Adjusted revenue decreased 2%, with only minimal impact of foreign exchange during the period. On an Adjusted Constant $ basis, revenue decreased 1% primarily driven by a decrease in Active Representatives and changes in macro-economic conditions.

Segment margin decreased 670 basis points, or increased 184 basis points on a Constant $ Adjusted segment margin basis, which was largely due the increase in Constant $ Adjusted gross margin and lower Constant $ Adjusted SG&A as a percentage of total revenue.

Constant $ Adjusted gross margin increased as the favorable impact of price/mix was party offset by the unfavorable impact of higher supply chain costs and foreign currency transaction losses.

The decrease in Constant $ Adjusted SG&A as a percentage of Adjusted revenue was largely driven by tight cost management.

Nine Months Ended September 30, 2022

Total revenue decreased 25% compared to the prior-year period, unfavorably impacted by the recognition of certain Brazil indirect taxes in both the current and prior-year periods. Excluding this item, Adjusted revenue decreased 23% unfavorably impacted by foreign exchange variations primarily driven by the weakening of the U.S. dollar relative to the Brazilian real, offset by the strengthening of the U.S. dollar relative to the Chilean peso, Colombian peso and the Argentinian peso.

On a Constant $ basis, Adjusted revenue decreased 21% which includes the impact from the sale of Avon Luxembourg, including our Mexican business, on July 1, 2021. Constant $ Adjusted revenue excluding the impact of the sale of Avon Luxembourg decreased 2%, as increases in Average Representative Sales was more than offset by a 28% decrease in Active Representatives.

Revenue in Brazil decreased 12% compared to the prior-year period, unfavorably impacted by the recognition of certain Brazil indirect taxes in both the current and prior-year periods. Excluding this item, Adjusted revenue decreased 6% favorably impacted by foreign exchange. On an Adjusted Constant $ basis, revenue decreased 10% primarily driven by a decrease in Active Representatives and changes in macro-economic conditions.

Segment margin decreased 1,110 basis points, or 747 basis points on a Constant $ Adjusted segment margin basis, was largely due to the stable Constant $ Adjusted gross margin and the impact of revenue decline causing deleverage of our fixed expenses.

Constant $ Adjusted gross margin remained stable as the favorable impact of price/mix was offset by the unfavourable impact of higher supply chain costs and foreign currency transaction losses.

The increase in Constant $ Adjusted SG&A as a percentage of Adjusted revenue was largely due to the impact of revenue decline, causing a deleveraging of our fixed expenses.

46

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(U.S. dollars in millions, except per share data)

LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of funds historically have been cash flows from operations, public offerings of notes, bank financings, issuance of commercial paper, borrowings under lines of credit and private placement of notes. Furthermore, since January 3, 2020, we are part of the Natura &Co group of companies which gives us access to intercompany funding. See Note 15, Debt for information on our debt, including the loans from Natura &Co and its affiliates maturing within 1 year.

The Company has cash on hand of approximately $217 as of September 30, 2022.

On November 7, 2022, the Company’s subsidiary, Avon Cosmetics Limited entered into a two-year committed intercompany multi-currency revolving credit facility with Natura &Co Luxembourg Holdings S.à r.l, a subsidiary of Natura &Co Holding and an affiliate of the Company, in the amount of $300. Borrowings under this facility will be used to reduce short-term financing from third-party banks and will bear interest at a rate per annum of 3% plus applicable currency benchmark rate.

Refinancing and the subsequent repurchase of Unsecured Notes

In May 2022, Avon Products, Inc. and Avon Cosmetics Limited entered into Promissory Notes with a subsidiary of Natura &Co Holding in the amount of $405 and $215 respectively. The Promissory Notes bear interest at a rate per annum of 6.71% and mature on May 17, 2029. In addition, in June 2022 Avon Cosmetics Limited entered into an additional Promissory Note with a subsidiary of Natura &Co Holding in the amount of $115. This Promissory Note bears interest at a rate per annum of 6.51% and matures on June 28, 2029.

