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Press release from PR Newswire

Avon Reports Second-Quarter 2011 Results

Thursday, July 28, 2011

Avon Reports Second-Quarter 2011 Results07:00 EDT Thursday, July 28, 2011Second-Quarter Revenue Up 9% Year over Year (Up 2% in Constant Dollars) Active Representatives Flat and Units Down 3% Beauty Sales Up 8% (Up 1% in Constant Dollars) Second-Quarter EPS from Continuing Ops of $0.47 versus $0.38 in the Prior Year Adjusted(1) EPS from Continuing Ops of $0.49 versus $0.47 in the Prior YearNEW YORK, July 28, 2011 /PRNewswire/ -- Avon Products, Inc. (NYSE: AVP) today reported second-quarter 2011 total revenue of $2.9 billion, 9% higher than that of second-quarter 2010. Constant-dollar sales rose 2% in the second quarter as foreign exchange contributed 7% to growth. Total units declined 3% while price/mix rose 5% during the quarter. Active Representatives were flat in the quarter. The acquisition of Silpada Designs, Inc. ("Silpada") contributed 150 basis points to revenue."Our first-half 2011 results were in line with our expectations of low-single digit constant-dollar growth and adjusted operating margins flat with a year ago," said Andrea Jung, Avon's Chairman and Chief Executive Officer. "We continue to expect mid-single digit revenue growth in the second half of this year, driven by our major global field activation program around our 125th anniversary. We also continue to expect significant margin expansion in the second half, resulting from gross margin improvement and revenue leverage." Avon's Beauty sales increased 8% year over year, or up 1% in constant dollars, in the second quarter. On a reported basis, fragrance and personal care grew 11%, color grew 8%, and skincare grew 3%. On a constant-dollar basis, fragrance and personal care grew 4%, color was flat, and skincare declined 4%. Second-quarter 2011 gross margin of 64.4% was 100 basis points above that of the prior-year quarter. On an adjusted basis, it declined by 30 basis points as the negative impact of rising product costs was partially offset by pricing benefits and favorable foreign currency.Selling, general and administrative expense in the quarter was flat as a percent of revenue versus second-quarter 2010 on a reported and adjusted basis as the company effectively managed overhead costs and rebalanced spending between Representative Value Proposition ("RVP") and advertising. As planned, lower advertising was offset by a higher investment in RVP during the second quarter of 2011. Within this rebalancing, advertising was $82 million for the quarter, down 16% or $15 million from a year ago. Avon invested an incremental $22 million in RVP in the second quarter of 2011 in Sales Leadership and higher incentives.  Second-quarter 2011 costs associated with the company's 2005 and 2009 restructuring programs were $12 million pre-tax, or $0.02 per share after-tax, compared with $10 million pre-tax, or $0.02 per share after-tax in the prior-year period. Second-quarter 2011 operating profit of $317 million was up 19% compared with the year-ago quarter, and operating margin was 11.1%, up 100 basis points year over year. Adjusted operating profit was up 6%, and adjusted operating margin was 11.5%, down 30 basis points from a year ago due to the lower gross margin. Second-quarter 2011's effective tax rate was 28.9%, compared with 33.8% in the year-ago quarter. Excluding the impact from restructuring costs, the second-quarter 2011 rate was 29.1%. Excluding the impact of Venezuelan special items and restructuring costs, the second-quarter 2010 tax rate was 29.9%. Income from continuing operations in the second quarter of 2011 was $209 million, or $0.47 per diluted share, compared with $165 million, or $0.38 per diluted share, in the year-ago quarter. Adjusted income from continuing operations was $217 million, or $0.49 per diluted share, compared with $205 million, or $0.47 per diluted share, in the year-ago second quarter.Net cash provided by operating activities was $88 million for the six months ended June 30, 2011, compared with $232 million in the same period of 2010. Higher net income was more than offset by higher inventory levels, a $75 million contribution to the U.S. pension plan, and a $36 million payment associated with the long-term incentive compensation plan. At quarter end, Avon's net debt was $2.2 billion, up $257 