AVP
$3.82
Avon Products
($.07)
(1.80%)
Earnings Details
1st Quarter March 2019
Thursday, May 02, 2019 6:45:00 AM
Tweet Share Watch
Summary

Avon Products (AVP) Recent Earnings

Avon Products (AVP) reported 1st Quarter March 2019 earnings of $0.03 per share on revenue of $1.2 billion. The consensus estimate was a loss of $0.01 per share on revenue of $1.3 billion. The Earnings Whisper number was for breakeven results. Revenue fell 14.8% compared to the same quarter a year ago.

Avon Products Inc is the manufacturer and marketer of beauty and related products. The Company operates in Latin America; Europe, Middle East & Africa; North America; and Asia Pacific.

Results
Reported Earnings
$0.03
Earnings Whisper
$0.00
Consensus Estimate
($0.01)
Reported Revenue
$1.19 Bil
Revenue Estimate
$1.25 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Avon Reports First-Quarter 2019 Results

LONDON, May 2, 2019 /PRNewswire/ -- Avon Products, Inc. (NYSE: AVP) today announced its results for the quarter ended March 31, 2019.


THREE MONTHS ENDED MARCH 31, 2019






Change vs 1Q18


Reported (GAAP)


Adjusted1 (Non-
GAAP)


Reported (GAAP)


Adjusted1 (Non-
GAAP)

     Total US$ Reportable Segment Revenue

$1,181.4


$1,181.4


(14)%


(14)%

     Total C$1 Reportable Segment Revenue Change





(3)%


(3)%

     Gross Margin

56.4%


56.8%


(200) bps


(160) bps

     Operating Margin

(0.3)%


4.5%


(350) bps


50 bps

     Diluted EPS

$(0.09)


$0.03


$(0.03)


$0.05

     Effective Tax Rate

(433.3)%


54.2%


*


*

     Free Cash Flow1

$(117.1)


$(117.1)


$6.2


$6.2









*Calculation not meaningful








 

Jan Zijderveld, Avon CEO, said, "We are pleased with the progress that we have made in the first quarter. We delivered constant-dollar revenue improvements in three of our four geographical segments, adjusted operating margin expansion of 50 basis points and free cash flow1 in line with seasonal trends, as we continue to make progress deploying our Open Up Avon strategies."

Mr. Zijderveld continued, "In the first quarter, our journey to Open Up Avon progressed, offering More Value, More Access and Improved Productivity for our millions of Representatives and customers. Our relentless focus on revenue growth management, including less discounting and more targeted and effective incentives and promotion management led to a 6% improvement in Average Orders and drove overall price/mix up 8% across our portfolio. Asia Pacific showed strong growth, as evidenced by expanded customer access and strong e-Commerce sales. Our ongoing focus on training contributed to continued improvement in Representative productivity. We are further reducing our costs, driving efficiencies and simplifying our business."

Mr. Zijderveld underscored, "Empowering women around the world to more productively and effectively build successful social selling businesses and generate relevant earnings remains core to our strategy and the key driver of our future growth."

Gustavo Arnal, Avon CFO, said, "I am excited to join Avon at such a pivotal time in its transformation journey. I look forward to helping Jan and the management team continue to drive the Open Up Avon strategy and build on the steps already taken to create a simpler, leaner and more agile business. The Company made good progress in the first quarter. I will work with senior leaders to sharpen the key focus areas to accelerate shareholder value creation."

