UNITED STATES OF AMERICA

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________

FORM 10-Q

_________________________


☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~September 30, 2021~~March 31, 2022


☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission file number 1-4881

_________________________

AVON PRODUCTS, INC.

(Exact name of registrant as specified in its charter)

_________________________


New York						13-0544597
(State or other jurisdiction of Incorporation or organization)						(I.R.S. Employer Identification No.)

Nunn Mills Road, Northampton NN1 5PA

United Kingdom

(Address of principal executive offices)

+44-1904-232425

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	None	None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Note: The registrant is a voluntary filer of reports required to be filed by certain companies under Sections 13 or 15(d) of the Securities Exchange Act of 1934.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer,"

"smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of Common Stock (par value $0.01) outstanding at ~~September 30, 2021~~March 31, 2022 was 101.34.

The registrant meets the conditions sets forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format.

TABLE OF CONTENTS


		Page Numbers
Part I. Financial Information

Item 1.	Financial Statements (Unaudited)

	Consolidated Statements of Operations Three Months Ended ~~September~~March ~~30, 2021~~3 1 , 202 2 and ~~September~~March ~~30,~~3 1 , 202021	3



	~~Consolidated Statements of Operations~~ ~~Nine~~ ~~Months Ended~~ ~~September~~ ~~30, 2021 and~~ ~~September~~ ~~30, 20~~20	4

	Consolidated Statements of Comprehensive Income (Loss) Three Months Ended ~~September~~March 31, 2022 and March 31, 2021	4



	Consolidated Balance Sheets March 3 ~~30, 2021~~1 , 2022 and ~~September~~ ~~30,~~December 31, 202021	5

	Consolidated Statements of ~~Comprehensive Income (Loss~~) ~~Nine~~ ~~Months Ended~~ ~~September~~ ~~30, 2021 and~~ ~~September~~ ~~30, 20~~20	5

	~~Consolidated Balance Sheets~~ ~~September~~ ~~30, 2021~~ ~~and~~ ~~December 31, 20~~20	7

	~~Consolidated Statements of~~ Cash Flows ~~Nine~~Three Months Ended ~~September~~ ~~30, 2021~~March 31, 2022 and ~~September~~ ~~30,~~March 31, 202021	86

	Consolidated Statement of Changes in Shareholders’ Deficit ~~Nine~~Three Months Ended ~~September~~ ~~30, 2021~~March 31, 2022 and ~~September~~ ~~30,~~March 31, 202021	107

	Notes to Consolidated Financial Statements	119 - 3425

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3526 - 5138

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5239

Item 4.	Controls and Procedures	5239

Part II. Other Information

Item 1.	Legal Proceedings	5340

Item 1A.	Risk Factors	5340

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5340

Item 5.	Other Information	5340

Item 6.	Exhibits	5441

	Signature	5542

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AVON PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


		Three Months Ended					Three Months Ended
(In millions)	(In millions)	September 30, 2021		September 30, 2020		(In millions)	March 31, 2022		March 31, 2021
Product sales	Product sales	$	728.7	$	950.1	Product sales	$	631.4	$	850.4
Other revenue	Other revenue	33.1		47.0		Other revenue	28.2		46.3
Revenue from affiliates of Natura &Co	Revenue from affiliates of Natura &Co	6.5		.9		Revenue from affiliates of Natura &Co	3.7		7.7
Total revenue	Total revenue	768.3		998.0		Total revenue	663.3		904.4
Costs, expenses and other:	Costs, expenses and other:					Costs, expenses and other:
Cost of sales	Cost of sales	(321.3)		(440.0)		Cost of sales	(287.4)		(398.3)
Cost of sales from affiliates of Natura &Co						Cost of sales from affiliates of Natura &Co	(4.2)		(7.1)
Selling, general and administrative expenses	Selling, general and administrative expenses	(465.9)		(534.2)		Selling, general and administrative expenses	(433.9)		(536.1)

Operating (loss) income		(18.9)		23.8
Operating loss						Operating loss	(62.2)		(37.1)

Interest expense	Interest expense	(37.3)		(37.4)		Interest expense	(13.0)		(14.9)
Loss on extinguishment of debt and credit facilities		—		(4.1)
Interest expense on Loan from affiliates of Natura &Co						Interest expense on Loan from affiliates of Natura &Co	(15.3)		(8.7)

Interest income	Interest income	1.1		.1		Interest income	.9		.2
Interest income from affiliates of Natura &Co						Interest income from affiliates of Natura &Co	.7		—
Other income (expense), net	Other income (expense), net	.7		(1.0)		Other income (expense), net	4.5		(1.3)
Gain on sale of business/assets		8.3		1.4

Total other expenses	Total other expenses	(27.2)		(41.0)		Total other expenses	(22.2)		(24.7)

Loss from continuing operations, before income taxes	Loss from continuing operations, before income taxes	(46.1)		(17.2)		Loss from continuing operations, before income taxes	(84.4)		(61.8)
Income taxes	Income taxes	10.4		(11.8)		Income taxes	(4.8)		(7.1)
Loss from continuing operations, net of tax	Loss from continuing operations, net of tax	(35.7)		(29.0)		Loss from continuing operations, net of tax	(89.2)		(68.9)
Loss from discontinued operations, net of tax		(7.4)		(4.5)
(Loss) income from discontinued operations, net of tax						(Loss) income from discontinued operations, net of tax	(7.8)		5.0
Net loss	Net loss	(43.1)		(33.5)		Net loss	(97.0)		(63.9)
Net loss attributable to noncontrolling interests		.6		.7
Net income (loss) attributable to noncontrolling interests						Net income (loss) attributable to noncontrolling interests	(.2)		.3
Net loss attributable to Avon	Net loss attributable to Avon	$	(42.5)	$	(32.8)	Net loss attributable to Avon	$	(97.2)	$	(63.6)

The accompanying notes are an integral part of these statements.

~~AVON PRODUCTS, INC.~~

AVON PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~COMPREHENSIVE INCOME (LOSS)

(Unaudited)
Nine Months Ended
(In millions) September 30, 2021 September 30, 2020
Product sales $ 2,443.9 $ 2,423.0
Other revenue 122.9 136.1
Revenue from affiliates of Natura &Co 22.9 2.7
Total revenue 2,589.7 2,561.8
Costs, expenses and other:
Cost of sales (1,111.7) (1,111.5)
Selling, general and administrative expenses (1,553.1) (1,578.4)
Operating loss (75.1) (128.1)
Interest expense (87.3) (100.9)
Loss on extinguishment of debt and credit facilities — (11.9)
Interest income 1.2 1.6
Other income (expense), net 4.3 (20.1)
Gain on sale of business/assets 9.8 1.5
Total other expenses (72.0) (129.8)
Loss from continuing operations, before income taxes (147.1) (257.9)
Income taxes (15.5) (26.7)
Loss from continuing operations, net of tax (162.6) (284.6)
Loss from discontinued operations, net of tax (6.5) (14.3)
Net loss (169.1) (298.9)
Net loss attributable to noncontrolling interests 1.4 2.3
Net loss attributable to Avon $ (167.7) $ (296.6)


	Three Months Ended
(In millions)	March 31, 2022		March 31, 2021
Net loss	$	(97.0)	$	(63.9)
Other comprehensive income (loss):
Foreign currency translation adjustments	53.8		(12.2)
Unrealized loss on revaluation of long-term intercompany balances	(3.0)		(32.3)
Change in unrealized loss on cash flow hedges	.1		—
Adjustments and amortization of net actuarial loss and prior service cost, net of taxes of $0.2 and $0.2	1.3		1.2

Total other comprehensive income (loss), net of income taxes	52.2		(43.3)
Comprehensive loss	(44.8)		(107.2)
Less: comprehensive (income) loss attributable to noncontrolling interests	(.1)		.3
Comprehensive loss attributable to Avon	$	(44.9)	$	(106.9)

The accompanying notes are an integral part of these statements.

AVON PRODUCTS, INC.

CONSOLIDATED BALANCE SHEETS

December 31, 2021 (Audited) and March 30, 2021 (Unaudited)


(In millions)	March 31, 2022		December 31, 2021
Assets
Current Assets
Cash and cash equivalents	$	208.5	$	251.5

Accounts receivable, net	212.1		198.7
Receivables from affiliates of Natura &Co	28.5		34.1
Loans to affiliates of Natura &Co	45.5		46.6
Inventories	421.8		384.1
Prepaid expenses and other	170.6		165.6
Assets held for sale	—		2.8

Total current assets	1,087.0		1,083.4
Property, plant and equipment, at cost	976.1		942.5
Less accumulated depreciation	(606.1)		(578.8)
Property, plant and equipment, net	370.0		363.7
Right-of-use assets	104.8		111.1
Goodwill	74.9		72.1
Deferred tax asset	135.8		121.4
Loans to affiliates of Natura &Co	46.7		46.7
Other assets	546.3		509.4

Total assets	$	2,365.5	$	2,307.8
Liabilities and Shareholders’ Deficit
Current Liabilities
Debt maturing within one year	$	561.4	$	32.6
Loans from affiliates of Natura &Co	458.3		371.7
Accounts payable	496.7		522.8
Payables to affiliates of Natura &Co	34.6		29.4

Accrued compensation	69.5		81.5
Other accrued liabilities	244.7		273.4
Sales taxes and taxes other than income	73.4		66.8
Income taxes	13.1		11.6
Current liabilities of discontinued operations	33.9		31.7

Total current liabilities	1,985.6		1,421.5
Long-term debt	214.9		676.0
Loans from affiliates of Natura &Co	721.0		736.3
Long-term operating lease liability	80.7		87.5
Employee benefit plans	88.6		84.6
Long-term income taxes	90.7		81.5
Other liabilities	81.1		75.1
Total liabilities	3,262.6		3,162.5

Shareholders’ Deficit

Additional paid-in capital	633.6		631.2
Retained losses	(501.4)		(404.2)
Accumulated other comprehensive loss	(1,033.2)		(1,085.5)

Total Avon shareholders’ deficit	(901.0)		(858.5)
Noncontrolling interests	3.9		3.8
Total shareholders’ deficit	(897.1)		(854.7)
Total liabilities and shareholders’ deficit	$	2,365.5	$	2,307.8

The accompanying notes are an integral part of these statements.

AVON PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended
(In millions)	March 31, 2022		March 31, 2021
Cash Flows from Operating Activities
Net loss	$	(97.0)	$	(63.9)
Loss from discontinued operations, net of tax	(7.8)		5.0
Loss from continuing operations, net of tax	(89.2)		(68.9)
Adjustments to reconcile net loss from continuing operations to net cash used by operating activities:
Depreciation	10.9		13.9
Amortization	4.8		6.0
Provision for doubtful accounts	14.1		17.4
Provision for obsolescence	6.4		7.7
Share-based compensation	2.4		.6
Foreign exchange (gains) losses	(7.3)		.5
Deferred income taxes	(2.5)		(1.6)



Other	(.6)		.3
Changes in assets and liabilities:
Accounts receivable	(20.6)		(18.4)
Inventories	(33.1)		(29.5)
Prepaid expenses and other	9.4		(21.6)
Accounts payable and accrued liabilities	(65.4)		(76.8)
Income and other taxes	3.2		.8
Noncurrent assets and liabilities	(.9)		.7
Net cash used by operating activities of continuing operations	(168.4)		(168.9)
Cash Flows from Investing Activities
Capital expenditures	(13.6)		(13.8)
Disposal of assets	2.7		1.1


Net cash used by investing activities of continuing operations	(10.9)		(12.7)
Cash Flows from Financing Activities

Debt, net (maturities of three months or less)	86.8		7.9
Proceeds from debt	68.6		76.5
Repayment of debt	(18.9)		(12.6)
Repayment of debt to affiliates of Natura &Co	(10.7)		—
Repayment of debt by affiliates of Natura &Co	11.7		—



Settlement of derivative contracts	1.3		(4.8)


Net cash provided by financing activities of continuing operations	138.8		67.0
Cash Flows from Discontinued Operations
Net cash used by operating activities of discontinued operations	(5.6)		(1.5)


Net cash used by discontinued operations	(5.6)		(1.5)
Effect of exchange rate changes on cash and cash equivalents, and restricted cash	3.1		(17.6)
Net decrease in cash and cash equivalents, and restricted cash	(43.0)		(133.7)
Cash and cash equivalents, and restricted cash at beginning of period	251.5		373.4
Cash and cash equivalents, and restricted cash at end of period	$	208.5	$	239.7

The accompanying notes are an integral part of these statements.

AVON PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT

(Unaudited)


(In millions)	Common Stock			Additional		Retained		Accumulated Other		Noncontrolling
	Shares	Amount		Paid-In Capital		Losses		Comprehensive Loss			Interests		Total
Balances at December 31, 2021	—	$	—	$	631.2	$	(404.2)	$	(1,085.5)		$	3.8	$	(854.7)
Net (loss) income	—	—		—		(97.2)		—			.2		(97.0)
Other comprehensive income	—	—		—		—		52.3			(.1)		52.2
Exercise/ vesting/ expense of share-based compensation	—	—		2.4		—		—			—		2.4

Balances at March 31, 2022(1)	—	$	—	$	633.6	$	(501.4)	$	(1,033.2)		$	3.9	$	(897.1)

(1) The number of shares of Common Stock (par value $0.01 per share) outstanding at March 31, 2022 was 101.34.