million from the year-end level. Second-Quarter Regional ResultsLatin America's second-quarter 2011 revenue was up 19% year over year, or up 10% in constant dollars, with continued strong growth in most large markets. Brazil was up 17%, or 4% in constant dollars, and continues to make progress towards stabilizing the service environment. Mexico was up 27%, or 18% in constant dollars, primarily driven by growth in Active Representatives. Venezuela was up 15% on both a reported and constant-dollar basis. The region's Active Representatives grew 4% and units sold were up 1%. Second-quarter operating profit was up 38%. Operating margin was 14.4%, or up 200 basis points from the second quarter of 2010. On an adjusted basis, Latin America's second-quarter operating profit was up 11% and the operating margin was 14.5%, down 100 basis points from a year ago. The decline in operating margin was driven by higher distribution costs due to the transition to new facilities in Brazil and Colombia, as well as higher bad debt expense.Second-quarter revenue in North America was down 7% year over year, or down 8% in constant dollars. Active Representatives were down 8%. Units sold declined 16% compared with a year ago. Silpada had a favorable impact of approximately 7 percentage points on second-quarter revenue and 1 percentage point to both Active Representatives and units. North America's second-quarter operating profit was down 31%. Operating margin was 4.9%, down 170 basis points versus last year's quarter. Adjusted operating profit was down 28%, with an adjusted operating margin of 6.5%, down 180 basis points, primarily reflecting fixed overhead costs with lower revenues. Silpada added 120 basis points to North America's adjusted operating margin.In Central & Eastern Europe, second-quarter revenue was up 5% year over year, or down 3% in constant dollars, reflecting a decline in average order and continued macroeconomic challenges in the region. Russia was up 5% on a reported basis and down 2% in constant dollars, as positive Active Representative growth was more than offset by difficult macroeconomic conditions. The region's Active Representatives were down 1% and units sold were down 2% in the quarter. Operating profit was down 8% versus the 2010 quarter. The region's operating margin was 19.6%, down 280 basis points from the prior-year quarter. Second-quarter 2011 adjusted operating profit was down 7%. Adjusted operating margin was 20.1%, down 260 basis points, due to higher distribution costs and an increased investment in RVP. Western Europe, Middle East & Africa's second-quarter revenue increased 13% versus the prior-year quarter, or up 5% in constant dollars, driven by an increase in Active Representatives. U.K. revenue was up 2%, or down 7% in constant dollars, reflecting declines in both Active Representatives and average order. Turkey rose 1%, or up 3% in constant dollars. South Africa rose 52%, or 38% in constant dollars. The region's Active Representatives grew 8% year over year and units sold increased 3%. Operating profit was down 13% versus the prior-year quarter. Operating margin was 13.0%, down 380 basis points from the prior-year quarter. Second-quarter 2011 adjusted operating profit was down 5% with an adjusted operating margin of 13.7%, down 260 basis points, due to lower gross margin.Asia Pacific reported a second-quarter revenue decline of 5% year over year, or 12% in constant dollars. Revenues in the Philippines rose 7%, or 2% in constant dollars. China declined 28%, or 31% in constant dollars, reflecting the continued transition away from a hybrid model to one which focuses on direct selling. The region's Active Representatives declined 14% and units sold decreased by 10%, primarily reflecting double-digit declines in both indicators in China. Operating profit was down 9% versus the 2010 quarter. The region's operating margin was 7.3%, down 40 basis points. China reported a modest operating profit compared with a loss for the same period last year. The region's adjusted operating profit was down 7% versus the 2010 quarter with an adjusted operating margin of 7.3%, down 20 basis points from a year ago, due to lower gross margin and fixed overhead costs on lower revenues. This was partially offset by suspended advertising in China during this transition phase.Avon will conduct a conference call at 9:00 A.M. today to discuss