Avon 2012 Annual Report Download - page 110

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Non-cash write-offs associated with employee-related costs are the result of settlement, curtailment and special termination benefit charges
for pension plans and postretirement due to the initiatives implemented.
The charges approved to date under the additional restructuring initiatives by reportable business segment were as follows: $13.8 in Latin
America, $10.2 in Europe, Middle East & Africa, $4.7 in North America, $4.3 in Asia Pacific, and $32.4 in Corporate.
$400M Cost Savings Initiative
On December 11, 2012, we announced initial steps of a cost savings initiative (the “$400M Cost Savings Initiative”), in an effort to stabilize
the business and return Avon to sustainable growth. The $400M Cost Savings Initiative includes a global headcount reduction and related
actions, as well as our exit from the South Korea and Vietnam markets. As part of the $400M Cost Savings Initiative, we identified certain
actions in the fourth quarter of 2012, the majority of which are expected to take effect in 2013, that we believe will accelerate top line
growth and reduce costs. As a result of these actions, we recorded total costs to implement these restructuring initiatives of $50.7 before
taxes associated with approved initiatives. For the initiatives approved to date, we expect our total costs to implement to be in the range of
$70 to $80 before taxes. At this time we are unable to quantify the total costs when the initiative is fully implemented. In connection with
the initial steps of the $400M Cost Savings Initiative, we expect to realize annualized savings of approximately $70 before taxes.
The total cost to implement recorded in 2012 related to these initiatives consisted of the following:
• net charge of $45.2 primarily for employee-related costs, including severance and pension benefits;
• accelerated depreciation of $2.2 associated with the closure and rationalization of certain facilities;
• net charge of $1.9 primarily related to contract termination costs associated with the closure of certain facilities and our exit from the
South Korea market; and
• inventory write-offs of $1.4 associated with the exit of our South Korea and Vietnam markets.
Of the total cost to implement, $49.3 was recorded in selling, general and administrative expenses and $1.4 was recorded in cost of sales for
2012. Cash payments associated with these charges are expected to be made primarily during 2013.
The liability balance for the $400M Cost Savings Initiative as of December 31, 2012 is as follows:
Employee-
Related
Costs
Inventory
Write-offs
Contract
Terminations/
Other Total
2012 Charges $45.2 $ 1.4 $1.9 $48.5
Cash payments (3.2) – (.2) (3.4)
Non-cash write-offs (.8) (1.4) – (2.2)
Foreign exchange .1 – – .1
Balance at December 31, 2012 $41.3 $ – $1.7 $43.0
The following table presents the restructuring charges incurred to date, net of adjustments, under our $400M Cost Savings Initiative, along
with the charges expected to be incurred under the plan:
Employee-
Related
Costs
Inventory
Write-offs
Currency
Translation
Adjustment
Write-offs
Contract
Terminations/
Other Total
Charges incurred to date $45.2 $1.4 $ – $1.9 $48.5
Charges to be incurred on approved initiatives 6.4 – (3.2) 2.1 5.3
Total expected charges on approved initiatives $51.6 $1.4 $(3.2) $4.0 $53.8
A V O N 2012 F-45