~~AVON PRODUCTS, INC.~~

~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)~~

~~(Unaudited)~~
Three Months Ended
(In millions) September 30, 2021 September 30, 2020
Net loss $ (43.1) $ (33.5)
Other comprehensive loss:
Foreign currency translation adjustments (5.7) (65.7)
Unrealized (loss) gain on revaluation of long-term intercompany balances (3.8) 40.4
Adjustments and amortization of net actuarial loss and prior service cost, net of taxes of $0.2 and $0.2 .7 4.4
Total other comprehensive loss, net of income taxes (8.8) (20.9)
Comprehensive loss (51.9) (54.4)
Less: comprehensive loss attributable to noncontrolling interests .9 .5
Comprehensive loss attributable to Avon $ (51.0) $ (53.9)

~~The accompanying notes are an integral part of these statements.~~

~~AVON PRODUCTS, INC.~~

~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)~~

~~(Unaudited)~~
Nine Months Ended
(In millions) September 30, 2021 September 30, 2020
Net loss $ (169.1) $ (298.9)
Other comprehensive loss:
Foreign currency translation adjustments (1.4) (149.7)
Unrealized (loss) income on revaluation of long-term intercompany balances (21.7) 13.8
Change in unrealized loss on cash flow hedges, net of taxes of $0.0 and $0.0 — .6
Adjustments and amortization of net actuarial loss and prior service cost, net of taxes of $0.6 and $0.6 3.2 8.4
Total other comprehensive loss, net of income taxes (19.9) (126.9)
Comprehensive loss (189.0) (425.8)
Less: comprehensive loss attributable to noncontrolling interests 1.6 2.3
Comprehensive loss attributable to Avon $ (187.4) $ (423.5)

~~The accompanying notes are an integral part of these statements.~~

~~AVON PRODUCTS, INC.~~

~~CONSOLIDATED BALANCE SHEETS~~

~~December 31, 2020 (Audited) and September 30, 2021 (Unaudited)~~
(In millions) September 30,
2021 December 31,
2020
Assets
Current Assets
Cash and cash equivalents $ 225.3 $ 364.9
Restricted cash — 7.8
Accounts receivable, net 210.0 259.1
Receivables from affiliates of Natura &Co 22.7 6.1
Loans to affiliates of Natura &Co 44.9 —
Inventories 424.5 459.1
Prepaid expenses and other 162.9 204.2
Assets held for sale 4.6 13.9
Total current assets 1,094.9 1,315.1
Property, plant and equipment, at cost 950.3 1,148.5
Less accumulated depreciation (587.7) (709.9)
Property, plant and equipment, net 362.6 438.6
Right-of-use assets 112.1 153.1
Goodwill 75.2 83.2
Deferred tax asset 118.6 135.8
Loans to affiliates of Natura &Co 51.1 —
Other assets 459.8 438.5
Total assets $ 2,274.3 $ 2,564.3
Liabilities and Shareholders’ Deficit
Current Liabilities
Debt maturing within one year $ 35.5 $ 28.0
Loans from affiliates of Natura &Co 148.7 1,008.6
Accounts payable 486.2 709.4
Payables to affiliates of Natura &Co 27.4 —
Accrued compensation 91.4 89.4
Other accrued liabilities 262.1 334.7
Sales taxes and taxes other than income 74.0 89.9
Income taxes 8.4 5.4
Current liabilities of discontinued operations 26.1 27.1
Liabilities held for sale — 2.3
Total current liabilities 1,159.8 2,294.8
Long-term debt 675.8 675.4
Loans from affiliates of Natura &Co 972.8 —
Long-term operating lease liability 88.1 120.9
Employee benefit plans 107.0 133.3
Long-term income taxes 85.5 101.1
Other liabilities 83.8 106.0
Total liabilities 3,172.8 3,431.5
Shareholders’ Deficit
Common stock — —
Additional paid-in capital 632.1 622.8
Retained losses (379.8) (360.5)
Accumulated other comprehensive loss (1,153.5) (1,133.8)
Total Avon shareholders’ deficit (901.2) (871.5)
Noncontrolling interests 2.7 4.3
Total shareholders’ deficit (898.5) (867.2)
Total liabilities and shareholders’ deficit $ 2,274.3 $ 2,564.3
~~The accompanying notes are an integral part of these statements.~~

~~AVON PRODUCTS, INC.~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(Unaudited)~~
Nine Months Ended
(In millions) September 30, 2021 September 30, 2020
Cash Flows from Operating Activities
Net loss $ (169.1) $ (298.9)
Loss from discontinued operations, net of tax (6.5) (14.3)
Loss from continuing operations, net of tax (162.6) (284.6)
Adjustments to reconcile net loss from continuing operations to net cash used by operating activities:
Depreciation 39.6 43.4
Amortization 17.6 19.3
Provision for doubtful accounts 48.5 64.2
Provision for obsolescence 20.3 28.2
Share-based compensation 7.7 21.8
Foreign exchange (gains) losses (1.2) 3.0
Deferred income taxes (10.5) 21.8
Impairment loss on assets 1.0 1.8
Gain on sale of business / assets (8.3) (1.5)
Other (.9) 22.1
Changes in assets and liabilities:
Accounts receivable (51.2) (84.0)
Inventories (76.4) (84.1)
Prepaid expenses and other 6.1 (9.0)
Accounts payable and accrued liabilities (80.9) (85.7)
Income and other taxes (8.8) 2.8
Noncurrent assets and liabilities (38.2) 13.9
Net cash used by operating activities of continuing operations (298.2) (306.6)
Cash Flows from Investing Activities
Capital expenditures (48.2) (30.0)
Disposal of assets 2.3 1.8
Net proceeds from sale of business / assets 13.9 11.3
Other investing activities — .4
Net cash used by investing activities of continuing operations(1)
(32.0) (16.5)
Cash Flows from Financing Activities
Cash dividends — (8.6)
Debt, net (maturities of three months or less) (5.0) 12.5
Proceeds from debt 269.9 80.8
Repayment of debt (57.5) (48.3)
Repayment of debt to affiliates of Natura &Co(1)
(31.7) —
Repayment of debt by affiliates of Natura &Co 49.8 —
Repurchase of common stock — (.4)
Costs associated with debt issue / repayment — (3.8)
Settlement of stock options — (25.8)
Settlement of derivative contracts (3.9) 19.5
Repayment of monetization of COFINS tax credits (15.5) —
Net cash provided by financing activities of continuing operations(1)
206.1 25.9
Cash Flows from Discontinued Operations
Net cash used by operating activities of discontinued operations (7.5) (11.2)
Net cash used by discontinued operations (7.5) (11.2)
Effect of exchange rate changes on cash and cash equivalents, and restricted cash (16.5) (23.9)
Net decrease in cash and cash equivalents, and restricted cash (148.1) (332.3)
Cash and cash equivalents, and restricted cash at beginning of period 373.4 661.0
Cash and cash equivalents, and restricted cash at end of period $ 225.3 $ 328.7

~~The accompanying notes are an integral part of these statements.~~

~~(1)~~ On July 1, 2021, the Company sold Avon Luxembourg, including our Mexican business, to a subsidiary of Natura &Co Holding for $150, with the proceeds used to repay maturing loans of $150 borrowed under the $250 Revolving Credit Facility with a subsidiary of Natura &Co Holding. Under the terms of the transaction and the associated Direction and Settlement Agreement, no cash flows in either investing or financing activities arose as a result of the transaction.

~~AVON PRODUCTS, INC.~~

~~CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT~~

~~(Unaudited)~~

(In millions) Common Stock Additional Retained Accumulated Other Noncontrolling
Shares Amount Paid-In Capital Losses Comprehensive Loss Interests Total
Balances at December 31, 2020 — $ — $ 622.8 $ (360.5) $ (1,133.8) $ 4.3 $ (867.2)
Net loss — — — (63.6) — (.3) (63.9)
Other comprehensive loss — — — — (43.3) — (43.3)
Exercise/ vesting/ expense of share-based compensation — — .6 — — — .6
Balances at March 31, 2021 — $ — $ 623.4 $ (424.1) $ (1,177.1) $ 4.0 $ (973.8)
Net loss — — — (61.6) — (.5) (62.1)
Other comprehensive income — — — — 32.1 .1 32.2
Exercise/ vesting/ expense of share-based compensation — — 4.2 — — — 4.2
Balances at June 30, 2021 (1)
— $ — $ 627.6 $ (485.7) $ (1,145.0) $ 3.6 $ (999.5)
Sale of Avon Luxembourg (2)
— — — 148.4 — — 148.4
Net loss — — — (42.5) — (.6) (43.1)
Other comprehensive loss — — — — (8.5) (.3) (8.8)
Exercise/ vesting/ expense of share-based compensation — — 4.5 — — — 4.5
Balances at September 30, 2021 (1)
— $ — $ 632.1 $ (379.8) $ (1,153.5) $ 2.7 $ (898.5)

~~(1)~~ ~~The number of shares of Common Stock (par value $0.01 per share) outstanding at September 30, 2021 was 101.34.~~

~~(2)~~ On July 1, 2021, the Company sold Avon Luxembourg Holdings S.à r.l. and its subsidiaries ("Avon Luxembourg"), including our Mexican business, to a subsidiary of Natura &Co Holding S.A. for $150. The sale was accounted for as a transaction under common control in accordance with ASC805 - Business Combinations, with the resulting gain of $148, representing the difference between the proceeds, the net assets of Avon Luxembourg on the date of sale, and the cumulative foreign currency translation adjustment, taken directly to Retained Earnings.

AVON PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT

~~(Audited)~~

(In millions) Common Stock Additional Retained Accumulated Other Treasury Stock Noncontrolling
Shares Amount Paid-In Capital Earnings, (Losses) Comprehensive Loss Shares Amount Interests Total
Balances at December 31, 2019 770.0 $ 192.6 $ 2,321.2 $ 2,138.9 $ (1,040.0) 319.9 $ (4,603.3) $ 6.8 $ (983.8)
Credit Losses Cumulative catch up — — — (2.0) — — — — (2.0)
Net loss — — — (171.0) — — — (.9) (171.9)
Other comprehensive loss — — — — (104.3) — — (.2) (104.5)
Conversion of Series C convertible preferred stock (1)
— — — (710.8) — (87.0) 1,197.6 — 486.8
Exercise/ vesting/ expense of share-based compensation — (.2) (9.7) — — — — — (9.9)
Exchange of common stock (2)
(770.0) (192.4) (1,788.1) (1,425.2) — (232.9) 3,405.7 — —
Balances at March 31, 2020 — — 523.4 (170.1) (1,144.3) — — 5.7 (785.3)
Net loss — — — (92.8) — — — (.7) (93.5)
Other comprehensive loss — — — — (1.5) — — — (1.5)
Exercise/ vesting/ expense of share-based compensation — — .8 — — — — — .8
Balances at June 30, 2020 — $ — $ 524.2 $ (262.9) $ (1,145.8) — $ — $ 5.0 $ (879.5)
Net loss — — — (32.8) — — — (.7) (33.5)
Gain on common control transaction — — — 1.4 — — — — 1.4
Other comprehensive loss, (income) — — — — (21.1) — — .2 (20.9)
Exercise/ vesting/ expense of share-based compensation — — 3.5 — — — — — 3.5
Balances at September 30, 2020(3)
— — 527.7 (294.3) (1,166.9) — — 4.5 (929.0)

~~(1)~~ On December 30, 2019, an affiliate of Cerberus Capital Management, L.P. ("Cerberus") elected to convert 435,000 shares of Series C Preferred Stock into 87,000,000 shares of the Company’s common stock, par value U.S.$0.25 per share, conditioned on the Conversion Condition (as defined below).(Unaudited)

~~(2)~~ In January 2020, subsequent to the Transaction, the Company restated its certificate of incorporation to effect a change in capitalization of the Company by changing the number of authorized shares of common stock from 1,525,000,000 shares (of which (i) 1,500,000,000 shares, par value $0.25 per share, were common stock and (ii) 25,000,000 shares, par value $1.00 per share, were preferred stock) to 1,000 shares of common stock, par value $0.01 per share. As a result of the Transaction, all of the issued and outstanding common stock of the Company, being 550,890,788, were canceled and converted. See Note 17, Mergers with Natura Cosméticos S.A.


(In millions)	Common Stock			Additional		Retained		Accumulated Other		Noncontrolling
	Shares	Amount		Paid-In Capital		Losses		Comprehensive Loss			Interests		Total
Balances at December 31, 2020	—	$	—	$	622.8	$	(360.5)	$	(1,133.8)		$	4.3	$	(867.2)
Net loss	—	—		—		(63.6)		—			(.3)		(63.9)
Other comprehensive loss	—	—		—		—		(43.3)			—		(43.3)
Exercise/ vesting/ expense of share-based compensation	—	—		.6		—		—			—		.6

Balances at March 31, 2021(1)	—	$	—	$	623.4	$	(424.1)	$	(1,177.1)		$	4.0	$	(973.8)

~~(3)~~(1) The number of shares of Common Stock (par value $0.01 per share) outstanding at ~~September 30, 2020~~March 31, 2021 was 101.34.

The accompanying notes are an integral part of these statements.

118

~~AVON PRODUCTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(U.S. dollars in millions, except per share data)~~

1. ACCOUNTING POLICIES

Basis of Presentation

We prepare our unaudited interim Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States ("GAAP"). We consistently applied the accounting policies described in our ~~2020~~2021 Annual Report on Form 10-K ("~~2020~~2021 Form 10-K") in preparing these unaudited interim Consolidated Financial Statements, other than those impacted by new accounting standards as described below. On January 3, 2020, we completed the Agreement and Plan of Mergers with Natura Cosméticos S.A., a Brazilian corporation (sociedade anônima) ("Natura Cosméticos"), Natura &Co Holding S.A., a Brazilian corporation (sociedade anônima) ("Natura &Co Holding") or ("Natura &Co), and two subsidiaries of Natura &Co Holding ~~("Natura &Co")~~ pursuant to which, in a series of transactions (the "Transaction"). Upon the consummation of the Transaction, the Company became a wholly owned subsidiary of Natura &Co Holding; and Avon's common stock ceased to be traded on the NYSE. The Company files these unaudited interim Consolidated Financial Statements with the SEC as a voluntary filer to comply with the terms of certain debt instruments. For additional information, see Note 17, Agreement and Plan of Mergers with Natura Cosméticos ~~S.A.~~contained in our 2021 Form 10-K.

In our opinion, the unaudited interim Consolidated Financial Statements reflect all adjustments of a normal recurring nature that are necessary for a fair statement of the results for the interim periods presented. Results for interim periods are not necessarily indicative of results for a full year. You should read these unaudited interim Consolidated Financial Statements in conjunction with our Consolidated Financial Statements contained in our ~~2020~~2021 Form 10-K. When used in this report, the terms "Avon," "Company," "we" or "us" mean Avon Products, Inc.

For interim Consolidated Financial Statements purposes, we generally provide for accruals under our various employee benefit plans for each quarter based on one quarter of the estimated annual expense, and adjust these accruals as estimates are refined. In addition, our income tax provision is determined using an estimate of our consolidated annual effective tax rate, adjusted in the current period for discrete income tax items including:

•the effects of significant, unusual or extraordinary pretax and income tax items, if any;

•the impact of changes in tax legislation, if any;

•withholding taxes recognized associated with cash repatriations; and

•the impact of loss-making subsidiaries for which we cannot recognize an income tax benefit and subsidiaries for which an effective tax rate cannot be reliably estimated.

~~Sale~~COVID-19, Russia-Ukraine war and ongoing concern

In 2021 and the first quarter of ~~Avon Luxembourg Holdings S.à r.l~~

~~On July 1, 2021,~~2022, the ~~Company sold Avon Luxembourg, including our Mexican business, to a subsidiary of Natura &Co Holding for $150, with~~economic disruption caused by the ~~proceeds used to repay maturing loans of $150 borrowed under the $250 Revolving Credit Facility with a subsidiary of Natura &Co Holding.~~

~~The sale was accounted for as a transaction under common control~~COVID-19 pandemic has resulted in ~~accordance with ASC805 - Business Combinations, with the resulting gain of $148, representing the difference between the proceeds, the net assets of Avon Luxembourg~~inflationary pressures on the ~~date~~cost of ~~sale,~~certain raw materials used in the production of essential items due to the increased demand for these inputs worldwide. These inflationary pressures have been compounded by the ongoing war between Russia and Ukraine, and by disruptions in global supply chains and climate events that hit electricity generation globally, among other events. Moreover, novel strains and variants of COVID-19 emerged in 2021 against which existing vaccines and acquired immunity may not be effective, and the ~~cumulative foreign currency translation adjustment, taken directly~~rollout of vaccination programs worldwide have compromised the ability of certain countries to ~~Retained Earnings. This has~~effectively contain the spread and the toll of the virus. While some restrictions have been ~~treated as a non cash flow item~~lifted in the ~~Consolidated Statements of Cash Flows. For additional information, see~~markets in which we operate, they may be reimplemented if the ~~Consolidated Statements of Changes in Shareholders' Deficit and the Consolidated Statements of Cash Flows.~~contagion does not subside, suppressing economic activity.