the quarter results. The dial-in number for the call is (800) 843-2086 in the U.S. or (706) 643-1815 from non-U.S. locations (conference ID number: 79121762). The call and related slide presentation will be webcast live at www.avoninvestor.com and can be accessed or downloaded from that site for a period of one year. Avon will be filing its Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 today. Please refer to the Form 10-Q for additional information on Avon's results for the quarter.Avon, the company for women, is a leading global beauty company, with over $10 billion in annual revenue. As the world's largest direct seller, Avon markets to women in more than 100 countries through approximately 6.5 million active independent Avon Sales Representatives. Avon's product line includes beauty products, as well as fashion and home products, and features such well-recognized brand names as Avon Color, ANEW, Skin-So-Soft, Advance Techniques, Avon Naturals, and mark. Learn more about Avon and its products at www.avoncompany.com. Footnote(1)"Adjusted" items refer to financial results presented in accordance with US GAAP that have been adjusted to exclude the impact of Venezuelan special items and restructuring costs, as described below, under "Non-GAAP Financial Measures." Non-GAAP Financial MeasuresTo supplement our financial results presented in accordance with generally accepted accounting principles in the United States ("GAAP"), we disclose operating results that have been adjusted to exclude the impact of changes due to the translation of foreign currencies into U.S. dollars. We refer to these adjusted growth rates as Constant $ growth, which is a non-GAAP financial measure. We believe this measure provides investors an additional perspective on trends.  To exclude the impact of changes due to the translation of foreign currencies into U.S. dollars, we calculate current year results and prior year results at a constant exchange rate. Currency impact is determined as the difference between actual growth rates and constant currency growth rates.We present gross margin, selling, general and administrative expenses as a percentage of revenue, operating profit, operating margin, income from continuing operations, earnings per share from continuing operations and effective tax rate on a non-GAAP basis.  The discussion of our segments presents operating profit and operating margin on a non-GAAP basis.  We have provided a quantitative reconciliation of the difference between the non-GAAP financial measure and the financial measure calculated and reported in accordance with GAAP.  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 uses the non-GAAP financial measures to evaluate its operating performance and believes that it is meaningful for investors to be made aware of, on a period-to-period basis, the impacts of 1) costs to implement ("CTI") restructuring initiatives and 2) costs and charges related to Venezuela being designated as a highly inflationary economy and the subsequent devaluation of its currency ("Venezuelan special items").  The Company believes investors find the non-GAAP information helpful in understanding the ongoing performance of operations separate from items that may have a disproportionate positive or negative impact on the Company's financial results in any particular period.  The Venezuelan special items include the impact on the Statement of Income caused by the devaluation of the Venezuelan currency on monetary assets and liabilities, such as cash, receivables and payables; deferred tax assets and liabilities; and nonmonetary assets, such as inventory and prepaid expenses.  For nonmonetary assets, the Venezuelan special items include the earnings impact caused by the difference between the historical cost of the assets at the previous official exchange rate of 2.15 and the revised official exchange rate of 4.30.  CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Statements in this release that are not historical facts or information are 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" and similar expressions, or the negative of those expressions, may identify forward-looking statements. Such forward-looking statements are based on management's reasonable current assumptions and expectations. Such forward-looking statements involve risks, uncertainties and other factors, which may cause the actual results, levels of activity, performance or achievement of Avon to be materially different from any future results expressed or implied by such forward-looking statements, and there can be no assurance that actual results will not differ materially from management's expectations. Such factors include, among others, the following: our ability to implement the key initiatives of, and realize the gross and operating margins and projected benefits (in the amounts and time schedules we expect) from, our global business strategy, including our multi-year restructuring initiatives, product mix and pricing strategies, enterprise resource planning, customer service initiatives, product line simplification program, sales and operation planning process, strategic sourcing initiative, outsourcing strategies, zero-overhead-growth philosophy, Internet platform and technology strategies, information technology and related system enhancements and cash management, tax, foreign currency hedging and risk management strategies; our ability to realize the anticipated benefits (including any projections concerning future revenue and operating margin increases) from our multi-year restructuring initiatives or other strategic initiatives on the time schedules or in the amounts that we expect, and our plans to invest these anticipated benefits ahead of future growth; the possibility of business disruption in connection with our multi-year restructuring initiatives or other strategic initiatives; our ability to realize sustainable growth from our investments in our brand and the direct-selling channel; our ability to transition our business in North America, including enhancing our Sales Leadership model and optimizing our product portfolio; a general economic downturn, a recession globally or in one or more of our geographic regions, such as North America, or sudden disruption in business conditions, and the ability of our broad-based geographic portfolio to withstand an economic downturn, recession, cost inflation, commodity cost pressures, competitive or other market pressures or conditions; the effect of political, legal, tax and regulatory risks imposed on us, our operations or our Representatives, including foreign exchange or other restrictions, adoption, interpretation and enforcement of foreign laws including any changes thereto, as well as reviews and investigations by government regulators that have occurred or may occur from time to time, including, for example, local regulatory scrutiny in China; our ability to effectively manage inventory and implement initiatives to reduce inventory levels, including the potential impact on cash flows and obsolescence; our ability to achieve growth objectives or maintain rates of growth, particularly in our largest markets and developing and emerging markets, such as Brazil or Russia; our ability to successfully identify new business opportunities and identify and analyze acquisition candidates, secure financing on favorable terms and negotiate and consummate acquisitions as well as to successfully integrate or manage any acquired business; the challenges to our recently acquired Silpada business, including the effect of rising silver prices, macro-economic pressures, competition, and the impact of declines in expected future cash flows and growth rates, or a change in the discount rate used to fair value expected future cash flows, which may impact the recoverability of the recorded goodwill and intangible assets;the effect of economic factors, including inflation and fluctuations in interest rates and currency exchange rates, as well as the designation of Venezuela as a highly inflationary economy, foreign exchange restrictions and the potential effect of such factors on our business, results of operations and financial condition; our ability to successfully transition and evolve our business in China in connection with the development and evolution of the direct-selling business in that market, our ability to operate using a direct-selling model permitted in that market and our ability to retain and increase the number of Active Representatives there over a sustained period of time; general economic and business conditions in our markets, including social, economic and political uncertainties in the international markets in our portfolio; any developments in or consequences of investigations and compliance