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x
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Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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¨
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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New York
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13-0544597
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(State or other jurisdiction of
Incorporation or organization)
|
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(I.R.S. Employer
Identification No.)
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Large accelerated filer
|
x
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Accelerated filer
|
¨
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Non-accelerated filer
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¨
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Smaller reporting company
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¨
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Emerging growth company
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¨
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Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
|
Common stock, par value $0.25 per share
|
AVP
|
NYSE
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|
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Page
Numbers
|
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Item 1.
|
|
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Three Months Ended March 31, 2019 and March 31, 2018
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Three Months Ended March 31, 2019 and March 31, 2018
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March 31, 2019 and December 31, 2018
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Three Months Ended March 31, 2019 and March 31, 2018
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Three Months Ended March 31, 2019 and March 31, 2018
|
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9 - 33
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Item 2.
|
32 - 48
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Item 3.
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||
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Item 4.
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||
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||
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Item 1.
|
||
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Item 2.
|
||
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Item 6.
|
||
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|
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||
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|
Three Months Ended
|
||||||
|
(In millions, except per share data)
|
March 31, 2019
|
|
March 31, 2018
|
||||
|
Net sales
|
$
|
1,116.2
|
|
|
$
|
1,309.6
|
|
|
Other revenue
|
70.7
|
|
|
83.9
|
|
||
|
Total revenue
|
1,186.9
|
|
|
1,393.5
|
|
||
|
Costs, expenses and other:
|
|
|
|
||||
|
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
|
)
|
||
|
Net loss attributable to noncontrolling interests
|
0.8
|
|
|
0.8
|
|
||
|
Net loss attributable to Avon
|
$
|
(32.7
|
)
|
|
$
|
(20.3
|
)
|
|
|
|
|
|
||||
|
Loss per share
|
|
|
|
||||
|
Basic
|
|
|
|
||||
|
Basic from continuing operations
|
$
|
(0.07
|
)
|
|
$
|
(0.06
|
)
|
|
Basic from discontinued operations
|
(0.02
|
)
|
|
—
|
|
||
|
Basic attributable to Avon
|
$
|
(0.09
|
)
|
|
$
|
(0.06
|
)
|
|
|
|
|
|
||||
|
Diluted
|
|
|
|
||||
|
Diluted from continuing operations
|
$
|
(0.07
|
)
|
|
$
|
(0.06
|
)
|
|
Diluted from discontinued operations
|
(0.02
|
)
|
|
—
|
|
||
|
Diluted attributable to Avon
|
$
|
(0.09
|
)
|
|
$
|
(0.06
|
)
|
|
|
Three Months Ended
|
||||||
|
(In millions)
|
March 31, 2019
|
|
March 31, 2018
|
||||
|
Net loss
|
$
|
(33.5
|
)
|
|
$
|
(21.1
|
)
|
|
Other comprehensive income:
|
|
|
|
||||
|
Foreign currency translation adjustments
|
(2.7
|
)
|
|
(4.2
|
)
|
||
|
Unrealized (losses) gains on revaluation of long-term intercompany balances, net of taxes of $0.0 and $0.0
|
(0.6
|
)
|
|
36.9
|
|
||
|
Change in unrealized gains/losses on cash flow hedges, net of taxes of $0.0 and $0.0
|
(1.9
|
)
|
|
—
|
|
||
|
Adjustments of and amortization of net actuarial loss and prior service cost, net of taxes of $0.2 and $0.2
|
1.3
|
|
|
2.9
|
|
||
|
Total other comprehensive (loss) income, net of income taxes
|
(3.9
|
)
|
|
35.6
|
|
||
|
Comprehensive (loss) income
|
(37.4
|
)
|
|
14.5
|
|
||
|
Less: comprehensive loss attributable to noncontrolling interests
|
(0.6
|
)
|
|
(0.6
|
)
|
||
|
Comprehensive (loss) income attributable to Avon
|
$
|
(36.8
|
)
|
|
$
|
15.1
|
|
|
(In millions)
|
March 31,
2019 |
|
December 31,
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
|
|
||
|
Assets held for sale
|
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
|
.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
|
|
|
|
Three Months Ended
|
||||||
|
(In millions)
|
March 31, 2019
|
|
March 31, 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 net loss 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
|
|
||
|
Foreign exchange (losses) gains
|
(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 our 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
|
|
(In millions, except per
|
|
Common Stock
|
|
Additional
|
|
Retained
|
|
Accumulated Other
|
|
Treasury Stock
|
|
Noncontrolling
|
|
|
||||||||||||||||||||
|
share data)
|
|
Shares
|
|
Amount
|
|
Paid-In Capital
|
|
Earnings
|
|
Comprehensive Loss
|
|
Shares
|
|
Amount
|
|
Interests
|
|
Total
|
||||||||||||||||
|
Balances at December 31, 2018
|
|
761.8
|
|
|
$
|
190.3
|
|
|
$
|
2,303.6
|
|
|
$
|
2,234.3
|
|
|
$
|
(1,030.4
|
)
|
|
319.4
|
|
|
$
|
(4,602.3
|
)
|
|
$
|
7.7
|
|
|
$
|
(896.8
|
)
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(32.7
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.8
|
)
|
|
(33.5
|
)
|
|||||||
|
Other comprehensive loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
(4.0
|
)
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
(3.9
|
)
|
||||||||
|
Dividends accrued - Series C convertible preferred stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6.2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6.2
|
)
|
|||||||
|
Exercise/ vesting/ expense of share-based compensation
|
|
1.3
|
|
|
0.3
|
|
|
(1.5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.2
|
)
|
|||||||
|
Purchases and sales of noncontrolling interests, net of dividends paid of $0.0
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
0.1
|
|
|||||||
|
Balances at March 31, 2019
|
|
763.1
|
|
|
$
|
190.6
|
|
|
$
|
2,302.1
|
|
|
$
|
2,195.4
|
|
|
$
|
(1,034.4
|
)
|
|
319.4
|
|
|
$
|
(4,602.3
|
)
|
|
$
|
7.1
|
|
|
$
|
(941.5
|
)
|
|
(In millions, except per
|
|
Common Stock
|
|
Additional
|
|
Retained
|
|
Accumulated Other
|
|
Treasury Stock
|
|
Noncontrolling
|
|
|
||||||||||||||||||||
|
share data)
|
|
Shares
|
|
Amount
|
|
Paid-In Capital
|
|
Earnings
|
|
Comprehensive Loss
|
|
Shares
|
|
Amount
|
|
Interests
|
|
Total
|
||||||||||||||||
|
Balances at December 31, 2017
|
|
758.7
|
|
|
$
|
189.7
|
|
|
$
|
2,291.2
|
|
|
$
|
2,320.3
|
|
|
$
|
(926.2
|
)
|
|
318.4
|
|
|
$
|
(4,600.0
|
)
|
|
$
|
10.3
|
|
|
$
|
(714.7
|
)
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(20.3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.8
|
)
|
|
(21.1
|
)
|
|||||||
|
Revenue Recognition Cumulative catch up
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(41.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(41.1
|
)
|
|||||||
|
Other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
35.2
|
|
|
|
|
|
|
0.4
|
|
|
35.6
|
|
||||||||||
|
Dividends accrued - Series C convertible preferred stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6.0
|
)
|
|||||||
|
Exercise/ vesting/ expense of share-based compensation
|
|
2.2
|
|
|
0.6
|
|
|
2.5
|
|
|
(0.4
|
)
|
|
—
|
|
|
(0.1
|
)
|
|
0.9
|
|
|
—
|
|
|
3.6
|
|
|||||||
|
Repurchase of common stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.9
|
|
|
(2.7
|
)
|
|
—
|
|
|
(2.7
|
)
|
|||||||
|
Purchases and sales of noncontrolling interests, net of dividends paid of $0.0
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
(0.2
|
)
|
|
(0.2
|
)
|
||||||||
|
Balances at March 31, 2018
|
|
760.9
|
|
|
$
|
190.3
|
|
|
$
|
2,293.7
|
|
|
$
|
2,252.5
|
|
|
$
|
(891.0
|
)
|
|
319.2
|
|
|
$
|
(4,601.8
|
)
|
|
$
|
9.7
|
|
|
$
|
(746.6
|
)
|
|
•
|
the effects of significant, unusual or extraordinary pretax and income tax items, if any;
|
|
•
|
withholding taxes recognized associated with cash repatriations; and
|
|
•
|
the impact of loss-making subsidiaries for which we cannot recognize an income tax benefit and subsidiaries for which an effective tax rate cannot be reliably estimated.
|
|
|
|
Three Months Ended March 31,
|
||||||
|
(Shares in millions)
|
|
2019
|
|
2018
|
||||
|
Numerator from continuing operations:
|
|
|
|
|
||||
|
Loss from continuing operations, less amounts attributable to noncontrolling interests
|
|
$
|
(23.2
|
)
|
|
$
|
(20.3
|
)
|
|
Less: Loss allocated to participating securities
|
|
(.2
|
)
|
|
(.2
|
)
|
||
|
Less: Cumulative dividends on preferred stock
|
|
6.3
|
|
|
5.9
|
|
||
|
Loss from continuing operations allocated to common shareholders
|
|
(29.3
|
)
|
|
(26.0
|
)
|
||
|
Numerator from discontinued operations:
|
|
|
|
|
||||
|
Loss from discontinued operations
|
|
$
|
(9.5
|
)
|
|
$
|
—
|
|
|
Less: Loss allocated to participating securities
|
|
(.1
|
)
|
|
—
|
|
||
|
Loss allocated to common shareholders
|
|
(9.4
|
)
|
|
—
|
|
||
|
Numerator attributable to Avon:
|
|
|
|
|
||||
|
Net loss attributable to Avon
|
|
$
|
(32.7
|
)
|
|
$
|
(20.3
|
)
|
|
Less: Loss allocated to participating securities
|
|
(.3
|
)
|
|
(.2
|
)
|
||
|
Less: Cumulative dividends on preferred stock
|
|
6.3
|
|
|
5.9
|
|
||
|
Loss allocated to common shareholders
|
|
(38.7
|
)
|
|
(26.0
|
)
|
||
|
Denominator:
|
|
|
|
|
||||
|
Basic EPS weighted-average shares outstanding
|
|
442.2
|
|
|
440.9
|
|
||
|
Diluted effect of assumed conversion of stock options
|
|
—
|
|
|
—
|
|
||
|
Diluted effect of assumed conversion of preferred stock
|
|
—
|
|
|
—
|
|
||
|
Diluted EPS adjusted weighted-average shares outstanding
|
|
442.2
|
|
|
440.9
|
|
||
|
Loss per Common Share from continuing operations:
|
|
|
|
|
||||
|
Basic
|
|
$
|
(.07
|
)
|
|
$
|
(.06
|
)
|
|
Diluted
|
|
(.07
|
)
|
|
(.06
|
)
|
||
|
Loss per Common Share from discontinued operations:
|
|
|
|
|
||||
|
Basic
|
|
$
|
(.02
|
)
|
|
$
|
—
|
|
|
Diluted
|
|
(.02
|
)
|
|
—
|
|
||
|
Loss per Common Share attributable to Avon:
|
|
|
|
|
||||
|
Basic
|
|
$
|
(.09
|
)
|
|
$
|
(.06
|
)
|
|
Diluted
|
|
(.09
|
)
|
|
(.06
|
)
|
||
|
|
|
Three Months Ended March 31, 2019
|
|
|
Selling, general and administrative expenses
|
|
9.5
|
|
|
Operating loss
|
|
(9.5
|
)
|
|
Loss from discontinued operations, net of tax
|
|
(9.5
|
)
|
|
|
|
March 31, 2019
|
||||||||||
|
|
|
Rye Office
|
|
Malaysia Maximin
|
|
Total
|
||||||
|
Current Held for sale assets
|
|
|
|
|
|
|
||||||
|
Property, Plant & Equipment (net)
|
|
$
|
12.5
|
|
|
$
|
3.1
|
|
|
$
|
15.6
|
|
|
Other assets
|
|
—
|
|
|
.1
|
|
|
.1
|
|
|||
|
|
|
$
|
12.5
|
|
|
$
|
3.2
|
|
|
$
|
15.7
|
|
|
|
|
|
|
|
|
|
||||||
|
Current Held for sale liabilities
|
|
|
|
|
|
|
||||||
|
Other liabilities
|
|
$
|
—
|
|
|
$
|
.1
|
|
|
$
|
.1
|
|
|
|
|
$
|
—
|
|
|
$
|
.1
|
|
|
$
|
.1
|
|
|
|
|
December 31, 2018
|
||||||||||||||
|
|
|
Avon Manufacturing (Guangzhou)
|
|
Rye Office
|
|
Malaysia Maximin
|
|
Total
|
||||||||
|
Current held for sale assets
|
|
|
|
|
|
|
|
|
||||||||
|
Inventories
|
|
$
|
8.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8.7
|
|
|
Property, Plant & Equipment (net)
|
|
36.7
|
|
|
12.3
|
|
|
3.0
|
|
|
52.0
|
|
||||
|
Cash and cash equivalents
|
|
3.7
|
|
|
—
|
|
|
—
|
|
|
3.7
|
|
||||
|
Other assets
|
|
1.1
|
|
|
—
|
|
|
.1
|
|
|
1.2
|
|
||||
|
|
|
$
|
50.2
|
|
|
$
|
12.3
|
|
|
$
|
3.1
|
|
|
$
|
65.6
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Current held for sale liabilities
|
|
|
|
|
|
|
|
|
||||||||
|
Accounts payable
|
|
8.6
|
|
|
—
|
|
|
—
|
|
|
8.6
|
|
||||
|
Other liabilities
|
|
2.6
|
|
|
—
|
|
|
.2
|
|
|
2.8
|
|
||||
|
|
|
$
|
11.2
|
|
|
$
|
—
|
|
|
$
|
.2
|
|
|
$
|
11.4
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
|
Cash and cash equivalents
|
|
$
|
406.4
|
|
|
$
|
532.7
|
|
|
Restricted Cash(1)
|
|
17.0
|
|
|
—
|
|
||
|
Long-term restricted cash(2)
|
|
7.6
|
|
|
—
|
|
||
|
Held for sale cash and cash equivalents
|
|
—
|
|
|
3.7
|
|
||
|
Cash and cash equivalents, and restricted cash at end of period per the statement of cash flows
|
|
$
|
431.0
|
|
|
$
|
536.4
|
|
|
|
|
Three Months Ended March 31,
|
||||||
|
|
|
2019
|
|
2018
|
||||
|
Statement of Operations Data
|
|
|
|
|
||||
|
Revenue from sale of product to New Avon(1)
|
|
$
|
4.8
|
|
|
$
|
5.9
|
|
|
Gross profit from sale of product to New Avon(1)
|
|
$
|
.1
|
|
|
$
|
.4
|
|
|
|
|
|
|
|
||||
|
Cost of sales for purchases from New Avon(2)
|
|
$
|
.6
|
|
|
$
|
.5
|
|
|
|
|
|
|
|
||||
|
Selling, general and administrative expenses related to New Avon:
|
|
|
|
|
||||
|
Transition services, intellectual property, technical support and innovation and subleases(3)
|
|
$
|
—
|
|
|
$
|
(3.2
|
)
|
|
Project management team(4)
|
|
$
|
1.4
|
|
|
.5
|
|
|
|
Net reduction of selling, general and administrative expenses