Highlights for First-Quarter 2019:

  • Total Reportable Segment Revenue decreased 14% in reported currency and 3% in constant dollars. Increases in Asia Pacific, South Latin America and North Latin America were offset by a decline in Europe, Middle East & Africa. Price/mix increased 8% with increases reported in all segments.
  • Gross Margin of 56.4%. Adjusted Gross Margin decreased 160 basis points to 56.8%, unfavorably impacted primarily by foreign exchange, partially offset by the favorable net impact of price and mix.
  • Operating Margin of (0.3)%. Adjusted Operating Margin increased 50 basis points to 4.5%, driven by cost savings initiatives that more than offset the change in Gross Margin.
  • Diluted Loss Per Share of $0.09. Adjusted Diluted Earnings Per Share of $0.03, compared with Adjusted Diluted Loss Per Share of $0.02 for first-quarter 2018.
  • Average order in constant dollars from Reportable Segments increased 6%, driven by increases in all segments.
  • Active Representatives and Ending Representatives, both from Reportable Segments, each declined 9%, with decreases reported in all segments but largely driven by declines in Brazil and Russia.
  • Foreign currency unfavorably impacted Diluted Loss Per Share by an estimated $0.01 per share and Adjusted Diluted Earnings Per Share by an estimated $0.03 per share, driven by the strength of the U.S. dollar against the currencies of the countries in which the Company operates.

Adjustments to First-Quarter 2019 GAAP Results to Arrive at Adjusted Results

During the first quarter of 2019, the following adjustments were made to GAAP results to arrive at Adjusted results and, in total, increased Diluted earnings per share by approximately $0.12:

  • The Company recorded costs to implement ("CTI") restructuring within operating profit of approximately $54 million. Partially offsetting these costs was a gain on the sale of the China manufacturing facility of approximately $10 million for a net adjustment to income from continuing operations of approximately $43 million before tax (approximately $40 million after tax), primarily related to the Open Up Avon initiative. The costs recorded within operating profit were primarily related to headcount reductions and professional services.

  • The Company recorded a transaction fee of approximately $4 million before and after tax.

First-Quarter 2019 Segment and Top Market Review (compared with first-quarter 2018)

THREE MONTHS ENDED MARCH 31, 2019

















SEGMENT RESULTS















($ in millions)

















Revenue


Active
Representatives


Average
Order
C$


Units
Sold


Price/
Mix C$


Ending
Representatives


US$


C$






Revenue & Drivers

Reported
(GAAP)


% var.
vs
1Q18


% var.
vs
1Q18


% var. vs
1Q18


% var.
vs
1Q18


% var.
vs
1Q18


% var.
vs
1Q18


% var. vs
1Q18

















Europe, Middle
    East & Africa

$

458.7


(19)%


(9)%


(12)%


3%


(15)%


6%


(12)%

South Latin
    America

414.7


(17)


1


(6)


7


(11)


12


(7)

North Latin
    America

192.7


(1)


1


(8)


9


(3)


4


(12)

Asia Pacific

115.3


3


7


(12)


19


(1)


8


(6)

Total from
    reportable
    segments

1,181.4


(14)


(3)


(9)


6


(11)


8


(9)

Other operating
    segments and
    business
    activities

5.5


(74)


(73)


*


*


*


*


*

Total Avon

$

1,186.9


(15)%


(4)%


(9)%


5%


(12)%


8%


(10)%



















 

Operating Profit/Margin


2019

Operating

Profit US$


 2019

Operating

Margin US$


Change in
US$ vs 
1Q18


Change in
C$ vs 
1Q18










Segment profit/margin









Europe, Middle East & Africa


$

59.2


12.9%


(20) bps


20 bps

South Latin America


23.8


5.7


20


150

North Latin America


16.5


8.6


(200)


(200)

Asia Pacific


16.7


14.5


520


500

Total from reportable segments


116.2


9.8


10


60










Other operating segments and
   business activities


.6







Unallocated global expenses


(63.1)







CTI restructuring initiatives


(53.5)







Other Items


(4.1)







Total Avon Reported (GAAP)


$

(3.9)


(0.3)%


(350) bps


(180) bps










Total Avon Adjusted (Non-GAAP)


$

53.7


4.5%


50 bps


150 bps














* Calculation not meaningful


Other operating segments and business activities include revenue from the sale of products to New Avon LLC since the separation of the Company's North America business into New Avon LLC on March 1, 2016 and ongoing royalties from the licensing of the Company's name and products. Other operating segments and business activities in 2018 also included the business results for Australia and New Zealand, which the Company exited in 2018.