reviews, and any litigation related thereto, including the ongoing internal investigation and compliance reviews of Foreign Corrupt Practices Act and related U.S. and foreign law matters in China and additional countries, as well as any disruption or adverse consequences resulting from such investigations, reviews, related actions or litigation; information technology systems outages, disruption in our supply chain or manufacturing and distribution operations, or 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 and large-scale power outages; the risk of product or ingredient shortages resulting from our concentration of sourcing in fewer suppliers; the quality, safety and efficacy of our products; the success of our research and development activities; our ability to attract and retain key personnel and executives; competitive uncertainties in our markets, including competition from companies in the cosmetics, fragrances, skincare and toiletries industry, some of which are larger than we are and have greater resources; our ability to implement our Sales Leadership program globally, to generate Representative activity, to increase the number of consumers served per Representative and their engagement online, to enhance the Representative and consumer experience and increase Representative productivity through field activation programs, Service Model Transformation and other investments in the direct-selling channel, and to compete with other direct-selling organizations to recruit, retain and service Representatives and to continue to innovate the direct-selling model; the impact of the seasonal nature of our business, adverse effect of rising energy, commodity and raw material prices, changes in market trends, purchasing habits of our consumers and changes in consumer preferences, particularly given the global nature of our business and the conduct of our business in primarily one channel; our ability to protect our intellectual property rights; the risk of an adverse outcome in any material pending and future litigations or with respect to the legal status of Representatives; our ratings, our access to cash and financing and ability to secure financing at attractive rates; and the impact of possible pension funding obligations, increased pension expense and any changes in pension regulations or interpretations thereof on our cash flow and results of operations. Additional information identifying such factors is contained in Item 1A of our 2010 Form 10-K for the year ended December 31, 2010. We undertake no obligation to update any such forward-looking statements. AVON PRODUCTS, INC.CONSOLIDATED STATEMENTS OF INCOME(Unaudited)(In millions, except per share data)Three months endedPercentSix months endedPercentJune 30ChangeJune 30Change2011201020112010Net sales$   2,815.9$  2,596.98%$   5,407.4$  5,013.48%Other revenue40.531.678.161.4Total revenue2,856.42,628.59%5,485.55,074.88%Cost of sales1,018.0962.11,967.81,896.8Selling, general and administrative expenses1,521.81,400.02,954.62,720.1Operating profit316.6266.419%563.1457.923%Interest expense23.920.346.642.1Interest income(3.9)(3.4)(8.7)(8.3)Other expense, net2.90.46.648.7Total other expenses22.917.344.582.5Income from continuing operations, before tax                293.7249.118%518.6375.438%Income taxes(85.0)(84.1)(157.7)(167.7)Income from continuing operations, net of tax            208.7165.026%360.9207.774%Discontinued operations, net of tax-4.2(8.6)4.8Net Income208.7169.2352.3212.5Net income attributable to noncontrolling interest(2.5)(1.6)(2.5)(2.4)Net income attributable to Avon$      206.2$     167.623%$      349.8$     210.166%Earnings per share:BasicBasic EPS from continuing operations$          .48$         .3826%$          .83$         .4873%Basic EPS from discontinued operations$              -$         .01$         (.02)$         .01Basic EPS attributable to Avon$          .48$         .3923%$          .81$         .4965%Diluted Diluted EPS from continuing operations$          .47$         .3824%$          .82$         .4774%Diluted EPS from discontinued operations$              -$         .01$         (.02)$         .01Diluted EPS attributable to Avon$          .47$         .3921%$          .80$         .4867%AVON PRODUCTS, INC.CONSOLIDATED BALANCE SHEETS(Unaudited)(In millions)June 30December 3120112010AssetsCurrent AssetsCash and cash equivalents$             