~~COVID-19 Pandemic~~

~~We continuously~~As a result, we continue to closely monitor the evolution of the COVID-19 pandemic in the markets in which we operate, ~~acting~~especially with regard to restrictive measures adopted by these jurisdictions. We continuously analyze the situation and act to minimize impacts on the operations and on the equity and financial ~~position. Management is~~position of the Company, with the objective of implementing appropriate measures, ~~to ensure~~ensuring the continuity of operations, ~~protect~~hedge cash, improve liquidity and promote the health and safety ~~for all stakeholders.~~of all.

~~During the third quarter~~In view of 2021, most markets in Avon International and many markets in Avon Latin America continued to be impacted by COVID-19 restrictions which resulted in deceleration of the Beauty market growth and a lower representative base. It is unclear if current lockdown measures will continue or be reestablished elsewhere globally which could dampen our recovery from COVID-19.

~~Considering~~ this scenario, we review the recoverability expectations of our financial and non-financial assets in the preparation of ~~this interim accounting information,~~these financial statements, considering the most recent information available and reflected in the ~~Company's~~Company’s business plans. In addition, we also consider possible effects on the ~~nine-month period ended September 30, 2021, no deterioration in~~financial statements including revenues and the ~~Company's~~continued transition to the digital environment, allowances for doubtful accounts receivable, impairment of non-financial assets, leases, liquidity ~~cash position or leverage that could impact compliance with financial covenants~~ and ~~short-term commitments was identified.~~capital resources and going concern.

129

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in millions, except per share data)

As of the date of this report, we are unable to estimate the long-term economic impact arising from efforts to curb the spread of the COVID-19 virus and the expected reduction in activity on our business, results of operations and financial condition. We will continue to review our revenue, investments, expenses and cash outflows, as well as adjusting our relationships with suppliers. Furthermore, the actions outlined above are continuously being re-evaluated in light of global developments relating to COVID-19.

See also “Item 1A. Risk ~~Factors —~~ Factors—The COVID-19 pandemic is adversely affecting, and is expected to continue to adversely affect, our operations, manufacturing, supply chains and distribution systems, and we have experienced and expect to continue to experience unpredictable negative effects associated with the pandemic" included in Item 1A of our ~~2020~~2021 Annual Report.

Going ~~concern~~Concern

Considering the uncertain nature of any possible future COVID-19 impacts which are beyond the Company’s control and the ongoing war between Russia and Ukraine, we ~~might~~ expect some negative impact on revenue ~~from COVID-19 to continue for the remainder of 2021,~~in 2022, which will, in turn, result in lower cash generation from activities. If the downturn is deeper or for longer than we anticipate, the Company could take certain further actions to ease the pressure of certain cash outflows, such as reducing discretionary expenditure, selling non-core assets, accessing government pandemic initiatives or arranging borrowing facilities with third-party banks and affiliate companies. Our projections indicate that we should have sufficient liquidity to meet our obligations to parties other than Natura &Co and its affiliates for a period of not less than 12 months from the issuance date of the Consolidated Financial Statements.

The Company has received an irrevocable commitment from Natura &Co Holding that it will provide sufficient financial support if and when needed to enable the Company to meet its ~~operating and financing~~ obligations as they come due in the normal course of business for a period of not less than 12 months from the date ~~of the~~ issuance of the Consolidated Financial Statements. This ~~support also~~ includes the ~~loan originally issued by a subsidiary~~obligations related to the $462 5.00% Notes, which are due to be repaid in March 2023, and the amount of $209 outstanding under the Natura &Co ~~Holding~~Loan due to ~~a subsidiary of the Company of $960, part of which was~~be repaid in ~~July 2021 with the proceeds from a loan maturing in 2028, with the balance now due on~~ November 2, 2022. As a result, the outstanding loan balances due to subsidiaries of Natura &Co Holding on September 30, 2021 stood at $149 maturing within one year, $206 maturing in November 2022 and $767 maturing in 2028.

Accounting Standards Implemented

ASU ~~2019-12, Simplifying~~2021-08, Business Combinations (Topic 805)

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for ~~Income Taxes~~

InContract Assets and Contract Liabilities from Contracts with Customers, which requires entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination. ASU 2021-08 will be effective for our fiscal year beginning after December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU 2019-12"), Income Taxes, which is intended to simplify the accounting standard and improve the usefulness of information provided in the financial statements. We adopted this new accounting guidance as of January 1, 2021.15, 2022. The adoption ~~did~~is not expected to have a material impact on our Consolidated Financial Statements.

~~ASU 2020-04, Reference Rate Reform (Topic 848)~~

In March 2020, the FASB issued ASU 2020-04 “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. In January 2021, the FASB issued ASU 2021-01 which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The guidance is effective for all entities as of March 12, 2020 through December 31, 2022.

The Company has implemented a transition plan to identify and modify its loans and other financial instruments with attributes that are either directly or indirectly influenced by LIBOR and, as a result, has elected to apply the optional expedient included in ASU 2020-04 to account for modifications of contracts within the scope of Topics 310, Receivables, and 470, Debt, to be accounted for by prospectively adjusting the effective interest rate.

2. DISCONTINUED OPERATIONS, ASSETS AND LIABILITIES HELD FOR SALE AND DIVESTITURES

Discontinued Operations

On March 1, 2016, the Company completed the separation of the North America business, which represented the Company’s operations in the United States, Canada and Puerto Rico, from the Company into New Avon Company, formerly New Avon, LLC ("New Avon"), a privately held company majority-owned and managed by Cerberus NA Investor LLC (an affiliate of Cerberus). From that date, the resolution of contingent liabilities and corresponding costs relating to Avon’s ownership and operation of the North America business prior to its separation from the Company into New Avon have been treated as discontinued operations.

The major classes of financial statement components comprising the loss on discontinued operations, net of tax for New Avon during the three-month periods ended March 31, 2022 and 2021, respectively, are shown below:


	Three Months Ended March 31,
	2022		2021
Selling, general and administrative expenses	$	(7.8)	$	5.0
Operating (loss) income	$	(7.8)	$	5.0
(Loss) income from discontinued operations, net of tax	$	(7.8)	$	5.0

1310

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in millions, except per share data)

The major classes of financial statement components comprising the loss on discontinued operations, net of tax for New Avon during the three and nine month periods ended September 30, 2021 and 2020 are shown below:

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Selling, general and administrative expenses $ (7.4) $ (4.5) $ (6.5) $ (14.3)
Operating loss $ (7.4) $ (4.5) $ (6.5) $ (14.3)
Loss from discontinued operations, net of tax $ (7.4) $ (4.5) $ (6.5) $ (14.3)

Assets and Liabilities Held for Sale

The major classes of assets comprising held for sale assets on the Consolidated Balance Sheets as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 are shown in the following table:

September 30, 2021 December 31, 2020
Current held for sale assets
Inventories $ — $ 2.6
Property, Plant & Equipment (net) 4.6 9.2
Cash and cash equivalents — .7
Other assets — 1.4
$ 4.6 $ 13.9
Current held for sale liabilities
Accounts payable $ — $ .5
Other liabilities — 1.8
$ — $ 2.3


	March 31, 2022		December 31, 2021

Current held for sale assets

Property, Plant & Equipment (net)	—		2.8


	$	—	$	2.8

At ~~September 30,~~March 31, 2022, there are were no assets held for sale. At December 31, 2021, assets held for sale include 1 business in Avon International segment and 1 property in the Avon Latin America Segment. At December 31, 2020, assets held for sale include 1 property and 1 business in Avon International segment andincluded 1 property in the Avon Latin America Segment.

Divestitures

There were no divestitures during the quarter ended March 31, 2022. The divestitures below took place during 2021.

Disposal of Avon Beauty Arabia in Saudi Arabia

On December 23, 2021, the Company completed the sale of its 51% share of the business and assets of Avon Beauty Arabia in exchange for converting the business to a distributorship model together with the write off of a $3.9 loan balance. In the fourth quarter of 2021 we recognized a loss of $1.1 before and after tax, which is reported separately in the Consolidated Statements of Operations representing the difference between the write off of the loan balance, the carrying value of the business and assets of the Avon Beauty Arabia on the date of sale, and associated disposal costs.

Disposal of Cosmetics Manufacturing Operations in India

On November 17, 2021, the Company completed the sale of the business and assets of the Cosmetics Manufacturing Operation in India for a total selling price of $2.9, the proceeds of which are presented as investing activities in the Consolidated Statement of Cash Flows. In the fourth quarter of 2021 we recognized a gain of $1.1 before and after tax, which is reported separately in the Consolidated Statements of Operations representing the difference between the proceeds, the carrying value of the business and assets of the Cosmetics Manufacturing Operation in India on the date of sale, and associated disposal costs.

Sale of Avon Luxembourg Holdings S.à r.l

The sale was accounted for as a transaction under common control in accordance with ASC805 - Business Combinations, with the resulting gain of $148, representing the difference between the proceeds, the net assets of Avon Luxembourg on the date of sale and the cumulative foreign currency translation adjustment, taken directly to Retained Earnings. For additional information, see the Consolidated Statements of Changes in Shareholders' Deficit.

~~Spanish Distribution Center~~

In September 2021, we completed the sale of our Spanish Distribution Center for a total selling price of $14.7, the proceeds of which are presented as investing activities in the Consolidated Statement of Cash Flows.

In the third quarter of 2021 we recognized a gain of $8.3 before and $6.2 after tax, which is reported separately in the Consolidated Statements of Operations representing the difference between the proceeds, the carrying value of the branch of the Spanish Distribution Center on the date of sale, and associated disposal costs.

~~AVON PRODUCTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(U.S. dollars in millions, except per share data)~~

~~Italy Branch~~

In June 2021, we completed the sale of a branch of our Italian business for a total selling price of $1.7, the proceeds of which will be received in installments between October 2021 and December 2026, and will be presented as investing activities in the Consolidated Statement of Cash Flows.

In the second quarter of 2021, we recorded a gain of $1.4 before and after tax, which is reported separately in the Consolidated Statements of Operations representing the difference between the proceeds and the carrying value of the branch of the Italian business on the date of sale.

~~Avon Shanghai~~

In August 2020, we signed an agreement to sell Avon Management Shanghai ("Avon Shanghai") to an affiliate of Natura &Co for a selling price of $2.9. In August 2020, we completed the sale of the entity and received proceeds of $2.9. These proceeds are presented as investing activities in the Consolidated Statement of Cash Flows. As the sale was to an affiliate under common control of Natura &Co, the gain on sale of $1.4 was recorded directly to Retained earnings.

~~Hungary Distribution Center in Gödöllő~~

In April 2020, we signed an agreement to sell the Hungary Distribution Center in Gödöllő for a total selling price of $3.4, and received a deposit of $.3. In June 2020, we completed the sale of the asset, and the remaining proceeds of $3.1 were received. These proceeds are presented as investing activities in the Consolidated Statement of Cash Flows.

In the second quarter of 2020, we recorded a gain of $.1 before and after tax, which is reported separately in the Consolidated Statements of Operations. The gain represents the difference between the proceeds and the carrying value of the Hungary Distribution Center on the date of sale.

~~China Wellness Plant~~

~~In March 2020, we signed an agreement to sell the China Wellness Plant, for a total selling price~~ ~~of $6.6 before~~ expenses. In the six-month period ended June 30, 2020, we received a cash deposit for the selling price of $6.6, presented as investing activities in the Consolidated Statement of Cash Flows, which included $3.3 of restricted cash.

In August 2020, we completed the sale of the China Wellness Plant and $3.3 of restricted cash in escrow was transferred to Avon. In the third quarter of 2020, we recorded a gain of $1.4 before tax, which is reported separately in the Consolidated Statements of Operations. The gain represents the difference between the net proceeds (after associated expenses) and the carrying value of the China Wellness Plant on the date of sale.

~~China manufacturing~~

On February 15, 2019, we completed the sale to TheFaceShop Co., Ltd., an affiliate of LG Household & Health Care Ltd. ("TheFaceShop"), of all of the equity interests in Avon Manufacturing (Guangzhou), Ltd. for a total selling price of $71.0, less expenses of approximately $1.1. The selling price included $23.5 relating to outstanding intercompany loans payable to Avon Manufacturing (Guangzhou), Ltd. from other Avon subsidiaries that was presented as financing activities in the Consolidated Statement of Cash Flows, this was subsequently settled in April 2019. The cash proceeds of $46.4, net of loan amounts, were presented as investing activities in the Consolidated Statement of Cash Flows, which included $7.5 of long-term restricted cash as of December 31, 2019. This was subsequently reclassified to short-term restricted cash in the three-month period ended March 31, 2020. The restriction on this cash was removed in the three-month period ended March 31, 2021.

1511

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in millions, except per share data)

3. RELATED PARTY TRANSACTIONS

On January 3, 2020, the Company became a wholly owned subsidiary of Natura &Co Holding. From this point, Natura &Co Holding, its subsidiaries and affiliates became related parties of the Company. On July 1, 2021, the Company sold Avon Luxembourg, including our Mexican business, to a subsidiary of Natura &Co Holding. As a result, beginning on July 1, 2021, transactions and balances between Avon International and Avon Luxembourg are no longer eliminated on consolidation and instead are treated as transactions and balances with Related Parties.

The following tables present the related party transactions with Natura &Co and its affiliates and the Instituto Avon in Brazil. There are no other related party transactions.