For a reconciliation of the difference between Reported (GAAP) and Adjusted (Non-GAAP), see "Supplemental Schedule - Non-GAAP Financial Measures" later in this release.

 



THREE MONTHS ENDED MARCH 31, 2019

Revenue - % var. vs 1Q18


Reported
(US$)


Reported
  (C$)


Top Market Revenue Drivers

Europe, Middle East & Africa


(19)%


(9)%



South Latin America


(17)%


1%



North Latin America


(1)%


1%



Asia Pacific


3%


7%










Brazil


(17)%


(2)%


impacted by a decrease in Active Representatives, partially offset by higher average
order

Mexico


—%


2%


impacted by higher average order, partially offset by a decrease in Active
Representatives

Argentina


(27)%


45%


impacted by higher average order, including the impact of inflationary pricing

Philippines


10%


12%


impacted by higher average order, partially offset by a decrease in Active
Representatives

Russia


(31)%


(19)%


impacted by a decrease in Active Representatives

 

First-Quarter 2019 Cash Flow Review (compared with first-quarter 2018)



Three Months Ended
March 31







2019


2018


Change
vs
1Q18


Drivers

Net cash used by operating
    activities of continuing
    operations


$

(142.7)


$

(96.3)


$

(46.4)


Driven by changes in working capital including a reduction in accounts
payable and accrued liabilities due to the timing of payments, including
payments related to CTI restructuring, partially offset by a reduction in
inventory associated with Open Up Avon.














Net cash provided (used)
    by investing activities of continuing
    operations


$

25.6


$

(27.0)


$

52.6


Primarily due to net proceeds from the sale of the China manufacturing
facility.

Free Cash Flow


$

(117.1)


$

(123.3)


$

6.2















Net cash provided by financing
    activities of continuing
    operations


$

18.0


$

0.4


$

17.6


Mainly due to the receipt of proceeds from the sale of the China
manufacturing facility, which included an amount to be used to settle
former intercompany debt, partially offset by debt issuance costs related to
the new revolving credit facility entered into in February 2019.  The China
manufacturing debt was subsequently settled in April 2019.

Subsequent Event

Sale of New Avon

In April 2019, the Company signed an agreement with LG Household & Health Care Ltd. to sell its 19.9% ownership interest in New Avon, a privately-held company that is majority-owned and managed by an affiliate of Cerberus.

LG Household & Health Care Ltd. will acquire all of the interests of New Avon for $125.0 in cash, of which Avon will receive $24.9 in cash for its 19.9% share. The closing is expected to occur on September 30, 2019.

Conference call

Avon will conduct a conference call at 9:00 a.m. Eastern Time today to discuss its quarterly results. The dial-in number for the call is (877) 407-0789 in North America or (201) 689-8562 from international locations. The call and related slide presentation will be webcast live at investor.avonworldwide.com and can be accessed or downloaded from that site for a period of one year. A telephonic playback of the call will also be available from 12:00 p.m. Eastern Time, May 2, 2019 through May 16, 2019. North American listeners may dial (844) 512-2921 and international listeners may dial (412) 317-6671; the passcode is 13689507. Please note that the Company intends to file its Form 10-Q on May 3, 2019.

About Avon Products, Inc.

For 130 years Avon has stood for women: providing innovative, quality beauty products which are primarily sold to women, through women. Millions of independent Representatives across the world sell iconic Avon brands such as Avon Color and ANEW through their social networks, building their own beauty businesses on a full- or part-time basis. Avon supports women's empowerment, entrepreneurship and well-being and has donated over $1 billion to women's causes through Avon and the Avon Foundation. Learn more about Avon and its products at www.avonworldwide.com. #Stand4Her

Footnotes

1 "Adjusted" items refer to financial measures that are derived from measures calculated in accordance with GAAP, but which have been adjusted to exclude certain items. Other Adjusted financial measures that the Company refers to include constant dollar ("C$") items and Free Cash Flow which the Company defines as net cash used by operating activities of continuing operations plus net cash provided (used) by investing activities of continuing operations. All of these adjusted items are Non-GAAP financial measures as described below under "Non-GAAP Financial Measures." 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.  Please refer to the Company's "Non-GAAP Financial Measures" description at the end of this release and the reconciliations the Company provides of these Non-GAAP financial measures to their comparable GAAP measures.