|
|
$
|
1.4
|
|
|
$
|
(2.7
|
)
|
|
|
|
|
|
|
||||
|
Interest income from Instituto Avon(5)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
||||
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
|
Balance Sheet Data
|
|
|
|
|
||||
|
Inventories(6)
|
|
$
|
.3
|
|
|
$
|
.3
|
|
|
Receivables due from New Avon(7)
|
|
$
|
4.3
|
|
|
$
|
7.0
|
|
|
Receivables due from Instituto Avon(5)
|
|
$
|
3.2
|
|
|
$
|
3.2
|
|
|
Payables due to New Avon(8)
|
|
$
|
1.0
|
|
|
$
|
.2
|
|
|
Payables due to an affiliate of Cerberus(9)
|
|
$
|
.6
|
|
|
$
|
.6
|
|
|
|
|
Three Months Ended March 31, 2019
|
||||||||||||||||||||||||||
|
|
|
Reportable segments
|
|
|
|
|
||||||||||||||||||||||
|
|
|
Europe, Middle East & Africa
|
|
South Latin America
|
|
North Latin America
|
|
Asia Pacific
|
|
Total reportable segments
|
|
Other operating segments and business activities
|
|
Total
|
||||||||||||||
|
Beauty:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Skincare
|
|
$
|
139.1
|
|
|
$
|
126.7
|
|
|
$
|
50.3
|
|
|
$
|
33.2
|
|
|
$
|
349.3
|
|
|
$
|
—
|
|
|
$
|
349.3
|
|
|
Fragrance
|
|
133.9
|
|
|
98.3
|
|
|
48.0
|
|
|
17.8
|
|
|
298.0
|
|
|
—
|
|
|
298.0
|
|
|||||||
|
Color
|
|
93.9
|
|
|
60.2
|
|
|
21.9
|
|
|
13.2
|
|
|
189.2
|
|
|
—
|
|
|
189.2
|
|
|||||||
|
Total Beauty
|
|
366.9
|
|
|
285.2
|
|
|
120.2
|
|
|
64.2
|
|
|
836.5
|
|
|
—
|
|
|
836.5
|
|
|||||||
|
Fashion & Home:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Fashion
|
|
60.5
|
|
|
38.8
|
|
|
22.1
|
|
|
42.9
|
|
|
164.3
|
|
|
—
|
|
|
164.3
|
|
|||||||
|
Home
|
|
8.5
|
|
|
60.2
|
|
|
40.3
|
|
|
6.4
|
|
|
115.4
|
|
|
—
|
|
|
115.4
|
|
|||||||
|
Total Fashion & Home
|
|
69.0
|
|
|
99.0
|
|
|
62.4
|
|
|
49.3
|
|
|
279.7
|
|
|
—
|
|
|
279.7
|
|
|||||||
|
Net sales
|
|
435.9
|
|
|
384.2
|
|
|
182.6
|
|
|
113.5
|
|
|
1,116.2
|
|
|
—
|
|
|
1,116.2
|
|
|||||||
|
Representative fees
|
|
22.5
|
|
|
29.5
|
|
|
10.1
|
|
|
1.8
|
|
|
63.9
|
|
|
—
|
|
|
63.9
|
|
|||||||
|
Other
|
|
.3
|
|
|
1.0
|
|
|
—
|
|
|
—
|
|
|
1.3
|
|
|
5.5
|
|
|
6.8
|
|
|||||||
|
Other revenue
|
|
22.8
|
|
|
30.5
|
|
|
10.1
|
|
|
1.8
|
|
|
65.2
|
|
|
5.5
|
|
|
70.7
|
|
|||||||
|
Total revenue
|
|
$
|
458.7
|
|
|
$
|
414.7
|
|
|
$
|
192.7
|
|
|
$
|
115.3
|
|
|
$
|
1,181.4
|
|
|
$
|
5.5
|
|
|
$
|
1,186.9
|
|
|
|
|
Three months ended March 31, 2018
|
||||||||||||||||||||||||||
|
|
|
Reportable segments
|
|
|
|
|
||||||||||||||||||||||
|
|
|
Europe, Middle East & Africa
|
|
South Latin America
|
|
North Latin America
|
|
Asia Pacific
|
|
Total reportable segments
|
|
Other operating segments and business activities
|
|
Total
|
||||||||||||||
|
Beauty:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Skincare
|
|
$
|
169.2
|
|
|
$
|
141.8
|
|
|
$
|
46.7
|
|
|
$
|
31.4
|
|
|
$
|
389.1
|
|
|
$
|
4.7
|
|
|
$
|
393.8
|
|
|
Fragrance
|
|
163.2
|
|
|
118.6
|
|
|
53.6
|
|
|
18.6
|
|
|
354.0
|
|
|
2.2
|
|
|
356.2
|
|
|||||||
|
Color
|
|
120.8
|
|
|
80.9
|
|
|
20.9
|
|
|
13.1
|
|
|
235.7
|
|
|
3.3
|
|
|
239.0
|
|
|||||||
|
Total Beauty
|
|
453.2
|
|
|
341.3
|
|
|
121.2
|
|
|
63.1
|
|
|
978.8
|
|
|
10.2
|
|
|
989.0
|
|
|||||||
|
Fashion & Home:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Fashion
|
|
79.8
|
|
|
46.5
|
|
|
22.6
|
|
|
39.7
|
|
|
188.6
|
|
|
1.9
|
|
|
190.5
|
|
|||||||
|
Home
|
|
9.3
|
|
|
71.9
|
|
|
41.2
|
|
|
7.0
|
|
|
129.4
|
|
|
.7
|
|
|
130.1
|
|
|||||||
|
Total Fashion & Home
|
|
89.1
|
|
|
118.4
|
|
|
63.8
|
|
|
46.7
|
|
|
318.0
|
|
|
2.6
|
|
|
320.6
|
|
|||||||
|
Net sales
|
|
542.3
|
|
|
459.7
|
|
|
185.0
|
|
|
109.8
|
|
|
1,296.8
|
|
|
12.8
|
|
|
1,309.6
|
|
|||||||
|
Representative fees
|
|
25.9
|
|
|
36.4
|
|
|
10.6
|
|
|
1.6
|
|
|
74.5
|
|
|
1.4
|
|
|
75.9
|
|
|||||||
|
Other
|
|
.2
|
|
|
1.0
|
|
|
—
|
|
|
—
|
|
|
1.2
|
|
|
6.8
|
|
|
8.0
|
|
|||||||
|
Other revenue
|
|
26.1
|
|
|
37.4
|
|
|
10.6
|
|
|
1.6
|
|
|
75.7
|
|
|
8.2
|
|
|
83.9
|
|
|||||||
|
Total revenue
|
|
$
|
568.4
|
|
|
$
|
497.1
|
|
|
$
|
195.6
|
|
|
$
|
111.4
|
|
|
$
|
1,372.5
|
|
|
$
|
21.0
|
|
|
$
|
1,393.5
|
|
|
|
|
2019
|
|
2018
|
||||||||||||
|
|
|
31 March
|
|
1 January
|
|
31 March
|
|
1 January
|
||||||||
|
Accounts receivable, net of allowances of $79, $93, $128 and $139
|
|
$
|
340.9
|
|
|
$
|
349.7
|
|
|
$
|
429.0
|
|
|
$
|
457.2
|
|
|
Contract liabilities
|
|
$
|
58.3
|
|
|
83.5
|
|
|
$
|
75.5
|
|
|
$
|
91.8
|
|
|
|
Components of Inventories
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
|
Raw materials
|
|
$
|
143.4
|
|
|
$
|
157.8
|
|
|
Finished goods
|
|
388.9
|
|
|
384.2
|
|
||
|
Total
|
|
$
|
532.3
|
|
|
$
|
542.0
|
|
|
|
|
Classification
|
|
January 1, 2019
|
|
March 31, 2019
|
||||
|
Assets
|
|
|
|
|
|
|
||||
|
Operating right-of-use assets
|
|
Right-of-use asset
|
|
$
|
187.5
|
|
|
$
|
180.3
|
|
|
Finance right-of-use assets
|
|
Property, Plant and Equipment
|
|
3.2
|
|
|
3.2
|
|
||
|
Total right-of-use assets
|
|
|
|
190.7
|
|
|
183.5
|
|
||
|
|
|
|
|
|
|
|
||||
|
Liabilities
|
|
|
|
|
|
|
||||
|
Current
|
|
|
|
|
|
|
||||
|
Operating lease liabilities
|
|
Other accrued liabilities
|
|
$
|
45.4
|
|
|
$
|
43.9
|
|
|
Finance lease liabilities
|
|
Other accrued liabilities
|
|
1.1
|
|
|
1.2
|
|
||
|
Total current lease liabilities
|
|
|
|
46.5
|
|
|
45.1
|
|
||
|
|
|
|
|
|
|
|
||||
|
Noncurrent
|
|
|
|
|
|
|
||||
|
Operating lease liabilities
|
|
Long-term operating lease liability
|
|
$
|
155.9
|
|
|
$
|
150.4
|
|
|
Finance lease liabilities
|
|
Long-term debt
|
|
1.9
|
|
|
2.0
|
|
||
|
Total noncurrent lease liabilities
|
|
|
|
$
|
157.8
|
|
|
$
|
152.4
|
|
|
|
|
|
|
|
|
|
||||
|
Total lease liability
|
|
|
|
$
|
204.3
|
|
|
$
|
197.5
|
|
|
Lease Cost
|
|
Classification
|
|
Three months ended March 31, 2019
|
||
|
Operating lease cost (1)
|
|
Selling, general and administrative expenses
|
|
$
|
16.8
|
|
|
Finance lease cost
|
|
|
|
|
||
|
Amortization of right-of-use assets
|
|
Selling, general and administrative expenses
|
|
0.4
|
|
|
|
Interest on lease liabilities
|
|
Interest Expense
|
|
0.1
|
|
|
|
Short-term leases costs
|
|
Selling, general and administrative expenses
|
|
1.1
|
|
|
|
Sublease income (2)
|
|
Selling, general and administrative expenses
|
|
(3.2
|
)
|
|
|
Net lease cost
|
|
|
|
$
|
15.2
|
|
|
Maturity of Lease Liabilities
|
|
Operating Leases
|
|
Finance Leases
|
|
Total
|
||||||
|
2019
|
|
$
|
44.8
|
|
|
$
|
1.1
|
|
|
$
|
45.9
|
|
|
2020
|
|
49.6
|
|
|
1.2
|
|
|
50.8
|
|
|||
|
2021
|
|
40.4
|
|
|
0.8
|
|
|
41.2
|
|
|||
|
2022
|
|
34.7
|
|
|
0.6
|
|
|
35.3
|
|
|||
|
2023
|
|
24.6
|
|
|
0.1
|
|
|
24.7
|
|
|||
|
2024
|
|
17.7
|
|
|
—
|
|
|
17.7
|
|
|||
|
Thereafter
|
|
29.3
|
|
|
—
|
|
|
29.3
|
|
|||
|
Total lease payments
|
|
$
|
241.1
|
|
|
$
|
3.8
|
|
|
$
|
244.9
|
|
|
Less: Interest
|
|
46.8
|
|
|
0.6
|
|
|
47.4
|
|
|||
|
Present value of lease liabilities
|
|
$
|
194.3
|
|
|
$
|
3.2
|
|
|
$
|
197.5
|
|
|
Maturity of Lease Liabilities
|
|
Operating Leases
|
|
Finance Leases
|
|
Total
|
||||||
|
2019
|
|
$
|
56.4
|
|
|
$
|
1.1
|
|
|
$
|
57.5
|
|
|
2020
|
|
42.0
|
|
|
0.6
|
|
|
42.6
|
|
|||
|
2021
|
|
35.3
|
|
|
0.4
|
|
|
35.7
|
|
|||
|
2022
|
|
31.1
|
|
|
0.2
|
|
|
31.3
|
|
|||
|
2023
|
|
22.4
|
|
|
0.1
|
|
|
22.5
|
|
|||
|
Thereafter
|
|
46.9
|
|
|
0.1
|
|
|
47.0
|
|
|||
|
Total lease payments(1)
|
|
$
|
234.1
|
|
|
$
|
2.5
|
|
|
$
|
236.6
|
|
|
Lease Term and Discount Rate
|
|
March 31, 2019
|
|
|
Weighted-average remaining lease term (years)
|
|
|
|
|
Operating leases
|
|
5.3
|
|
|
Finance leases
|
|
3.0
|
|
|
Weighted-average discount rate
|
|
|
|
|
Operating leases
|
|
8.3
|
%
|
|
Finance leases
|
|
11.6
|
%
|
|
Other Information
|
|
Three Months Ended March 31, 2019
|
||
|
- Operating Cash Flows From Operating Leases
|
|
16.4
|
|
|
|
- Financing Cash Flows From Finance Leases
|
|
0.3
|
|
|
|
Cash Paid For Amounts Included In Measurement of Liabilities
|
|
$
|
16.7
|
|
|
|
|
|
||
|
Right-of-use Assets Obtained In Exchange For New Finance Liabilities
|
|
$
|
0.7
|
|
|
Right-of-use Assets Obtained In Exchange For New Operating Liabilities
|
|
$
|
12.8
|
|
|
|
|
Three Months Ended March 31,
|
||||||||||||||||||||||
|
|
|
Pension Benefits
|
|
|
|
|
||||||||||||||||||
|
Net Periodic Benefit Costs
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Postretirement Benefits
|
||||||||||||||||||
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||||||
|
Service cost
|
|
$
|
.5
|
|
|
$
|
.9
|
|
|
$
|
1.0
|
|
|
$
|
1.2
|
|
|
$
|
—
|
|
|
$
|
.1
|
|
|
Interest cost
|
|
.6
|
|
|
.6
|
|
|
3.9
|
|
|
4.2
|
|
|
.3
|
|
|
.3
|
|
||||||
|
Expected return on plan assets
|
|
(.8
|
)
|
|
(.8
|
)
|
|
(7.9
|
)
|
|
(8.4
|
)
|
|
—
|
|
|
—
|
|
||||||
|
Amortization of prior service credit
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(.1
|
)
|
||||||
|
Amortization of net actuarial losses
|
|
.7
|
|
|
1.3
|
|
|
1.3
|
|
|
1.8
|
|
|
—
|
|
|
—
|
|
||||||
|
Settlements/curtailments
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
|
Net periodic benefit costs(1)
|
|
$
|
1.0
|
|
|
$
|
2.0
|
|
|
$
|
(1.6
|
)
|
|
$
|
(1.2
|
)
|
|
$
|
.3
|
|
|
$
|
.3
|
|
|
Three Months Ended March 31, 2019
|
|
Foreign Currency Translation Adjustments
|
|
Cash Flow Hedges
|
|
Net Investment Hedges
|
|
Pension and Postretirement Benefits
|
|
Investment in New Avon
|
|
Total
|
||||||||||||
|
Balance at December 31, 2018
|
|
$
|
(936.2
|
)
|
|
$
|
0.5
|
|
|
$
|
(4.3
|
)
|
|
$
|
(93.8
|
)
|
|
$
|
3.4
|
|
|
$
|
(1,030.4
|
)
|
|
Other comprehensive loss other than reclassifications
|
|
(3.4
|
)
|
|
(2.4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5.8
|
)
|
||||||
|
Reclassifications into earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Derivative losses on cash flow hedges, net of tax of $0.0
|
|
|
|
0.5
|
|
|
|
|
|
|
|
|
0.5
|
|
||||||||||
|
Amortization of net actuarial loss and prior service cost, net of tax of $.2(1)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.3
|
|
|
—
|
|
|
1.3
|
|
||||||
|
Total reclassifications into earnings
|
|
—
|
|
|
0.5
|
|
|
—
|
|
|
1.3
|
|
|
—
|
|
|
1.8
|
|
||||||
|
Balance at March 31, 2019
|
|
$
|
(939.6
|
)
|
|
$
|
(1.4
|
)
|
|
$
|
(4.3
|
)
|
|
$
|
(92.5
|
)
|
|
$
|
3.4
|
|
|
$
|
(1,034.4
|
)
|
|
Three Months Ended March 31, 2018
|
|
Foreign Currency Translation Adjustments
|
|
Net Investment Hedges
|
|
Pension and Postretirement Benefits
|
|
Investment in New Avon
|
|
Total
|
||||||||||
|
Balance at December 31, 2017
|
|
$
|
(829.6
|
)
|
|
$
|
(4.3
|
)
|
|
$
|
(95.7
|
)
|
|
$
|
3.4
|
|
|
$
|
(926.2
|
)
|
|
Other comprehensive income other than reclassifications
|
|
32.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
32.3
|
|
|||||
|
Reclassifications into earnings:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Amortization of net actuarial loss and prior service cost, net of tax of $.2(1)
|
|
—
|
|
|
—
|
|
|
2.9
|
|
|
—
|
|
|
2.9
|
|
|||||
|
Total reclassifications into earnings
|
|
—
|
|
|
—
|
|
|
2.9
|
|
|
—
|
|
|
2.9
|
|
|||||
|
Balance at March 31, 2018
|
|
$
|
(797.3
|
)
|
|
$
|
(4.3
|
)
|
|
$
|
(92.8
|
)
|
|
$
|
3.4
|
|
|
$
|
(891.0
|
)
|
|
|
|
Three Months Ended March 31,
|
||||||
|
Total Revenue
|
|
2019
|
|
2018
|
||||
|
Europe, Middle East & Africa
|
|
$
|
458.7
|
|
|
$
|
568.4
|
|
|
South Latin America
|
|
414.7
|
|
|
497.1
|
|
||
|
North Latin America
|
|
192.7
|
|
|
195.6
|
|
||
|
Asia Pacific
|
|
115.3
|
|
|
111.4
|
|
||
|
Total revenue from reportable segments
|
|
1,181.4
|
|
|
1,372.5
|
|
||
|
Other operating segments and business activities
|
|
5.5
|
|
|
21.0
|
|
||
|
Total revenue
|
|
$
|
1,186.9
|
|
|
$
|
1,393.5
|
|
|
|
|
Three Months Ended March 31,
|
||||||
|
Operating Profit
|
|
2019
|
|
2018
|
||||
|
Segment Profit
|
|
|
|
|
||||
|
Europe, Middle East & Africa
|
|
$
|
59.2
|
|
|
$
|
74.4
|
|
|
South Latin America
|
|
23.8
|
|
|
27.2
|
|
||
|
North Latin America
|
|
16.5
|
|
|
20.8
|
|
||
|
Asia Pacific
|
|
16.7
|
|
|
10.4
|
|
||
|
Total profit from reportable segments
|
|
$
|
116.2
|
|
|
$
|
132.8
|
|
|
Other operating segments and business activities
|
|
.6
|
|
|
2.2
|
|
||
|
Unallocated global expenses
|
|
(63.1
|
)
|
|
(79.2
|
)
|
||
|
CTI restructuring initiatives
|
|
(53.5
|
)
|
|
(10.9
|
)
|
||
|
Other items
|
|
(4.1
|
)
|
|
—
|
|
||
|
Operating (loss) profit
|
|
$
|
(3.9
|
)
|
|
$
|
44.9
|
|
|
Components of Prepaid Expenses and Other
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
|
Prepaid taxes and tax refunds receivable
|
|
$
|
126.6
|
|
|
$
|
145.0
|
|
|
Receivables other than trade
|
|
56.2
|
|
|
69.2
|
|
||
|
Prepaid brochure costs, paper and other literature
|
|
14.4
|
|
|
14.9
|
|
||
|
Other
|
|
58.0
|
|
|
42.9
|
|
||
|
Prepaid expenses and other
|
|
$
|
255.2
|
|
|
$
|
272.0
|
|
|
Components of Other Assets
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
|
Net overfunded pension plans
|
|
$
|
95.8
|
|
|
$
|
88.1
|
|
|
Capitalized software
|
|
88.8
|
|
|
89.3
|
|
||
|
Judicial deposits
|
|
72.2
|
|
|
74.1
|
|
||
|
Long-term receivables
|
|
79.4
|
|
|
73.2
|
|
||
|
Trust assets associated with supplemental benefit plans
|
|
37.4
|
|
|
37.0
|
|
||
|
Tooling (plates and molds associated with our beauty products)
|
|
12.0
|
|
|
12.6
|
|
||
|
Other
|
|
28.1
|
|
|
16.1
|
|
||
|
Other assets
|
|
$
|
413.7
|
|
|
$
|
390.4
|
|
|
|
|
Three Months Ended March 31,
|
||||||
|
|
|
2019
|
|
2018
|
||||
|
CTI recorded in operating profit - COGS
|
|
|
|
|
||||
|
Manufacturing asset write-offs
|
|
$
|
3.8
|
|
|
$
|
—
|
|
|
Inventory write-off
|
|
0.5
|
|
|
0.6
|
|
||
|
|
|
4.3
|
|
|
0.6
|
|
||
|
|
|
|
|
|
||||
|
CTI recorded in operating profit - SG&A
|
|
|
|
|
||||
|
Net charges for employee-related costs, including severance benefits