1,011.0$           1,179.9Accounts receivable, net828.8826.3Inventories1,341.01,152.9Prepaid expenses and other1,104.21,025.2Total current assets4,285.04,184.3Property, plant and equipment, at cost2,861.22,750.9Less accumulated depreciation(1,169.4)(1,123.5)Property, plant and equipment, net1,691.81,627.4Goodwill687.9675.1Other intangible assets, net357.8368.3Other assets1,094.31,018.6Total assets$             8,116.8$           7,873.7Liabilities and Shareholders' EquityCurrent LiabilitiesDebt maturing within one year$                807.4$              727.6Accounts payable832.7809.8Accrued compensation236.1293.2Other accrued liabilities719.1771.6Sales and taxes other than income212.7207.6Income taxes111.3146.5Total current liabilities2,919.32,956.3Long-term debt2,417.32,408.6Employee benefit plans492.9561.3Long-term income taxes106.9128.9Other liabilities142.1146.0Total liabilities$             6,078.5$           6,201.1Shareholders' EquityCommon stock$                187.3$              186.6Additional paid-in-capital2,064.42,024.2Retained earnings4,761.44,610.8Accumulated other comprehensive loss(423.1)(605.8)Treasury stock, at cost(4,565.7)(4,559.3)Total Avon shareholders' equity2,024.31,656.5Noncontrolling Interest14.016.1Total shareholders' equity$             2,038.3$           1,672.6Total liabilities and shareholders' equity                                             $             8,116.8$           7,873.7AVON PRODUCTS, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)(In millions)Six Months EndedJune 3020112010Cash Flows from Operating ActivitiesIncome from continuing operations, net of tax$           360.9$          207.7Adjustments to reconcile net income to net cash provided by operating activities:            Depreciation and amortization115.588.5            Provision for doubtful accounts125.3104.3            Provision for obsolescence54.548.4            Share-based compensation24.032.0            Deferred income taxes(51.1)(18.8)            Charge for Venezuelan monetary assets and liabilities-46.1            Other55.123.0Changes in assets and liabilities:            Accounts receivable(103.0)(109.6)            Inventories(204.6)(108.8)            Prepaid expenses and other(13.0)(25.3)            Accounts payable and accrued liabilities(120.2)31.3            Income and other taxes(58.5)(77.1)            Noncurrent assets and liabilities(96.7)(9.5)Net cash provided by operating activities of continuing operations88.2232.2Cash Flows from Investing ActivitiesCapital expenditures(144.5)(139.4)Disposal of assets6.910.8Purchases of investments(26.8)(0.3)Proceeds from sale of investments6.29.4Acquisitions and other investing activities-(144.3)Net cash used by investing activities of continuing operations(158.2)(263.8)Cash Flows from Financing ActivitiesCash dividends(203.3)(189.5)Debt, net (maturities of three months or less)(36.4)(36.4)Proceeds from debt642.519.8Repayment of debt(535.9)(20.5)Proceeds from exercise of stock options15.315.4Excess tax benefit realized from share-based compensation1.92.6Repurchase of common stock(7.0)(10.9)Net cash used by financing activities of continuing operations(122.9)(219.5)Cash provided by operating activities - Disc Ops-3.5Cash used by investing activities - Disc Ops(1.2)(0.1)Cash used by financing activities - Disc Ops-(0.2)Net cash (used) provided by Discontinued Operations(1.2)3.2Effect of exchange rate changes on cash and equivalents25.2(79.6)Net change in cash and equivalents(168.9)(327.5)Cash and equivalents at beginning of year (1)$        1,179.9$       1,311.6Cash and equivalents at end of period (2)$        1,011.0$          984.1(1) Includes cash and cash equivalents of discontinued operations of $13.5M at January 1, 2010.(2) Includes cash and cash equivalents of discontinued operations of $10.6M at June 30, 2010.AVON PRODUCTS, INC.SUPPLEMENTAL SCHEDULE(Unaudited)(In millions)THREE MONTHS ENDED 06/30/11REGIONAL RESULTS$ in MillionsTotal Revenue US$C$UnitsPrice/Mix C$Active RepsAverage Order C$% var. vs2Q10% var. vs2Q10% var. vs2Q10% var. vs2Q10% var. vs2Q10% var. vs2Q10Latin America$   1,348.219%10%1%9%4%6%North America508.4(7)(8)(16)8(8)-Central & Eastern Europe375.15(3)(2)(1)(1)(2)Western Europe, Middle East & Africa 398.3135328(3)Asia Pacific 226.4(5)(12)(10)(2)(14)2Total from operations2,856.492(3)5-2Global and other-------Total$   2,856.49%2%(3)%5%-%2%2011GAAP Operating