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Statement of Operations Data	Statement of Operations Data									Statement of Operations Data
Revenue from affiliates of Natura &Co~~(3)~~(1)	Revenue from affiliates of Natura &Co~~(3)~~(1)	$	6.5	$	.9	$	22.9	$	2.7	Revenue from affiliates of Natura &Co~~(3)~~(1)	$	3.7	$	7.7
Gross profit from affiliates of Natura &Co(2)(3)		$	2.4	$	.1	$	3.5	$	.5

Interest income from Instituto Avon(1)		$	—	$	—	$	—	$	.1
Cost of sales from affiliates of Natura &Co(2)(1)										Cost of sales from affiliates of Natura &Co(2)(1)	$	(4.2)	$	(7.1)
Gross profit from affiliates of Natura &Co(2)(1)										Gross profit from affiliates of Natura &Co(2)(1)	$	(.5)	$	.6

Interest expense on Loan from affiliates of Natura &Co(5)		$	(16.2)	$	(1.3)	$	(34.7)	$	(1.6)

Interest expense on Loan from affiliates of Natura &Co(4)										Interest expense on Loan from affiliates of Natura &Co(4)	$	(15.3)	$	(8.7)
Interest income on Loan to affiliates of Natura &Co(5)	Interest income on Loan to affiliates of Natura &Co(5)	$	.8	$	—	$	.8	$	—	Interest income on Loan to affiliates of Natura &Co(5)	$	.7	$	—

September 30, 2021 December 31, 2020
Balance Sheet Data
Receivables due from Instituto Avon(1)
$ .8 $ .8
Trade Receivables due from affiliates of Natura &Co(2)
$ 20.3 $ 6.1
Other receivables due from affiliates of Natura &Co(7)
$ 2.4 $ —
Loans to affiliates of Natura &Co maturing within one year(7)
$ 44.9 $ —
Loans to affiliates of Natura &Co maturing after one year(7)
$ 51.1 $ —
Trade Payables due to affiliates of Natura &Co(7)
$ (23.5) $ —
Other payables due to affiliates of Natura &Co(4)
$ (4.0) $ —
Loans from affiliates of Natura &Co maturing within one year(5)
$ (148.7) $ (1,008.6)
Loans from affiliates of Natura &Co maturing after one year(5)
$ (972.8) $ —
Investments in affiliates of Natura &Co(6)
$ .1 $ —


	March 31, 2022		December 31, 2021
Balance Sheet Data

Trade Receivables due from affiliates of Natura &Co(1)	$	25.4	$	32.7
Derivative Receivables due from affiliates of Natura &Co(7)	$	1.1	$	—
Other receivables due from affiliates of Natura &Co(6)	$	1.9	$	1.4
Loans to affiliates of Natura &Co maturing within one year(6)	$	45.5	$	46.6
Loans to affiliates of Natura &Co maturing after one year(6)	$	46.7	$	46.7
Trade Payables due to affiliates of Natura &Co(6)	$	(25.4)	$	(24.5)
Derivative Payables due to affiliates of Natura &Co(6)	$	(1.0)	$	—
Other payables due to affiliates of Natura &Co(3)	$	(8.2)	$	(4.9)
Loans from affiliates of Natura &Co maturing within one year(4)	$	(458.3)	$	(371.7)
Loans from affiliates of Natura &Co maturing after one year(4)	$	(721.0)	$	(736.3)

Investments in affiliates of Natura &Co(5)	$	.1	$	.1

(1) During the second quarter of 2018, the Company entered into an agreement to loan the Instituto Avon, an independent non-government charitable organization in Brazil, R$12 million (Brazilian reais) for an unsecured five-year term at a fixed interest rate of 7% per annum, to be paid back in 5 equal annual installments. The Instituto Avon was created by an Avon subsidiary in Brazil, with the board and executive team comprised of Avon Brazil management. The purpose of the loan was to provide the Instituto Avon with the means to donate funds to Fundação Pio XII (a leading cancer prevention and treatment organization in Brazil and owner of the Hospital do Câncer de Barretos), in order to invest in equipment with the objective of expanding breast cancer prevention and treatment.

~~(2)~~ During the second quarter of 2020, the Company entered into manufacturing agreements with affiliates of Natura &Co Holding. The Company recorded revenue from related party of ~~$4.5~~$3.5 and ~~$.9~~$7.7 associated with these agreements during the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. The Company recorded gross loss from related party of $.7 and gross profit from related party of ~~$.4 and $.1~~$.6 associated with these agreements during the three months ended ~~September 30,~~March 31, 2022 and 2021, and 2020, respectively. The Company recorded revenue from related party of $20.9 and $2.7 associated with these agreements during the nine months ended September 30, 2021 and 2020, respectively. The Company recorded gross profit from related party of $1.5 and $.5 associated with these agreements during the nine months ended September 30, 2021 and 2020, respectively. Trade receivables due from affiliates of Natura &Co primarily relate to these manufacturing agreements.

~~(3)~~(2) The Company is party to a license agreement with Avon Mexico, whereby Avon Mexico pays the Company a variable royalty. The Company recorded revenue from related party of ~~$2 and $2~~$.2 associated with these agreements during the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, respectively. The Company recorded gross profit from related party of ~~$2 and $2~~$.2 associated with these agreements during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022, respectively.

(3) The amount payable to Natura &Co mainly relates to the vesting and settlement of share-based compensation awards denominated in Natura &Co American Depository Receipts including the 2018 and 2019 long-term employee incentive program which vested and were automatically exercised in March 2021 and March 2022 respectively.

(4) Loans from affiliates of Natura &Co Holding at March 31, 2022 of $1,179.3 include $721.0 outstanding under a Promissory Note between Avon Beauty Limited and a subsidiary of Natura &Co Holding, and $208.9 outstanding under a Promissory Note with a subsidiary of Natura &Co Holding and an affiliate of the Company. In addition, loans from affiliates of Natura &Co Holding at March 31, 2022 of $249.4 includes a number of intercompany loans between Natura &Co Luxembourg, Natura Cosméticos and Avon Products, Inc. and its affiliates. Loans from affiliates of Natura &Co Holding at December 31, 2021 of $1,108.0 include $736.3 outstanding under a Promissory Note between Avon Beauty Limited and a subsidiary of Natura &Co

1612

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in millions, except per share data)

~~(4)~~ The payable to Natura &Co relates to the vesting and settlement of share based compensation awards denominated in Natura &Co American Depository Receipts including the 2018 long-term employee incentive program which vested and were automatically exercised in March 2021.

~~(5)~~ ~~Loans from affiliates of Natura &Co Holding at September 30, 2021 of $1,121.5 include $767.1 outstanding under a Promissory Note between Avon Beauty Limited and a subsidiary of Natura &Co~~ Holding, and ~~$205.7~~$207.3 outstanding under a Promissory Note with a subsidiary of Natura &Co Holding and an affiliate of the Company. On 29 October 2021, the $205.7 Promissory Note between Avon International Operations Inc. and a subsidiary of Natura &Co Holding was amended to extend its maturity to November 2, 2022. In accordance with ASC 470 - Debt, the $206 Promissory Note has therefore been presented as non-current in the Consolidated Balance Sheet as of September 30, 2021. In addition loans from affiliates of Natura &Co Holding at ~~September 30,~~December 31, 2021 include ~~$148.7~~$164.4 of intercompany loans between Avon Luxembourg and Avon Products, Inc. affiliates that, following the sale of Avon Luxembourg to a subsidiary of Natura &Co Holding on July 1, 2021, were redesignated as loans from affiliates of Natura & Co Holdings. Loans from affiliates of Natura &Co Holding at December 31, 2020 of $1,008.6 include $965 outstanding under a Promissory Note between Avon International Operations Inc. and a subsidiary of Natura &Co Holding. Loans from affiliates of Natura &Co Holding at December 31, 2020 also include $41.6 outstanding under the Revolving Credit Facility between Avon Luxembourg and Natura &Co International S.à r.l.. See Note 15, Debt and Other Financing, for further information relating to these loans.

~~(6)~~(5) During the second quarter of 2021, Avon Cosméticos LTDA., made an investment of R$.5 in Natura &Co Pay Holding Financeira S.A., representing a 10% holding in the company. This is presented in other assets in our Consolidated Balance Sheets.

~~(7)~~(6) On July 1, 2021, the Company sold Avon Luxembourg, including our Mexican business, to a subsidiary of Natura &Co Holding. As a result, transactions and balances between Avon International and Avon Luxembourg are no longer eliminated on consolidation and instead are treated as transactions and balances with Related Parties.

(7) During the quarter ended March 31, 2022, the Company entered into foreign exchange forward contracts with Natura &Co Luxembourg, a subsidiary of Natura &Co Holding, to manage a portion of its foreign currency exchange rate exposures. At March 31, 2022, we had outstanding related party foreign exchange forward contracts with notional amounts totaling approximately $175 for various currencies, all of which were designated as cash flow hedges. In addition we had $1.1 of Accounts Receivable and $1.0 of Accounts Payable recorded in our Consolidated Balance Sheets associated with these transactions.

4. REVENUE

Disaggregation of revenue

In the following table, revenue is disaggregated by product or service type. All revenue is recognized at a point in time when control of a product is transferred to a customer:


		Three Months Ended September 30, 2021											Three Months Ended March 31, 2022
		Avon International		Avon Latin America		Total reportable segments		Affiliates of Natura&Co		Total			Avon International		Avon Latin America		Total reportable segments		Affiliates of Natura&Co		Total
Beauty:	Beauty:											Beauty:
Skincare	Skincare	$	134.2	$	109.6	$	243.8	$	—	$	243.8	Skincare	$	116.8	$	95.6	$	212.4	$	—	$	212.4
Fragrance	Fragrance	118.3		85.2		203.5		—		203.5		Fragrance	104.1		80.3		184.4		—		184.4
Color	Color	52.7		44.3		97.0		—		97.0		Color	51.7		37.8		89.5		—		89.5
Total Beauty	Total Beauty	305.2		239.1		544.3		—		544.3		Total Beauty	272.6		213.7		486.3		—		486.3
Fashion & Home:	Fashion & Home:											Fashion & Home:
Fashion	Fashion	56.3		33.3		89.6		—		89.6		Fashion	53.5		23.1		76.6		—		76.6
Home	Home	15.3		67.1		82.4		—		82.4		Home	12.6		55.9		68.5		—		68.5
Total Fashion & Home	Total Fashion & Home	71.6		100.4		172.0		—		172.0		Total Fashion & Home	66.1		79.0		145.1		—		145.1
Certain Brazil indirect taxes*		—		12.4		12.4		—		12.4

Product sales	Product sales	376.8		351.9		728.7		—		728.7		Product sales	338.7		292.7		631.4		—		631.4
Representative fees	Representative fees	15.8		17.1		32.9		—		32.9		Representative fees	14.6		13.6		28.2		—		28.2
Other	Other	—		.2		.2		6.5		6.7		Other	—		—		—		3.7		3.7
Other revenue	Other revenue	15.8		17.3		33.1		6.5		39.6		Other revenue	14.6		13.6		28.2		3.7		31.9
Total revenue	Total revenue	$	392.6	$	369.2	$	761.8	$	6.5	$	768.3	Total revenue	$	353.3	$	306.3	$	659.6	$	3.7	$	663.3

1713

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in millions, except per share data)


		Three Months Ended September 30, 2020											Three Months Ended March 31, 2021
		Avon International		Avon Latin America		Total reportable segments		Affiliates of Natura&Co		Total			Avon International		Avon Latin America		Total reportable segments		Affiliates of Natura&Co		Total
Beauty:	Beauty:											Beauty:
Skincare	Skincare	$	156.1	$	159.0	$	315.1	$	—	$	315.1	Skincare	$	145.3	$	127.0	$	272.3	$	—	$	272.3
Fragrance	Fragrance	137.2		112.6		249.8		—		249.8		Fragrance	119.9		102.1		222.0		—		222.0
Color	Color	64.5		60.9		125.4		—		125.4		Color	63.4		50.5		113.9		—		113.9
Total Beauty	Total Beauty	357.8		332.5		690.3		—		690.3		Total Beauty	328.6		279.6		608.2		—		608.2
Fashion & Home:	Fashion & Home:					—		—				Fashion & Home:					—		—
Fashion	Fashion	67.6		54.7		122.3		—		122.3		Fashion	67.7		50.8		118.5		—		118.5
Home	Home	13.9		123.6		137.5		—		137.5		Home	16.8		106.9		123.7		—		123.7
Total Fashion & Home	Total Fashion & Home	81.5		178.3		259.8		—		259.8		Total Fashion & Home	84.5		157.7		242.2		—		242.2

Product sales	Product sales	439.3		510.8		950.1		—		950.1		Product sales	413.1		437.3		850.4		—		850.4
Representative fees	Representative fees	16.7		29.6		46.3		—		46.3		Representative fees	17.8		28.3		46.1		—		46.1
Other	Other	1.1		(.4)		.7		.9		1.6		Other	—		.2		.2		7.7		7.9
Other revenue	Other revenue	17.8		29.2		47.0		.9		47.9		Other revenue	17.8		28.5		46.3		7.7		54.0
Total revenue	Total revenue	$	457.1	$	540.0	$	997.1	$	.9	$	998.0	Total revenue	$	430.9	$	465.8	$	896.7	$	7.7	$	904.4

Nine Months Ended September 30, 2021
Avon International Avon Latin America Total reportable segments Affiliates of Natura&Co Total
Beauty:
Skincare $ 426.5 $ 370.6 $ 797.1 $ — $ 797.1
Fragrance 352.7 293.3 646.0 — 646.0
Color 175.1 145.0 320.1 — 320.1
Total Beauty 954.3 808.9 1,763.2 — 1,763.2
Fashion & Home:
Fashion 188.7 133.3 322.0 — 322.0
Home 46.7 290.2 336.9 — 336.9
Total Fashion & Home 235.4 423.5 658.9 — 658.9
Certain Brazil indirect taxes* — 21.8 21.8 — 21.8
Product sales 1,189.7 1,254.2 2,443.9 — 2,443.9
Representative fees 50.1 72.3 122.4 — 122.4
Other .1 .4 .5 22.9 23.4
Other revenue 50.2 72.7 122.9 22.9 145.8
Total revenue $ 1,239.9 $ 1,326.9 $ 2,566.8 $ 22.9 $ 2,589.7

~~AVON PRODUCTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(U.S. dollars in millions, except per share data)~~

Nine Months Ended September 30, 2020
Avon International Avon Latin America Total reportable segments Affiliates of Natura&Co Total
Beauty:
Skincare $ 429.3 $ 398.6 $ 827.9 $ — $ 827.9
Fragrance 348.2 299.4 $ 647.6 — 647.6
Color 194.9 154.5 $ 349.4 — 349.4
Total Beauty 972.4 852.5 1,824.9 — 1,824.9
Fashion & Home:
Fashion 178.8 124.9 $ 303.7 — 303.7
Home 34.8 259.6 $ 294.4 — 294.4
Total Fashion & Home 213.6 384.5 598.1 — 598.1
Product sales 1,186.0 1,237.0 2,423.0 — 2,423.0
Representative fees 48.0 78.4 $ 126.4 — 126.4
Other 5.2 4.5 $ 9.7 2.7 12.4
Other revenue 53.2 82.9 136.1 2.7 138.8
Total revenue $ 1,239.2 $ 1,319.9 $ 2,559.1 $ 2.7 $ 2,561.8

* The three and nine months ended September 30, 2021 include approximately $12 and $22, respectively, to reflect the impact of certain Brazil indirect taxes which were recorded in product sales, in our Consolidated Income Statements. See Note 10 Supplemental Balance Sheet Information, to the Consolidated Financial Statements contained herein for further information.

Contract balances

The timing of revenue recognition generally is different from the timing of a promise made to a Representative. As a result, we have contract liabilities, which primarily relate to the advance consideration received from Representatives prior to transfer of the related good or service for material rights, such as loyalty points and status programs, and are primarily classified within other accrued liabilities (with the long-term portion in other liabilities) in our Consolidated Balance Sheets.