|
|
35.3
|
|
|
8.3
|
|
||
|
Implementation costs, primarily related to professional service fees
|
|
8.7
|
|
|
1.1
|
|
||
|
Dual running costs
|
|
1.8
|
|
|
—
|
|
||
|
Contract termination and other net benefits
|
|
3.3
|
|
|
0.2
|
|
||
|
Accelerated depreciation
|
|
0.1
|
|
|
0.7
|
|
||
|
|
|
49.2
|
|
|
10.3
|
|
||
|
|
|
|
|
|
||||
|
CTI recorded in operating profit
|
|
53.5
|
|
|
10.9
|
|
||
|
|
|
|
|
|
||||
|
CTI recorded in other expenses
|
|
|
|
|
||||
|
Gain on sale of China business (relating mainly to foreign currency translation adjustment gain)
|
|
(10.3
|
)
|
|
—
|
|
||
|
|
|
|
|
|
||||
|
Total CTI
|
|
$
|
43.2
|
|
|
$
|
10.9
|
|
|
|
|
|
|
|
||||
|
Open Up Avon
|
|
$
|
45.1
|
|
|
$
|
—
|
|
|
Transformation Plan
|
|
$
|
(2.0
|
)
|
|
$
|
10.9
|
|
|
Other
|
|
$
|
0.1
|
|
|
$
|
—
|
|
|
|
|
Employee-Related Costs
|
|
Inventory/Assets Write-offs
|
|
Foreign Currency Translation Adjustment Write-offs
|
|
Contract Terminations/Other
|
|
Total
|
||||||||||
|
Balance at December 31, 2018
|
|
$
|
19.6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1.1
|
|
|
$
|
20.7
|
|
|
2019 charges
|
|
$
|
37.6
|
|
|
$
|
4.3
|
|
|
$
|
(10.3
|
)
|
|
$
|
3.0
|
|
|
34.6
|
|
|
|
Adjustments
|
|
(1.3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.3
|
)
|
|||||
|
Cash payments
|
|
(9.6
|
)
|
|
—
|
|
|
—
|
|
|
(0.7
|
)
|
|
(10.3
|
)
|
|||||
|
Non-cash write-offs
|
|
—
|
|
|
(4.3
|
)
|
|
10.3
|
|
|
—
|
|
|
6.0
|
|
|||||
|
Foreign exchange
|
|
(.8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(.8
|
)
|
|||||
|
Balance at March 31, 2019
|
|
$
|
45.5
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3.4
|
|
|
$
|
48.9
|
|
|
|
|
Employee-Related Costs
|
|
Contract Terminations/Other
|
|
Total
|
||||||
|
Balance at December 31, 2018
|
|
$
|
34.4
|
|
|
$
|
3.6
|
|
|
$
|
38.0
|
|
|
2019 charges
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
|
Adjustments
|
|
(1.1
|
)
|
|
.2
|
|
|
(.9
|
)
|
|||
|
Cash payments
|
|
(10.8
|
)
|
|
(2.5
|
)
|
|
(13.3
|
)
|
|||
|
Non-cash write-offs
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
|
Foreign exchange
|
|
.1
|
|
|
—
|
|
|
.1
|
|
|||
|
Balance at March 31, 2019
|
|
$
|
22.6
|
|
|
$
|
1.3
|
|
|
$
|
23.9
|
|
|
|
|
Employee- Related Costs
|
|
Inventory/ Asset Write-offs
|
|
Contract
Terminations/Other
|
|
Foreign Currency Translation Adjustment Write-offs
|
|
Total
|
||||||||||
|
Open Up Avon
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Charges incurred to-date
|
|
$
|
62.7
|
|
|
$
|
92.6
|
|
|
$
|
5.3
|
|
|
$
|
(10.3
|
)
|
|
$
|
150.3
|
|
|
Estimated charges to be incurred on approved initiatives
|
|
1.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.0
|
|
|||||
|
Total expected charges on approved initiatives
|
|
$
|
63.7
|
|
|
$
|
92.6
|
|
|
$
|
5.3
|
|
|
$
|
(10.3
|
)
|
|
$
|
151.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Transformation Plan
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Charges incurred to-date
|
|
$
|
126.9
|
|
|
$
|
2.3
|
|
|
$
|
40.9
|
|
|
$
|
3.4
|
|
|
$
|
173.5
|
|
|
Estimated charges to be incurred on approved initiatives
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
|
Total expected charges on approved initiatives
|
|
$
|
126.9
|
|
|
$
|
2.3
|
|
|
$
|
40.9
|
|
|
$
|
3.4
|
|
|
$
|
173.5
|
|
|
|
|
Europe, Middle East & Africa
|
|
South Latin America
|
|
North Latin America
|
|
Asia
Pacific
|
|
Global & Other Operating Segments
|
|
Total
|
||||||||||||
|
Open Up Avon
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
2018
|
|
$
|
32.2
|
|
|
$
|
36.4
|
|
|
$
|
27.9
|
|
|
$
|
14.4
|
|
|
$
|
6.2
|
|
|
$
|
117.1
|
|
|
First quarter 2019
|
|
13.5
|
|
|
12.7
|
|
|
2.9
|
|
|
(3.2
|
)
|
|
7.3
|
|
|
33.2
|
|
||||||
|
Charges incurred to-date
|
|
45.7
|
|
|
49.1
|
|
|
30.8
|
|
|
11.2
|
|
|
13.5
|
|
|
150.3
|
|
||||||
|
Estimated charges to be incurred on approved initiatives
|
|
.1
|
|
|
—
|
|
|
.4
|
|
|
—
|
|
|
.5
|
|
|
1.0
|
|
||||||
|
Total expected charges on approved initiatives
|
|
$
|
45.8
|
|
|
$
|
49.1
|
|
|
$
|
31.2
|
|
|
$
|
11.2
|
|
|
$
|
14.0
|
|
|
$
|
151.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Transformation Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
2015
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21.4
|
|
|
$
|
21.4
|
|
|
2016
|
|
30.9
|
|
|
13.2
|
|
|
4.4
|
|
|
9.1
|
|
|
16.8
|
|
|
74.4
|
|
||||||
|
2017
|
|
.9
|
|
|
5.6
|
|
|
(.6
|
)
|
|
(.5
|
)
|
|
49.4
|
|
|
54.8
|
|
||||||
|
2018
|
|
5.0
|
|
|
4.1
|
|
|
.6
|
|
|
.6
|
|
|
13.4
|
|
|
23.7
|
|
||||||
|
First quarter 2019
|
|
(1.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
.3
|
|
|
(.8
|
)
|
||||||
|
Charges incurred to-date
|
|
35.7
|
|
|
22.9
|
|
|
4.4
|
|
|
9.2
|
|
|
101.3
|
|
|
173.5
|
|
||||||
|
Estimated charges to be incurred on approved initiatives
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
|
Total expected charges on approved initiatives
|
|
$
|
35.7
|
|
|
$
|
22.9
|
|
|
$
|
4.4
|
|
|
$
|
9.2
|
|
|
$
|
101.3
|
|
|
$
|
173.5
|
|
|
|
|
Europe, Middle East & Africa
|
|
South Latin
America
|
|
Asia
Pacific
|
|
Total
|
||||||||
|
Net balance at December 31, 2018
|
|
$
|
18.0
|
|
|
$
|
66.8
|
|
|
$
|
2.6
|
|
|
$
|
87.4
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Changes during the period ended March 31, 2019:
|
|
|
|
|
|
|
|
|
||||||||
|
Foreign exchange
|
|
(.3
|
)
|
|
1.5
|
|
|
—
|
|
|
1.2
|
|
||||
|
Net balance at March 31, 2019
|
|
$
|
17.7
|
|
|
$
|
68.3
|
|
|
$
|
2.6
|
|
|
$
|
88.6
|
|
|
|
Level 1
|
|
Level 2
|
|
Total
|
||||||
|
Assets:
|
|
|
|
|
|
|
|||||
|
Available-for-sale securities
|
$
|
3.9
|
|
|
$
|
—
|
|
|
$
|
3.9
|
|
|
Foreign exchange forward contracts
|
$
|
—
|
|
|
$
|
17.1
|
|
|
$
|
17.1
|
|
|
Total
|
$
|
3.9
|
|
|
$
|
17.1
|
|
|
$
|
21.0
|
|
|
Liabilities:
|
|
|
|
|
|
$
|
—
|
|
|||
|
Foreign exchange forward contracts
|
$
|
—
|
|
|
$
|
1.9
|
|
|
$
|
1.9
|
|
|
Total
|
$
|
—
|
|
|
$
|
1.9
|
|
|
$
|
1.9
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||||||||||
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
||||||||
|
Available-for-sale securities
|
$
|
3.9
|
|
|
$
|
3.9
|
|
|
$
|
3.8
|
|
|
$
|
3.8
|
|
|
Debt maturing within one year(1)
|
(425.4
|
)
|
|
(433.4
|
)
|
|
(12.0
|
)
|
|
(12.0
|
)
|
||||
|
Long-term debt(1)
|
(1,196.4
|
)
|
|
(1,207.1
|
)
|
|
(1,581.6
|
)
|
|
(1,460.2
|
)
|
||||
|
Foreign exchange forward contracts
|
15.2
|
|
|
15.2
|
|
|
(5.1
|
)
|
|
(5.1
|
)
|
||||
|
•
|
Available-for-sale securities - The fair values of these investments were the quoted market prices for issues listed on securities exchanges.
|
|
•
|
Debt maturing within one year and long-term debt - The fair values of our debt and other financing were determined using Level 2 inputs based on indicative market prices.
|
|
•
|
Foreign exchange forward contracts - The fair values of forward contracts were estimated based on quoted forward foreign exchange prices at the reporting date.
|
|
|
Asset
|
|
Liability
|
||||||||
|
|
Balance Sheet
Classification
|
|
Fair
Value
|
|
Balance Sheet
Classification
|
|
Fair
Value
|
||||
|
Derivatives designated as hedges:
|
|
|
|
|
|
|
|
||||
|
Foreign exchange forward contracts
|
Prepaid expenses and other
|
|
$
|
—
|
|
|
Accounts payable
|
|
$
|
1.6
|
|
|
|
|
|
|
|
|
|
|
||||
|
Derivatives not designated as hedges:
|
|
|
|
|
|
|
|
||||
|
Foreign exchange forward contracts
|
Prepaid expenses and other
|
|
$
|
17.1
|
|
|
Accounts payable
|
|
$
|
.3
|
|
|
Total derivatives
|
|
|
$
|
17.1
|
|
|
|
|
$
|
1.9
|
|
|
|
|
Three Months Ended March 31,
|
|||||||||
|
|
|
2019
|
|
2018
|
|
%/Basis Point
Change
|
|||||
|
Select Consolidated Financial Information
|
|
|
|
|
|
|
|||||
|
Total revenue
|
|
$
|
1,186.9
|
|
|
$
|
1,393.5
|
|
|
(15
|
)%
|
|
Cost of sales
|
|
517.0
|
|
|
579.7
|
|
|
(11
|
)%
|
||
|
Selling, general and administrative expenses
|
|
673.8
|
|
|
768.9
|
|
|
(12
|
)%
|
||
|
Operating (loss) profit
|
|
(3.9
|
)
|
|
44.9
|
|
|
*
|
|
||
|
Interest expense
|
|
33.2
|
|
|
36.2
|
|
|
(8
|
)%
|
||
|
Interest income
|
|
(1.7
|
)
|
|
(4.2
|
)
|
|
(60
|
)%
|
||
|
Other (income) expense, net
|
|
(22.6
|
)
|
|
2.5
|
|
|
*
|
|
||
|
Loss on extinguishment of debt and credit facilities
|
|
2.0
|
|
|
—
|
|
|
*
|
|
||
|
(Loss) income from continuing operations, before income taxes
|
|
(4.5
|
)
|
|
10.4
|
|
|
*
|
|
||
|
Loss from continuing operations, net of tax
|
|
(24.0
|
)
|
|
(21.1
|
)
|
|
*
|
|
||
|
Net loss attributable to Avon
|
|
$
|
(32.7
|
)
|
|
$
|
(20.3
|
)
|
|
*
|
|
|
|
|
|
|
|
|
|
|||||
|
Diluted loss per share attributable to Avon
|
|
$
|
(.09
|
)
|
|
$
|
(.06
|
)
|
|
*
|
|
|
|
|
|
|
|
|
|
|||||
|
Advertising expenses(1)
|
|
$
|
(16.1
|
)
|
|
$
|
(29.1
|
)
|
|
(45
|
)%
|
|
|
|
|
|
|
|
|
|||||
|
Reconciliation of Non-GAAP Financial Measures
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|||||
|
Gross margin
|
|
56.4
|
%
|
|
58.4
|
%
|
|
(200
|
)
|
||
|
CTI restructuring
|
|
0.4
|
|
|
—
|
|
|
—
|
|
||
|
Adjusted gross margin
|
|
56.8
|
%
|
|
58.4
|
%
|
|
(160
|
)
|
||
|
|
|
|
|
|
|
|
|||||
|
Selling, general and administrative expenses as a % of total revenue
|
|
56.8
|
%
|
|
55.2
|
%
|
|
160
|
|
||
|
CTI restructuring
|
|
(4.1
|
)
|
|
(.8
|
)
|
|
(330
|
)
|
||
|
Other items
|
|
(.3
|
)
|
|
—
|
|
|
(.3
|
)
|
||
|
Adjusted selling, general and administrative expenses as a % of total revenue
|
|
52.4
|
%
|
|
54.4
|
%
|
|
(200
|
)
|
||
|
|
|
|
|
|
|
|
|||||
|
Operating (loss) profit
|
|
$
|
(3.9
|
)
|
|
$
|
44.9
|
|
|
*
|
|
|
CTI restructuring
|
|
53.5
|
|
|
10.9
|
|
|
|
|
||
|
Other items
|
|
4.1
|
|
|
—
|
|
|
|
|||
|
Adjusted operating profit
|
|
$
|
53.7
|
|
|
$
|
55.8
|
|
|
(4
|
)%
|
|
|
|
|
|
|
|
|
|||||
|
Operating margin
|
|
(.3
|
)%
|
|
3.2
|
%
|
|
(350
|
)
|
||
|
CTI restructuring
|
|
4.5
|
|
|
.8
|
|
|
370
|
|
||
|
Other items
|
|
.3
|
|
|
—
|
|
|
.3
|
|
||
|
Adjusted operating margin
|
|
4.5
|
%
|
|
4.0
|
%
|
|
50
|
|
||
|
|
|
|
|
|
|
|
|||||
|
Change in Constant $ Adjusted operating margin(2)
|
|
|
|
|
|
150
|
|
||||
|
|
|
|
|
|
|
|
|||||
|
Loss (income) before taxes
|
|
$
|
(4.5
|
)
|
|
$
|
10.4
|
|
|
*
|
|
|
CTI restructuring
|
|
43.2
|
|
|
10.9
|
|
|
|
|
||
|
Other items
|
|
4.1
|
|
|
—
|
|
|
|
|||
|
Adjusted income before taxes
|
|
$
|
42.8
|
|
|
$
|
21.3
|
|
|
101
|
%
|
|
|
|
|
|
|
|
|
|
||||
|
Income taxes
|
|
$
|
(19.5
|
)
|
|
$
|
(31.5
|
)
|
|
(38
|
)%
|
|
CTI restructuring
|
|
(3.7
|
)
|
|
(2.1
|
)
|
|
|
|
||
|
Special tax items
|
|
—
|
|
|
9.2
|
|
|
|
|
||
|
Adjusted income taxes
|
|
$
|
(23.2
|
)
|
|
$
|
(24.4
|
)
|
|
(5
|
)%
|
|
|
|
|
|
|
|
|
|
||||
|
Effective tax rate
|
|
(433.3
|
)%
|
|
302.9
|
%
|
|
|
|
||
|
|
|
Three Months Ended March 31,
|
|||||||||
|
|
|
2019
|
|
2018
|
|
%/Basis Point
Change
|
|||||
|
Adjusted effective tax rate
|
|
54.2
|
%
|
|
114.6
|
%
|
|
|
|
||
|
|
|
|
|
|
|
|
|||||
|
Net cash (used) by operating activities of continuing operations
|
|
$
|
(142.7
|
)
|
|
$
|
(96.3
|
)
|
|
48
|
%
|
|
Net cash provided by investing activities of continuing operations
|
|
25.6
|
|
|
(27.0
|
)
|
|
*
|
|
||
|
Free cash flow (used) by continuing operations
|
|
$
|
(117.1
|
)
|
|
$
|
(123.3
|
)
|
|
(5
|
)%
|
|
|
|
|
|
|
|
|
|||||
|
Performance Metrics
|
|
|
|
|
|
|
|||||
|
Change in Active Representatives
|
|
|
|
|
|
(9
|
)%
|
||||
|
Change in units sold
|
|
|
|
|
|
(12
|
)%
|
||||
|
Change in Ending Representatives
|
|
|
|
|
|
(10
|
)%
|
||||
|
(1)
|
Advertising expenses are recorded in SG&A.
|
|
(2)
|
Change in Constant $ Adjusted operating margin for all years presented is calculated using the current-year Constant $ rates.
|
|
|
Three Months Ended March 31,
|
|
% Change
|
||||||||||
|
|
2019
|
|
2018
|
|
US$
|
|
Constant $
|
||||||
|
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
|
164.3
|
|
|
188.6
|
|
|
(13
|
)
|
|
(5
|
)
|
||
|
Home
|
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
|
)
|
|
Net sales from Other operating segments and business activities
|
—
|
|
|
12.8
|
|
|
(100
|
)
|
|
(100
|
)
|
||
|
Net sales
|
$
|
1,116.2
|
|
|
$
|
1,309.6
|
|
|
(15
|
)
|
|
(4
|
)
|
|
•
|
a decrease of 220 basis points due to the net unfavorable impact of foreign currency transaction losses and foreign currency translation largely due to currency devaluations in Brazil, Argentina and Turkey, partially offset by an increase of 150 basis points due to the favorable net impact of mix and pricing. Mix and pricing improvements were driven by inflationary pricing, lower promotional discounts, more effective incentives and more favorable product mix in most markets; and
|
|
•
|
a decrease of 90 basis points from the higher cost of incentives.
|
|
•
|
foreign currency transaction losses (classified within cost of sales, and SG&A in our Consolidated Statements of Operations), which had an unfavorable impact to operating profit and Adjusted operating profit of approximately $25, or approximately 170 basis points to operating margin and Adjusted operating margin;
|
|
•
|
foreign currency translation, which had an immaterial and unfavorable impact of approximately $15 to operating profit and Adjusted operating profit, respectively, or a favorable impact of approximately 20 basis points and an unfavorable impact of approximately 40 basis points, respectively, to operating margin and Adjusted operating margin; and
|
|
•
|
higher foreign exchange net gains on our working capital (classified within other expense, net in our Consolidated Statements of Operations) as compared to the prior year, resulting in a favorable impact of approximately $20 before tax on both a reported and Adjusted basis.
