Avon 2012 Annual Report Download - page 46

North America – 2012 Compared to 2011
%/Point Change
2012 2011 US$ Constant $
Total revenue $1,906.8 $2,064.6 (8)% (8)%
Operating loss (214.9) (188.0) (14)% (14)%
CTI restructuring 30.5 24.7
Impairment charges 209.0 263.0
Adjusted Non-GAAP operating profit $ 24.6 $ 99.7 (75)% (75)%
Operating margin (11.3)% (9.1)% (2.2) (2.1)
CTI restructuring 1.6 1.2
Impairment charges 11.0 12.7
Adjusted Non-GAAP operating margin 1.3% 4.8% (3.5) (3.5)
Active Representatives (12)%
Units sold (6)%
Amounts in the table above may not necessarily sum due to rounding.
Effective in the second quarter of 2012, the Dominican Republic was included in Latin America, whereas in prior periods it had been
included in North America. The impact was not material to either segment. Accordingly, North America amounts exclude the results of the
Dominican Republic for all periods presented.
Total revenue decreased 8% on both a reported and Constant $ basis, primarily due to a decrease in Active Representatives, partially offset
by larger average order. The North America segment consists of the North America Avon business and includes the North America Silpada
business. Revenue in the North America Avon business declined 6% on both a reported and Constant $ basis due to a decline in Active
Representatives, partially offset by larger average order primarily due to Representative mix. Revenue in the North America Silpada business
declined 19% on both a reported and Constant $ basis primarily due to lower average order, as well as a decrease in Active Representatives.
Sales of Beauty products declined 8%, or 7% on a Constant $ basis. Sales of non-Beauty products declined 9%, on both a reported and
Constant $ basis, due to the declines in both the North America Avon business and the North America Silpada business.
Operating margin benefited by 1.7 points as compared to the prior-year period due to lower non-cash goodwill and intangible asset
impairment charges associated with our Silpada business. See Note 17, Goodwill and Intangible Assets, on pages F-48 through F-51 of our
2012 Annual Report for more details. Operating margin was negatively impacted by .4 points as compared to the prior-year period from
higher CTI restructuring. Adjusted Non-GAAP operating margin declined 3.5 points on both a reported and Constant $ basis, primarily as a
result of:
• a decline of 2.2 points from increased investments in RVP, primarily due to costs related to the One Simple Sales Model implementation in
the U.S.;
• a decline of 1.3 points due to lower gross margin caused primarily by approximately .8 points from the unfavorable net impact of mix and
pricing and approximately .7 points from higher supply chain costs primarily due to higher obsolescence costs. These were partially offset
by a benefit of out-of-period adjustments associated with vendor liabilities of .3 points;
• a nonrecurring benefit of .5 points that occurred in 2011 due to a reduction in the estimated fair value of an earnout provision recorded
in connection with the Silpada acquisition, as we revised our estimate of the earnout liability to zero;
• a decline of .4 points from higher brochure costs;
• a benefit of 1.1 points from lower overhead costs, primarily due to headcount reduction; and
• a benefit of .4 points from lower advertising costs.
We continue to expect challenging financial results within the North America Avon business, partially as a result of the ongoing impact of
field transformation and redistricting in the U.S., as well as simplifying and enhancing the earnings opportunity for Representatives.
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