In May 2022, we repurchased $461.9 of our 5% Notes due 15 March, 2023. The aggregate repurchase price was equal to the principal amount of the notes, plus a premium of $15.0 and accrued interest of $5.4. In connection with the repurchase, we incurred a loss on extinguishment of debt of $15.7 before tax in the quarter ended June 30, 2022 consisting of the $15.0 premium paid for the repurchase and $.7 for the write-off of debt issuance costs and discounts related to the initial issuance of the notes that were repurchased.

In June 2022, the $210 outstanding under the Promissory Note with a subsidiary of Natura &Co Holding and an affiliate of the Company, maturing in November 2022, was repaid in full.

COVID-19, Russia-Ukraine war and going concern

Considering the uncertain nature of any possible future COVID-19 impacts which are beyond the Company’s control and the ongoing war between Russia and Ukraine, we have observed some negative impacts on revenue in 2022, which will, in turn, result in lower cash generation from activities. If the downturn is deeper or for longer than we anticipate, the Company could take certain further actions to ease the pressure of certain cash outflows, such as reducing discretionary expenditure, selling non-core assets, accessing government pandemic initiatives or arranging borrowing facilities with third-party banks and affiliate companies.

The Company has received an irrevocable commitment from Natura &Co Holding that it will provide sufficient financial support if and when needed to enable the Company to meet its obligations as they come due in the normal course of business. This commitment is effective through to March 31, 2024, a period of more than 12 months from the date of issuance of the Consolidated Financial Statements.

Other liquidity matters

We may seek to retire our outstanding debt in open market purchases, through existing call mechanisms, privately negotiated transactions, through derivative instruments, cash tender offers or otherwise. Repurchases of debt may be funded by cash or the incurrence of additional debt and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors, and the amounts involved may be material. We may also elect to incur additional debt to finance ongoing operations or to meet our other liquidity needs. However, our credit ratings remain below investment grade which may impact our ability to access such transactions on favorable terms, if at all. For more information, see "Item 1A. Risk Factors - Risks Related to Financial Matters - Our credit ratings are below investment grade, which could limit our access to financing, affect the market price of our financing and increase financing costs. A downgrade in our credit ratings may adversely affect our access to liquidity," and "Risk Factors - General Risk Factors - A general economic downturn, a recession globally or in one or more of our geographic regions or markets or sudden disruption in business conditions or other challenges may adversely affect our business, our access to liquidity and capital, and our credit ratings" included in Item 1A of our 2021 Annual Report.

Our liquidity could also be negatively impacted by restructuring initiatives, dividends, capital expenditures, acquisitions, and certain contingencies, including any legal or regulatory settlements, described more fully in Note 7, Contingencies, to the Consolidated Financial Statements included herein. See our Cautionary Statement for purposes of the "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995 contained in this report.

47

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(U.S. dollars in millions, except per share data)

Off balance sheet arrangements

At September 30, 2022, the Company has issued a number of guarantees totaling $184 that it could be required to make in the event of adverse judgments in a number of lawsuits in Brazil. See Note 7, Contingencies, to the Consolidated Financial Statements included herein for more information. The company has no other material off balance sheet arrangements at September 30, 2022.

Cash Flows

Net Cash Used by Operating Activities of Continuing Operations

Net cash used by operating activities of continuing operations during the first nine months of 2022 was approximately $223 as compared to net cash used by operating activities of continuing operations of approximately $298 during the first nine months of 2021, a decreased cash outflow of approximately $75. This was primarily driven by a reduction in inventory and increased payables offset by increased losses in the first nine months of 2022.

Net Cash Used by Investing Activities of Continuing Operations

Net cash used by continuing investing activities during the first nine months of 2022 was approximately $37, as compared to net cash used by continuing investing activities of approximately $32 during the first nine months of 2021. The approximate $5 increase to net cash used by continuing investing activities was primarily due to proceeds received in the first nine months of 2021 in relation from the sale of the Spanish Distribution Center, which was offset by reduced capital expenditure in the first nine months of 2022 compared to the first nine months of 2021.