Profit US$% var. vs2Q102011GAAP Operating Margin US$2011Non-GAAP Operating Profit US$ (1)2010Non-GAAP Operating Profit US$ (1)2011Non-GAAP   Operating  Margin (1)2010Non-GAAP   Operating  Margin (1)Latin America$      194.638%14.4%$             195.7$             176.414.5%15.5%North America24.8(31)4.932.945.46.58.3Central & Eastern Europe73.4(8)19.675.380.820.122.7Western Europe, Middle East & Africa51.6(13)13.054.457.513.716.3Asia Pacific 16.6(9)7.316.617.87.37.5Total from operations361.0812.6374.9377.913.114.4Global and other(44.4)34-(46.3)(67.7)--Total$      316.619%11.1%$             328.6$             310.211.5%11.8%CATEGORY SALES (US$)ConsolidatedUS$C$% var. vs 2Q10% var. vs 2Q10Beauty (color cosmetics/fragrances/skincare/personal care) $2,039.28%1%Fashion (jewelry/watches/apparel/footwear/accessories/childrens)  (2) 511.1105Home (gift & decorative products/housewares/entertainment & leisure/childrens/nutrition) (2)265.65(2)Net sales$2,815.98%2%Other revenue40.52823Total revenue$2,856.49%2%SIX MONTHS ENDED 06/30/11REGIONAL RESULTS$ in MillionsTotal Revenue US$C$UnitsPrice/Mix C$Active RepsAverage Order C$% var. vs6M10% var. vs 6M10% var. vs6M10% var. vs6M10% var. vs 6M10% var. vs 6M10Latin America$   2,479.618%10%3%7%4%6%North America1,020.7(4)(5)(15)10(7)2Central & Eastern Europe786.93(2)(2)-(2)-Western Europe, Middle East & Africa 744.614105591Asia Pacific453.7(5)(12)(11)(1)(14)2Total from operations5,485.583(2)5-3Global and other-------Total$   5,485.58%3%(2)%5%-%3%2011GAAP Operating Profit US$% var. vs 6M102011GAAP Operating Margin US$2011Non-GAAPOperatingProfit US$ (1)2010Non-GAAP Operating Profit US$ (1)2011Non-GAAPOperating Margin (1)2010Non-GAAPOperating Margin (1)Latin America$      334.146%13.5%$             332.9$             305.813.4%14.5%North America52.6(34)5.272.393.47.18.7Central & Eastern Europe150.3119.1149.3150.819.019.7Western Europe, Middle East & Africa 85.7511.587.678.411.812.0Asia Pacific 36.5108.036.032.37.96.7Total from operations659.21512.0678.1660.712.413.0Global and other(96.1)15-(88.3)(114.7)--Total$      563.123%10.3%$             589.8$             546.010.8%10.8%CATEGORY SALES (US$)ConsolidatedUS$C$% var. vs 6M10% var. vs 6M10Beauty (color cosmetics/fragrances/skincare/personal care)$3,914.18%3%Fashion (jewelry/watches/apparel/footwear/accessories/childrens)  (2)999.195Home (gift & decorative products/housewares/entertainment & leisure/childrens/nutrition) (2)494.24(1)Net sales$5,407.48%3%Other revenue78.12724Total revenue$5,485.58%3%(1)For a further discussion on our non-GAAP financial measures, please refer to our discussion of non-GAAP financial measures in this release and reconciliations of our non-GAAP financial measures to the related GAAP financial measure in the following supplemental schedules.(2)During the third quarter of 2010, items associated with children's products, that were previously reported in Home, were reclassified into Fashion if such children's product was Fashion related.AVON PRODUCTS, INC.SUPPLEMENTAL SCHEDULENON-GAAP FINANCIAL MEASURES(Unaudited)This supplemental schedule provides adjusted non-GAAP financial information and a quantitative reconciliationof the difference between the non-GAAP financial measure and the financial measure calculated and reported inaccordance with GAAP.$ in Millions (except per share data)THREE MONTHS ENDED 06/30/11Reported(GAAP)CTIrestructuringinitiativesRoundingAdjusted(Non-GAAP)Cost of Sales$         1,018.0$                3.5$         1,014.5Selling, general and administrative expenses1,521.88.51,513.3Operating profit316.612.0328.6Income from continuing operations before taxes                       293.712.0305.7Income taxes(85.0)(3.9)(88.9)Income from continuing operations$            208.7$                8.1$            216.8Diluted EPS from continuing operations0.470.020.49Gross margin64.4%0.164.5%SG&A as a % of Revenues 53.3%(0.3)53.0%Operating margin11.1%0.411.5%Effective tax rate28.9%0.10.129.1%SEGMENT OPERATING PROFITLatin America$            194.6$                1.1$            195.7North America24.88.132.9Central & Eastern Europe 73.41.975.3Western Europe, Middle East & Africa51.62.854.4Asia Pacific 16.6-16.6Global and other(44.4)(1.9)(46.3)Total$            316.6$              12.0$            328.6SEGMENT OPERATING MARGINLatin America14.4%0.114.5%North America4.9%1.66.5%Central & Eastern Europe 19.6%0.520.1%Western