|
|
|
Three Months Ended March 31,
|
||||||||||||
|
|
|
|
|
|
%/Basis Point Change
|
||||||||
|
|
2019
|
|
2018
|
|
US$
|
|
Constant $
|
||||||
|
Total revenue
|
$
|
458.7
|
|
|
$
|
568.4
|
|
|
(19
|
)%
|
|
(9
|
)%
|
|
Segment profit
|
59.2
|
|
|
74.4
|
|
|
(20
|
)%
|
|
(8
|
)%
|
||
|
|
|
|
|
|
|
|
|
||||||
|
Segment margin
|
12.9
|
%
|
|
13.1
|
%
|
|
(20
|
)
|
|
20
|
|
||
|
|
|
|
|
|
|
|
|
||||||
|
Change in Active Representatives
|
|
|
|
|
|
|
(12
|
)%
|
|||||
|
Change in units sold
|
|
|
|
|
|
|
(15
|
)%
|
|||||
|
Change in Ending Representatives
|
|
|
|
|
|
|
(12
|
)%
|
|||||
|
|
Three Months Ended March 31,
|
||||||||||||
|
|
|
|
|
|
%/Basis Point Change
|
||||||||
|
|
2019
|
|
2018
|
|
US$
|
|
Constant $
|
||||||
|
Total revenue
|
$
|
414.7
|
|
|
$
|
497.1
|
|
|
(17
|
)%
|
|
1
|
%
|
|
Segment profit
|
23.8
|
|
|
27.2
|
|
|
(13
|
)%
|
|
33
|
%
|
||
|
|
|
|
|
|
|
|
|
||||||
|
Segment margin
|
5.7
|
%
|
|
5.5
|
%
|
|
20
|
|
|
150
|
|
||
|
|
|
|
|
|
|
|
|
||||||
|
Change in Active Representatives
|
|
|
|
|
|
|
(6
|
)%
|
|||||
|
Change in units sold
|
|
|
|
|
|
|
(11
|
)%
|
|||||
|
Change in Ending Representatives
|
|
|
|
|
|
|
(7
|
)%
|
|||||
|
|
Three Months Ended March 31,
|
||||||||||||
|
|
|
|
|
|
%/Basis Point Change
|
||||||||
|
|
2019
|
|
2018
|
|
US$
|
|
Constant $
|
||||||
|
Total revenue
|
$
|
192.7
|
|
|
$
|
195.6
|
|
|
(1
|
)%
|
|
1
|
%
|
|
Segment profit
|
16.5
|
|
|
20.8
|
|
|
(21
|
)%
|
|
(18
|
)%
|
||
|
|
|
|
|
|
|
|
|
||||||
|
Segment margin
|
8.6
|
%
|
|
10.6
|
%
|
|
(200
|
)
|
|
(200
|
)
|
||
|
|
|
|
|
|
|
|
|
||||||
|
Change in Active Representatives
|
|
|
|
|
|
|
(8
|
)%
|
|||||
|
Change in units sold
|
|
|
|
|
|
|
(3
|
)%
|
|||||
|
Change in Ending Representatives
|
|
|
|
|
|
|
(12
|
)%
|
|||||
|
|
Three Months Ended March 31,
|
||||||||||||
|
|
|
|
|
|
%/Basis Point Change
|
||||||||
|
|
2019
|
|
2018
|
|
US$
|
|
Constant $
|
||||||
|
Total revenue
|
$
|
115.3
|
|
|
$
|
111.4
|
|
|
3
|
%
|
|
7
|
%
|
|
Segment profit
|
16.7
|
|
|
10.4
|
|
|
61
|
%
|
|
64
|
%
|
||
|
|
|
|
|
|
|
|
|
||||||
|
Segment margin
|
14.5
|
%
|
|
9.3
|
%
|
|
520
|
|
|
500
|
|
||
|
|
|
|
|
|
|
|
|
||||||
|
Change in Active Representatives
|
|
|
|
|
|
|
(12
|
)%
|
|||||
|
Change in units sold
|
|
|
|
|
|
|
(1
|
)%
|
|||||
|
Change in Ending Representatives
|
|
|
|
|
|
|
(6
|
)%
|
|||||
|
•
|
our ability to improve our financial and operational performance and execute fully our global business strategy, including our ability to implement the key initiatives of, and/or realize the projected benefits (in the amounts and time schedules we expect) from, our Transformation Plan, Open Up Avon, stabilization strategies, cost savings initiatives, restructuring and other initiatives, product mix and pricing strategies, enterprise resource planning, customer service initiatives, sales and operation planning process, outsourcing strategies, Internet platform and technology strategies including e-commerce, marketing and advertising strategies, information technology and related system enhancements and cash management, tax, foreign currency hedging and risk management strategies, and any plans to invest these projected benefits ahead of future growth;
|
|
•
|
our ability to achieve the anticipated benefits of our strategic partnership with Cerberus Capital Management, L.P.;
|
|
•
|
our broad-based geographic portfolio, which is heavily weighted towards emerging markets, a general economic downturn, a recession globally or in one or more of our geographic regions or markets, such as Brazil, Mexico or Russia, or sudden disruption in business conditions, and the ability to withstand an economic downturn, recession, cost inflation, commodity cost pressures, economic or political instability (including fluctuations in foreign exchange rates), competitive or other market pressures or conditions;
|
|
•
|
the effect of economic factors, including inflation and fluctuations in interest rates and foreign currency exchange rates; as well as the designation of Argentina as a highly inflationary economy, and the potential effect of such factors on our business, results of operations and financial condition;
|
|
•
|
the possibility of business disruption in connection with our Transformation Plan, Open Up Avon, stabilization strategies, cost savings initiatives, or restructuring and other initiatives;
|
|
•
|
our ability to reverse declining revenue, to improve margins and net income, or to achieve profitable growth, particularly in our largest markets and developing and emerging markets, such as Brazil, Mexico and Russia;
|
|
•
|
our ability to improve working capital and effectively manage doubtful accounts and inventory and implement initiatives to reduce inventory levels, including the potential impact on cash flows and obsolescence;
|
|
•
|
our ability to reverse declines in Active Representatives, to enhance our sales leadership programs, to generate Representative activity, to increase the number of consumers served per Representative and their engagement online, to enhance branding and the Representative and consumer experience and increase Representative productivity through field activation and segmentation programs and technology tools and enablers, to invest in the direct-selling channel, to offer a more social selling experience, and to compete with other direct-selling organizations to recruit, retain and service Representatives and to continue to innovate the direct-selling model;
|
|
•
|
general economic and business conditions in our markets, including social, economic and political uncertainties, such as in Russia and Ukraine or elsewhere, and any potential sanctions, restrictions or responses to such conditions imposed by other markets in which we operate;
|
|
•
|
the effect of political, legal, tax, including changes in tax rates, and other regulatory risks imposed on us abroad and in the U.S., our operations or the Representatives, including foreign exchange, pricing, data privacy or other restrictions, the adoption, interpretation and enforcement of foreign laws, including in jurisdictions such as Brazil and Russia, and any changes thereto, as well as reviews and investigations by government regulators that have occurred or may occur from time to time, including, for example, local regulatory scrutiny;
|
|
•
|
competitive uncertainties in our markets, including competition from companies in the consumer packaged goods industry, some of which are larger than we are and have greater resources;
|
|
•
|
the impact of the adverse effect of volatile energy, commodity and raw material prices, changes in market trends, purchasing habits of our consumers and changes in consumer preferences, particularly given the global nature of our business and the conduct of our business in primarily one channel;
|
|
•
|
our ability to attract and retain key personnel;
|
|
•
|
other sudden disruption in business operations beyond our control as a result of events such as acts of terrorism or war, natural disasters, pandemic situations, large-scale power outages and similar events;
|
|
•
|
key information technology systems, process or site outages and disruptions, and any cyber security breaches, including any security breach of our systems or those of a third-party provider that results in the theft, transfer or unauthorized disclosure of Representative, customer, employee or Company information or compliance with information security and privacy laws and regulations in the event of such an incident which could disrupt business operations, result in the loss of critical and confidential information, and adversely impact our reputation and results of operations, and related costs to address such malicious intentional acts and to implement adequate preventative measures against cyber security breaches;
|
|
•
|
our ability to comply with various data privacy laws affecting the markets in which we do business;
|
|
•
|
the risk of product or ingredient shortages resulting from our concentration of sourcing in fewer suppliers;
|
|
•
|
any changes to our credit ratings and the impact of such changes on our financing costs, rates, terms, debt service obligations, access to lending sources and working capital needs;
|
|
•
|
the impact of our indebtedness, our access to cash and financing, and our ability to secure financing or financing at attractive rates and terms and conditions;
|
|
•
|
the impact of our business results (including the impact of any adverse foreign exchange movements and significant restructuring charges), on our ability to comply with certain covenants in our revolving credit facility;
|
|
•
|
our ability to successfully identify new business opportunities, strategic alliances and strategic alternatives and identify and analyze alliance candidates, secure financing on favorable terms and negotiate and consummate alliances;
|
|
•
|
disruption in our supply chain or manufacturing and distribution operations;
|
|
•
|
the quality, safety and efficacy of our products;
|
|
•
|
the success of our research and development activities;
|
|
•
|
our ability to protect our intellectual property rights, including in connection with the separation of the North America business;
|
|
•
|
our ability to repurchase the series C preferred stock in connection with a change of control; and
|
|
•
|
the risk of an adverse outcome in any material pending and future litigation or with respect to the legal status of Representatives.
|
|
|
|
Total Number
of Shares
Purchased
|
|
Average Price
Paid per Share
|
|
Total Number of Shares
Purchased as Part of
Publicly Announced
Programs
|
|
Approximate Dollar
Value of Shares that
May Yet Be Purchased
Under the Program
|
|||
|
1/1 - 1/31/19
|
|
—
|
|
|
$
|
—
|
|
|
*
|
|
*
|
|
2/1 - 2/28/19
|
|
—
|
|
|
—
|
|
|
*
|
|
*
|
|
|
3/1 - 3/31/19
|
|
—
|
|
|
—
|
|
|
*
|
|
*
|
|
|
Total
|
|
—
|
|
|
$
|
—
|
|
|
*
|
|
*
|
|
*
|
These amounts are not applicable as the Company does not have a share repurchase program in effect.
|
|
|
|
|
3.1
|
|
|
|
|
|
10.1
|
|
|
|
|
|
10.2
|
|
|
|
|
|
10.3
|
|
|
|
|
|
31.1
|
|
|
|
|
|
31.2
|
|
|
|
|
|
32.1
|
|
|
|
|
|
32.2
|
|
|
|
|
|
101
|
The following materials formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Statements of Operations, (ii) Consolidated Statements of Comprehensive Loss, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements
|
|
|
|
AVON PRODUCTS, INC.
|
|
|
|
(Registrant)
|
|
|
|
|
|
Date:
|
May 3, 2019
|
/s/ Laura Barbrook
|
|
|
|
Laura Barbrook
|
|
|
|
Vice President and Corporate
|
|
|
|
Controller - Principal Accounting Officer
|
|
|
|
|
|
|
|
Signed both on behalf of the
|
|
|
|
registrant and as chief
|
|
|
|
accounting officer.
|
|
ARTICLE I DEFINITIONS
|
2
|
|
1.1.
|
Defined Terms. 2
|
|
1.2.
|
Construction. 9
|
|
ARTICLE II SALE AND PURCHASE
|
10
|
|
2.1.
|
Sale and Purchase. 10
|
|
2.2.
|
Purchase Price. 10
|
|
ARTICLE III CLOSING
|
10
|
|
3.1
|
Closing. 10
|
|
3.2
|
Closing Payments. 11
|
|
3.3
|
Post-Closing Payment. 11
|
|
3.4
|
Payment of the Intercompany Loan Balances. 11
|
|
3.5
|
Closing Deliveries. 12
|
|
3.6
|
Avon Asia Withholding Tax. 13
|
|
3.7
|
Escrow. 14
|
|
3.8
|
Late Payment. 15
|
|
ARTICLE IV REPRESENTATIONS AND WARRANTIES
|
15
|
|
4.1
|
Representations and Warranties of Sellers relating to each Seller and the Sale Equity. 15
|
|
4.2
|
Representations and Warranties of each Seller relating to the Company. 16
|
|
4.3
|
Representations and Warranties of Purchaser. 26
|
|
ARTICLE V COVENANTS
|
27
|
|
5.1.
|
Conduct of Business. 27
|
|
5.2.
|
Best Efforts; Cooperation and Assistance. 29
|
|
5.3.
|
Access and Information. 31
|
|
5.4.
|
Replacement of Directors. 31
|
|
5.5.
|
No Shop. 31
|
|
5.6.
|
Confidentiality; Public Announcements. 31
|
|
5.7.
|
Employee Retentions. 32
|
|
5.8.
|
INTENTIONALLY OMITTED. 32
|
|
5.9.
|
Related Party Contracts; Transitional Agreements. 33
|
|
5.10.
|
Non-Competition; Non-Solicitation. 33
|
|
5.11.
|
Tax Return Filing After Closing. 34
|
|
5.12.
|
Manufacturing and Supply Agreement. 34
|
|
5.13.
|
Use of Company Name. 34
|
|
ARTICLE VI CONDITIONS PRECEDENT
|
35
|
|
6.1.
|
Conditions Precedent to the Obligations of each Seller to Sell the Sale Equity. 35
|
|
6.2.
|
Conditions Precedent to the Obligations of Purchaser to Purchase the Sale Equity. 35
|
|
ARTICLE VII INDEMNIFICATION
|
36
|
|
7.1.
|
Indemnification. 36
|
|
7.2.
|
Survival of Claims. 37
|
|
7.3.
|
Limitations on Liability. 37
|
|
7.4.
|
Claims for Indemnification. 38
|
|
7.5.
|
Indemnification Procedures for Tax Claims 39
|
|
7.6.
|
Additional Indemnification. 41
|
|
7.7.
|
Sole and Exclusive Remedy. 41
|
|
ARTICLE VIII TERMINATION
|
41
|
|
8.1.
|
Termination. 41
|
|
8.2.
|
Effect of Termination. 42
|
|
ARTICLE IX MISCELLANEOUS
|
42
|
|
9.1.
|
Entire Agreement. 42
|
|
9.2.
|
Assignment. 42
|
|
9.3.
|
Tax and Expenses. 42
|
|
9.4.
|
Governing Law and Dispute Resolution. 42
|
|
9.5.
|
Amendments. 43
|
|
9.6.
|
Severability. 43
|
|
9.7.
|
Notices. 43
|
|
9.8.
|
Joint and Several Liability. 44
|
|
9.9.
|
Language; Counterparts. 44
|
|
9.10.
|
No Third Party Beneficiary. 44
|
|
(i)
|
TheFaceShop Co., Ltd., a company incorporated and existing under the laws of Korea and having its registered address at 58 Saemunan-ro, Jongno-gu, Seoul, Korea (“Purchaser”);
|
|
(ii)
|
Avon Asia Holdings Company, a company incorporated and existing under the laws of Republic of Mauritius and having its registered address at 2nd Floor, 22 Saint Georges Street, Port Louis, Republic of Mauritius (“Avon Asia”); and
|
|
(iii)
|
Avon Products (China) Co., Ltd. (“雅Å芳¼༈¨中Ð国ú༉©有Ð限Þ公«司¾” in Chinese), a company incorporated and existing under the laws of the PRC and having its registered address at Unit 03-04, FL 7, No. 18, Hua Cheng Avenue, Tianhe District, Guangzhou, PRC (“Avon China” and together with Avon Asia, collectively, “Sellers” and individually, a “Seller”).
|
|
1.1.
|
Defined Terms.
|
|
2.1.
|
Sale and Purchase.
|
|
(a)
|
USD 28,400,000, representing Avon Asia’s pro rata portion of the Purchase Price based on its Allocation Percentage (the “Avon Asia Consideration”), shall be paid by Purchaser to Avon Asia; and
|
|
(b)
|
RMB 295,460,820, which is the RMB amount equivalent to USD 42,600,000 converted using the Agreed USD/RMB Rate, representing Avon China’s pro rata portion of the Purchase Price based on its Allocation Percentage (the “Avon China Consideration”), shall be paid by Purchaser to Avon China,
|
|
(a)
|
to Avon Asia, the Avon Asia Consideration, less the sum of (i) the Avon Asia Escrow Amount, and (ii) the Avon Asia Holdback Amount, by wire transfer of immediately available funds in USD to the bank account of Avon Asia designated and notified to Purchaser in writing by Avon Asia at least five (5) Business Days prior to the Closing Date; and
|
|
(b)
|
to Avon China, the Avon China Consideration (the “Avon China Closing Payment”), by wire transfer of immediately available funds in RMB to the Avon China Escrow Account.
|
|
(a)
|
Within five (5) Business Days after Purchaser’s receipt of a written notice from Avon China notifying that Avon China has set up the Asset Realization Account for purpose of receiving its portion of the Closing Payments, Purchaser and Avon China shall irrevocably instruct the Escrow Agent to release from the Avon China Escrow Account to Avon China an amount equal to the Intercompany Loan Balances outstanding on the Closing Date (the “Avon China First Release Amount”), by wire transfer of immediately available funds in RMB to the Asset Realization Account; and
|
|
(b)
|
Within five (5) Business Days after the completion of the repayment of Intercompany Loan Balances in accordance with Section 3.4, Purchaser and Avon China shall irrevocably instruct the Escrow Agent to release from the Avon China Escrow Account to Avon China, the Avon China Consideration, less the sum of (i) Avon China Escrow Amount and (ii) the Avon China First Release Amount, by wire transfer of immediately available funds in RMB to the Asset Realization Account.
|
|
(a)
|
Purchaser’s Deliverables at the Closing. At the Closing, Purchaser shall deliver (or cause to be delivered) to each Seller the following items:
|
|
(i)
|
a written receipt confirming Purchaser’s receipt of such Seller’s portion of the Sale Equity, duly executed by Purchaser;
|
|
(ii)
|
an executed copy of each of the Avon Asia Escrow Agreement and the Avon China Escrow Agreement, duly executed by Purchaser;
|
|
(iii)
|
all other documents or instruments required to be delivered by Purchaser pursuant hereto or reasonably requested by Sellers to consummate the Transaction.
|
|
(b)
|
Sellers’ Deliverables at the Closing. At the Closing, each Seller shall deliver (or cause to be delivered) to Purchaser the following items:
|
|
(i)
|
original capital contribution certificate issued by the Company representing Purchaser’s holding of all Sale Equity in the Company;
|
|
(ii)
|
copy of the shareholders registry of the Company with the Company’s seal chopped in which Purchaser is recorded as the sole legal and beneficial owner of all of the Sale Equity, free and clear of any and all Encumbrances, as of the Closing Date;
|
|
(iii)
|
a written letter confirming the waiver of the right of first refusal and consent to the Transaction by each Seller;
|
|
(iv)
|
a copy of the resolutions of the board of directors of the Company approving the Transaction;
|
|
(v)
|
a written receipt issued by Avon Asia confirming Avon Asia’s receipt of its portion of the Closing Payment, duly executed by such Seller, provided that the foregoing portion of the Closing Payment is fully received by Avon Asia on the Closing Date;
|
|
(vi)
|
the original letter of resignation, waiver, and release of each of the directors of the Company in the form attached hereto as Exhibit 5.4(a), along with all other documents required for the registration of such resignations with the competent SAMR;
|
|
(vii)
|
an executed copy of the Manufacturing and Supply Agreement, duly executed by the Company and ACL;
|
|
(viii)
|
an executed copy of each of the Avon Asia Escrow Agreement and the Avon China Escrow Agreement, duly executed by the Seller which is a party thereto;
|
|
(ix)
|
a copy of the new business license of the Company and other necessary supporting documents evidencing the completion of the SAMR Registration and showing Purchaser as the sole equity holder of the Company;
|
|
(x)
|
a copy of the certificate regarding the MOFCOM Filing and other necessary supporting documents evidencing the completion of the MOFCOM Filing and showing Purchaser as the sole equity holder of the Company; and
|
|
(xi)
|
all other documents or instruments required to be delivered by each Seller pursuant hereto or reasonably requested by Purchaser to consummate the transactions contemplated by this Agreement.
|
|
(i)
|
Avon Asia shall complete the CGT Reporting and Payment and provide the documents set forth in (x) or (y) above, as applicable, as soon as practicable but no later than three (3) months after the Closing.
