Avon 2013 Annual Report Download - page 16

PART I
• improve our marketing and advertising, including our brochures and our social media presence;
• improve working capital, effectively manage inventory and implement initiatives to reduce inventory levels, including the potential impact
on cash flows and obsolescence;
• secure financing at attractive rates, maintain appropriate capital investment, capital structure and cash flow levels to fund, among other
things, cash dividends, and implement cash management, tax, foreign currency hedging and risk management strategies;
• reverse declines in Active Representatives and Representative satisfaction by successfully reducing campaign complexity, implementing our
Leadership program globally, enhancing the Representative experience and earnings potential and improving our brand image;
• increase the productivity of Representatives through successful implementation of field activation programs and technology tools and
enablers and other investments in the direct-selling channel;
• improve management of our businesses in developing markets, including improving local information technology resources and
management of local supply chains;
• increase the number of consumers served per Representative and their engagement online, as well as to reach new consumers through a
combination of new brands, new businesses, new channels and pursuit of strategic opportunities such as acquisitions, joint ventures and
alliances with other companies;
• comply with certain covenants in our debt instruments as a result of the impact of any significant restructuring charges or significant legal
or regulatory settlements, obtain necessary waivers from compliance with, or necessary amendments to, such covenants, and address the
impact any non-compliance with such covenants may have on our ability to secure financing; and
• estimate and achieve any financial projections concerning, for example, future revenue, profit, cash flow, and operating margin increases.
There can be no assurance that any of these initiatives will be successfully and fully executed within the time periods that we expect.
We may experience financial and strategic difficulties and delays or unexpected costs in
completing our various restructuring and cost-savings initiatives, including achieving any
anticipated savings and benefits of these initiatives.
In 2012, we announced a cost savings initiative (the “$400M Cost Savings Initiative”) in an effort to stabilize the business and return Avon
to sustainable growth, which is expected to be achieved through restructuring actions as well as other cost-savings strategies that will not
result in restructuring charges. The $400M Cost Savings Initiative is designed to reduce our operating expenses as a percentage of total
revenue to help us achieve a targeted low double-digit operating margin by 2016. The restructuring actions under the $400M Cost Savings
Initiative primarily consist of global headcount reductions and related actions, as well as the restructuring or closure of certain smaller,
under-performing markets, including our exit from the South Korea, Vietnam and Republic of Ireland markets.
As a result of the actions approved to-date, we have recorded total costs to implement these restructuring initiatives of $119.1 million
before taxes, of which $68.4 million before taxes was recorded in 2013. For the actions approved to-date, we expect our total costs to
implement restructuring to be in the range of $140 million to $150 million before taxes. The additional charges not yet incurred associated
with the actions approved to-date of approximately $20 million to $30 million before taxes are expected to be recorded primarily in 2014. At
this time we are unable to quantify the total costs to implement these restructuring initiatives that will be incurred through the time the
initiative is fully implemented. In connection with the restructuring actions approved to-date associated with the $400M Cost Savings
Initiative, we expect to realize annualized savings of approximately $165 million to $170 million (both before taxes). See Note 15,
Restructuring Initiatives on pages F-45 through F-49 of our 2013 Annual Report for details of the costs of the restructuring initiatives.
We may not realize anticipated savings or benefits from one or more initiatives arising under our $400M Cost Savings Initiative, restructuring
programs or other cost-savings initiatives in full or in part or within the time periods we expect. Other events and circumstances, such as
financial and strategic difficulties and delays or unexpected costs, may occur which could result in our not realizing all or any of the
anticipated savings or benefits. If we are unable to realize these savings or benefits, our ability to continue to fund other initiatives may be
adversely affected. In addition, our plans to invest these savings and benefits ahead of future growth means that such costs will be incurred
whether or not we realize these savings and benefits. We are also subject to the risks of labor unrest, negative publicity and business
disruption in connection with our $400M Cost Savings Initiative, restructuring programs or other cost-savings initiatives. Failure to realize
anticipated savings or benefits from our $400M Cost Savings Initiative, restructuring programs or other cost-savings initiatives could have a
material adverse effect on our business, prospects, financial condition, liquidity, results of operations and cash flows.