Avon 2015 Annual Report Download - page 21

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 with favorable terms; and
• estimate and achieve any financial projections concerning, for example, future revenue, profit, cash flow, and operating margin increases
and maintain an effective internal control environment as a result of any challenges associated with the implementation of our various
plans, strategies and initiatives.
There can be no assurance if and when any of these initiatives will be successfully and fully executed or completed.
We may experience financial and strategic difficulties and delays or unexpected costs in
completing our transformation plan and any other restructuring and cost-savings initiatives,
including achieving any anticipated savings and benefits of these initiatives.
In 2012, we outlined initial steps toward achieving a cost-savings target of $400 million 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. 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). We continue to analyze our
cost structure and expect to incur additional restructuring charges as a result. For example, in January 2016, we announced a transformation
plan (the “Transformation Plan”), which includes cost reduction efforts to continue to improve our cost structure and to enable us to
reinvest in growth. As a result of this plan, we have targeted pre-tax annualized cost savings of approximately $350 million after three years,
with an estimated $200 million from supply chain reductions and an estimated $150 million from other cost reductions, which are expected
to be achieved through restructuring actions as well as other cost-savings strategies that will not result in restructuring charges. We plan to
reinvest a portion of these cost savings in growth initiatives, including media, social selling and information technology systems that will help
us modernize our business. We initiated the 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.
As we work to right-size our cost structure, we may not realize anticipated savings or benefits from one or more of the various restructuring
and cost-savings initiatives we may undertake as part of these efforts 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, including the impact of foreign currency and
inflationary pressures, may occur which could result in our not realizing our targets. If we are unable to realize these savings or benefits, our
ability to continue to fund other initiatives and aspects of our business may be adversely affected. In addition, any 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 these initiatives, and the failure
to realize anticipated savings or benefits from such initiatives could have a material adverse effect on our business, prospects, financial
condition, liquidity, results of operations and cash flows.
There can be no assurance that we will be able to reverse declining revenue, margins and net
income and achieve profitable growth.
There can be no assurance that we will be able to reverse declining revenue, margins and net income, and to achieve profitable growth in
the future, particularly in our largest markets, such as Brazil and in developing and emerging markets, such as Mexico and Russia. Our
revenue in 2015 was $6,160.5 million, compared with $7,648.0 million in 2014 and $8,496.8 million in 2013. Our gross margin in 2015
was 60.3%, compared with 60.7% in 2014 and 62.7% in 2013. Our operating margin in 2015 was 2.7%, compared with 5.7% in 2014
and 6.4% in 2013. In 2015, we had a loss from continuing operations, net of tax, of $796.5 million, compared with a loss from continuing
operations, net of tax, of $344.5 million in 2014, and income from continuing operations, net of tax, of $67.5 million in 2013. Reversing
these trends will depend on our ability to improve financial and operational performance and execution of our global business strategy.
There can be no assurance that we will be able to reverse these trends.
To reverse these trends in revenue, margins and net income and to achieve profitable growth, we also need to successfully implement
certain initiatives including our Transformation Plan, and there can no assurance that we will be able to do so. Our achievement of profitable
growth is also subject to the strengths and weaknesses of our individual international markets, which are or may be impacted by global
economic conditions. We cannot assure that our broad-based geographic portfolio will be able to withstand an economic downturn,
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