Generally, we record accounts receivable when we invoice a Representative. In addition, we record an estimate of an allowance for doubtful accounts on receivable balances based on an analysis of historical data and current circumstances, including seasonality, changing trends, ~~and~~ the impact of ~~COVID-19.~~COVID-19 and the ongoing war between Russia and Ukraine. The allowance for doubtful accounts is reviewed for adequacy, at a minimum, on a quarterly basis. We generally have no detailed information concerning, or any communication with, any ultimate consumer of our products beyond the Representative. We have no legal recourse against the ultimate consumer for the collection of any accounts receivable balances due from the Representative to us. If the financial condition of the Representatives were to deteriorate, resulting in their inability to make payments, additional allowances may be required.

The following table provides information about receivables and contract liabilities from contracts with customers at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020:~~2021:


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Accounts receivable, net of allowances of $37.0 and $51.1		$	210.0	$	259.1
Accounts receivable, net of allowances of $45.1 and $37.2						Accounts receivable, net of allowances of $45.1 and $37.2	$	212.1	$	198.7
Contract liabilities	Contract liabilities	$	33.2	$	52.1	Contract liabilities	$	34.2	$	37.1

The contract liability balances relate to certain material rights (loyalty points, status program and prospective discounts). During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, we recognized ~~$38.3~~$23.5 of revenue related to the contract liability balance at the beginning of the ~~nine~~three month period ended ~~September 30, 2021,~~March 31, 2022, as the result of performance obligations satisfied. In addition, we deferred an additional ~~$24.3~~$20.4 related to certain material rights granted during the period, for which the performance obligations are not yet satisfied. Of the amount deferred during the period, substantially all will be recognized within a year, with the significant majority to be captured within a quarter. The remaining movement in the contract liability balance is attributable to foreign exchange differences arising on the translation of the balance as at ~~September 30, 2021~~March 31, 2022 as compared with December 31, ~~2020, and the sale of Avon Luxembourg.~~2021.

1914

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in millions, except per share data)

5. INVENTORIES


Components of Inventories	Components of Inventories	September 30, 2021		December 31, 2020		Components of Inventories	March 31, 2022		December 31, 2021
Raw materials	Raw materials	$	111.6	$	131.3	Raw materials	$	117.6	$	103.4
Finished goods	Finished goods	312.9		327.8		Finished goods	304.2		280.7
Total	Total	$	424.5	$	459.1	Total	$	421.8	$	384.1

6. LEASES

We have operating and finance leases for corporate and market offices, warehouses, automotive and other equipment. Our sublease portfolio consists of the sublease of our previous principal executive office located at 777 Third Avenue, New York, NY.

The table below shows the sublease income recorded in the Consolidated Statement of Operations incurred during the three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:

Three Months Ended September 30, Nine Months Ended September 30,
Lease Costs Classification 2021 2020 2021 2020
Sublease income Selling, general and administrative expenses 3.6 3.1 10.9 11.7


		Three Months Ended March 31,
Lease Costs	Classification	2022	2021
Sublease income	Selling, general and administrative expenses	3.7	4.3

7. CONTINGENCIES

Brazilian Tax Assessments

Tax on Manufactured Products – minimum pricing rules

In December 2012 and in October 2017, our Brazilian subsidiary, Avon Industrial LTDA (Avon Brazil Manufacturing) received excise tax ("IPI") assessments for the years 2008 and 2014.

As in prior IPI cases that have been resolved in Avon’s favor, the assessments assert that the establishment in 1995 of separate manufacturing and distribution companies in Brazil was done without a valid business purpose, and that Avon Brazil Manufacturing did not observe minimum pricing rules to define the taxable basis of the tax on manufactured products. The structure adopted in 1995 is comparable to that used by many other companies in Brazil. We believe that our Brazilian corporate structure is appropriate, both operationally and legally, and that the assessments are unfounded.

These matters are being contested at the administrative court, where proceedings are currently in progress. As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the total amount under discussion classified as reasonably possible was ~~$366~~$430 and ~~$378, respectively.~~$360, respectively, the increase largely due to movements in foreign exchange rates.

Tax on Manufactured Products – Decree equated certain commercial companies (not subject to IPI taxation) to industrial companies (IPI taxpayers)

In May 2015, an executive decree established the levy of IPI on the sales of cosmetic products by Avon Brazil. Avon Brazil filed an objection to this levy on the basis that it is not constitutional since this tax is already paid by Avon Brazil Manufacturing. In December 2016, Avon Brazil received a favorable decision from the Federal District Court regarding this objection. This decision has been appealed by the Federal Tax Authority. As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the total amount under discussion classified as reasonably possible was ~~$241~~$292 and ~~$231, respectively.~~$243, respectively, the increase largely due to movements in foreign exchange rates.

Talc-Related Litigation

The Company has been named a defendant in numerous personal injury lawsuits filed in U.S. courts, alleging that certain talc products the Company sold in the past were contaminated with asbestos. Many of these actions involve a number of co-defendants from a variety of different industries, including manufacturers of cosmetics and manufacturers of other products that, unlike the Company’s products, were designed to contain asbestos. As of ~~September 30, 2021,~~March 31, 2022, there were ~~152~~158 individual cases pending against the Company. During the three months ended ~~September 30, 2021, 33~~March 31, 2022, 13 new cases were filed and 106 cases were dismissed, settled or otherwise resolved. The value of the settlements was not material, either individually or in the aggregate,

AVON PRODUCTS, INC.

to the Company’s results of operations for the three months ended ~~September 30, 2021.~~March 31, 2022. Additional similar cases arising out of the use of the Company’s talc products are reasonably anticipated.

~~AVON PRODUCTS, INC.~~

We believe that the claims asserted against us in these cases are without merit. We are defending vigorously against these claims and will continue to do so. To date, ~~the Company has not proceeded to trial in any case filed against it and~~ there have been no findings of liability enforceable against the Company. However, nationwide trial results in similar cases filed against other manufacturers of cosmetic talc products have ranged from outright dismissals to very large jury awards of both compensatory and punitive damages. Given the inherent uncertainties of litigation, we cannot predict the outcome of all individual cases pending against the Company, and we are only able to make a specific estimate for a small number of individual cases that have advanced to the later stages of legal proceedings. For the remaining cases, we provide an estimate of exposure on an aggregated and ongoing basis, which takes into account the historical outcomes of all cases we have resolved to date. Any accruals currently recorded on the Company’s balance sheet with respect to these cases are not material. However, any adverse outcomes, either in an individual case or in the aggregate, could be material. Future costs to litigate these cases, which we expense as incurred, are not known but may be significant, though some costs will be covered by insurance.

Brazilian Labor-Related Litigation

On an ongoing basis, the Company is subject to numerous and diverse labor-related lawsuits filed by employees in Brazil. These cases are assessed on an aggregated and ongoing basis based on historical outcomes of similar cases. The claims made are often for significantly larger sums than have historically been paid out by the Company. Our practice continues to be to recognize a liability based on our assessment of historical payments in similar cases. Our best estimate of the probable loss for such cases at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 was approximately $9$13 and ~~$8,~~$11, respectively. Accordingly, we have recognized a liability for this amount.

~~Shareholder Litigation~~Brazilian Financial Indemnities

~~On February 14, 2019,~~As of March 31, 2022 and December 31, 2021, the Company has issued a ~~purported shareholder’s class action complaint (Bevinal v. Avon Products, Inc., et al., No. 19-cv-1420) was filed~~number of guarantees totaling $201 and $157, respectively, which it could be required to make in the ~~United States District Court for the Southern District~~event of ~~New York against the Company and certain former officers~~adverse judgments in a number of the Company. The complaint was subsequently amended and recaptioned "In re Avon Products, Inc. Securities Litigation". The amended complaint is brought on behalf of a purported class consisting of all purchasers or acquirers of Avon common stock between January 21, 2016 and November 1, 2017, inclusive. The complaint asserts violations of sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act") based on allegedly false or misleading statements and alleged market manipulation with respect to, among other things, changes made to Avon’s credit terms for Representativeslawsuits in Brazil. Avon and the individual defendants filed a motion to dismiss which the court denied. During 2020, the parties reached an agreement on a settlement of this class action. The terms of settlement include releases by members of the class of claims against the Company and the individual defendants and payment of $14.5 million. Approximately $2 million of the settlement was paid by the Company (which represented the remaining deductible under the Company’s applicable insurance policies) and the remainder of the settlement was paid by the Company’s insurers. On August 31, 2020, the court granted preliminary approval of the settlement, and on February 3, 2021, the court entered an order and judgment granting final approval of the settlement. This judgment is now final.

Other Matters

Various other lawsuits and claims, arising in the ordinary course of business or related to businesses previously sold, are pending or threatened against Avon. In management’s opinion, based on its review of the information available at this time, the total cost of resolving such other contingencies at ~~September 30, 2021~~March 31, 2022 is not expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows.

~~AVON PRODUCTS, INC.~~

8. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The tables below present the changes in AOCI by component and the reclassifications out of AOCI for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:

Three Months Ended September 30, 2021 Foreign Currency Translation Adjustments Net Investment Hedges Pension and Postretirement Benefits Total
Balance at June 30, 2021 $ (1,051.9) $ (4.3) $ (88.8) $ (1,145.0)
Other comprehensive loss other than reclassifications (9.2) — — (9.2)
Sale of Avon Luxembourg .1 — (.1) —
Reclassifications into earnings:
Amortization of net actuarial loss and prior service cost, net of tax of $0.2(1)
— — .7 .7
Total reclassifications into earnings — — .7 .7
Balance at September 30, 2021 $ (1,061.0) $ (4.3) $ (88.2) $ (1,153.5)

Three Months Ended September 30, 2020 Foreign Currency Translation Adjustments Net Investment Hedges Pension and Postretirement Benefits Total
Balance at June 31, 2020 $ (1,053.1) $ (4.3) $ (88.4) $ (1,145.8)
Other comprehensive loss other than reclassifications (25.5) — 2.4 (23.1)
Reclassifications into earnings:
Amortization of net actuarial loss and prior service cost, net of tax of $0.2(1)
— — 2.0 2.0
Total reclassifications into earnings — — 2.0 2.0
Balance at September 30, 2020 $ (1,078.6) $ (4.3) $ (84.0) $ (1,166.9)

Nine Months Ended September 30, 2021 Foreign Currency Translation Adjustments Net Investment Hedges Pension and Postretirement Benefits Total
Balance at December 31, 2020 $ (1,038.2) $ (4.3) $ (91.3) $ (1,133.8)
Other comprehensive loss other than reclassifications (22.9) — — (22.9)
Sale of Avon Luxembourg .1 — (.1) —
Reclassifications into earnings:
Amortization of net actuarial loss and prior service cost, net of tax of $0.6(1)
— — 3.2 3.2
Total reclassifications into earnings — — 3.2 3.2
Balance at September 30, 2021 $ (1,061.0) $ (4.3) $ (88.2) $ (1,153.5)


Three Months Ended March 31, 2022	Foreign Currency Translation Adjustments		Net Investment Hedges		Cash Flow Hedges		Pension and Postretirement Benefits		Total
Balance at December 31, 2021	$	(1,062.3)	$	(4.3)	$	—	$	(18.9)	$	(1,085.5)
Other comprehensive income other than reclassifications	50.9		—		.1		—		51.0

Reclassifications into earnings:
Amortization of net actuarial loss and prior service cost, net of tax of $0.2(1)	—		—		—		1.3		1.3
Total reclassifications into earnings	—		—		—		1.3		1.3
Balance at March 31, 2022	$	(1,011.4)	$	(4.3)	$	.1	$	(17.6)	$	(1,033.2)

2216

AVON PRODUCTS, INC.

Nine Months Ended September 30, 2020 Foreign Currency Translation Adjustments Cash Flow Hedges Net Investment Hedges Pension and Postretirement Benefits Total
Balance at December 31, 2019 $ (942.7) $ (.6) $ (4.3) $ (92.4) $ (1,040.0)
Other comprehensive loss other than reclassifications (135.9) — — 2.4 (133.5)
Reclassifications into earnings:
Derivative losses on cash flow hedges, net of tax of $0.0 — .6 — — .6
Amortization of net actuarial loss and prior service cost, net of tax of $0.6(1)
— — — 6.0 6.0
Total reclassifications into earnings — .6 — 6.0 6.6
Balance at September 30, 2020 $ (1,078.6) $ — $ (4.3) $ (84.0) $ (1,166.9)


Three Months Ended March 31, 2021	Foreign Currency Translation Adjustments		Net Investment Hedges		Pension and Postretirement Benefits		Total
Balance at December 31, 2020	$	(1,038.2)	$	(4.3)	$	(91.3)	$	(1,133.8)
Other comprehensive loss other than reclassifications	(44.5)		—		—		(44.5)
Reclassifications into earnings:

Amortization of net actuarial loss and prior service cost, net of tax of $0.2(1)	—		—		1.2		1.2
Total reclassifications into earnings	—		—		1.2		1.2
Balance at March 31, 2021	$	(1,082.7)	$	(4.3)	$	(90.1)	$	(1,177.1)

For further details on Other Comprehensive income, (loss) other than reclassifications see the Consolidated ~~Statement~~Statements of Comprehensive ~~Loss.~~Income (Loss).

(1) Gross amount reclassified to other income (expense), net in our Consolidated Statements of Operations, and related taxes reclassified to income taxes in our Consolidated Statements of Operations.

Foreign exchange net ~~loss~~losses of ~~$4.5~~$2.4 and ~~net gain $5.6~~$2.0 for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, respectively, and foreign exchange net loss of $4.6 and net gain of $1.7 for the nine months ended September 30, 2021 and 2020,~~ respectively, resulting from the translation of actuarial losses and prior service cost recorded in AOCI, are included in foreign currency translation adjustments in our Consolidated Statements of Comprehensive ~~Loss.~~Income (Loss).

~~AVON PRODUCTS, INC.~~

9. SEGMENT INFORMATION

We have identified 2 reportable segments based on geographic operations: Avon International and Avon Latin America.

We determine segment profit by deducting the related costs and expenses from segment revenue. Segment profit includes an allocation of central expenses to the extent they support the operating activity of the segment. Segment profit excludes certain ~~CTI~~costs to implement ("CTI") restructuring initiatives, certain significant asset impairment charges, and other expenses, which are not allocated to a particular segment, if applicable. This is consistent with the manner in which we assess our performance and allocate resources.

