Avon 2014 Annual Report Download - page 33

related to the finalization of the FCPA settlements. See Risk Factors on pages 10 through 11 of our 2014 Annual Report, Note 1, Description
of the Business and Summary of Significant Accounting Policies on pages F-8 through F-14 of our 2014 Annual Report, Note 7, Income
Taxes on pages F-21 through F-25 of our 2014 Annual Report, and Note 15, Contingencies on pages F-47 through F-48 of our 2014 Annual
Report, for more information.
New Accounting Standards
Information relating to new accounting standards is included in Note 2, New Accounting Standards, to our consolidated financial statements
contained in this 2014 Annual Report.
Performance Metrics
Within this MD&A, in addition to our key financial metrics of revenue, operating profit and operating margin, we utilize the performance
metrics defined below to assist in the evaluation of our business.
Performance Metrics Definition
Change in Active Representatives This metric is a measure of Representative activity based on the number of unique
Representatives submitting at least one order in a sales campaign, totaled for all campaigns in
the related period. To determine the change in Active Representatives, this calculation is
compared to the same calculation in the corresponding period of the prior year. Orders in
China are excluded from this metric as our business in China is predominantly retail. Liz Earle
is also excluded from this calculation as they do not distribute through the direct-selling
channel.
Change in units sold This metric is based on the gross number of pieces of merchandise sold during a period, as
compared to the same number in the same period of the prior year. Units sold include
samples sold and products contingent upon the purchase of another product (for example,
gift with purchase or discount purchase with purchase), but exclude free samples.
Change in Average Order This metric is a measure of Representative productivity. The calculation is the difference of the
year-over-year change in revenue on a Constant $ basis and the Change in Active
Representatives. Change in Average Order may be impacted by a combination of factors such
as inflation, units, product mix, and/or pricing.
Non-GAAP Financial Measures
To supplement our financial results presented in accordance with generally accepted accounting principles in the United States (“GAAP”),
we disclose operating results that have been adjusted to exclude the impact of changes due to the translation of foreign currencies into U.S.
dollars, including changes in: revenue, operating profit, Adjusted operating profit, operating margin and Adjusted operating margin. We
also refer to these adjusted financial measures as Constant $ items, which are Non-GAAP financial measures. We believe these measures
provide investors an additional perspective on trends. To exclude the impact of changes due to the translation of foreign currencies into U.S.
dollars, we calculate current-year results and prior-year results at a constant exchange rate. Foreign currency impact is determined as the
difference between actual growth rates and constant- currency growth rates.
We also present gross margin, selling, general and administrative expenses as a percentage of revenue, total and net global expenses,
operating profit, operating margin and effective tax rate on a Non-GAAP basis. The discussion of our segments presents operating profit and
operating margin on a Non-GAAP basis. We refer to these Non-GAAP financial measures as “Adjusted.” We have provided a quantitative
reconciliation of the difference between the Non-GAAP financial measures and the financial measures calculated and reported in accordance
with GAAP. The Company uses the Non-GAAP financial measures to evaluate its operating performance and believes that it is meaningful
for investors to be made aware of, on a period-to-period basis, the impacts of 1) costs to implement (“CTI”) restructuring initiatives, 2) costs
and charges related to the devaluations of Venezuelan currency in March 2014 and February 2013, combined with being designated as a
highly inflationary economy, a valuation allowance for deferred tax assets related to Venezuela, and the benefit related to the release of a
provision associated with the excess cost of acquiring U.S. dollars in Venezuela (“Venezuelan special items”), 3) the $89 accrual recorded in
2013 for the settlements related to the FCPA investigations and the additional $46 accrual recorded in the first quarter of 2014 for the
settlements related to the FCPA investigations, and the associated approximate $19 net tax benefit recorded in the fourth quarter of 2014
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