|
|
(ii)
|
Purchaser shall deduct and withhold USD 1,181,000, which is equivalent to ten percent (10%) of the Avon Asia Estimated Capital Gain (the “Avon Asia Holdback Amount”), from the Avon Asia Consideration. “Avon Asia Estimated Capital Gain” means, for the sole purpose of determining the Avon Asia Holdback Amount, the difference between the Avon Asia Consideration and the aggregate
|
|
(a)
|
At the Closing, Purchaser shall deposit with the Escrow Agent (i) (x) USD 3,000,000 (the “Avon Asia Escrow Amount”) and (y) the Avon Asia Holdback Amount in USD 1,181,000, to be held in the Avon Asia Escrow Account pursuant to the Avon Asia Escrow Agreement, and (ii) (x) an RMB amount equivalent to USD 4,500,000 converted using the Agreed USD/RMB Rate, which is RMB 31,210,650, to the Avon China Escrow Account (the “Avon China Escrow Amount” and together with the Avon Asia Escrow Amount, the “Escrow Amounts”), and (y) the difference between the Avon China Consideration and Avon China Escrow Amount, which is RMB 264,250,170, in each case to be held in the Avon China Escrow Account pursuant to Avon China Escrow Agreement. The Avon Asia Escrow Amount and the Avon China Escrow Amount shall be available for and used to satisfy any claim arising in relation to Sellers’ indemnities set forth in Section 7.1(a) of this Agreement (but subject to the limitations set forth in Section 7.3); provided, however, that the Avon Asia Escrow Amount shall be available for and used to satisfy any claim arising in relation to Avon Asia’s indemnities set forth in Section 3.6(c). Each Escrow Account shall be maintained for 24 months (the “Escrow Term”) following the Closing.
|
|
(b)
|
For the avoidance of doubt, to the extent that any claim which has been notified to Sellers by Purchaser remains unresolved at the expiration of each Escrow Account, the Escrow Amount corresponding to such claim amount shall not be released from such Escrow Account until such claim is resolved in accordance with Section 9.4, and the Parties shall (i) extend the Escrow Term until such claim is resolved so that the Escrow Amount corresponding to such claim shall remain in such Escrow Account in the same manner; and (ii) cause the Escrow Agent to release the undisputed Escrow Amounts remaining in the respective Escrow Accounts upon expiration of the initial Escrow Term pursuant to Section 3.7(d). Purchaser agrees not to abuse its right of claim without any reasonable cause.
|
|
(c)
|
In the event that any breach or non-fulfillment of any of Sellers’ representations, warranties, covenants, agreements or obligations under this Agreement is made known to Purchaser prior to the Closing, subject to the limitations as provided in Section 7.3, Purchaser shall prepare and deliver to Seller a statement setting forth in reasonable detail the description of the alleged breaches/non-fulfillments and the amount of Losses incurred by the Company or Purchaser in connection with such breach or non-fulfillment, as applicable. In such event, the Parties shall negotiate in good faith to agree on the amount of Losses arising from such breach or non-fulfillment, which shall be deducted from the Purchase Price, with the Escrow Amount being reduced by the same amount. In the event that the Parties cannot agree on the full amount of such Losses after such good-faith negotiation, the portion of the Losses to which the Parties agree shall be deducted from the Purchase Price (with corresponding reduction of the Escrow Amount), and Purchaser shall have the right to seek indemnification in respect of the excess amount of such Losses after the Closing in accordance with Article VII.
|
|
(d)
|
On the expiry date of the Escrow Term, Purchaser and the respective Seller shall, in accordance with the Avon Asia Escrow Agreement and Avon China Escrow Agreement, respectively, irrevocably instruct the Escrow Agent to:
|
|
(i)
|
release to Avon Asia the Avon Asia Escrow Amount remaining in the Avon Asia Escrow Account, by wire transfer of immediately available funds in USD to the bank account of Avon Asia designated and notified to Purchaser in writing by Avon Asia at least five (5) Business Days prior to such expiry date; and
|
|
(ii)
|
release to Avon China the Avon China Escrow Amount remaining in the Avon China Escrow Account, by wire transfer of immediately available funds in RMB to the bank account of Avon China designated
|
|
(a)
|
Organization and Existence; Authorization. Each Seller is duly organized and validly existing under the Laws of the jurisdiction of its incorporation, and has requisite power and authority required to conduct its business as it is now being conducted. Each Seller has full authority and capacity to execute and deliver this Agreement and to perform its obligations hereunder and the execution and delivery by such Seller of this Agreement, the performance of its obligations hereunder, and the consummation by such Seller of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate proceedings on the part of such Seller. This Agreement has been duly executed and delivered by each Seller, and this Agreement constitutes the legal, valid and binding obligation of such Seller enforceable against such Seller in accordance with its terms, except insofar as the enforceability hereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, rehabilitation, special liquidation, fraudulent conveyance, or other similar Laws affecting the enforcement of creditors’ rights generally.
|
|
(b)
|
Absence of Conflicts; No Consents. Neither the execution, delivery and performance of this Agreement, nor the Transaction, will contravene, conflict with, or result in a violation of (i) any provision of the Organizational Documents of any Seller or the Company, (ii) any Law applicable to any Seller or the Company or any of the assets owned by the Company, (iii) any of the terms or requirements of, or give any Government Authority the right to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental Approval that is held by the Company, or (iv) any Material Contract. No Governmental Approval or consent or approval by or notification to any Person is required to be obtained by each Seller in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby.
|
|
(c)
|
Sale Equity. Each Seller holds of record and legally and beneficially owns its portion of the Sale Equity set forth next to its name on Exhibit 1, in each case free and clear of any Encumbrances. At the Closing, Purchaser shall acquire all of the Sale Equity free and clear of any Encumbrances. Such Sale Equity to be transferred to Purchaser at the Closing shall (i) have had its corresponding registered capital fully paid-in, (ii) have been issued in compliance with all applicable Laws and (iii) not be subject to any pre-emptive, subscription or other similar rights of any other Person, except for the right of refusal that will be waived pursuant to Section 3.5(b)(iii) below.
|
|
(d)
|
Litigation. There are no Proceedings pending or, to the Knowledge of Sellers, threatened against any of Sellers that prohibits or restricts the Transaction.
|
|
(e)
|
No Brokers. No Person has acted, directly or indirectly, as a broker, finder or financial advisor for each Seller or any of its Affiliates in connection with the Transaction for which the Company has incurred or will incur any liability.
|
|
(a)
|
Organization and Existence. The Company is a company duly organized and validly existing under the Laws of PRC, and has all requisite power and authority required to conduct its business as it is now being conducted and to own, lease and operate all of its properties and assets. Sellers have made available to Purchaser true, correct and complete copies of the Organizational Documents of the Company and such documents are in full force and effect.
|
|
(b)
|
Capitalization.
|
|
(i)
|
Section 4.2(b) of the Disclosure Schedules sets forth an accurate list as of the date hereof and as of the Closing Date of the registered capital of the Company, the paid-in registered capital of the Company and the legal ownership thereof. The Sale Equity represents one hundred percent (100%) of the equity interests in the Company. There are no outstanding options, warrants, purchase rights, subscription rights, conversion rights, exchange rights or other Contracts or commitments that may require the Company to issue any equity interests of the Company.
|
|
(ii)
|
There are no obligations, contingent or otherwise, of the Company to repurchase, redeem or otherwise acquire any equity interests of the Company or provide material funds to, or make any material investment in (in the form of a loan, capital contribution or otherwise) or provide any guarantee with respect to the obligations of, any Person. There are no outstanding stock appreciation, phantom stock, profit participation or similar rights with respect to the Company. There are no bonds, debentures, notes or other indebtedness of the Company having the right to vote or consent (or, convertible into, or exchangeable for, securities having the right to vote or consent) on any matters on which shareholders (or other equity holders) of the Company may vote.
|
|
(iii)
|
The Company does not have any Subsidiaries or branches.
|
|
(c)
|
Financial Statements; Internal Controls.
|
|
(i)
|
Section 4.2(c) of the Disclosure Schedules sets forth the audited financial statements of the Company as of and for each of the fiscal year ended December 31, 2016 and December 31, 2017, and the reviewed financial statements of the Company as of and for the ten-month period ended September 30, 2018 (collectively, the “Financial Statements”). The Financial Statements (including the notes thereto) have been prepared in accordance with the Accounting Standards and fairly present in all material respects the financial condition and the results of operations of the Company as at and for the relevant period covered in the applicable Financial Statements.
|
|
(ii)
|
The Company maintains (i) books, records and accounts that reflect, in reasonable detail, the character and amount of all transactions of the Company, its assets and liabilities and such books, records and accounts are complete and accurate in all material respects and (ii) adequate and effective internal accounting controls which provide commercially reasonable assurance that (A) all assets, liabilities and transactions of the Company are accounted for in accordance with the Accounting Standards and (B) the Company has not established or maintained any unrecorded funds or accounts.
|
|
(d)
|
No Undisclosed Liabilities. The Company does not have any Liabilities, except (i) Liabilities that are specifically stated in the Financial Statements, or (ii) Liabilities incurred in the Ordinary Course of Business since the Balance Sheet Date.
|
|
(e)
|
Absence of Changes. Since the Balance Sheet Date, except as set forth in Section 4.2(e) of the Disclosure Schedules, (i) the Company has conducted its business in the Ordinary Course of Business, (ii) there has been no Material Adverse Effect and (iii) there has not occurred any matter that would require the consent of Purchaser pursuant to Section 5.1 had such matter occurred after the date hereof.
|
|
(f)
|
Litigation. There is no Proceeding pending or, to the Knowledge of Seller, threatened against the Company (or any of its directors, officers or employees with respect to whom the Company may be obligated to indemnify for any Losses incurred as a result of any such Proceeding) or any assets or properties material to the Company.
|
|
(g)
|
Compliance with Laws; Governmental Approvals.
|
|
(i)
|
The Company has been in all material respects in compliance with all Laws applicable to the Company and its assets, and has not received any written notices or other communications from any Governmental Authority regarding any actual or possible material violation of Law.
|
|
(ii)
|
The Company is not a party or subject to any Order and the Company holds all Governmental Approvals that are required for the conduct of its business (including the manufacture and assembly of its products) as now being conducted, and such Governmental Approvals are valid and in full force and effect. The Company has been in compliance with all Governmental Approvals in all material respects. All such Governmental Approvals are renewable in the Ordinary Course of Business, and there is no fact, condition or circumstance that could reasonably be expected to lead to any modification, suspension, revocation or non-renewal of any of such Governmental Approvals.
|
|
(iii)
|
Unless otherwise disclosed in the Disclosure Schedules, none of the Company or any Associated Person of the Company, have: (i) violated, or engaged in any activity, practice or conduct which would violate, any applicable Anti-Corruption Law or AML Law; (ii) used corporate funds or assets for any unlawful contribution, gift, entertainment or other unlawful expense, or made any unlawful bribe, rebate, payoff, influence payment, facilitation payment, kickback or other unlawful payment; or (iii) directly, or indirectly through its agents, representatives or any other Associated Person, offered, promised, paid, given or authorized payment or the giving of money or anything else of value to any Government Official or Governmental Entity for the purpose of (A) influencing any act or decision of such Government Official or Governmental Entity in his, her or its official capacity, including a decision to do or omit to do any act in violation of his, her or its lawful duties, or (B) inducing such Government Official or Governmental Entity to use his, her or its influence or position to influence any act or decision of any Governmental Entity, in either case in order to obtain or retain business for, direct business to, or secure an improper advantage for, any of Sellers or the Company.
|
|
(iv)
|
The Company has adopted and maintains in effect adequate policies, procedures and controls to ensure that the Company has complied and is in compliance with applicable Anti-Corruption Laws and AML Laws.
|
|
(h)
|
Title to Assets. The Company has good, valid and marketable title to, or has a valid leasehold, license or other similar interest in, all of its material tangible and intangible assets owned, leased or otherwise used by the Company (including, for the avoidance of doubt, the Company Owned Real Property, the Company Leased Real Property and the Company Intellectual Property, the “Company Assets”), free and clear of all Encumbrances. Such Company Assets comprise all of the material assets required by the Company to conduct its business as now being conducted and are sufficient, in all material respects, for the continued conduct of its business after the Closing in substantially the same manner as conducted prior to the Closing. There is no claim or right entitling any Governmental Authority, or other Person, to use, have access to, possess or control any of the Company Assets or any part thereof or otherwise to limit the right of the Company to use or possess any of the Company Assets in any form. The Company has obtained all requisite Governmental Approvals entitling the Company to construct, purchase, own, operate, use and dispose of the Company Assets as they are being presently used. All Company Assets are in good working order and repair (normal wear and tear excepted) and have been regularly and appropriately maintained according to appropriate technical specification, environmental, occupational health and safety rules and the terms and conditions of any applicable Contract and Law.
|
|
(i)
|
Real Property.
|
|
(i)
|
Section 4.2(i)(i) of the Disclosure Schedules sets forth an accurate and complete list of the Company Owned Real Property.
|
|
(ii)
|
Section 4.2(i)(ii) of the Disclosure Schedules sets forth an accurate and complete list of the Company Leased Real Property.
|
|
(iii)
|
With regard to each Company Lease, except as disclosed in Section 4.2(i)(iii) of the Disclosure Schedules, (i) such Company Lease is valid and effective in accordance with the terms thereof, (ii) neither the Company nor to the Knowledge of each Seller, any other party to a Company Lease is in breach thereof, (iii) to the Knowledge of each Seller, no event or circumstance has occurred or currently exists which, with notice, lapse of time or both, would become a material default by the Company or any other party thereto, and (iv) to the Knowledge of each Seller, no events or circumstances exist which may prevent or hinder (A) the renewal of such Company Lease in the Ordinary Course of Business or (B) the refund of any key money deposit upon expiration of the Company Lease.
|
|
(iv)
|
With regard to the land parcel located at Industrial district C3-1, C3-2, Taiping Village, Conghua City, PRC, (i) the Company has complied with the relevant procedures for the grant of the land-use right as required by applicable Laws, (ii) has complied, and is in compliance, with the relevant land-use right grant agreement (“Land-Use Right Grant Agreement”) (“国ú有Ð建¨设è用Ã地Ø使¹用Ã权¨出ö让Ã合
|
|
(v)
|
The Company has not entered into any sublease, license, option, right concession or other agreement or arrangement granting to any person the right to use or occupy any Company Owned Real Property or Company Leased Real Property or any portion thereof and the Company has not received notice from any Governmental Authority or other Person that the use and occupancy of any of the Company Owned Real Property or the Company Leased Real Property, and the conduct of its business thereon, violates in any material respects any applicable Law applicable to the construction, maintenance and use of the Company Owned Real Property or Company Leased Real Property, including, without limitation, the building codes, zoning, subdivision or other land use or similar Laws.
|
|
(vi)
|
There is no pending or, to the Knowledge of Sellers, threatened condemnation or eminent domain proceeding with respect to any Company Owned Real Property or Company Leased Real Property or any part thereof.
|
|
(j)
|
Permits.
|
|
(i)
|
The Company holds all material Permits which are required for the conduct of the business of the Company (including the manufacture and assembly of its products and acting as a foreign trade dealer) as it is being conducted as of the date hereof. Except as set forth in Section 4.2(j)(i) of the Disclosure Schedules, all requirements, conditions and provisions ordered by any Governmental Authority or contained in a Permit were complied with and have been fulfilled in material respects.
|
|
(ii)
|
No revocation relating to any Permit has been announced or to the Knowledge of Sellers threatened in writing by a Governmental Authority; and
|
|
(iii)
|
The Company conducts its business in compliance with all material provisions of the Permits. No capital expenditures will be required to ensure compliance by the Company with such Permits, as in force at the Closing Date.
|
|
(k)
|
Material Contracts. Except for the Contracts set forth in Section 4.2(k) of the Disclosure Schedules (each such Contract, a “Material Contract”), the Company is not a party to any of the following types of Contracts which are valid and effective:
|
|
(i)
|
Non-Competes. Any Contract containing covenants limiting or purporting to limit (or that following the Closing could limit) the freedom of the Company to compete or operate in any line of business or geographical area;
|
|
(ii)
|
Indebtedness; Guarantees. Any Contract with any other Person which relates to indebtedness for borrowed money or the deferred purchase price of property (in either case, whether incurred, assumed, guaranteed or secured by any asset) in any single transaction or series of related transactions in excess of RMB 1 million, or the guarantee by the Company of any such obligation;
|
|
(iii)
|
Capital Expenditures. Any Contract (together with related Contracts) containing covenants requiring capital expenditures by the Company in any single transaction or series of related transactions in excess of RMB 1 million in any twelve (12)-month period;
|
|
(iv)
|
Joint Ventures. Any partnership, consortium, profit (loss) sharing or joint venture agreement;
|
|
(v)
|
Employment-related Contracts. Any collective bargaining agreement, trade union agreements, any other Contract with any other representatives of workers, or any indemnification agreement with any director or officer of the Company;
|
|
(vi)
|
Governmental Authorities. Any Contract with a Governmental Authority to which the Company is a party;
|
|
(vii)
|
Outsourcing Agreements. Any Contract entered into for purposes of outsourcing of the functions of the Company;
|
|
(viii)
|
Lease Agreements. Any Contract for lease of the Company Leased Real Property under which the security deposit exceeds RMB 1 million;
|
|
(ix)
|
Related Party Agreements. Any Related Party Contracts;
|
|
(x)
|
Consequential. Any Contract under the terms of which, as a direct result of the entry into and performance of this Agreement, (A) any other Person will be entitled to exercise any material right (including any
|
|
(xi)
|
Expenditure. Any Contract (together with related Contracts) which involves, or is reasonably likely to involve, aggregate expenditure by the Company (or by the Company) in excess of RMB 5 million in any twelve (12)-month period or which obliges the Company to make any minimum purchase;
|
|
(xii)
|
Revenue. Any Contract (together with related Contracts) which involves, or is reasonably likely to involve, aggregate revenue for the Company in excess of RMB 5 million in any twelve (12)-month period;
|
|
(xiii)
|
Tax Sharing. Any tax-sharing agreement; or
|
|
(xiv)
|
Other Contracts. Any Contract which has an annual contract value in excess of RMB 1 million which was entered into otherwise than in the Ordinary Course of Business or which is not on arm’s-length terms.
|
|
(l)
|
Insurance.
|
|
(i)
|
Sellers have made available to Purchaser copies of all insurance certificates and coverage maintained by or otherwise relating to the Company and its properties and assets and business. All insurance policies are in full force and effect, all premiums due and payable thereunder have been paid in full, and neither the Company nor its Affiliate is in default with respect to the obligations under any such policies or has otherwise failed to comply in all respects with the terms and conditions of such policies in all material respects.
|
|
(ii)
|
Since the Balance Sheet Date, the Company has not received any notice of cancellation or termination or denial of coverage with respect to any insurance policies referred to in sub-paragraph (i) of this Section 4.2(l) except to the extent such policy has expired and been replaced in the Ordinary Course of Business.
|
|
(iii)
|
No claim has been made by, or in relation to, the Company under any such insurance policy in the last three (3) years and there are no outstanding claims related to the Company under any insurance policy or default with respect to the provisions in any such policy.
|
|
(m)
|
Company Benefits Plan Matters.
|
|
(i)
|
With respect to each Company Benefits Plan, the Company has made available to Purchaser true, complete and correct copies of each of the following, as applicable: (i) the Company Benefits Plan document, together with all amendments thereto, and (ii) all relevant regulatory approvals received from any Governmental Authority.
|
|
(ii)
|
With respect to each Company Benefits Plan, it has been, in all material respects, established, operated and maintained in accordance with its terms and in compliance with applicable Laws. With respect to each Company Benefits Plan that is intended to be, or required by applicable Law to be, funded and/or book-reserved, such plan is funded and/or book reserved, as appropriate, based upon reasonable actuarial assumptions, and to the extent no funding is required under applicable Law, adequate accruals under applicable accounting principles are reflected in the Financial Statements.
|
|
(iii)
|
The Company provides each Company Employee with all compensation and benefits, the key aspects of which are set out in Schedule E.
|
|
(iv)
|
Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated thereunder will (either alone or together with any other event, contingent or otherwise, including a termination of employment or service) (i) entitle any current or former employee, director, officer or independent contractor of the Company to any payment (other than severance pay required by any applicable Law or severance pay pursuant to the internal regulations of the Company), or (ii)
|
|
(n)
|
Employee Matters.
|
|
(i)
|
The Company is not a party to any collective bargaining agreements. For the last three (3) years, the Company has not experienced any strikes, slowdowns, work stoppages, lockouts, or threats thereof, by or with respect to any employees of the Company.
|
|
(ii)
|
The Transaction will not give rise to any obligations to obtain consent from any labor union, works council or other employee representative bodies representing all or any category of employees of the Company.
|
|
(iii)
|
The Company is, and for the last three (3) years has been, in compliance in all material respects with all applicable Laws respecting labor, employment and employment practices, terms and conditions of employment, wages and hours, employee classification, reduction in force, dispatched employment, unemployment compensation benefits and occupational safety and health. Except as disclosed in Section 4.2(n) of the Disclosure Schedules, no Proceedings relating to non-compliance with the foregoing have been brought in the last three (3) or are pending or, to the Knowledge of each Seller, are threatened.
|
|
(iv)
|
There is no amount that is past due and owing by the Company to any of the current or former directors, officers, employees or independent contractors of the Company (including, without limitation, any salary, bonus, overtime allowance, severance pay, unused leave compensation, social insurance, housing fund or any other compensation or benefit).