Summarized financial information concerning our reportable segments was as follows:
Three Months Ended September 30, Nine Months Ended September 30,
Total Revenue 2021 2020 2021 2020
Avon International $ 392.6 $ 457.1 $ 1,239.9 $ 1,239.2
Avon Latin America* 369.2 540.0 1,326.9 1,319.9
Total revenue from reportable segments*(1)
761.8 997.1 2,566.8 2,559.1
Revenue from affiliates to Natura &Co 6.5 .9 22.9 2.7
Total revenue*(1)(6)
768.3 998.0 2,589.7 2,561.8
Three Months Ended September 30, Nine Months Ended September 30,
Operating Loss 2021 2020 2021 2020
Segment Profit (Loss)
Avon International $ 2.0 $ 17.4 $ (4.4) $ 15.7
Avon Latin America* (4.1) 22.0 8.9 (46.0)
Total (loss) profit from reportable segments*(2)(6)
$ (2.1) $ 39.4 $ 4.5 $ (30.3)
Unallocated global expenses(3)
(4.2) (3.2) (17.1) (5.0)
Certain Brazil taxes(5)
(1.7) — (1.7) 10.6
CTI restructuring initiatives (10.9) (12.4) (60.8) (17.6)
Costs related to the Transaction (4)
— — — (85.8)
Operating (loss) profit*(6)
$ (18.9) $ 23.8 $ (75.1) $ (128.1)


	Three Months Ended March 31,
Total Revenue	2022		2021
Avon International	$	353.3	$	430.9
Avon Latin America	306.3		465.8
Total revenue from reportable segments(1)	659.6		896.7
Revenue from affiliates to Natura &Co	3.7		7.7
Total revenue(1)(4)	663.3		904.4


	Three Months Ended March 31,
Operating Loss	2022		2021
Segment Loss
Avon International	$	(.9)	$	(7.0)
Avon Latin America	(44.6)		(4.6)
Total loss from reportable segments(2)(4)	$	(45.5)	$	(11.6)
Unallocated global expenses(3)	(5.9)		(6.0)

CTI restructuring initiatives	(10.8)		(19.5)
Operating loss(4)	$	(62.2)	$	(37.1)

AVON PRODUCTS, INC.

(1)Total revenue also includes revenue from other business activities of ~~$.2~~$.1 and ~~$2.8~~$1.9 for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, and $4.5 and $11.6 for the nine months ended September 30, 2021 and 2020,~~ respectively, allocated to Avon International and Avon Latin America segments. Other business activities include revenue from the sale of products to New Avon since the separation of the Company’s North America business into New Avon on March 1, 2016 and ongoing royalties from the licensing of our name and products.

(2)Total loss from reportable segments also includes profit from other business activities and central expenses allocated to Avon International and Avon Latin America segments. Other business activities of ~~$.2~~$.1 and ~~$1.3~~$.1 for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, and $.6 and $5.4 for the nine months ended September 30, 2021 and 2020,~~ respectively, include profit from the sale of products to New Avon since the separation of the Company’s North America business into New Avon on March 1, 2016 and ongoing royalties from the licensing of our name and products. Central expenses of ~~$56.2~~$29.0 and ~~$50.2~~$60.2 for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, and $172.2 and $153.2 for the nine months ended September 30, 2021 and 2020~~ respectively, include corporate general and administrative expenses allocated to Avon International and Avon Latin America to the extent they support the operating activity of the segment.

(3)For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ unallocated global expenses primarily include stewardship and other expenses not directly attributable to reportable segments.

(4)For the nine months ended September 30, 2020, costs related to the Transaction primarily include professional fees of approximately $44, severance payments of approximately $25 and acceleration of share based compensation of approximately $10 relating to these terminations triggered by change in control provisions. Refer to Note 17, Merger with Natura for more information relating to the Natura transaction.

~~AVON PRODUCTS, INC.~~

~~(5)~~The three and nine month periods ended September 30, 2021 include the impact of certain Brazil taxes, which were recorded in selling, general and administrative expenses, net in the amounts of approximately $2~~. The nine month periods ended September 30, 2020 include the impact of certain Brazil taxes, which were recorded in selling, general and administrative expenses, net in the amount of approximately~~ ~~$11~~.

~~(6)~~On July 1, 2021, the Company sold Avon Luxembourg, including our Mexican business, to a subsidiary of Natura &Co Holding. As a result, from the same date, the results of Avon Luxembourg are no longer included within Avon's consolidated results. The ~~nine~~three month period ended ~~September 30,~~March 31, 2021 includes ~~the results of Avon Luxembourg for the period from January 1 to June 30, 2021, and the three and nine month periods ended September 30, 2020 include~~ the results of Avon Luxembourg.

10. SUPPLEMENTAL BALANCE SHEET INFORMATION

At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, prepaid expenses and other included the following:


Components of Prepaid Expenses and Other	Components of Prepaid Expenses and Other	September 30, 2021		December 31, 2020		Components of Prepaid Expenses and Other	March 31, 2022		December 31, 2021
Prepaid taxes and tax refunds receivable	Prepaid taxes and tax refunds receivable	$	83.4	$	117.6	Prepaid taxes and tax refunds receivable	$	84.8	$	84.0
Receivables other than trade	Receivables other than trade	27.6		34.9		Receivables other than trade	28.8		27.8
Prepaid brochure costs, paper and other literature	Prepaid brochure costs, paper and other literature	9.7		12.0		Prepaid brochure costs, paper and other literature	9.9		8.3
Other	Other	42.2		39.7		Other	47.1		45.5
Prepaid expenses and other	Prepaid expenses and other	$	162.9	$	204.2	Prepaid expenses and other	$	170.6	$	165.6

At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, other assets included the following:


Components of Other Assets	Components of Other Assets	September 30, 2021		December 31, 2020		Components of Other Assets	March 31, 2022		December 31, 2021
Net overfunded pension plans	Net overfunded pension plans	$	106.7	$	103.0	Net overfunded pension plans	$	159.6	$	162.5
Capitalized software	Capitalized software	72.0		76.0		Capitalized software	75.9		74.9
Judicial deposits	Judicial deposits	47.0		50.9		Judicial deposits	56.7		47.2
Long-term receivables including Taxes	Long-term receivables including Taxes	188.8		157.0		Long-term receivables including Taxes	210.1		180.2
Trust assets associated with supplemental benefit plans	Trust assets associated with supplemental benefit plans	29.9		33.7		Trust assets associated with supplemental benefit plans	30.4		30.4
Other	Other	15.4		17.9		Other	13.6		14.2
Other assets	Other assets	$	459.8	$	438.5	Other assets	$	546.3	$	509.4

Prepaid taxes and tax refunds receivable and long-term receivables include approximately ~~$133~~$144 and ~~$112~~$128 related to certain Brazil indirect taxes as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. During the second quarter of 2021, the Brazilian Supreme Federal Court ruled on a Motion of Clarification which supported the recognition of additional receivable balances related to certain Brazil indirect taxes. ~~As of September 30, 2021, we have recorded our best estimate of the receivable of $24 and will continue to assess the impacts of the ruling.~~

11. RESTRUCTURING INITIATIVES

Natura &Co - Avon Integration

Subsequent to the merger of Natura and Avon in January 2020, an integration plan (the "Avon Integration") was established to create the right global infrastructure to support the future ambitions of the Natura &Co Group while also identifying synergies and opportunities to leverage our combined strength, scale and reach. Synergies will be derived mainly from procurement, manufacturing/distribution and administrative, as well as ~~top line~~top-line synergies, primarily between Avon LATAM and Natura &Co Latin America.

AVON PRODUCTS, INC.

Open Up Avon, Open Up & Grow and Transformation Plan

In January 2016, we initiated a transformation plan (the "Transformation Plan"), in order to enable us to achieve our long-term goals of mid-single-digit Constant $ revenue growth and low double-digit operating margin. There are no further restructuring actions to be taken associated with our Transformation Plan as, beginning in the third quarter of 2018, all new restructuring actions approved operate under our new Open Up Avon plan described below.

In September 2018, we initiated a new strategy in order to return Avon to growth ("Open Up Avon"). The Open Up Avon strategy was integral to our ability to return Avon to growth, built around the necessity of incorporating new approaches to various elements of our business, including increased utilization of third-party providers in manufacturing and technology, a

~~AVON PRODUCTS, INC.~~

more ~~fit for purpose~~fit-for-purpose asset base, and a focus on enabling our Representatives to more easily interact with the company and achieve relevant earnings. In January 2019, we announced significant advancements in this strategy, including a structural reset of inventory processes and a reduction in global workforce.

In May 2020, the new leadership of Avon International refreshed our strategy ("Open Up & Grow") which aims to return Avon International to growth over the next three years. Open Up & Grow replaces and builds on the success of the Open Up Avon strategy, launched in 2018, to strengthen competitiveness through enhancing the representative experience, improving brand position and relevance, accelerating digital expansion and improving costs. Over the next three years, savings are expected to continue to be achieved through restructuring actions (that may continue to result in charges related to severance, contract terminations and asset write-offs), as well as other cost-savings strategies that would not result in restructuring charges.

~~Costs to Implement~~CTI Restructuring Initiatives - Three Months Ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~

During the three months ended ~~September 30, 2021,~~March 31, 2022, we recorded net ~~costs to implement~~CTI of ~~$2.6,~~$10.8, of which ~~$3.1~~$3.5 related to Avon Integration, and a net benefit of ~~$.4~~$7.5 related to Open Up & Grow and a net benefit of ~~$.1~~$.2 related to the Transformation Plan, in our Consolidated Statements of Operations. During the three months ended ~~September 30, 2020,~~March 31, 2021, we recorded ~~costs to implement~~CTI of ~~$10.9~~$19.5 of which ~~$11.1~~$6.1 related to Avon Integration, ~~$.7~~$14.2 related to Open Up & Grow, and a net benefit of ~~$.9~~$.8 related to the Transformation Plan, in our Consolidated Statements of Operations.

During the nine months ended September 30, 2021, we recorded net costs to implement of $51.0, of which $13.0 related to Avon Integration, $38.6 related to Open Up & Grow and a net benefit of $.6 related to the Transformation Plan, in our Consolidated Statements of Operations. During the nine months ended September 30, 2020, we recorded costs to implement of $16.1 of which $12.7 related to Avon Integration, $7.6 related to Open Up & Grow, and a net benefit of $4.2 related to the Transformation Plan, in our Consolidated Statements of Operations.

~~AVON PRODUCTS, INC.~~

The costs during the three and ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ consisted of the following:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
CTI recorded in operating profit - COGS	CTI recorded in operating profit - COGS									CTI recorded in operating profit - COGS

Inventory write-off	Inventory write-off	—		(.8)		.2		(1.1)		Inventory write-off	—		.2
		—		(.8)		.2		(1.1)			—		.2

CTI recorded in operating profit - SG&A	CTI recorded in operating profit - SG&A									CTI recorded in operating profit - SG&A
Net charges for employee-related costs, including severance benefits	Net charges for employee-related costs, including severance benefits	3.1		5.7		33.5		4.0		Net charges for employee-related costs, including severance benefits	2.4		9.3
Implementation costs, primarily related to professional service fees	Implementation costs, primarily related to professional service fees	3.3		5.9		13.5		6.7		Implementation costs, primarily related to professional service fees	6.1		4.1
Dual running costs	Dual running costs	.2		.8		.8		2.3		Dual running costs	.4		.3
Contract termination and other net benefits	Contract termination and other net benefits	2.8		.4		10.2		3.4		Contract termination and other net benefits	1.9		5.0
Impairment of other assets		1.0		—		1.0		.7
Accelerated depreciation		.1		—		.3		.4

Variable lease charges	Variable lease charges	.4		.4		1.3		1.3		Variable lease charges	—		.6
		10.9		13.2		60.6		18.8			10.8		19.3

CTI recorded in operating profit		10.9		12.4		60.8		17.7

CTI recorded in other (expense) income
(Gain) loss on sale of business / assets		(8.3)		(1.5)		(9.8)		(1.6)

Total CTI	Total CTI	$	2.6	$	10.9	$	51.0	$	16.1	Total CTI	$	10.8	$	19.5

Avon Integration	Avon Integration	$	3.1	$	11.1	$	13.0	$	12.7	Avon Integration	$	3.5	$	6.1
Open Up & Grow	Open Up & Grow	$	(.4)	$	.7	$	38.6	$	7.6	Open Up & Grow	$	7.5	$	14.2
Transformation Plan	Transformation Plan	$	(.1)	$	(.9)	$	(.6)	$	(4.2)	Transformation Plan	$	(.2)	$	(.8)

The following liability balances include restructuring costs such as employee-related costs, inventory and asset write-offs, foreign currency translation write-offs and contract terminations, and do not include other ~~costs to implement~~CTI restructuring initiatives such as professional services fees, dual running costs, accelerated depreciation and gain on sale of business.

AVON PRODUCTS, INC.

The liability balance included in other accrued liabilities in our Consolidated Balance Sheet for the restructuring actions associated with Avon Integration at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 is ~~$1.7~~$0.3 and ~~$.7,~~$1.6, respectively, related to employee related costs.

The liability balance included in other accrued liabilities in our Consolidated Balance Sheet for the restructuring actions associated with Open Up & Grow at ~~September 30, 2021~~March 31, 2022 is as follows:

Employee-Related Costs Inventory/Assets Write-offs Contract Terminations/Other Total
Balance at December 31, 2020 $ 9.0 $ — $ 2.8 $ 11.8
2021 charges 30.8 1.1 2.6 34.5
Cash payments (18.1) — (3.9) (22.0)
Non-cash write-offs — (1.1) — (1.1)
Foreign exchange (.4) — (.1) (.5)
Balance at September 30, 2021 $ 21.3 $ — $ 1.4 $ 22.7

~~AVON PRODUCTS, INC.~~


	Employee-Related Costs		Inventory/Assets Write-offs		Contract Terminations/Other		Total
Balance at December 31, 2021	$	14.0	$	—	$	1.2	$	15.2
2022 charges	1.5		—		1.2		2.7

Cash payments	(6.8)		—		(1.3)		(8.1)

Foreign exchange	(.3)		—		—		(.3)
Balance at March 31, 2022	$	8.4	$	—	$	1.1	$	9.5

The liability balance included in other accrued liabilities in our Consolidated Balance Sheet for the restructuring actions associated with our Transformation Plan at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 is ~~$1.5~~$1.4 and ~~$3.5,~~$1.5, respectively, related to employee related costs.

The majority of cash payments, if applicable, associated with the year-end liability ~~and the liability at September 30, 2021~~ are expected to be made during ~~2021.~~2022.