Forward-Looking Statements

This press release contains "forward-looking statements" that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements relating to the Company's growth and long-term success, and improved representative engagement and service. Because forward-looking statements inherently involve risks and uncertainties, actual future results may differ materially from those expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, the possibility of business disruption, competitive uncertainties, and general economic and business conditions in Avon's markets as well as the other risks detailed in Avon's Annual Report on Form 10-K for the year ended December 31, 2018, and Avon's other filings with the Securities and Exchange Commission. Avon undertakes no obligation to update any statements in this press release for changes that happen after the date of this release.


 

AVON PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In millions, except per share data)



Three Months Ended

Percent

Change


March 31



2019


2018


Net sales

$

1,116.2


$

1,309.6

(15)%

Other revenue

70.7


83.9


Total revenue

1,186.9


1,393.5

(15)%






Cost of sales

517.0


579.7


Selling, general and administrative expenses

673.8


768.9


Operating (loss) profit

(3.9)


44.9

*






Interest expense

33.2


36.2


Loss on extinguishment of debt and credit facilities

2.0



Interest income

(1.7)


(4.2)


Other (income) expense, net

(22.6)


2.5


Gain on sale of business

(10.3)



Total other expenses

0.6


34.5







(Loss) income from continuing operations, before income taxes

(4.5)


10.4

*

Income taxes

(19.5)


(31.5)







Loss from continuing operations, net of tax

(24.0)


(21.1)


Loss from discontinued operations, net of tax

(9.5)








Net loss

(33.5)


(21.1)

(59)%

Net loss attributable to noncontrolling interests

0.8


0.8


Net loss attributable to Avon

$

(32.7)


$

(20.3)

(61)%






Loss per share (1)





Basic





Basic EPS from continuing operations

$

(0.07)


$

(0.06)

(17)%

Basic EPS from discontinued operations

(0.02)


*

Basic EPS attributable to Avon

$

(0.09)


$

(0.06)

(50%)






Diluted





Diluted EPS from continuing operations

$

(0.07)


$

(0.06)

(17%)

Diluted EPS from discontinued operations

(0.02)


*

Diluted EPS attributable to Avon

$

(0.09)


$

(0.06)

(50%)






Weighted-average shares outstanding:





Basic

442.2


440.9


Diluted

442.2


440.9







* Calculation not meaningful





(1) Under the two-class method, loss per share is calculated using net loss allocable to common shares, which is derived by reducing net loss by the loss allocable to participating securities and earnings allocated to convertible preferred stock. Net loss allocable to common shares used in the basic and diluted earnings per share calculation was ($38.6) and ($26.0) for the three months ended March 31, 2019 and 2018, respectively.

 

 

AVON PRODUCTS, INC.

CONSOLIDATED BALANCE SHEETS

December 31, 2018 (Audited) and March 31, 2019 (Unaudited)

(In millions)




March 31,


December 31,



2019


2018

Assets





Current Assets





Cash and cash equivalents


$

406.4



$

532.7


Restricted cash


17.0




Accounts receivable, net


340.9



349.7


Inventories


532.3



542.0


Prepaid expenses and other


255.2



272.0


Held for sale assets


15.7



65.6


Total current assets


1,567.5



1,762.0







Property, plant and equipment, at cost


1,200.5



1,207.8


Less accumulated depreciation


(657.3)



(650.2)