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|
(o)
|
Intellectual Property. Each Company Intellectual Property is subsisting, valid and enforceable. The Company (i) owns all right, title and interest in and to each item of or otherwise have valid right to use all Company Intellectual Property, free and clear of all Encumbrances or (ii) has the valid right, free and clear of any Encumbrances, to use all the Intellectual Property used in, or otherwise necessary for, the conduct of the business of the Company. Neither the Company nor its operation of its business infringes, misappropriates, dilutes or otherwise violates, nor has it infringed, misappropriated, diluted or otherwise violated, any Intellectual Property of any third party. The Company has taken all commercially reasonable measures to protect the secrecy, confidentiality and value of all trade secrets, and there has not been any material unauthorized disclosure of any such trade secrets. There has been no material failure or other material substandard performance of any Company’s IT Systems that has caused any material disruption to its business. There has been no material unauthorized intrusion or breach of the security of the Company’s IT Systems, nor any material loss of data.
|
|
(p)
|
Taxes.
|
|
(i)
|
(A) All Tax Returns of the Company that are required to be filed on or before the Closing Date have been or will be timely filed on or before the Closing Date with the appropriate Tax Authorities in the manner required by applicable Laws, (B) all such Tax Returns are or will be true and complete when filed, (C) all Taxes due (whether or not shown or required to be shown on a Tax Return) have been or will be timely paid when due, (D) all deficiencies asserted or assessments made prior to the Closing Date by the relevant Tax Authority in connection with any Taxes have been or will be timely paid on or before the Closing Date (except for Taxes that are being contested in good faith);
|
|
(ii)
|
No issue that has been raised by the relevant Tax Authority in connection with any such Tax Return is currently pending, and there is no Proceeding or audit now in progress or pending against the Company with respect to any Tax;
|
|
(iii)
|
The Company is not party to or bound by any Tax indemnity agreement, Tax allocation agreement or Tax sharing agreement (except, in each case, any agreement entered into in the Ordinary Course of Business and not primarily related to Taxes);
|
|
(iv)
|
The Company has properly withheld and paid to the relevant Tax Authority all Taxes required to have been withheld and paid with respect to third parties; and
|
|
(v)
|
No agreement or document extending the period of assessment or collection of any Tax payable by the Company is currently in effect, and the Company has not consented to any such extension.
|
|
(q)
|
Environmental Matters and Production Safety. The Company has obtained and holds all Permits in respect of the design, construction and operation of its environment protection facilities and production safety. The Company is currently in compliance with, and has complied with, all such Permits and applicable Environmental Laws in all material respects. There is no pending or, to the Knowledge of Sellers, threatened Proceedings, notice of noncompliance or information request, in each case seeking to impose, or that would result in the imposition of, any material liability on the Company arising under any Environmental Law or arising from the release or presence of or exposure to Hazardous Substances. There has been no release or presence of or exposure to any Hazardous Substance, whether on or off the property currently or formerly owned or operated by the
|
|
(r)
|
Related Party Transactions. Except as disclosed in Section 4.2(r) of the Disclosure Schedules and the Intercompany Loan Agreements, no Seller Party (a) owns any asset, properties or rights, tangible or intangible, used in its business of the Company, (b) initiated or, to the Knowledge of Sellers, threatened to bring any Proceedings against the Company, (c) provides goods or services to, or receives goods or services from, the Company, (d) owes any Indebtedness to, is owed any Indebtedness by, has guaranteed or provided other credit support in respect of any Indebtedness of, or owes any Indebtedness guaranteed by the Company or secured by any assets of the Company, or (e) is engaged in any other transaction with the Company. All Contracts entered into between the Company, on the one hand, and any Seller Party, on the other hand (each of the foregoing, a “Related Party Contract”) were entered into in the Ordinary Course of Business and upon terms no less favorable to the Company than would reasonably be expected to be obtainable in a comparable arm’s-length transaction with a Person that is not a Seller Party in accordance with the relevant transfer pricing policies. A true, correct and complete copy of each Related Party Contract has been made available to Purchaser.
|
|
(s)
|
Suppliers. Section 4.2(s)(i) of the Disclosure Schedules sets forth a list of the top twenty (20) suppliers (each, a “Material Supplier”) of the Company during the last full fiscal year. Except as disclosed in Section 4.2(s)(ii) of the Disclosure Schedules, no Material Supplier has notified the Company or each Seller that it intends to discontinue or materially decrease the rate of, or materially and adversely change the terms (whether related to payment, price or otherwise) with respect to, its business relationship with its business or the Company. To the Knowledge of each Seller, no events or circumstances exist which may reasonably cause any Material Supplier to discontinue or materially decrease the rate of, or materially and adversely change the terms (whether with respect to payment, price or otherwise) with respect to, its business relationship with the Company or its business.
|
|
(t)
|
Inventory. All inventory material for the business conducted by the Company is of a quality and quantity usable and salable in the Ordinary Course of Business as of the Closing Date, except for obsolete or slow-moving inventory and items of below-standard quality, all of which have been written off or written down to net realizable value to the extent required by the policy of the Company described in Section 4.2(t) of the Disclosure Schedules.
|
|
(u)
|
Insolvency. There has been no petition in bankruptcy, insolvency or reorganization filed against the Company or the Company’s going into receivership or otherwise becoming insolvent, or any analogous event. The Company is not in liquidation and no order has been made or effective resolution passed for the liquidation or winding up of the Company.
|
|
(v)
|
Accuracy of Information. To the Knowledge of Sellers, all written information which was disclosed to Purchaser or its advisors in the Disclosure Schedules and the due diligence materials have been, taken as a whole, correct and complete and there are no circumstances that were not disclosed in the Disclosure Schedules and the due diligence materials that would make the information as disclosed as at the date of this Agreement and as of the Closing Date false or misleading.
|
|
4.1
|
Representations and Warranties of Purchaser.
|
|
(a)
|
Organization and Existence; Authorization. Purchaser is duly organized and validly existing under the Laws of the jurisdiction of its organization, and has requisite power and authority required to conduct its business as it is now being conducted. Purchaser has full authority and capacity to execute and deliver this Agreement and to perform its obligations hereunder and the execution and delivery by Purchaser of this Agreement, the performance of its obligations hereunder, and the consummation by Purchaser of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate proceedings on the part of Purchaser. This Agreement has been duly executed and delivered by Purchaser, and this Agreement constitutes the legal, valid and binding obligation of Purchaser enforceable against Purchaser in accordance with its terms, except insofar as the enforceability hereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, rehabilitation, special liquidation, fraudulent conveyance, or other similar Laws affecting the enforcement of creditors’ rights generally.
|
|
(b)
|
Absence of Conflicts; No Consents. Neither the execution, delivery and performance of this Agreement, nor the Transaction, will contravene, conflict with, or result in a violation of (i) any provision of the Organizational Documents of Purchaser, or (ii) any Law applicable to Purchaser. Other than the Purchaser Required Approvals, no Governmental Approval or consent or approval by or notification to any Person is required to be obtained by each Seller in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby.
|
|
(c)
|
Litigation. As of the date hereof, there is no Proceeding pending or, to the Knowledge of Purchaser, threatened against Purchaser that prohibits or restricts the Transaction.
|
|
(d)
|
No Brokers. No Person has acted, directly or indirectly, as a broker, finder or financial advisor for Purchaser or any of its Affiliates in connection with the Transaction for which the Company will incur any liability.
|
|
(e)
|
Sufficiency and Legitimacy of Funds. As of the Closing Date, Purchaser will have sufficient and legitimate immediately available funds to make all payments required to be made under or in connection with this Agreement, including the payment of the Purchase Price, in each case when such payments become due.
|
|
5.1.
|
Conduct of Business.
|
|
(a)
|
amend any Organizational Documents of the Company;
|
|
(b)
|
merge or consolidate with or into any other Person, dissolve or liquidate;
|
|
(c)
|
declare, set aside, make or pay any dividend or other distribution, payable in cash, stock or property, with respect to any capital stock or other equity or ownership interest in the Company or enter into any agreement with respect to the voting of the capital stock of the Company;
|
|
(d)
|
take any action that would require unanimous approval by all directors of the Company, except for those resolutions that may be required to effectuate and carry out the terms and conditions of this Agreement;
|
|
(e)
|
make any change in accounting methods, policies, principles or procedures, other than as required by Law, as then in effect;
|
|
(f)
|
(A) accelerate, terminate, cancel, renew, amend, grant a waiver under or otherwise modify any Material Contract or (B) enter into any Contract that would constitute a Material Contract if in effect as of the date hereof, in each case other than in the Ordinary Course of Business;
|
|
(g)
|
make any loans, advances or capital contributions to or investments in any Person in excess of RMB 1 million, other than in the Ordinary Course of Business;
|
|
(h)
|
incur, assume or guarantee any Indebtedness or liability of any Person, other than in the Ordinary Course of Business;
|
|
(i)
|
authorize for issuance, issue, sell, grant, pledge, deliver or agree or commit to issue, sell, grant, pledge or deliver (whether through the issuance or granting of options, warrants, convertible or exchangeable securities, commitments, subscriptions, rights to purchase or otherwise) any registered capital or any other securities convertible or exchangeable into or exercisable for any registered capital of the Company, or amend any of the terms of any such securities;
|
|
(j)
|
sell or lease, transfer or otherwise dispose of any of assets having a value exceeding RMB 1 million, other than in the Ordinary Course of Business;
|
|
(k)
|
make any capital expenditures in any single transaction in excess of RMB 1 million, or series of related transactions in excess of RMB 2 million in the aggregate, other than in the Ordinary Course of Business;
|
|
(l)
|
commence, dismiss or settle, pay or discharge, consent to any non-monetary relief in connection with of any material Proceeding;
|
|
(m)
|
hire, engage, transfer, terminate the employment or services of (except for cause as determined by the Company in good faith consistent with past practice) or promote any (A) employee at the director level or above or individual who has an annual compensation greater than RMB 1 million, or (B) other than in the Ordinary Course of Business, any independent contractor or employee not described in clause (A) above;
|
|
(n)
|
increase salary, bonus or other compensation or benefit of employees or other equivalent change of employment terms, or grant or commit to severance pay, special bonus, special employee benefits or other similar or equivalent amount or consideration, except for (i) as required by Law or the Company Benefits Plan, or (ii) payment of retention bonus to certain employees prior to the Closing provided that the Sellers shall fully indemnify and reimburse, or cause to be indemnified and reimbursed, the Company prior to the Closing such retention bonus made by the Company;
|
|
(o)
|
acquire any corporation, partnership or other business organization or division or business unit or material asset thereof or any equity interest therein;
|
|
(p)
|
make, change, or rescind any material election relating to Taxes unless otherwise required by Law, amend any Tax Return, surrender any material right or claim to a refund of Taxes, consent to any extension or waiver of the statute of limitations period applicable to any Taxes, Tax Returns or claims for taxes; or
|
|
(q)
|
enter into any Contract or arrangement to do any of the foregoing.
|
|
5.2.
|
Best Efforts; Cooperation and Assistance.
|
|
(a)
|
Each Seller and Purchaser shall use their reasonable best efforts to take all actions and do all things necessary, proper or advisable to consummate and make effective, in compliance with all of the terms of this Agreement, the transactions contemplated hereby (including satisfaction, but not waiver, of the conditions precedent which it is responsible for or otherwise in control of, as set forth in Article VI below) as soon as possible but no later than the Long-Stop Date.
|
|
(b)
|
Subject to Section 5.2(c), Purchaser shall use its reasonable best efforts to give any notices to, make any filings with, and obtain, as soon as practicable, any Governmental Approvals for which it is solely responsible and, to the extent necessary, each Seller shall use its reasonable best efforts to assist Purchaser in respect of the foregoing. Subject to and conditional upon the execution of the Avon Asia Escrow Agreement and the Avon China Escrow Agreement in accordance with Section 5.2(d), each Seller shall use its reasonable best efforts to give any notices to, make any filings with, and obtain, as soon as practicable, any Governmental Approval for which it is solely responsible or jointly responsible with Purchaser and, to the extent necessary, Purchaser shall use its reasonable best efforts to assist each Seller in respect of the foregoing. Without limiting the generality of the foregoing, each Party shall (i) cooperate with each other and file an application for obtaining the Purchaser Required Approvals as soon as practicable after the date hereof, (ii) respond promptly to inquiries from any applicable Governmental Authority in connection with such filings, including providing any supplemental information that may be requested by such Governmental Authority and (iii) reasonably update each other of the status of progress of such filing.
|
|
(c)
|
Subject to and conditional upon the execution of the Avon Asia Escrow Agreement and the Avon China Escrow Agreement in accordance with Section 5.2(d), each Seller shall immediately and cause the Company to immediately, and, with respect to the procedures, applications and filings that need to be undertaken by Purchaser, Purchaser shall, immediately proceed with any and all procedures, applications and filings for the SAMR Registration (which shall be made as one single filing to effectuate the transfer of Sale Equity, and for which
|
|
(d)
|
As soon as practicable after the date of this Agreement but no later than one (1) month after the date hereof, the Parties shall negotiate in good faith and enter into the Avon Asia Escrow Agreement and the Avon China Escrow Agreement.
|
|
(e)
|
From and after the date of this Agreement until the earlier of the Closing Date or termination of this Agreement, each Seller shall, and shall cause the Company to, use its and their commercially reasonable efforts, obtain, prior to the Closing, all consents and approvals from any Person other than a Governmental Authority that may be required in connection with the Transaction (including any counterparty to a Material Contract under which such counterparty will become entitled to terminate it as a result of the Transaction or which require the consent of such counterparty in connection with the Transaction) (the “Third Party Consent”).
|
|
(f)
|
Each of Sellers shall use its reasonable best efforts for the Company to renew the New Avon MSA and shall provide full cooperation in connection therewith as reasonably requested by Purchaser.
|
|
(g)
|
From and after the date of this Agreement until the earlier of the Closing Date or termination of this Agreement, each Seller shall give prompt notice to Purchaser and Purchaser shall give prompt notice to each Seller of (i) any representation or warranty made by it contained in this Agreement becoming inaccurate and (ii) the failure by it to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement within the time contemplated hereby.
|
|
5.3.
|
Access and Information.
|
|
(a)
|
For three (3) years after the date hereof, each of the Parties shall maintain in confidence, and shall cause their respective directors, officers, employees, agents, and Affiliates to maintain in confidence, and not use for any purpose other than the consummation of the Transaction or the exercise of rights or performance of obligations hereunder, any information obtained in confidence from the other Party pursuant to this Agreement, except to
|
|
(b)
|
Each Party shall also maintain the terms of this Agreement and the Transaction in confidence, and shall cause its directors, officers, employees, agents and Affiliates to maintain the same in confidence, except for any press releases agreed by the Parties in writing, and except to the extent that (i) the Parties otherwise agree so in writing, or (ii) the furnishing or use of such information is required by Law (including reporting obligations under U.S. and Korean securities laws) or in connection with a Proceeding applicable to or involving such Party or its Affiliates.
|
|
(c)
|
Notwithstanding Section 5.6(a) and (b), the Parties shall consult with each other before issuing any press releases or otherwise making any public statements with respect to this Agreement or the Transaction, and neither Party shall issue any press release or make any public statement prior to obtaining the other Party’s written approval, except that no such approval shall be necessary to the extent disclosure may be required by applicable Laws on the condition that prior to such disclosure the disclosing Party provides the other Party with the draft of such press release or public statement reasonably in advance, consults with the other Party about their content, and endeavors to obtain the other Party’s consent for such disclosure.
|
|
(d)
|
For the avoidance of doubt, the Confidentiality and Non-Disclosure Agreement, dated August 16, 2018, between Avon Products Inc. and Purchaser shall be terminated as of the date hereof, and neither party thereto shall have any liability or further obligation to the other party thereunder.
|
|
(a)
|
terminate each of the Related Party Contracts (which, for the avoidance of doubt, does not include the New Avon MSA and the Manufacturing and Supply Agreement), except for those otherwise specifically provided in this Agreement, as of the Closing Date, on terms and conditions that release the Company from all past or future Liabilities or obligations from and after the Closing Date and deliver to Purchaser written evidence of such termination reasonably satisfactory to Purchaser; provided, however, that each Seller shall and shall cause the relevant Seller Party to extend the contract term of each of the Related Party Contracts otherwise agreed upon
|
|
(b)
|
if requested by Purchaser, enter into, or cause to be entered into, a transitional services agreement in form and substance reasonably requested by Purchaser and acceptable to Sellers, that is necessary for the stand-alone operations of the Company on and after the Closing.
|
|
5.4.
|
Non-Competition; Non-Solicitation.