Net Cash Provided by Financing Activities of Continuing Operations

Net cash provided by continuing financing activities during the first nine months of 2022 was approximately $250, as compared to cash provided by continuing financing activities of $206 in the first nine months of 2021. The approximate $44 increase to net cash from financing activities was primarily driven by the repayment of outstanding debt, which was offset by proceeds from debt incurred during the first nine months of 2022.

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MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(U.S. dollars in millions, except per share data)

FINANCIAL INSTRUMENTS AND RISK MANAGEMENT STRATEGIES

Interest Rate Risk

Approximately 35% of our debt portfolio, our short-term debt, is exposed to floating interest rates. Our long-term borrowings are all at fixed rates of interest.

Foreign Currency Risk

We conduct business globally, with operations in various locations around the world. Since 2016, all of our consolidated revenue has been derived from operations of subsidiaries outside of the U.S. The functional currency for most of our foreign operations is their local currency. We may reduce our exposure to fluctuations in cash flows associated with changes in foreign exchange rates by creating offsetting positions, including through the use of derivative financial instruments.

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Statements in this report (or in the documents it incorporates by reference) that are not historical facts or information may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "estimate," "project," "forecast," "plan," "believe," "may," "expect," "anticipate," "intend," "planned," "potential," "can," "expectation," "could," "will," "would" and similar expressions, or the negative of those expressions, may identify forward-looking statements. They include, among other things, statements regarding our anticipated or expected results, future financial performance, various strategies and initiatives (including our Open Up & Grow and Avon Integration plans, stabilization strategies, digital strategies, cost savings initiatives, restructuring and other initiatives and related actions), costs and cost savings, competitive advantages, impairments, the impact of foreign currency, including devaluations, and other laws and regulations, government investigations, results of litigation, contingencies, taxes and tax rates, potential alliances or divestitures, liquidity, cash flow, uses of cash and financing, hedging and risk management strategies, pension, postretirement and incentive compensation plans, supply chain, the legal status of the Representatives, and the anticipated impact of the evolving COVID-19 pandemic and related responses from governments and private sector participants on the Company, its supply chain, third-party suppliers, project development timelines, costs, revenue, margins, liquidity and financial condition, the anticipated timing, speed and magnitude of recovery from these COVID-19 pandemic related impacts and the Company’s planned actions and responses to this pandemic. Such forward-looking statements are based on management's reasonable current assumptions, expectations, plans and forecasts regarding the Company's current or future results and future business and economic conditions more generally. Such forward-looking statements involve risks, uncertainties and other factors, which may cause the actual results, levels of activity, performance or achievement of Avon to be materially different from any future results expressed or implied by such forward-looking statements, and there can be no assurance that actual results will not differ materially from management's expectations. Therefore, you should not rely on any of these forward-looking statements as predictors of future events. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:

•the COVID-19 pandemic is adversely affecting, and is expected to continue to adversely affect, our operations, manufacturing, supply chains and distribution systems. There is uncertainty around the duration and breadth of the COVID-19 pandemic and the effectiveness of responses to it, including as a result of the emergence of new variants, the rollout of vaccination campaigns and uncertainty as to whether existing vaccines and treatments will be effective against these new variants. As a result, we cannot reasonably estimate at this time the continued impact, that COVID-19 may have on our business or operations. The extent to which COVID-19 impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact including on financial markets or otherwise. See also "Item 1A. Risk Factors—The COVID-19 pandemic is adversely affecting, and is expected to continue to adversely affect, our operations, manufacturing, supply chains and distribution systems, and we have experienced and expect to continue to experience unpredictable negative effects associated with the pandemic" included in Item 1A of our 2021 Annual Report;

•general economic and business conditions in our markets, including social, economic and political uncertainties, such as the ongoing war between Ukraine and Russia or elsewhere, and any existing and potential sanctions, restrictions or responses to such conditions imposed by other markets in which we operate. See also “Item 1A. Risk Factors—Risks Related to Our International Operations— Our ability to conduct business in our international markets may be affected by economic, political, legal, tax and regulatory risks” and “Item 1A. Risk Factors—Risks Related to Our International Operations—The ongoing war between Ukraine and Russia may have a material adverse effect on our business, financial condition and results of operations” included in Item 1A of this report;