Property, plant and equipment, net


543.2



557.6







Right-of-use assets


180.3




Goodwill


88.6



87.4


Deferred tax asset


204.2



212.6


Other assets


413.7



390.4


Total assets


2,997.5



3,010.0







Liabilities, Series C Convertible Preferred Stock and Shareholders' Deficit





Current Liabilities





Debt maturing within one year


425.4



12.0


Accounts payable


706.0



816.5


Accrued compensation


103.9



85.5


Other accrued liabilities


425.2



451.3


Sales taxes and taxes other than income


94.1



103.9


Income taxes


11.0



15.9


Held for sale liabilities


0.1



11.4


Current liabilities of discontinued operations


9.5




Total current liabilities


1,775.2



1,496.5


Long-term debt


1,196.4



1,581.6


Long-term operating lease liability


150.4




Employee benefit plans


128.2



128.3


Long-term income taxes


135.3



136.2


Other liabilities


55.2



72.1


Total liabilities


3,440.7



3,414.7







Series C convertible preferred stock


498.3



492.1







Shareholders' Deficit





Common stock


190.6



190.3


Additional paid-in capital


2,302.1



2,303.6


Retained earnings


2,195.4



2,234.3


Accumulated other comprehensive loss


(1,034.4)



(1,030.4)


Treasury stock, at cost


(4,602.3)



(4,602.3)


Total Avon shareholders' deficit


(948.6)



(904.5)


Noncontrolling interests


7.1



7.7


Total shareholders' deficit


(941.5)



(896.8)


Total liabilities, series C convertible preferred stock and shareholders' deficit


2,997.5



3,010.0







 

 

AVON PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In millions)



Three Months Ended



March 31



2019


2018

Cash Flows from Operating Activities





Net loss


$

(33.5)



$

(21.1)


Loss from discontinued operations, net of tax


(9.5)




Loss from continuing operations, net of tax


$

(24.0)



$

(21.1)


Adjustments to reconcile loss from continuing operations, net of tax to net cash used by
operating activities:





Depreciation


20.6



20.8


Amortization


6.6



7.1


Provision for doubtful accounts


29.9



43.1


Provision for obsolescence


6.7



9.7


Share-based compensation


(0.5)



3.8


Revaluation of Argentinian monetary assets and liabilities

 and other foreign exchange losses

 


(19.2)



4.6


Deferred income taxes


8.2



1.8


Other


(8.6)



3.2







Changes in assets and liabilities:





Accounts receivable


(24.3)



(4.4)


Inventories


4.8



(58.4)


Prepaid expenses and other


38.4



0.1


Accounts payable and accrued liabilities


(164.2)



(106.3)


Income and other taxes


(12.0)



(0.9)


Noncurrent assets and liabilities


(5.1)



0.6


Net cash used by operating activities of continuing operations


(142.7)



(96.3)







Cash Flows from Investing Activities





Capital expenditures


(21.2)



(27.8)


Disposal of assets


0.4



0.8


Net proceeds from sale of business


46.4




Net cash provided (used) by investing activities of continuing operations


25.6



(27.0)







Cash Flows from Financing Activities





Debt, net (maturities of three months or less)


27.2



3.6


Repurchase of common stock




(2.7)


Other financing activities


(9.2)



(0.5)


Net cash provided by financing activities of continuing operations


18.0



0.4







Effect of exchange rate changes on cash and cash equivalents, and restricted cash


(6.3)



13.9


Net decrease in cash and cash equivalents, and restricted cash


(105.4)



(109.0)


Cash and cash equivalents, and restricted cash at beginning of year(1)


536.4



881.5


Cash and cash equivalents, and restricted cash at end of period (2)


431.0



772.5







(1)

Includes cash and cash equivalents of $3.7 classified as Held for sale assets in the Company's Consolidated
Balance Sheets at the end of the year in 2018

(2)

Includes restricted cash related to the sale of Avon Manufacturing (Guangzhou), Ltd at March 31, 2019.


 

AVON PRODUCTS, INC.