|
|
(a)
|
From the Closing Date until the date that is five (5) years after the Closing Date, each Seller shall not, and shall cause its Affiliates not to, without the prior written consent of Purchaser, directly or indirectly, (i) hire or solicit for employment any officer or employee of the Company or (ii) induce or encourage any such officer or employee to no longer be employed by the Company; provided, however, that nothing in this ýSection 5.10(a) shall prohibit each Seller or any of its Affiliates from engaging in general solicitations to the public or general advertising not targeted at employees of the Company.
|
|
(b)
|
From the Closing Date until the date that is five (5) years after the Closing Date, Purchaser shall not, and shall cause its Affiliates not to, without the prior written consent of Sellers, directly or indirectly, (i) hire or solicit for employment any officer or employee of any of Sellers or Avon Beauty & Cosmetics Research and Development (Shanghai) Co., Ltd. (“Avon R&D”) or (ii) induce or encourage any such officer or employee to no longer be employed by any of Sellers or Avon R&D; provided, however, that nothing in this ýSection 5.10(b) shall prohibit Purchaser or any of its Affiliates from engaging in general solicitations to the public or general advertising not targeted at employees of any of Sellers or Avon R&D.
|
|
(c)
|
From the Closing Date until the date that is five (5) years after the Closing Date, each Seller shall not, and shall cause its Affiliates not to, without the prior written consent of Purchaser, directly or indirectly, (i) engage in the Competing Business anywhere in the Restricted Territory, or (ii) control (including as a joint venture partner, agent, representative, consultant or lender) any Person that engages directly or indirectly in the Competing Business in the Restricted Territory. For purposes of this Agreement, (A) “Competing Business” means the manufacturing of cosmetic products and (B) “Restricted Territory” means PRC. For the avoidance of doubt, any of Sellers or its Affiliates’ engagement with any contract manufacturer in the PRC for the manufacture and supply of cosmetic products shall not be restricted by this Section 5.10(c).
|
|
(d)
|
The Parties accept and agree that the provisions of this Section 5.10 are necessary to protect the legitimate business and proprietary interests of the Company and of Purchaser after the Closing Date and that their terms and conditions (including the scope, duration and geographical areas of restriction) are fair and reasonable. It is the intention of the Parties that if any restriction or covenant contained in this Section 5.10 is held to cover a geographic area or to be for a length of time which is not permitted by applicable Laws, or in any way construed to be too broad or to any extent invalid, such restriction or covenant shall not be construed to be null, void and of no effect, but valid and enforceable to the maximum extent permitted under the applicable Laws, and a court of competent jurisdiction or the arbitral tribunal shall construe and interpret or reform this ýSection 5.10 to provide for a covenant having the maximum enforceable geographic area, time period and other provisions that would be valid and enforceable under such applicable Laws.
|
|
6.1.
|
Conditions Precedent to the Obligations of each Seller to Sell the Sale Equity.
|
|
(a)
|
No Injunction. No Law or Order shall have been enacted, entered, promulgated or endorsed by any Governmental Authority of competent jurisdiction that prohibits the consummation of the Transaction or any part thereof.
|
|
(b)
|
Governmental Approvals. All requisite Governmental Approvals (including the Purchaser Required Approvals) required to have been obtained prior to the Closing shall have been obtained without any condition (through the expiration of any applicable waiting period or otherwise).
|
|
(c)
|
Representations and Warranties. The representations and warranties of Purchaser in Section 4.3 shall be true and correct in all material respects (except for those representations and warranties which are qualified as to materiality, in which case such representations and warranties shall be true and correct in all respects) as of the Closing Date as though made on and as of such date (other than representations and warranties which address matters only as of a certain date, which shall be as of such date).
|
|
(d)
|
Performance. Purchaser shall have performed, satisfied and complied with, in all material respects, all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by it at or prior to the Closing Date.
|
|
(e)
|
Escrow Agreement. Each of the Avon Asia Escrow Agreement and Avon China Escrow Agreement shall have been entered into by and among the parties thereto.
|
|
6.2.
|
Conditions Precedent to the Obligations of Purchaser to Purchase the Sale Equity.
|
|
(a)
|
No Injunction. No Law or Order shall have been enacted, entered, promulgated or endorsed by any Governmental Authority of competent jurisdiction that prohibits the consummation of the Transaction or any part thereof.
|
|
(b)
|
Governmental Approvals. All requisite Governmental Approvals (including the Purchaser Required Approvals) required to have been obtained prior to the Closing shall have been obtained without any condition (through the expiration of any applicable waiting period or otherwise).
|
|
(c)
|
Representations and Warranties. The representations and warranties of each Seller in Sections 4.1 and 4.2 shall be true and correct in all material respects (except for those representations and warranties which are qualified as to materiality, in which case such representations and warranties shall be true and correct in all respects) as
|
|
(d)
|
Performance. Each Seller shall have performed, satisfied and complied with, in all material respects, all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by each Seller at or prior to the Closing Date.
|
|
(e)
|
Escrow Agreement. Each of the Avon Asia Escrow Agreement and Avon China Escrow Agreement shall have been entered into by and among the parties thereto.
|
|
(f)
|
Manufacturing and Supply Agreement. The Manufacturing and Supply Agreement shall be in full force and effect as from the Closing Date without being amended or terminated as of the Closing Date.
|
|
(g)
|
License Agreement. The License Agreement shall have been entered into by and between the parties thereto.
|
|
(h)
|
No Material Adverse Effect. Since the date of this Agreement, there shall not have occurred any Material Adverse Effect.
|
|
(i)
|
Reimbursement of Retention Bonus. The Company shall have been fully reimbursed of any retention bonus paid in accordance with Section 5.1(n).
|
|
7.1.
|
Indemnification.
|
|
(a)
|
From and after the Closing, Purchaser agrees to indemnify, defend and hold harmless each Seller and its Affiliates, shareholders, directors, officers, employees, agents and advisors (the “Seller Indemnified Parties”) from and against any and all Losses that are actually incurred by such Seller Indemnified Parties as a result of or in connection with any inaccuracy in or breach of any of the representations and warranties made by Purchaser in Section 4.3 of this Agreement or any breach of, or failure by Purchaser to perform any of Purchaser’s covenants, agreements or other obligations contained in this Agreement.
|
|
(b)
|
From and after the Closing, Sellers agree to, jointly and severally, indemnify, defend and hold harmless Purchaser and its Affiliates, shareholders, directors, officers, employees, agents and advisors (including, for the avoidance of doubt, the Company after the Closing) (the “Purchaser Indemnified Parties”) from and against any and all Losses that are actually incurred by such Purchaser Indemnified Parties as a result of or in connection with any inaccuracy in or breach of any of the representations or warranties made by any Seller in Sections 4.1 or 4.2 in this Agreement or any breach of, or failure by any Seller to perform any of Sellers’ covenants, agreements or other obligations contained in this Agreement.
|
|
7.2.
|
Survival of Claims.
|
|
7.3.
|
Limitations on Liability.
|
|
(a)
|
Sellers shall not be exempted from liability for breach of their representations and warranties or any covenants, agreements or other obligations under this Agreement by reason of Purchaser’s knowledge of such breach, whether through the access to information under Section 5.3 or otherwise.
|
|
(b)
|
For any claims against Sellers or Purchaser from whom indemnification is sought (the “Indemnifying Party”), as the case may be, pursuant to Section 7.1(a) or Section 7.1(b), other than any claims arising out of or based on (i) any breach of the Fundamental Representations or any of the representations or warranties contained in Section 4.2(p)(Taxes), (ii) any breach or failure to perform any of the covenants, agreements or obligations contained in this Agreement (including the Purchaser’s obligation to pay the Purchase Price) or (iii) fraud or willful misconduct, by such Indemnifying Party, the indemnification obligations of the Indemnifying Party in the aggregate shall not exceed fifteen percent (15%) of the Purchase Price; notwithstanding the foregoing, in no event shall the aggregate indemnification obligation of Sellers in relation to all claims exceed the Purchase Price. With respect to any claims against any Indemnifying Party for breach of any of its representations and warranties hereunder other than the Fundamental Representations or any of the representations or warranties contained in Section 4.2(p)(Taxes), such Indemnifying Party shall not be liable (x) for any individual occurrence, event, circumstance, act or omission where the Loss resulting therefrom is less than RMB 1 million (the “De Minimis”) and (y) for any Losses unless the aggregate amount of all Losses (it being understood that any such individual claims for amounts less than the De Minimis shall be ignored in determining whether the Aggregate Basket Amount has been exceeded) of the Indemnifying Party exceeds three percent (3%) of the Purchase Price (the “Aggregate Basket Amount”), in which case the Indemnifying Party shall be liable for all such Losses including the amount constituting the Aggregate Basket Amount.
|
|
(c)
|
In calculating the amount of any Losses payable to an Indemnified Party hereunder, the amount of the Losses (i) shall not be duplicative of any other Loss for which an indemnification claim has been made, (ii) shall be computed net of any amounts actually recovered by such Indemnified Party (the “Third Party Indemnification Amount”) under any other indemnification agreements, understanding or similar arrangements other than this Agreement with respect to such Losses, and (iii) shall be computed net of any amounts actually recovered by such Indemnified Party under any insurance policy with respect to such Losses and (iv) shall be computed net of any tax benefit actually realized by the Indemnified Party (or any of its Affiliates) with respect to such Loss for the taxable year of such Loss, as calculated on a with and without basis.
|
|
(d)
|
Notwithstanding anything in this Agreement to the contrary, neither Party shall be liable to the other Party for any consequential, indirect, special, punitive or incidental damages.
|
|
7.4.
|
Claims for Indemnification.
|
|
(a)
|
Third-Party Claims. All claims for indemnification made under this Agreement resulting from, related to or arising out of a third-party claim against an Indemnified Party (a “Third Party Claim”) shall be made in accordance with this Section 7.4(a). An Indemnified Party shall give prompt written notification (not more than thirty (30) calendar days after becoming aware of any third party claim) (a “Third Party Claim Notice”) to the Indemnifying Party of the commencement of any action, suit or proceeding relating to a Third Party Claim for which indemnification may be sought or, if earlier, upon the assertion of any such claim by a third party; provided, however, that if the Indemnified Party fails to provide the Indemnifying Party with such notice in a timely manner, or in reasonable detail to apprise the Indemnifying Party of the nature of such Third Party Claim, in each case taking into account the facts and circumstances with respect to such Third Party Claim, the Indemnifying Party shall not be liable to the Indemnified Party to the extent that the Indemnifying Party's position is prejudiced as a result thereof, but for the avoidance of doubt then only to the extent of such prejudice.. Such Third Party Claim Notice shall include a description in reasonable detail, to the extent known or on hand at the time, of the facts constituting the basis for such third-party claim, documents reasonably evidencing the existence and material contents of the Third Party Claim and the amount of the Losses claimed. At any time after delivery of such Third Party Claim Notice, the Indemnifying Party may, upon written notice thereof to the Indemnified Party within 14 calendar days of its receipt of the Third Party Claim Notice, assume control of the defense of such action, suit, proceeding or claim by acknowledging its indemnification obligations as provided in this Article VII in writing to the Indemnified Party; provided, however, that the Indemnifying Party shall not be permitted to assume control of the defense if the Third Party Claim involves a claim for non-monetary relief against the Indemnified Party. If the Indemnifying Party does not assume control of such defense or fails to give a written notice to assume control of such defense within the 14-day period, then the Indemnified Party shall have the right to defend or prosecute such Third Party Claim on its own and settle, compromise or discharge such Third Party Claim at its sole direction, and the Indemnifying Party shall remain liable for any Losses resulting therefrom to the extent that such Losses are subject to indemnification in accordance with this Article 7. Neither any Seller nor Purchaser shall take any action the purpose of which is to prejudice the defense of any claim subject to indemnification hereunder or to induce a third party to assert a claim subject to indemnification hereunder.
|
|
(b)
|
Procedure for Claims. In the event an Indemnified Party claims a right to payment pursuant hereto with respect to any matter not involving a Third-Party Claim (a “Direct Claim”), such Indemnified Party shall send written notice of such claim to the Indemnifying Party (a “Notice of Claim”). Such Notice of Claim shall specify in detail the legal basis for and the underlying facts of such Direct Claim. For the avoidance of doubt, the Parties agree and understand that Notices of Claim in respect of a breach of a representation or warranty must be delivered prior to the expiration of the survival period for such representation or warranty under Section 7.2. In case the Indemnifying Party disputes the liability asserted under such Direct Claim, the Indemnifying Party shall send a notice of such dispute to the Indemnified Party within thirty (30) days following its receipt of such Notice of Claim. In the event the Indemnifying Party disputes its liability with respect to such Direct Claim as provided above, as promptly as possible, such Indemnified Party and the Indemnifying Party shall establish the merits and amount of such Direct Claim (by mutual agreement or otherwise pursuant to an enforceable decision or award rendered in accordance with Section 9.4 in respect of such dispute) and, within ten (10) Business Days following the final agreement between the Parties or the date of an enforceable decision or award rendered in accordance with Section 9.4 with respect to the merits and amount of such Direct Claim, the Indemnifying Party shall pay to the Indemnified Party immediately available funds in an amount equal to such Direct Claim as determined hereunder.
|
|
7.5.
|
Indemnification Procedures for Tax Claims
|
|
(a)
|
If a Tax Claim shall be made by any Taxing Authority, which, if successful, might result in an indemnity payment to any Indemnified Party pursuant to Section 7.1, the Indemnified Party shall promptly notify the Indemnifying Party in writing of such Tax Claim. If the Indemnified Party fails to provide the Indemnifying Party with notice of a Tax Claim for which the Indemnifying Party may be liable under Section 7.1 within a sufficient period of time to allow the Indemnifying Party to effectively contest such Tax Claim, or in reasonable detail to apprise the Indemnifying Party of the nature of the Tax Claim, in each case taking into account the facts and circumstances with respect to such Tax Claim, the Indemnifying Party shall not be liable to any Indemnified Party to the extent that the Indemnifying Party's position is prejudiced as a result thereof, but for the avoidance of doubt then only to the extent of such prejudice.
|
|
(b)
|
Sellers shall control all proceedings taken in connection with any Tax Claim (including selection of counsel).
|
|
(c)
|
All written communications pertaining to any Tax Claim relating to Taxes of the Company for a Pre-Closing Tax Period or a Straddle Period which are transmitted to or received from the relevant Tax Authority by Purchaser shall be copied to Sellers as soon as reasonably practicable after such communications have been so transmitted to or received by Purchaser.
|
|
(d)
|
Notwithstanding the above Section 7.5(b) and (c), for any Tax Claim relating to Taxes of the Company for a Pre-Closing Tax Period or a Straddle Period, Sellers shall have the right to control all proceedings taken in connection with any such Tax Claim (including in respect of the selection of counsel) and, in furtherance thereto, Purchaser shall take such action and procure that the Company shall, at Sellers’ sole cost and expense (such cost and expense to only include reasonable third party costs and expenses properly incurred by the Company) take such action as Seller may promptly by written notice to Purchaser request to dispute, resist or compromise such liabilities, costs, damages, Taxes, Losses or expenses; provided, however, that Purchaser (and counsel of its own choosing) shall have the right to participate fully in all aspects of the prosecution or defense of any Tax Claim relating to a Straddle Period, at Purchaser's sole expense and Seller shall not be entitled to settle, either administratively or after the commencement of litigation, any Tax Claim which would adversely affect the liability for Taxes of Purchaser or the Company for any period after the Closing Date to any extent (including, but not limited to, the imposition of income tax deficiencies, the reduction of asset basis or cost adjustments, the lengthening of any amortization or depreciation periods, the denial of amortization or depreciation, or the reduction of loss or credit carryforwards) without the prior consent of Purchaser, which shall not be unreasonably withheld or delayed.
|
|
(e)
|
Purchaser shall (and will be entitled to procure that the Company shall) be at liberty without reference to Seller to admit, compromise or otherwise deal with any Tax Claim after the service of a notice in writing on Purchaser by Sellers stating that Sellers consider that the Tax Claim should no longer be resisted.
|
|
(f)
|
Purchaser shall and shall procure that the Company shall cooperate with Sellers in contesting any Tax Claim, which cooperation shall include the retention (and upon Sellers' reasonable request) of records and information which are reasonably relevant to such Tax Claim, and making employees available on a mutually convenient basis to provide additional information or explanation of any material provided hereunder or to testify at proceedings relating to such Tax Claim, in each case at Sellers’ sole expense.
|
|
(g)
|
Notwithstanding anything to the contrary in this Section, Purchaser shall not be obliged to: (i) appeal or procure that the Company appeal against any Tax Claim in any forum beyond the first relevant appellate body; or (ii) take or procure that the Company takes any action the effect of which is likely to affect the future conduct of the business of Purchaser, the Company, and/or any member of Purchaser's group or affect the rights or reputations of any of them; in each case of the foregoing the Parties shall discuss in good faith any reasonable alternative measure to mitigate such risks.
|
|
7.6.
|
Additional Indemnification.
|
|
7.7.
|
Sole and Exclusive Remedy.
|
|
8.1.
|
Termination.
|
|
(a)
|
by mutual written agreement of Sellers and Purchaser;
|
|
(b)
|
by either Sellers acting as one party or Purchaser, in the event that the Closing has not occurred by the Long-Stop Date by reason of failure of any conditions set forth in Section 6.1 (in the case of termination by Sellers) or Section 6.2 (in the case of termination by Purchaser), provided, however, that a Party to which failure of any conditions applicable to it under Article VI is attributable may not terminate this Agreement pursuant to this Section 8.1(b);
|
|
(c)
|
by either Sellers acting as one party or Purchaser with a written notice to the other Party if the other Party has materially breached any of its covenants or obligations under this Agreement and has failed to cure such breach within twenty (20) days following such written notice;
|
|
(d)
|
by either Sellers acting as one party or Purchaser with immediate effect upon the filing of a petition in bankruptcy, insolvency or reorganization against or by the other Party, or such other Party becoming subject to a composition for creditors, whether by law or agreement, or such other Party going into receivership or otherwise becoming insolvent, or any analogous event occurring under the laws of the jurisdiction in which a Party is incorporated; or
|
|
(e)
|
by Sellers acting as one party, in case of failure to complete the MOFCOM Filing within fifteen (15) Business Days after the application therefor is submitted.
|
|
8.2.
|
Effect of Termination.
|
|
9.1.
|
Entire Agreement.
|
|
9.2.
|
Assignment.
|
|
9.3.
|
Tax and Expenses.
|
|
9.4.
|
Governing Law and Dispute Resolution.
|
|
9.5.
|
Amendments.
|
|
9.6.
|
Severability.
|
|
9.7.
|
Notices.
|
|
9.8.
|
Language; Counterparts.
|
|
9.9.
|
No Third Party Beneficiary.
|
|
By: /s/ Lisa Siders _
Name: Lisa Siders
Title: Director
|
|
By: /s/ Asson Chang ____
Name: Asson Chang
Title: Legal Representative of Avon Products (China) Co. Ltd.