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AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(U.S. dollars in millions, except per share data)

•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 Open Up & Grow and Avon Integration plans, 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, digital 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 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 Open Up & Grow and Avon Integration plans, 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, Russia and the United Kingdom;

•our ability to improve working capital and effectively manage doubtful accounts and inventory and implement initiatives to reduce inventory levels, and 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;

•the effect of economic, 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, environmental rules and regulations in areas related to our activities, including with regard to climate change, 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;

•disruptions to our manufacturing operations, supply chains and distribution systems;

•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 cybersecurity 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 cybersecurity breaches;

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AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(U.S. dollars in millions, except per share data)

•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;

•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;

•the risk of an adverse outcome in any material pending and future litigation or with respect to the legal status of Representatives; and,

•other risks and uncertainties include the possibility that the expected synergies and value creation from the Transaction (as defined in “Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview”) will not be realized or will not be realized within the expected time period; the risk that the businesses of the Company and Natura &Co Holding will not be integrated successfully; disruption from the Transaction making it more difficult to maintain business and operational relationships; the possibility that the intended accounting and tax treatments of the Transaction are not achieved; the effect of the consummation of the Transaction on customers, employees, representatives, suppliers and partners and operating results; as well as more specific risks and uncertainties.

Additional information identifying such factors is contained in Item 1A of our 2021 Form 10-K for the year ended December 31, 2021, and in Item 1A of this 10-Q. We undertake no obligation to update any such forward-looking statements.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in market risk from the information provided in Item 7A, Quantitative and Qualitative Disclosures About Market Risk, of our 2021 Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, our principal executive and principal financial officers carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 of the Exchange Act. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply its judgment in evaluating and implementing possible controls and procedures. Based upon their evaluation, the principal executive and principal financial officers concluded that our disclosure controls and procedures were effective as of September 30, 2022, at the reasonable assurance level. Disclosure controls and procedures are designed to ensure that information relating to Avon (including our consolidated subsidiaries) required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the United States Securities and Exchange Commission’s rules and forms and to ensure that information required to be disclosed is accumulated and communicated to management to allow timely decisions regarding disclosure.

Changes in Internal Control over Financial Reporting

Our management has evaluated, with the participation of our principal executive and principal financial officers, whether any changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2022 have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on the evaluation we conducted, our management has concluded that no such changes have occurred.

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AVON PRODUCTS, INC.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 7, Contingencies, to the Consolidated Financial Statements included herein.

ITEM 1A. RISK FACTORS

The following additional risk factor should be read in conjunction with the risk factors set forth under "Risk Factors" in Item 1A of our 2021 Annual Report. The developments described below have heightened, or in some cases manifested, certain of the risks disclosed in the risk factor section of our 2021 Annual Report, and such risk factors are further qualified by the information relating to our operations in Russia and Ukraine as described in this Form 10-Q and our Form 10-Q for the quarter ended March 31, 2022 (“Q1 2022 Form 10-Q”), including in the additional risk factor below.

You should carefully consider the risks described below and in our 2021 Annual Report in addition to the other information set forth in this Form 10-Q, our Q1 2022 Form 10-Q and in our 2021 Annual Report, including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections and the consolidated financial statements and related notes. These risks, some of which have occurred and any of which may occur in the future, may have a material adverse effect on our business, financial condition and results of operations. The risks described below and in our 2021 Annual Report are not the only risks we face. There may be other risks we are not currently aware of or that we currently deem not to be material but that may become material in the future. Therefore, historical operating results, financial and business performance, events and trends are often not a reliable indicator of future operating results, financial and business performance, events or trends.

The ongoing war between Ukraine and Russia may have a material adverse effect on our business, financial condition and results of operations.