The following table presents the restructuring charges incurred to date under Avon Integration and Open Up & Grow (formerly Open Up Avon) ~~and the Transformation Plan,~~ along with the estimated charges expected to be incurred on approved initiatives under the plans:


		Employee- Related Costs		Inventory/ Asset Write-offs		Contract Terminations/Other		Foreign Currency Translation Adjustment Write-offs		Total			Employee- Related Costs		Inventory/ Asset Write-offs		Contract Terminations/Other		Foreign Currency Translation Adjustment Write-offs		Total
Avon Integration	Avon Integration											Avon Integration
Charges incurred to date	Charges incurred to date	$	11.9	$	—	$	.2	$	—	$	12.1	Charges incurred to date	$	13.3	$	—	$	.9	$	—	$	14.2
Estimated charges to be incurred on approved initiatives	Estimated charges to be incurred on approved initiatives	—		—		—		—		—		Estimated charges to be incurred on approved initiatives	—		—		—		—		—
Total expected charges on approved initiatives	Total expected charges on approved initiatives	$	11.9	$	—	$	.2	$	—	$	12.1	Total expected charges on approved initiatives	$	13.3	$	—	$	.9	$	—	$	14.2

Open Up & Grow	Open Up & Grow											Open Up & Grow
Charges incurred to date	Charges incurred to date	$	114.0	$	107.6	$	15.0	$	(10.9)	$	225.7	Charges incurred to date	$	117.3	$	107.4	$	17.1	$	(10.9)	$	230.9
Estimated charges to be incurred on approved initiatives	Estimated charges to be incurred on approved initiatives	.2		—		—		—		.2		Estimated charges to be incurred on approved initiatives	.2		—		—		—		.2
Total expected charges on approved initiatives	Total expected charges on approved initiatives	$	114.2	$	107.6	$	15.0	$	(10.9)	$	225.9	Total expected charges on approved initiatives	$	117.5	$	107.4	$	17.1	$	(10.9)	$	231.1

AVON PRODUCTS, INC.

The charges, net of adjustments, of initiatives under the Avon Integration and Open Up & Grow ~~and the Transformation Plan,~~ along with the estimated charges expected to be incurred on approved initiatives under the plans, by reportable segment are as follows:

Avon International Avon Latin America Total
Avon Integration
2020 $ 6.2 $ 4.6 $ 10.8
First quarter 2021 (.5) 2.0 1.5
Second quarter 2021 (.7) — (.7)
Third quarter 2021 — .5 .5
Charges incurred to date 5.0 7.1 12.1
Estimated charges to be incurred on approved initiatives — — —
Total expected charges on approved initiatives $ 5.0 $ 7.1 $ 12.1
Open Up & Grow
2018 $ 52.8 $ 64.3 $ 117.1
2019 34.7 36.9 71.6
2020 3.2 (.8) 2.4
First quarter 2021 9.4 (.1) 9.3
Second quarter 2021 21.1 — 21.1
Third quarter 2021 4.1 .1 4.2
Charges incurred to date 125.3 100.4 225.7
Estimated charges to be incurred on approved initiatives .2 — .2
Total expected charges on approved initiatives $ 125.5 $ 100.4 $ 225.9

~~AVON PRODUCTS, INC.~~


	Avon International		Avon Latin America		Total
Avon Integration
2020	$	6.2	$	4.6	$	10.8
2021	(1.2)		3.0		$	1.8
First quarter 2022	.1		1.5		1.6


Charges incurred to date	5.1		9.1		14.2
Estimated charges to be incurred on approved initiatives	—		—		—
Total expected charges on approved initiatives	$	5.1	$	9.1	$	14.2

Open Up & Grow
2018	$	52.8	$	64.3	$	117.1
2019	34.7		36.9		71.6
2020	3.2		(.8)		2.4
2021	36.9		.2		37.1
First quarter 2022	2.7		—		2.7


Charges incurred to date	130.3		100.6		230.9
Estimated charges to be incurred on approved initiatives	.2		—		.2
Total expected charges on approved initiatives	$	130.5	$	100.6	$	231.1

The charges above are not included in segment ~~profit,~~loss, as this excludes ~~costs to implement~~CTI restructuring initiatives. The amounts shown in the tables above as charges ~~recorded~~incurred to date relate to initiatives that have been approved and recorded in the consolidated financial statements, as the costs are probable and estimable. The amounts shown in the tables above as total expected charges on approved initiatives represent charges recorded to-date plus charges yet to be recorded for approved initiatives as the relevant accounting criteria for recording an expense have not yet been met.

12. GOODWILL
Avon International Avon Latin America Total
Net balance at December 31, 2020 $ 20.0 $ 63.2 $ 83.2
Changes during the period ended September 30, 2021:
Foreign exchange (1.3) (6.7) (8.0)
Net balance at September 30, 2021 $ 18.7 $ 56.5 $ 75.2


	Avon International		Avon Latin America		Total


Net balance at December 31, 2021	$	17.6	$	54.5	$	72.1

Changes during the period ended March 31, 2022:


Foreign exchange	(.4)		3.2		2.8



Net balance at March 31, 2022	$	17.2	$	57.7	$	74.9

13. FAIR VALUE

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of ~~September 30, 2021:~~March 31, 2022:

Level 1 Level 2 Total
Assets:
Foreign exchange forward contracts $ — $ 2.7 $ 2.7
Total $ — $ 2.7 $ 2.7
Liabilities:
Foreign exchange forward contracts $ — $ — $ —
Total $ — $ — $ —

AVON PRODUCTS, INC.


	Level 1		Level 2		Total
Assets:

Foreign exchange forward contracts	$	—	$	.1	$	.1
Total	$	—	$	.1	$	.1
Liabilities:
Foreign exchange forward contracts	$	—	$	.6	$	.6
Total	$	—	$	.6	$	.6

The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, ~~2020:~~2021:


		Level 1		Level 2		Total			Level 1		Level 2		Total
Assets:
Available-for-sale securities		$	4.2	$	—	$	4.2
Foreign exchange forward contracts		$	—	$	2.8	$	2.8
Total		$	4.2	$	2.8	$	7.0

Liabilities:	Liabilities:							Liabilities:
Foreign exchange forward contracts	Foreign exchange forward contracts	$	—	$	6.0	$	6.0	Foreign exchange forward contracts	$	—	$	2.7	$	2.7
Total	Total	$	—	$	6.0	$	6.0	Total	$	—	$	2.7	$	2.7

Fair Value of Financial Instruments

Our financial instruments include cash and cash equivalents, available-for-sale securities, short-term investments, accounts receivable, debt maturing within one year, accounts payable, long-term debt and foreign exchange forward contracts. The carrying value for cash and cash equivalents, accounts receivable, accounts payable, debt maturing within one year and short-term investments approximate fair value because of the short-term nature of these instruments.

~~AVON PRODUCTS, INC.~~

The net asset (liability) amounts recorded in the balance sheet (carrying amount) and the estimated fair values of our remaining financial instruments at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively, consisted of the following:


		September 30, 2021				December 31, 2020					March 31, 2022		December 31, 2021
		Carrying Amount		Fair Value		Carrying Amount		Fair Value			Carrying Amount	Fair Value	Carrying Amount	Fair Value
Available-for-sale securities		$	—	$	—	$	4.2	$	4.2

Loans to affiliates of Natura &Co maturing within one year	Loans to affiliates of Natura &Co maturing within one year	44.9		44.9		—		—		Loans to affiliates of Natura &Co maturing within one year	45.5	45.5	46.6	46.6
Loans to affiliates of Natura &Co maturing after one year	Loans to affiliates of Natura &Co maturing after one year	51.1		51.1		—		—		Loans to affiliates of Natura &Co maturing after one year	46.7	46.7	46.7	46.7
Debt maturing within one year	Debt maturing within one year	(35.5)		(35.5)		(28.0)		(28.0)		Debt maturing within one year	(561.4)	(567.6)	(32.6)	(32.6)
Loans from affiliates of Natura &Co maturing within one year	Loans from affiliates of Natura &Co maturing within one year	(148.7)		(148.7)		(1,008.6)		(1,008.6)		Loans from affiliates of Natura &Co maturing within one year	(458.3)	(458.3)	(371.7)	(371.7)
Long-term debt(1)	Long-term debt(1)	(675.8)		(767.1)		(675.4)		(782.4)		Long-term debt(1)	(215.2)	(252.0)	(676.0)	(754.2)
Loans from affiliates of Natura &Co maturing after one year	Loans from affiliates of Natura &Co maturing after one year	(972.8)		(972.8)		—		—		Loans from affiliates of Natura &Co maturing after one year	(721.0)	(721.0)	(736.3)	(736.3)
Foreign exchange forward contracts	Foreign exchange forward contracts	2.7		2.7		(3.2)		(3.2)		Foreign exchange forward contracts	(.5)	(.5)	(2.7)	(2.7)

(1) The carrying value of long-term debt is presented net of debt issuance costs and includes any related discount or premium, as applicable.

The methods and assumptions used to estimate fair value are as follows:

•Available-for-sale securities - The fair values of these investments were the quoted market prices for issues listed on securities exchanges.

•Long-term debt - The fair values of our debt and other financing were determined using Level 2 inputs based on indicative market prices.

•Foreign exchange forward contracts - The fair values of forward contracts were estimated based on quoted forward foreign exchange prices at the reporting date.

AVON PRODUCTS, INC.

14. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We operate globally, with manufacturing and distribution facilities in various countries around the world. We may reduce our exposure to fluctuations in the fair value and cash flows associated with changes in interest rates and foreign exchange rates by creating offsetting positions, including through the use of derivative financial instruments. If we use foreign currency-rate sensitive and interest-rate sensitive instruments to hedge a certain portion of our existing and forecasted transactions, we would expect that any gain or loss in value of the hedge instruments generally would be offset by decreases or increases in the value of the underlying forecasted transactions.

We do not enter into derivative financial instruments for trading or speculative purposes, nor are we a party to leveraged derivatives. Agreements governing our derivative contracts generally contain standard provisions that could trigger early termination of the contracts in certain circumstances, including if we were to merge with another entity and the creditworthiness of the surviving entity were to be "materially weaker" than that of Avon prior to the Transaction.

Derivatives are recognized in the Consolidated Balance Sheets at their fair values. The following table presents the fair value of derivative instruments at ~~September 30,~~March 31, 2022:


	Asset			Liability
	Balance Sheet Classification	Fair Value		Balance Sheet Classification	Fair Value
Derivatives designated as hedges:
Foreign exchange forward contracts	Prepaid expenses and other	$	1.1	Accounts payable	$	1.0

Derivatives not designated as hedges:
Foreign exchange forward contracts	Prepaid expenses and other	$	.1	Accounts payable	$	.6
Total derivatives		$	1.2		$	1.6

Derivatives are recognized in the Consolidated Balance Sheets at their fair values. The following table presents the fair value of derivative instruments at December 31, 2021:

Asset

Liability

Balance Sheet
Classification

Fair
Value

Balance Sheet
Classification

Fair
Value

Derivatives not designated as hedges:

Foreign exchange forward contracts

Prepaid expenses and other

~~2.7~~—

Accounts payable

—2.7

Total derivatives

~~2.7~~—

—2.7

~~AVON PRODUCTS, INC.~~

~~Derivatives are recognized in the Consolidated Balance Sheets at their fair values. The following table presents the fair value of derivative instruments at December 31, 2020:~~

Asset Liability
Balance Sheet
Classification Fair
Value Balance Sheet
Classification Fair
Value
Derivatives designated as hedges:
Foreign exchange forward contracts Prepaid expenses and other $ 2.8 Accounts payable $ 6.0
Total derivatives $ 2.8 $ 6.0

Interest Rate Risk

On June 30, 2021 we entered into a cross-currency interest rate swap agreement with a third party bank, designated as a cash flow hedge, whereby we receive fixed rate interest payments on $11 at 2.10% per annum in exchange for making floating interest rate payments on R$55 at CDI plus 1.87% for a period of 6 months. At September 30, 2021, the fair value of the cross currency interest-rate swap agreement was $.9. At December 31, 2020, we did not have any interest-rate swap agreements.

Approximately 7%13% and 4%5% of our debt portfolio at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively, was exposed to floating interest rates, which relates to our short-term debt portfolio.

Foreign Currency Risk

We may use foreign exchange forward contracts to manage a portion of our foreign currency exchange rate exposures. At ~~September 30, 2021,~~March 31, 2022, we had outstanding third-party foreign exchange forward contracts with notional amounts totaling approximately ~~$131~~$237 for various currencies, none of which were designated as cash flow hedges.

During the quarter ended March 31, 2022, the Company entered into foreign exchange forward contracts with Natura &Co Luxembourg, a subsidiary of Natura &Co Holding, to manage a portion of its foreign currency exchange rate exposures. At March 31, 2022, we had outstanding related party foreign exchange forward contracts with notional amounts totaling approximately $175 for various currencies for up to 9 months, all of which were designated as cash flow hedges. In addition we had $1.1 Accounts Receivable and $1.0 Accounts Payable recorded in our Consolidated Balance Sheets associated with these transactions, all of which are expected to be reclassified into earnings within the next 12 months.

We may use foreign exchange forward contracts to manage foreign currency exposure of certain balance sheet items. The change in fair value of these items is immediately recognized in earnings and substantially offsets the foreign currency

AVON PRODUCTS, INC.

translation impact recognized in earnings relating to the associated balance sheet items. During the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ we recorded a gain of ~~$2.8~~$3.5 and a loss $13.9, respectively, in other (expense) income, net in our Consolidated Statements of Operations related to these undesignated foreign exchange forward contracts. During the nine months ended September 30, 2021 and 2020, we recorded a gain of $1.5 and a loss $7.1,$.7, respectively, in other (expense) income, net in our Consolidated Statements of Operations related to these undesignated foreign exchange forward contracts.

15. DEBT

Natura Revolving Credit Facility

In May 2020, the Company’s subsidiary, Avon Luxembourg entered into a Revolving Credit Facility Agreement with Natura &Co International S.à r.l., a subsidiary of Natura &Co Holding and an affiliate of the Company, in the initial amount of $100, increased to $250 in March ~~2021),~~2021, which may be used for working capital and other general corporate ~~purposes (the "Facility").~~purposes. Borrowings under ~~the~~this Facility bear interest at a rate per annum of LIBOR plus a margin determined on an ~~arms~~arm's length basis, and the Facility is to mature on May 31, 2022. On July 1, 2021, the Company sold Avon Luxembourg to a subsidiary of Natura &Co Holding and ~~the~~therefore Company no longer has access to this facility.

Other Loans from Affiliates of Natura &Co

In November 2020, Avon International Operations, Inc. ("AIO") entered into a Promissory Note with a subsidiary of Natura &Co Holding and an affiliate of the Company in the amount of $960. The Promissory Note bears interest at a rate per annum of 3.13% and matures on November 2, ~~2021~~2022 (“the Natura &Co Loan”). On July 1, 2021, as part of the sale of Avon Luxembourg to a subsidiary of Natura &Co Holding the $960 loan was partially repaid with the proceeds from a loan maturing in 2028. As at ~~September 30, 2021, $206~~March 31, 2022, $209 was outstanding under the Natura &Co Loan and ~~$767~~$721 was outstanding under the loan maturing in 2028 which is between Avon Beauty Limited, and Natura &Co Luxembourg ~~Holdings S.à r.l.~~ ("Natura &Co ~~Lux~~Luxembourg Loan"). On 29 October 2021, the $206 Promissory Note between Avon International Operations Inc. and a subsidiary of Natura &Co Holding was amended to extend its maturity to November 2, 2022. In accordance with ASC 470 - Debt, the $206 Promissory Note has therefore been presented as non-current in the Consolidated Balance Sheet as of September 30, 2021.

