Avon 2012 Annual Report Download - page 47

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PART II
North America – 2011 Compared to 2010
%/Point Change
2011 2010 US$ Constant $
Total revenue $2,064.6 $2,193.5 (6)% (6)%
Operating (loss) profit (188.0) 147.3 (228)% (228)%
CTI restructuring 24.7 41.3
Impairment charge 263.0 –
Adjusted Non-GAAP operating profit $ 99.7 $ 188.6 (47)% (48)%
Operating margin (9.1)% 6.7% (15.8) (16.0)
CTI restructuring 1.2 1.9
Impairment charge 12.7 –
Adjusted Non-GAAP operating margin 4.8% 8.6% (3.8) (3.8)
Active Representatives (9)%
Units sold (10)%
Amounts in the table above may not necessarily sum due to rounding.
The North America segment consists of the North America Avon business and includes the North America Silpada business for the period
since its acquisition at the end of July 2010. During 2011, Silpada’s results have been included in the North America results for the entire
year presented, whereas the results during 2010 include Silpada’s results only since the end of July 2010. The inclusion of Silpada in our
2011 results for the unmatched period through July favorably impacted North America revenue growth by 4 points, operating profit growth
by 6 points, adjusted Non-GAAP operating profit growth by 1 point, and adjusted Non-GAAP operating margin growth by .1 point.
The total revenue decline of 6% on both a reported and Constant $ basis for 2011 was primarily due to a decline in Active Representatives.
Sales of Beauty products decreased 6% during 2011, partly due to weakness in the beauty market. Sales of non-Beauty products declined
7% during 2011. The inclusion of Silpada in our 2011 results during the unmatched period through July contributed 10 points to non-
Beauty growth rates during 2011.
Operating margin was negatively impacted by 12.7 points by a non-cash goodwill and intangible asset impairment charge 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 benefited .7 points as compared to the prior-year period from lower CTI restructuring. Adjusted Non-GAAP operating
margin declined 3.8 points on both a reported and Constant $ basis, primarily as a result of:
• a decline of 2.5 points from increased investments in RVP;
• a decline of 2.2 points due to lower revenues while continuing to incur overhead expenses that do not vary directly with revenue;
• a decline of 1.0 point of lower gross margin primarily due to commodity cost pressures;
• a decline of .2 points due to a lower benefit from the reduction in the estimated fair value of an earnout provision recorded in connection
with the Silpada acquisition. During 2011, operating margin benefited by .5 points 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. In
comparison, operating margin during 2010 benefited by .7 points due to the change in the fair value of the earnout provision from $26 at
the date of acquisition to $11 at December 31, 2010;
• a benefit of 1.0 point from lower advertising costs; and
• a benefit of .8 points from improved bad debt.