The ongoing war between Russia and Ukraine has provoked strong reactions from the United States, the UK, the EU and various other countries around the world, including from the members of the North Atlantic Treaty Organization, or “NATO.” Following Russia’s invasion of Ukraine beginning on February 24, 2022, the United States, the UK, the EU and other countries announced broad economic sanctions against Russia, including financial measures such as freezing Russia’s central bank assets and limiting its ability to access its U.S. dollar reserves. The United States, the EU and the UK have also banned people and businesses from dealings with the Russian central bank, its finance ministry and its wealth fund, among others. Selected Russian banks will also be removed from the Swift messaging system, which enables the smooth transfer of money across borders. Other sanctions by the UK include major Russian banks being excluded from the UK financial system, stopping them from accessing sterling and clearing payments, major Russian companies and the state being stopped from raising finance or borrowing money on the UK markets, and the establishment of limits on deposits Russians can make at UK banks. The United States, the EU and the UK have also adopted personal measures, such as sanctions on individuals with close ties to Mr. Putin, and placed visa restrictions on several Russian oligarchs, as well as their family members and close associates, as well as asset freezes. While the precise effect of the ongoing war and these sanctions on the Russian and global economies remains uncertain, they have already resulted in significant volatility in financial markets, depreciation of the Russian ruble and the Ukrainian hryvnia against the U.S. dollar and other major currencies, as well as in an increase in energy and commodity prices globally. Should the conflict continue, markets may face continued volatility as well as economic and security consequences including, but not limited to, supply shortages of different kinds, further increases in prices of commodities, including piped gas, oil and agricultural goods, reduced consumer purchasing power, significant disruptions in logistics infrastructure, telecommunications services, the risk of unavailability of information technology systems and infrastructure, among others, given that Russia and Ukraine are significant exporters of commodities. Given that Russia and Ukraine are among the largest grain exporters in the world, impacts on financial markets, inflation, interest rates, unemployment and other matters could affect the global economy that is currently recovering from the effects of the COVID-19 pandemic. Other potential consequences include, but are not limited to, growth in the number of popular uprisings in the region, increased political discontent, especially in the regions most affected by the conflict or economic sanctions, increase in cyber-terrorism activities and attacks, exodus to regions close to the areas of conflict and increase in the number of refugees fleeing across Europe, among other unforeseen social and humanitarian effects.

We have sales operations in multiple countries including in Russia and Ukraine and we are continuously monitoring the developments to assess any potential future impacts that may arise as a result of the ongoing crisis. Given our operations in Russia and Ukraine, the adverse effects—global or localized—of the ongoing war between Russia and Ukraine, and/or economic sanctions and import and/or export controls to be imposed on the Russian government by the United States, the UK, the EU or others, and the above-mentioned adverse effect on the wider global economy and market conditions could, in turn, have a material adverse effect on our business, financial condition and results of operations.

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AVON PRODUCTS, INC.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

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ITEM 6. EXHIBITS

10.1	Promissory Note dated as of June 29, 2022 between Avon Cosmetics Limited and Natura &Co Luxembourg Holdings S.à.r.l. (incorporated by reference to Exhibit 4.1 to Avon’s Current Report on Form 8-K filed on July 1, 2022).
10.2	Promissory Note dated as of May 17, 2022 between Avon Products, Inc. and Natura &Co UK Holdings Plc (incorporated by reference to Exhibit 4.1 to Avon’s Current Report on Form 8-K filed on May 23, 2022).
10.3	Promissory Note dated as of May 17, 2022 between Avon Cosmetics Limited and Natura &Co UK Holdings Plc (incorporated by reference to Exhibit 4.2 to Avon’s Current Report on Form 8-K filed on May 23, 2022).
10.4	Amendment Number One dated as of June 17, 2022, to the Intellectual Property License Agreement, dated as of March 1, 2016, among Avon Products, Inc., Avon International Operations, Inc., Avon NA IP LLC and New Avon LLC.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, As adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, As adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following materials formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Statements of Operations, (ii) Consolidated Statements of Comprehensive Income (Loss), (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements

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AVON PRODUCTS, INC.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

		AVON PRODUCTS, INC.
		(Registrant)
Date:	November 10, 2022	/s/ Samantha Hutchison
		Samantha Hutchison
		Controller - Principal Accounting Officer
		Signed both on behalf of the
		registrant and as chief
		accounting officer.

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