SUPPLEMENTAL SCHEDULE

(Unaudited)

(In millions)


CATEGORY SALES FROM REPORTABLE SEGMENTS (US$)











Consolidated






Reported



Three Months Ended 
March 31


US$


C$



2019


2018


%var.
vs
1Q18


% var.
vs
1Q18

Beauty:









Skincare


$

349.3



$

389.1



(10)%


1%

Fragrance


298.0



354.0



(16)


(4)

 Color


189.2



235.7



(20)


(9)

Total Beauty


836.5



978.8



(15)


(3)

Fashion & Home:









Fashion (jewelry/watches/apparel/
  
footwear/accessories/children's)


164.3



188.6



(13)


(5)

Home (gift & decorative products/housewares/
  
entertainment & leisure/children's/nutrition)


115.4



129.4



(11)


1

Total Fashion & Home


279.7



318.0



(12)


(2)

Net sales from reportable segments


1,116.2



1,296.8



(14)


(3)

Other revenue from reportable segments


65.2



75.7



(14)


(2)

Total revenue from reportable segments


1,181.4



1,372.5



(14)


(3)

Total revenue from Other operating segments and
   business activities


5.5



21.0



(74)


(73)

Total revenue


$

1,186.9



$

1,393.5



(15)


(4)













 

 

AVON PRODUCTS, INC.

SUPPLEMENTAL SCHEDULE

NON-GAAP FINANCIAL MEASURES

(Unaudited)

Three Months Ended March 31, 2019

(In millions, except per share data)


This supplemental schedule provides adjusted Non-GAAP financial information and a quantitative reconciliation of the difference between the Non-GAAP financial measure and the most directly comparable financial measure calculated and reported in accordance with GAAP.




THREE MONTHS ENDED MARCH 31, 2019



Reported

(GAAP)


CTI

restructuring

initiatives


Other items


Adjusted (Non-GAAP)

Total revenue


$

1,186.9



$



$



$

1,186.9


Cost of sales


517.0



4.3





512.7


Selling, general and administrative expenses


673.8



49.2



4.1



620.5


Operating (loss) profit


(3.9)



53.5



4.1



53.7


Gain on sale of business


10.3



(10.3)







All other expenses


(10.9)







(10.9)


(Loss) income from continuing operations, before income
   taxes


(4.5)



43.2



4.1



42.8


Income taxes


(19.5)



(3.7)





(23.2)


(Loss) income from continuing operations, net of tax


$

(24.0)



$

39.5



$

4.1



$

19.6














Diluted EPS from continuing operations


$

(0.09)









$

0.03














Gross margin


56.4

%


0.4





56.8

%

SG&A as a % of revenue


56.8

%


(4.1)



(0.3)



52.3

%

Operating margin


(0.3)

%


4.5



0.3



4.5

%

Effective tax rate


(433.3)

%








54.2

%














Amounts in the table above may not necessarily sum because the computations are made independently.


Note: The diluted EPS impact for each Non-GAAP item on the table above is not provided due to the participation rights of the Series C convertible preferred stock. The Reported and Adjusted diluted EPS are calculated independently and factor in the participation rights of the Series C convertible preferred stock, and, therefore, would cause the amounts not to sum to Adjusted diluted EPS.




Three Months
Ended March 31,

2019

Net cash (used) by operating activities of continuing operations


$

(142.7)

Net cash provided by investing activities of continuing operations


25.6

Free cash flow


$

(117.1)

 

 

AVON PRODUCTS, INC.

SUPPLEMENTAL SCHEDULE

NON-GAAP FINANCIAL MEASURES

(Unaudited)

Three Months Ended March 31, 2018

(In millions, except per share data)


This supplemental schedule provides adjusted Non-GAAP financial information and a quantitative reconciliation of the difference between the Non-GAAP financial measure and the most directly comparable financial measure calculated and reported in accordance with GAAP.