|
|
Record Owner
|
Amount of Registered Capital Corresponding to Sale Equity (USD)
|
Allocation Percentage
|
|
Avon Asia
|
8,600,000
|
40%
|
|
Avon China
|
12,900,000
|
60%
|
|
Borrower
|
Principal (RMB)
|
Interest (RMB)
|
Total Amount (RMB)
|
|
Avon China
|
50,000,000
|
633,783
|
50,633,783
|
|
AHPM
|
104,350,000
|
1,668,681
|
106,018,681
|
|
Benefit Items
|
Coverage
|
Sum assured
|
|
Term life
|
Death caused by disease
|
36*monthly salary
(Min. RMB100,000)
|
|
AD&D
|
Accidental death and Dismemberment
|
36*monthly salary
(Min. RMB100,000)
|
|
Critical Illness
|
The insured can directly submit the claim to insurance provider if suffered from any kind of the 29 critical illness listed in the contract for the first time. ICBC-AXA should strictly keep it confidential
|
RMB100,000
|
|
Medial
|
Annual limit of inpatient & outpatient treatment
|
RMB20,000
|
|
|
Outpatient reimbursement ratio
|
90%
|
|
|
Inpatient reimbursement ratio
|
100%
|
|
|
Inpatient daily room and board limit
|
RMB80
|
|
maternity
|
Annual limit
|
RMB10,000
|
|
|
Reimbursement ratio
|
100%
|
|
Hospital Income
|
Inpatient treatment is required according to physician’s opinion due to illness
|
RMB50 per day
|
|
Public Fund
|
For Inpatient and outpatient treatment only
|
RMB1,000,000
|
|
Benefit Items
|
Coverage
|
Sum assured
|
|
Medial
|
Annual limit of inpatient & outpatient treatment
|
RMB20,000
|
|
|
Outpatient reimbursement ratio
|
50%
|
|
|
Inpatient reimbursement ratio
|
50%
|
|
Public Fund
|
Shared by employee & dependent, for inpatient and outpatient only
|
RMB1,000,000 with 60% reimburse
|
|
Benefit Items
|
Coverage
|
Sum assured
|
|
Supplementary Inpatient Insurance
|
Annual limit
|
RMB144,000
|
|
|
Deductible
|
RMB20,000
|
|
|
Reimbursement ratio
|
80%
|
|
1.
|
any inconsistency among the total area on the real estate certificate, the environmental protection facility acceptance approval and approval for fire control acceptance on construction which were issued or granted to the Company prior to the Closing Date;
|
|
2.
|
any expired Permits relating to cosmetics that the Company is still operating prior to the Closing Date;
|
|
3.
|
the Company’s having not obtained all Governmental Approvals required for the Company to implement the flexible working-hour system prior to the Closing Date;
|
|
4.
|
the Company’s any noncompliance with applicable Law relating to social insurance and housing fund by the Company or any labor dispute agency with respect to labor dispatch employees prior to the Closing Date;
|
|
5.
|
the Company’s failure, as of the Closing Date, (i) to pay overtime allowances under the standard working hour system or (ii) to ensure that the corresponding proportion of the overall dispatched employees against the total number of the employees currently working in the Company does not exceed the maximum rate as permitted by applicable Law;
|
|
6.
|
the Company’s failure to file the renewal of the registration of the quality standards (whether national, industrial or corporate) and the certificate thereof prior to the Closing Date;
|
|
7.
|
the Company’s failure to complete the update or recordation of the current name of the Company’s legal representative (i.e. Ronald Chua Tamayo) in all of the Company’s licenses, certificates and Permits (including but not limited to the Certificate of Registration of Customs Declaration Entity, the Recordation of Inspection Declaration Entity, the Opening Bank Account Permit and the Pollution Discharge Permission); or
|
|
8.
|
the Company’s failure to duly obtain any and all Governmental Approvals required for special purpose’s cosmetics and non-special purpose’s cosmetics required in connection with its business as currently conducted on the Closing Date.
|
|
•
|
Pension entitlement and enrolment
|
|
•
|
Bank details
|
|
•
|
Avon’s data privacy agreement
|
|
•
|
When you join Avon you will be required to access our HR system and update both your contact information and personal information.
|
|
•
|
You will also be required to bring a copy of your right to work documents on your first day at Avon
|
|
Surname:
|
Myers
|
|
Forename:
|
Jonathan
|
|
Address of Employee:
|
|
|
Post code:
|
|
|
Job Title:
|
Executive Vice President, Chief Operating Officer of Avon Products, Inc.
|
|
Reporting to:
|
Chief Executive Officer
|
|
Grade:
|
E02 (Executive Vice President)
|
|
Effective Date:
Continuity of Employment:
Salary:
|
1 September 2017
No previous service counts towards your continuity of employment.
£470,000 per annum
|
|
Annual Incentive Programme:
|
As stated in your offer letter, you are eligible for the annual incentive programme available to similarly situated Executive Vice President-level associates, with a target level of 80% of earned eligible base salary. The actual amount of bonus awarded is contingent on relevant individual and business performance goals being achieved and the terms and conditions of the applicable annual incentive program. The payment of bonus and the rules of the scheme are at Avon’s discretion and are subject to change. Details of the bonus scheme will be supplied annually.
|
|
Long Term Incentive Plan:
|
As stated in your offer letter, you are eligible to participate in the long-term incentive plan available for similarly situated associates at your level. Further details of the scheme are available on request. Please note the terms of the scheme are subject to change.
|
|
Working hours:
|
Weekly hours: 37.5 plus such additional hours as are necessary for the proper performance of your duties. You acknowledge that you shall not receive further remuneration in respect of such additional hours.
|
|
Location:
|
You will be based at Avon’s corporate headquarters in Chiswick.
You may be required to work at other Avon sites from time to time.
|
|
Remuneration:
|
Method of Payment
You will be paid monthly in arrears by or on the last working day of each month by direct credit transfer to your bank or building society account.
Basic Pay Review
Your basic pay will be reviewed annually based on performance.
Deductions
The Company reserves the right to make deductions from your pay in the event of any monies owing to the Company but attributable to you.
|
|
|
|
|
Normal Working Pattern:
|
The Company operates in accordance with the Working Time Regulations 1998. If you require further information please refer to the Company Working Hours Policy held electronically on the HR website.
|
|
Flexibility:
|
Avon will expect you to perform all reasonable tasks assigned to you during the course of your employment which it believes you are competent to perform; you will be required to be flexible in your job responsibilities and to react to the needs of the business. This means that you may be required to:
vary your working hours
to travel on the Company's business (both within the United Kingdom or abroad) as may be required for the proper performance of your duties under the appointment
carry out duties which may be outside the scope of your normal responsibilities but which you are competent to perform.
The Company will give reasonable notice for any changes with regard to occasional travel that might affect you and will always strive at a very minimum to provide 48 hours’ notice. During your employment, you will not be required to work outside the United Kingdom for any continuous period of more than one month.
|
|
Private Medical Insurance:
|
You will be eligible for private medical cover for yourself and up to family cover, depending on your personal circumstances
If you wish to join the scheme you can do so by using our Flexible Benefits system, UP2U. You will receive confirmation of the website and access details shortly after joining the Company.
Further changes to your PMI subscription can only be made once a year when the UP2U ‘window’ is opened to all eligible employees or if a ‘lifestyle event’ (marriage/divorce/birth of child) occurs.
Please note PMI is a benefit which is taxable at source.
|
|
Life Assurance:
|
4 times annual salary is paid on death in service (subject to a cap of £1.8 Million).
|
|
Company Sick Pay:
|
The Company operates a Company Sick Pay Scheme for the benefit of its employees which is in addition to Statutory Sick Pay entitlement. All payments made under this company scheme are at the sole discretion of the Company. Please refer to the Company Sickness Absence Policy which outlines the circumstances in which Company sick pay may be withheld.
Service with AvonEntitlement
0-1 year 4 weeks
1-2 years 8 weeks
2-5 years 16 weeks
5+ years 26 weeks
|
|
Pension Scheme:
|
Avon operates an employee contributory pension scheme which is open to all permanent and fixed term employees. Under current Auto Enrolment legislation Avon is required to automatically enroll employees who meet certain criteria into a qualifying scheme. Full details of the current Avon Pension Scheme, the enrolment criteria and how Auto Enrolment is applied can be found in the enclosed pension documents.
For tax purposes, the Pension Input Period in the Avon Cosmetics Pension Plan ends on 31st March each year.
|
|
Company Car:
|
You are eligible for a Company Car at the benchmark
level for your grade or an annual cash equivalent of
£15,252, subject to normal deductions.
You will be provided separately with a copy of the Company Car policy.
Further details can be obtained from the Car Fleet department on 01604 618986.
|
|
Holiday Entitlement:
|
The Company’s holiday year runs from 1 January to 31 December. You are entitled to 28 days holiday per year plus 8 public holidays.
An employee will accrue holiday from the day their employment with Avon starts.
At the conclusion of your employment, you will be paid for any accrued but untaken holiday.
Holiday entitlement on termination will be calculated according to the percentage of the year worked i.e. as the number of days worked divided by 365 (366 for a leap year).
Should you have taken in excess of your accrued entitlement the company may deduct the cash equivalent from your final salary.
At the Company’s discretion you may be required to reserve several days of your holiday entitlement. You will be notified of any such requirement in advance on an annual basis.
|
|
Flexible Benefits:
|
The Company operates a self-service electronic flexible benefits scheme called UP2U. Shortly after joining the Company you will be sent details of Avon’s UP2U scheme which will allow you to opt into the Private Medical Scheme and to purchase childcare vouchers at that time.
Following this there are annual enrolments for the flexible benefits scheme. Enrolment details will be sent to you at this time.
|
|
Notice Period:
|
In the event of involuntary termination (other than for cause) the Company agrees to pay you the equivalent of 24 months’ base salary (inclusive of a payment in lieu of statutory notice), on the basis that you enter into an appropriate settlement agreement with the Company which shall include for example a general release of claims, together with reasonable and appropriate non-competition and non-solicitation provisions and other covenants. Such payment will be made as soon as reasonably practicable following termination.
In all other circumstances, you are entitled to receive and are obliged to give the Company 6 months’ notice to terminate your employment.
The Company reserves the right to pay salary in lieu of notice. Alternatively the Company reserves the right to terminate your employment without notice or salary in lieu of notice in accordance with the Disciplinary Procedure.
Should you wish to resign from the Company, a letter of your intended resignation should be sent to the Company. The Company requires you to work your notice period unless otherwise mutually agreed. If you fail to give notice to the Company or give the incorrect notice, the Company shall be entitled to withhold a sum from any monies due to you equivalent to the value of the salary you would have been entitled to during the un-worked notice period.
For the purposes of this clause, a termination “for cause” shall mean a termination by the Company because of your (a) continued failure (after formal written notification of the failure requiring you to remedy the same) to perform substantially your duties; (b) your wilful failure to perform substantially your duties or other wilful conduct that is materially detrimental to the Company; (c) your personal dishonesty in the performance of your duties; (d) your breach of fiduciary duty involving personal profit; (e) your commission or conviction of a felony or misdemeanour or pleading guilty to a felony or misdemeanour (excluding a motoring offence which does not lead to a custodial sentence); (f) your wilful or significant violation of any Avon rule or procedure, including without limitation, absenteeism, violation of safety rules or insubordination; or (g) violation of the Code of Conduct. All determinations of whether any of the events above have occurred and/or whether cause shall have occurred will be determined by the Company in its sole discretion (acting reasonably and in good faith).
|
|
Garden Leave:
|
The Company reserves the right to require you not to
attend your place of work for all or part of your notice
period, in its absolute discretion. This period is referred to as “Garden Leave”. During Garden Leave:
(a) the Company shall be under no obligation to provide any work to you and may revoke any powers you hold on behalf of the Company (or any group company);
(b) the Company (acting reasonably) may require you to carry out alternative duties or to only perform such specific duties as are expressly assigned to you, at such location (including your home) as the Company may decide;
(c) you will be continue to receive your basic salary and normal contractual benefits in the usual way and subject to the terms of any benefit arrangement;
(d) you shall remain an employee of the Company and bound by the terms of this agreement (including any implied duties of good faith and fidelity); and
(e) the Company may exclude you from any premises of the Company (or any group company).
Any accrued but unused holiday entitlement shall be deemed to be taken during any period of Garden Leave.
|
|
Company Equipment:
|
If you are allocated any Company equipment and your employment is terminated for whatever reason, unless otherwise agreed in writing, you must immediately return all company equipment in good working order as received by you.
Deductions may be made from any final payments for
any associated loss or damage.
|
|
Code of Conduct:
|
Some examples are outlined below, however this is
not exhaustive and you should refer to the Code of
Conduct on the Avon Global Website for further
guidance.
|
|
Code of Conduct - Gifts:
|
The exchange of gifts is often used as a way to enhance business relationships, and within the guidelines stated in Avon’s Code of Conduct and Ethics, this is an acceptable practice. Avon permits gifts only of “nominal value,” such as meals, fruit baskets, and bottles of wine, flowers, chocolates/candies, tickets to occasional sporting events or concerts, and other routine gifts.
Any gifts of greater than nominal value or that otherwise exceed the common courtesies associated with ethical business practices could give the appearance of impropriety and must not be accepted. Examples of gifts that are not permitted include vendor-sponsored trips, vacations, luxury leather accessories, electronics or sporting equipment. Cash and/or loans of any amount are strictly prohibited at all times.
These same standards apply to associates of all levels within the company. If there is any question as to whether or not the value of an offered gift is more than nominal, consult with your Manager or HR.
|
|
Code of Conduct - Conflict of Interest:
|
In line with Avon’s Code of Conduct and Ethics, employees have an obligation to act in the best interest of Avon. Conflicts of interest are prohibited, which means that no employee should place himself or herself in a situation in which personal interest might conflict with the interest of Avon. A breach of these rules may lead to disciplinary action.
A “conflict of interest” occurs when an associate’s private or family interest interferes in any way, or even appears to interfere, with the interest of Avon. A conflict of interest can arise when an associate takes an action or has an interest that may make it difficult for him or her to perform his or her work objectively and effectively.
|
|
Code of Conduct - Other Interests:
|
You should not engage directly or indirectly in any business or employment if, in the reasonable opinion of the Company, this work may have an adverse effect upon the performance of your duties for the Avon Group.
|
|
Inventions and Improvements:
|
Any invention, design or improvement upon any existing invention, product or work during the course of your employment will belong to the Company. This includes any computer programme or design whether or not it is capable of patent registered design, design right, database, copyright or any other similar protection, and whether you made or discovered it alone or in conjunction with anybody else. You must immediately tell your Line Manager of any such invention or improvement.
If the Company asks you to do so, you must comply with any requests that it makes in order to ensure that the invention or improvement becomes or remains the property of the Company or its nominee.
|
|
Confidential Information:
|
You must not (at any time) either during or at any time after the termination of your employment:
divulge, disclose or communicate any confidential Information to any person or persons, firm or company other than duly authorised employees of the Company
or
use any confidential information for your own purposes or for any purposes other than those of the Company.
You must at all times exercise utmost care, attention and discretion in handling any confidential information relating to the Avon Group or personal information relating to an individual of which you are aware.
For the purposes of this clause, confidential information includes any of the below:
information in whatever form relating to the organisation
business plans
finances
transactions
terms of business
marketing strategies
sales
customers and prospective customers
suppliers
design and manufacturing process
technical specifications
private affairs of the Company
personal information relating to an individual
other information of a confidential nature
For these purposes, "confidential information" shall not include information that comes into the public domain (otherwise than by reason of a breach by you of your obligations under this Contract). For the avoidance of doubt, you are not prohibited from disclosing any information where you are required to make such disclosure by law or a relevant regulatory authority.
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Data Protection and Privacy:
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All information within the Avon Group is processed in accordance with the requirements of the Data Protection Act. The Company expects all staff to respect the privacy of other individuals and protection of their personal data. Your offer of employment is subject to you agreeing and signing up to our data privacy terms.
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Directorships
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The Company (or its affiliates, as applicable) will maintain appropriate director's and officer's liability insurance for your benefit and maintain such cover whilst you are a director and for so long after you have ceased to be a director as any claim may lawfully be brought against you.
In relation to any directorships you hold which arise out of or are connected to your employment, the Company shall provide you (both during and after your employment has terminated) with copies of non-privileged Board Minutes (and documents referred to therein) which you reasonably require to defend yourself in any legal, regulatory or quasi-judicial proceedings.
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Right to Search:
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To help the Company provide a safe environment and
to deter criminal, obscene, pornographic or
defamatory acts. While on Company premises or
while using company equipment, the Company has
the right to carry out:
Searches of your person, personal
belongings and vehicle without notice in
accordance with Company guidelines.
Drug, drink and substance checks without
notice, in line with the Misuse of Drugs
and Alcohol policy.
Video surveillance.
Monitoring of electronic communications
on private or public lines, such as email.
Failure to comply will lead to disciplinary action and may lead to dismissal.
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Key Company Policies:
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The following policies are available on the HR website:
Grievance Policy
Performance Capability Policy
Misconduct Policy
Sickness Absence Policy
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Medical Examinations:
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The Company may require a medical report to enable it to make decisions regarding your employment, e.g. in cases of ill-health. The Company may require you to undergo a medical examination by its medical advisor. In addition, you will be expected to provide the Company’s health professional with information about your medical condition as it may reasonably require. This is in order to ensure your state of health enables the Company to act within both yours and the Company’s best interest.
You may be asked in specific circumstances to consent
to the Company contacting your doctor and to his or
her discussing your medical condition and history with
us or a doctor nominated by the Company.
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Collective Agreement:
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There is no collective agreement which directly affects
your employment.
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Variations to Terms and Conditions:
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The Company reserves the right to change the terms
and conditions of your employment from time to time to
take into account Company policy, the needs of the
business and/or new legislation. This may include
implementation of new policies and procedures as they
become necessary to meet the needs of the business.
Reasonable notice will be given when this occurs.
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Entire Agreement
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This agreement and the offer letter constitutes the entire agreement between the parties and supersedes and extinguishes all previous agreements, promises, assurances, warranties, representations and understandings between them, whether written or oral, relating to its subject matter. Each party acknowledges that in entering into this agreement it does not rely on and shall have no remedies in respect of any statement, representation, assurance or warranty (whether made innocently or negligently) that is not set out in this agreement.
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Governing Law
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This agreement and any dispute or claim arising out of or in connection with it or its subject matter or formation shall be governed by and construed in accordance with the law of England and Wales.
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Jurisdiction
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Each party irrevocably agrees that the courts of England and Wales shall have exclusive jurisdiction to settle any dispute or claim arising out of or in connection with this agreement or its subject matter or formation.
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/s/ Jan Zijderveld
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Jan Zijderveld
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Chief Executive Officer
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/s/ Gustavo Arnal
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Gustavo Arnal
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Executive Vice President and
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Chief Financial Officer
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/s/ Jan Zijderveld
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Jan Zijderveld
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Chief Executive Officer
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May 3, 2019
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/s/ Gustavo Arnal
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Gustavo Arnal
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Executive Vice President and
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Chief Financial Officer
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May 3, 2019
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