Avon 2015 Annual Report Download - page 19

Environmental Matters
Compliance with environmental regulations impacting our global operations has not had, and is not anticipated to have, any material
adverse effect on our financial position, capital expenditures or competitive position.
Employees
At December 31, 2015, we employed approximately 28,300 employees, excluding North America. Of these, approximately 800 were
employed in the U.S. and approximately 27,500 were employed in other countries. In addition, we employed approximately 2,600 in our
North America business (which has been presented as discontinued operations), and of these, approximately 2,100 were employed in the
U.S. and approximately 500 were employed in other countries.
Transformation Plan
In January 2016, we announced a transformation plan (the “Transformation Plan”), which includes investing in growth, reducing costs in an
effort to continue to improve our cost structure and improving our financial resilience. As a result of this plan, we expect to invest $350 into
the business over the next three years with an estimated $150 in media and social selling and $200 related to the service model evolution
and information technology, which will be aimed at improving the overall Representative experience. With respect to cost reductions, we
have targeted pre-tax annualized cost savings of approximately $350 after three years, with an estimated $200 from supply chain reductions
and an estimated $150 from other cost reductions. These cost savings are expected to be achieved through restructuring actions as well as
other cost-savings strategies that will not result in restructuring charges. We are targeting the realization of $70 of these pre-tax cost savings
in 2016. We have initiated this Transformation Plan in order to enable us to achieve our long-term goals of double-digit operating margin
and mid single-digit constant-dollar revenue growth. While we expect to evaluate options to improve our financial resilience, we have
already implemented actions in this area, including refinancing our revolving credit facility, divesting Liz Earle Beauty Co. Limited (“Liz
Earle”), prepaying our 2.375% Notes (as defined in “Capital Resources” within MD&A on pages 59 through 60) and suspending our
dividend.
See Note 14, Restructuring Initiatives on pages F-45 through F-48 of our 2015 Annual Report, Note 3, Discontinued Operations and
Divestitures on pages F-15 through F-18 of our 2015 Annual Report and Note 5, Debt and Other Financing on pages F-19 through F-21 of
our Annual Report for more information on these items.
$400M Cost Savings Initiative
In 2012, we outlined initial steps toward achieving a cost-savings target of $400 before taxes by the end of 2015. In connection with this
cost-savings target, 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. As part of the $400M Cost Savings Initiative, we identified areas for cost efficiency that
required restructuring charges for reductions in our global workforce and related actions across many of our businesses and functions, as
well as the closure of certain smaller, under-performing markets, including South Korea, Vietnam, Republic of Ireland, Bolivia and France.
We also expected to achieve savings through other cost-savings strategies that would not result in restructuring charges (including
reductions in legal costs). While we achieved the targeted cost savings, we did not achieve our targeted low double-digit operating margin
primarily due to the unfavorable impact of foreign exchange, inflationary pressures and the continued revenue decline in North America
(which has since been presented as discontinued operations for all periods presented). Additional information regarding the $400M Cost
Savings Initiative is included in Note 14, Restructuring Initiatives on pages F-45 through F-48 of our 2015 Annual Report.
Acquisitions and Dispositions
In December 2015, we entered into definitive agreements with affiliates of Cerberus, which included the separation of the North America
business from Avon into a privately-held company that will be majority-owned and managed by an affiliate of Cerberus. Avon will retain
approximately 20% ownership in this new privately-held company. In July 2015, we completed the sale of Liz Earle. In July 2013, we
completed the sale of Silpada Designs, Inc. (“Silpada”). Refer to Note 3, Discontinued Operations and Divestitures, on pages F-15 through
F-18 of our 2015 Annual Report, for additional information regarding the sales of the North America business, Liz Earle and Silpada.
Website Access to Reports
Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, are, and
have been throughout 2015, available without charge on our investor website (www.avoninvestor.com) as soon as reasonably practicable
after they are filed with or furnished to the U.S. Securities and Exchange Commission (the “SEC”). We also make available on our website
the charters of our Board Committees, our Corporate Governance Guidelines and our Code of Conduct. Copies of these SEC reports and
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