THREE MONTHS ENDED MARCH 31, 2018



Reported

(GAAP)


CTI

restructuring

initiatives


Special tax items


Adjusted

(Non-GAAP)

Total revenue


$

1,393.5



$



$



$

1,393.5


Cost of sales


579.7



0.6





579.1


Selling, general and administrative expenses


768.9



10.3





758.6


Operating profit


44.9



10.9





55.8


Income before income taxes


10.4



10.9





21.3


Income taxes


(31.5)



(2.1)



9.2



(24.4)


Net loss


$

(21.1)



$

8.8



$

9.2



$

(3.1)











Diluted EPS


$

(0.06)







$

(0.02)











Gross margin


58.4

%






58.4

%

SG&A as a % of revenue


55.2

%


(0.8)





54.4

%

Operating margin


3.2

%


0.8





4.0

%

Effective tax rate


302.9

%






114.6

%










Amounts in the table above may not necessarily sum because the computations are made independently.


Note: The diluted EPS impact for each Non-GAAP item on the table above is not provided due to the participation rights of the Series C convertible preferred stock. The Reported and Adjusted diluted EPS are calculated independently and factor in the participation rights of the Series C convertible preferred stock, and, therefore, would cause the amounts not to sum to Adjusted diluted EPS.




Three Months
Ended March 31,

2018

Net cash (used) by operating activities of continuing operations


$

(96.3)

Net cash (used) by investing activities of continuing operations


(27.0)

Free cash flow


$

(123.3)


 

AVON PRODUCTS, INC.

SUPPLEMENTAL SCHEDULE

(Unaudited)

(In millions, except per share data)


Approximate Impact of Foreign Currency


THREE MONTHS ENDED MARCH 31, 2019


Estimated impact    
($ in millions)


Estimated impact 
on diluted EPS

Year-on-Year impact on Reported (GAAP)
results:




Total revenue

(11) pts



Operating profit - transaction

$



(25)


$



(0.04)

Operating profit - translation


Total operating profit

$



(25)


$



(0.04)

Operating margin

 (150) bps



Revaluation of working capital

$



20


$



0.03

Diluted EPS



$



(0.01)





Year-on-Year impact on Adjusted (Non-
GAAP) results:




Adjusted revenue

(11) pts



Adjusted operating profit - transaction

$



(25)


$



(0.04)

Adjusted operating profit - translation

(15)


(0.02)

Total Adjusted operating profit

$



(40)


$



(0.06)

Adjusted operating margin

 (210) bps



Revaluation of working capital

$



20


$



0.03

Adjusted diluted EPS




$



(0.03)







Amounts in the table above may not necessarily sum because the computations are made
independently.

 

Non-GAAP Financial Measures

To supplement the Company's financial results presented in accordance with GAAP, the Company discloses 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 (loss), Adjusted operating profit, operating margin, Adjusted operating margin and diluted earnings (loss) per share. The Company also refers to these adjusted financial measures as constant dollar items, which are Non-GAAP financial measures. The Company believes 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, the Company calculates current-year results and prior-year results at constant exchange rates, which are updated on an annual basis as part of the Company's budgeting process. Foreign currency impact is determined as the difference between actual growth rates and constant-dollar growth rates.

The Company also presents revenue, cost of sales, gross margin, selling, general and administrative expenses, selling, general and administrative expenses as a percentage of revenue, operating profit (loss), operating margin, income (loss) before taxes, income taxes, net income (loss), diluted earnings (loss) per share and effective tax rate on a Non-GAAP basis. The Company refers to these Non-GAAP financial measures as "Adjusted." The Company also presents free cash flow as an additional financial measure for liquidity. The Company has provided quantitative reconciliations of the Non-GAAP financial measures to the most directly comparable financial measures calculated and reported in accordance with GAAP. See "Supplemental Schedule -  Non-GAAP Financial Measures" within this release for these quantitative reconciliations.

The Company uses 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) transaction fees and 3) one-time tax items that are not associated with recurring, normal operations ("Special tax items").

The Special tax items include the impact on the provision for income taxes in the Consolidated Statements of Operations during 2018 due to one-time tax reserves of approximately $9 million associated with the Company's uncertain tax positions.

Cision View original content:http://www.prnewswire.com/news-releases/avon-reports-first-quarter-2019-results-300842437.html

SOURCE Avon Products, Inc.