Europe, Middle East & Africa13.0%0.713.7%Asia Pacific 7.3%-7.3%Global and other---Total11.1%0.411.5%AVON PRODUCTS, INC.SUPPLEMENTAL SCHEDULENON-GAAP FINANCIAL MEASURES(Unaudited)$ in Millions (except per share data)SIX MONTHS ENDED 06/30/11Reported(GAAP)CTIrestructuringinitiativesRoundingAdjusted(Non-GAAP)Cost of Sales$         1,967.8$                4.7$         1,963.1Selling, general and administrative expenses2,954.622.02,932.6Operating profit563.126.7589.8Income from continuing operations before taxes                   518.626.7545.3Income taxes(157.7)(9.7)(167.4)Income from continuing operations$            360.9$              17.0$            377.9Diluted EPS from continuing operations0.820.040.86Gross margin64.1%0.164.2%SG&A as a % of Revenues 53.9%(0.4)53.5%Operating margin10.3%0.510.8%Effective tax rate30.4%0.330.7%SEGMENT OPERATING PROFITLatin America$            334.1$               (1.2)$            332.9North America52.619.772.3Central & Eastern Europe 150.3(1.0)149.3Western Europe, Middle East & Africa85.71.987.6Asia Pacific 36.5(0.5)36.0Global and other(96.1)7.8(88.3)Total$            563.1$              26.7$            589.8SEGMENT OPERATING MARGINLatin America13.5%-(0.1)13.4%North America5.2%1.97.1%Central & Eastern Europe 19.1%(0.1)19.0%Western Europe, Middle East & Africa11.5%0.311.8%Asia Pacific 8.0%(0.1)7.9%Global and other---Total10.3%0.510.8%AVON PRODUCTS, INC.SUPPLEMENTAL SCHEDULENON-GAAP FINANCIAL MEASURES(Unaudited)$ in Millions (except per share data)THREE MONTHS ENDED 06/30/10Reported(GAAP)CTIrestructuringinitiativesVenezuelanspecial itemsRoundingAdjusted(Non-GAAP)Cost of Sales$            962.1$                2.2$              33.4$            926.5Selling, general and administrative expenses1,400.08.2-1,391.8Operating profit266.410.433.4310.2Income from continuing operations before taxes                  249.110.433.4292.9Income taxes(84.1)(3.6)-0.1(87.6)Income from continuing operations$            165.0$                6.8$              33.4$                0.1$            205.3Diluted EPS from continuing operations0.380.020.08(0.01)0.47Gross margin63.4%0.11.364.8%SG&A as a % of Revenues 53.3%(0.3)-53.0%Operating margin10.1%0.41.311.8%Effective tax rate33.8%0.1(4.0)29.9%SEGMENT OPERATING PROFITLatin America$            140.6$                2.4$              33.4$            176.4North America36.29.2-45.4Central & Eastern Europe 79.61.2-80.8Western Europe, Middle East & Africa59.4(1.9)-57.5Asia Pacific 18.3(0.5)-17.8Global and other(67.7)--(67.7)Total$            266.4$              10.4$              33.4$            310.2SEGMENT OPERATING MARGINLatin America12.4%0.22.915.5%North America6.6%1.7-8.3%Central & Eastern Europe 22.4%0.3-22.7%Western Europe, Middle East & Africa16.8%(0.5)-16.3%Asia Pacific 7.7%(0.2)-7.5%Global and other----Total10.1%0.41.311.8%AVON PRODUCTS, INC.SUPPLEMENTAL SCHEDULENON-GAAP FINANCIAL MEASURES(Unaudited)$ in Millions (except per share data)SIX MONTHS ENDED 06/30/10Reported(GAAP)CTIrestructuringinitiativesVenezuelanspecial itemsRoundingAdjusted(Non-GAAP)Cost of Sales$         1,896.8$                4.7$              63.1$         1,829.0Selling, general and administrative expenses2,720.110.99.42,699.8Operating profit457.915.672.5546.0Income from continuing operations before taxes                  375.415.6118.6509.6Income taxes(167.7)(5.5)12.7(160.5)Income from continuing operations$            207.7$              10.1$            131.3$            349.1Diluted EPS from continuing operations0.470.020.300.010.80Gross margin62.6%0.11.20.164.0%SG&A as a % of Revenues53.6%(0.2)(0.2)53.2%Operating margin9.0%0.31.40.110.8%Effective tax rate44.7%0.1(13.3)31.5%SEGMENT OPERATING PROFITLatin America$            228.6$                4.7$              72.5$            305.8North America79.913.5-93.4Central & Eastern Europe 148.22.6-150.8Western Europe, Middle East & Africa81.6(3.2)-78.4Asia Pacific 33.3(1.0)-32.3Global and other(113.7)(1.0)-(114.7)Total$            457.9$              15.6$              72.5$            546.0SEGMENT OPERATING MARGINLatin America10.8%0.23.40.1 14.5%North America7.5%1.3-(0.1) 8.7%Central & Eastern Europe 19.3%0.3-0.1 19.7%Western Europe, Middle East & Africa12.5%(0.5)-12.0%Asia Pacific 6.9%(0.2)-6.7%Global and other----Total9.0%0.31.40.110.8%SOURCE Avon Products, Inc.For further information: Amy Low Chasen, Monica Chang, Ilene Drucker, +1-212-282-5320