In addition, loans from affiliates of Natura &Co Holding at ~~September 30, 2021~~March 31, 2022 of ~~$149~~$249 includes a number of intercompany loans between ~~Avon~~Natura &Co Luxembourg, Natura Cosméticos and Avon Products, Inc. ~~affiliates that, following the sale of Avon Luxembourg to a subsidiary of Natura &Co Holding S.A. on July 1, 2021, were redesignated as loans from affiliates of Natura & Co Holding.~~

~~AVON PRODUCTS, INC.~~

affiliates.

Other Short-Term Financing

In addition, at ~~September 30, 2021,~~March 31, 2022, we utilized approximately ~~$36~~$100 of short-term financing from third-party banks across multiple markets.

~~2019 Revolving Credit Facility~~

In February 2019, Avon International Capital, p.l.c. ("AIC"), a wholly owned foreign subsidiary of the Company, entered into a three year €200.0 senior secured revolving credit facility (the "2019 facility") and capitalized $11.0 of issuance costs, the related cash outflow is presented in other financing activities within the 10-K Consolidated Statement of Cash Flows. The 2019 facility was available for general corporate and working capital purposes.

As of December 31, 2019, there were no amounts outstanding under the 2019 facility and on January 3, 2020, the facility was automatically canceled upon change of control, and as a result $7.8 of unamortized issuance costs were written off, see Note 17, Mergers with Natura Cosméticos S.A.

Unsecured Notes

In March 2013, we issued a series of unsecured notes (the "2013 Notes"). As of ~~September 30, 2021,~~March 31, 2022, the following 2013 Notes remain outstanding: $461.9 aggregate principal amount of 5% Notes due March 15, 2023 and $216.1 aggregate principal amount of 6.95% Notes due March 15, 2043. Interest on the 2013 Notes is payable semiannually on March 15 and September 15 of each year. The indenture governing the 2013 Notes contains interest rate adjustment provisions depending on the long-term credit ratings assigned to the 2013 Notes by S&P and Moody’s. As described in the indenture, the interest rates on the 2013 Notes increase or decrease by .25% for each one-notch movement below investment grade on each of the credit ratings assigned to the 2013 Notes by S&P or Moody's. These adjustments are limited to a total increase of 2% above the respective interest rates in effect on the date of issuance of the 2013 Notes.

In September 2020, we repurchased $27.8 of our 6.95% Notes due March 15, 2043. The aggregate repurchase price was equal to the principal amount of the notes, plus a premium of $3.8 and accrued interest of $1.2. In connection with the repurchase, we incurred a loss on extinguishment of debt of $4.1 before tax in the third quarter of 2020 consisting of the $3.8 premium paid for the repurchases, and $.3 for the write-off of debt issuance costs and discounts related to the initial issuance of the notes that were repurchased.

~~Senior Secured Notes~~

In August 2016, AIO issued $500.0 in aggregate principal amount of 7.875% Senior Secured Notes due August 15, 2022 (the "2016 Notes"). In July 2019, AIC issued $400.0 in aggregate principal amount of 6.5% Senior Secured Notes due August 15, 2022 (the "2019 Notes").

In November 2020, in connection with the Natura & Co Promissory Note, we redeemed the outstanding principal amount of our 2016 Notes due August 15, 2022 and the outstanding principal amount of our 2019 Notes due August 15, 2022. With respect to the 2016 Notes, the aggregate redemption amount paid was equal to the outstanding principal amount of $500, plus a premium of $9.8 and accrued interest of $8.4. With respect to the 2019 Notes, the aggregate redemption amount paid was equal to the outstanding principal amount of $400, plus a premium of $7.9 and accrued interest of $5.6.

In connection with the redemption, we incurred a loss on extinguishment of debt of $25.6 before tax in the fourth quarter of 2020 consisting of the $17.7 premiums, and the write-off of $7.9 of debt issuance costs related to the initial issuances of the notes that were redeemed.

For a more detailed description of the Company’s debt agreements, refer to Note 7, Debt and Other Financing of our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

16. INCOME TAXES

Our quarterly income tax provision is calculated using an estimated annual effective income tax approach. The quarterly effective tax rate can differ from our estimated annual effective tax rate as the Company cannot apply an effective tax rate approach for all of its operations. For those entities that can apply an effective tax rate approach, as of ~~September 30, 2021,~~March 31, 2022, our annual effective tax rate, excluding discrete items, is ~~32.1%~~26.4%, as compared to ~~25.9%~~26.5% as of ~~September 30, 2020.~~March 31, 2021.

The remaining entities, which are operations that generate pre-tax losses which cannot be tax benefited and/or have an effective tax rate which cannot be reliably estimated, have to account for their income taxes on a discrete year-to-date basis as of the end of each quarter and are excluded from the effective tax rate approach. The estimated annual effective tax rate for ~~2021~~2022 and ~~2020~~2021 also excludes the unfavorable impact of withholding taxes associated with certain intercompany payments, including royalties,

AVON PRODUCTS, INC.

service charges, interest and dividends, which in the aggregate are relatively consistent each year due to the need to repatriate

~~AVON PRODUCTS, INC.~~

funds to cover U.S. and U.K. based costs, such as interest on debt and central expenses. Withholding taxes associated with the relatively consistent intercompany payments are accounted for discretely and accrued in the provision for income taxes as they become due.

The provision for income taxes for the three months ended ~~September 30,~~March 31, 2022 and 2021 was $4.8 and ~~2020 was $(10.4) and $11.8,~~$7.1, respectively. Our effective tax rates for the three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were 22.6% and (68.6)%, respectively. The provision for income taxes for the nine months ended September 30, 2021 and 2020 was $15.5 and $26.7, respectively. Our effective tax rates for the nine months ended September 30, 2021 and 2020 were (10.5)(5.7)% and ~~(10.4)~~(11.5)%, respectively.

The effective tax rates for the three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were impacted by CTI restructuring charges which could not all be benefited, country mix of earnings and withholding taxes. The effective tax rate in the ~~third~~first quarter of ~~2021~~2022 was ~~favorably~~unfavorably impacted by the ~~accrual of net income tax benefits of $8.9 associated with the release of reserves for uncertain tax positions of $10.4, offset by the net~~ recording of valuation allowances of ~~$1.5~~$3.1 and other miscellaneous net tax expense of $5.0. The effective tax rate in the ~~third~~first quarter of ~~2020~~2021 was ~~favorably~~unfavorably impacted by the accrual of net income tax benefits of $5.7 associated with the release of income tax reserves of $10.8 associated with our uncertain tax positions, and the recording of a valuation allowance of $4.3 and other miscellaneous income tax expense of ~~$.8.~~

The effective tax rates for the nine months ended September 30, 2021 and 2020 were impacted by CTI restructuring charges which could not all be benefited, country mix of earnings and withholding taxes. The effective tax rate in the nine months ended September 30, 2021 was unfavorably impacted by the accrual of net tax expense of $.4 due to the net release of reserves for uncertain tax positions of $7.8, the net recording of valuation allowances of $7.5 and miscellaneous income tax expense of approximately $.7. The effective tax rate in the nine months ended September 30, 2020 was also favorably impacted by the accrual of net income tax benefits of $1.8 associated with the release of income tax reserves of $11.2 associated with our uncertain tax positions, net of recording a valuation allowance of $4.3 and other miscellaneous income tax expense of $5.1.$2.4.

In prior years, we had previously recorded valuation allowances against certain deferred tax assets associated with the U.S. and various foreign jurisdictions. We intend to continue maintaining these valuation allowances on our deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change on the basis of the level of profitability that we are able to achieve. The Company continuously monitors its operational and capital structure changes, business performance, tax planning actions and tax planning strategies that could potentially allow for the recognition of deferred tax assets which are currently subject to a valuation allowance. There is the possibility that, in the foreseeable future, certain deferred tax assets could be recognized, which may be material, related to changes in business operations and associated financing of such operations.

Further, the Company continuously assesses available positive and negative evidence to estimate whether sufficient future taxable income will be generated to utilize our existing deferred tax assets that are not subject to a valuation allowance. As of ~~September 30, 2021,~~March 31, 2022, the COVID-19 pandemic is an example of negative evidence the Company must consider. As of ~~September 30, 2021,~~March 31, 2022, the negative evidence associated with COVID-19 has not required the recording of additional valuation allowances against deferred tax assets that are expected to be realized in future periods. The Company will continue to monitor the COVID-19 pandemic and other effects that could impact the conclusions regarding the realizability of its remaining deferred tax assets. Potential negative evidence, including such things as the worsening of the economies in the markets we operate in and reduced profitability of our markets could give rise to a need for a valuation allowance to reduce our deferred tax assets in upcoming quarters.

~~17. MERGER WITH NATURA COSMÉTICOS S.A.~~

~~On May 22, 2019,~~We monitor the ~~Company entered into the Agreement and Plan~~realizability of Mergers (as amended by Amendment Number One to Agreement and Plant of Mergers, dated as of October 3, 2019, and as further amended by Amendment Number Two to Agreement and Plan of Mergers, dated as of November 5, 2019, the "Merger Agreement") among the Company, Natura Cosméticos S.A., a Brazilian corporation (sociedade anônima) ("Natura Cosméticos"), Natura &Co Holding, a Brazilian corporation (sociedade anônima), Nectarine Merger Sub I, Inc., a Delaware corporation and a direct wholly owned subsidiary of Natura &Co Holding ("Merger Sub I"), and Nectarine Merger Sub II, Inc., a Delaware corporation and a direct wholly owned subsidiary of Merger Sub I ("Merger Sub II"), pursuant to which (i) Natura &Co Holding, after the completion of certain restructuring steps, holds all issued and outstanding shares of Natura Cosméticos, (ii) Merger Sub II merged with and into the Company, with the Company surviving the merger (the "First Merger") and (iii) Merger Sub I merged with and into Natura &Co Holding (the "Second Merger"), with Natura &Co Holding surviving the merger and as a result of which the Company and Natura Cosméticos became wholly owned direct subsidiaries of Natura &Co Holding (collectively, the "Transaction").

~~AVON PRODUCTS, INC.~~

~~The Transaction was consummated on January 3, 2020, and at this time, the Company became a wholly owned direct subsidiary of Natura &Co Holding.~~ ~~In connection with the Transaction, trading of the Company’s stock was suspended by the NYSE, and the Company’s common stock was subsequently delisted and deregistered.~~

~~On completion of the Transaction, each share of the Company’s~~ common stock issued and outstanding immediately prior to the consummation of the Transaction was converted into the ultimate right to receive, (i) 0.300 validly issued and allotted, fully paid-up American Depositary Shares of Natura &Co Holding, ("Natura &Co Holding ADSs") against the deposit of 2 shares of common stock of Natura &Co Holding ("Natura &Co Holding Shares", subject to adjustment in accordance with the terms of the Merger Agreement, and any cash in lieu of fractional Natura &Co Holding ADSs or (ii) 0.600 validly issued and allotted, fully paid-up Natura &Co Holding Shares, subject to adjustment in accordance with the terms of the Merger Agreement, and any cash in lieu of fractional Natura &Co Holding Shares. The Company’s Series C Preferred Stock held by Cerberus Investor were converted to common stock prior to consummation of the Transaction and were therefore automatically converted into common stock of Natura &Co. In January 2020, Natura &Co Holding paid the accrued dividend of $91.5 to Cerberus.

Natura &Co Holding Shares are listed on the B3 S.A. - Brasil, Bolsa, Balcão stock exchange, and Natura &Co Holding ADSs are listed on the NYSE. Additionally, upon the consummation of the Transaction, Avon common stock ceased to be traded on the NYSE.

In January 2020, subsequent to the Transaction, the Company restated the certificate of incorporation. The certificate of incorporation was restated to effect a change in capitalization of the Company by changing the number of authorized shares of common stock from 1,525,000,000 shares (of which (i) 1,500,000,000 shares, par value $0.25 per share, are common stock and (ii) 25,000,000 shares, par value $1.00 per share, are preferred stock) to 1,000 shares of common stock, par value $0.01 per share. As a result, all of the issued and outstanding common stock of the Company, being 550,890,788 were canceled and converted into 101.34 common stock, par value $0.01 per share, and all outstanding treasury shares were canceled.

~~The Company incurred costs of $46 in relation to the Transaction, primarily professional fees during the year ended December 31, 2020.~~

During January 2020, it was announced that the employment of certain senior officers of the Company would be terminated, in connection with the Transaction. The Company incurred severance of approximately $25 and acceleration of share based compensation of approximately $10 relating to these terminations triggered by change in control provisions.

As a result of the Transaction, the Company made payments of approximately $26 related to the settlement of stock options. In addition, any remaining restricted stock units and performance restricted stock units were exchanged for awards of Natura &Co Holding. The replacement awards contain substantially the same terms and conditions of the original awards except for the removal of the performance conditions. As such, the replacement awards contain only a service vesting condition.

On consummation of the Transaction, a deferred compensation scheme relating to former employees of the Company became payable which resulted in extinguishing the liability and a cash outflow of approximately $12.

In January 2020, upon completion of the Transaction, the Company’s revolving credit facility was canceled, triggered by change in control provisions. As a result, debt issuance costs of $7.8 were written off.

As a result of the Transaction, the Company will no longer have access to certain tax attributes of approximately $546 to approximately $616 in certain taxing jurisdictions. These tax attributes had been formerly reflected asour deferred tax assets ~~which were subject~~on a continuous basis. Should macroeconomic and socio-political conditions change or our business operations do not improve, approximately $75 of deferred tax assets could potentially need to be offset with the recording of a ~~full~~ valuation allowance ~~and as a result, there was no impact to net income in 2020 from~~during the ~~write-off of the~~next 12 months. The deferred tax ~~asset and the~~assets are associated ~~valuation allowances.~~

~~18. SUBSEQUENT EVENTS~~

~~On October 29, 2021, the $206 Promissory Note between~~with Avon ~~International Operations Inc. and~~subsidiary operations that suffered a ~~subsidiary of Natura &Co Holding S.A. was amended to extend its maturity to November 2, 2022. In accordance with ASC 470 - Debt, the $206 Promissory Note has therefore been presented as non-current~~loss in ~~the Consolidated Balance Sheet as of September 30,~~earnings before tax during 2021.

3425

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(U.S. dollars in millions, except per share data)

When used in this report, the terms "Avon," "Company," "we," "our" or "us" mean, unless the context otherwise indicates, Avon Products, Inc. and its majority, wholly owned and controlled subsidiaries.

When used in this report, the term ~~Constant $~~"Constant $" means translated at a constant rate to allow comparisons between periods without the impact of movements in foreign exchange rates.

OVERVIEW

We are a global manufacturer and marketer of beauty and related products. We are a fully owned direct subsidiary of Natura &Co Holding following the consummation of the Merger Agreement with Natura Cosméticos, Natura &Co Holding and two subsidiaries of Natura &Co Holding (the "Transaction") on January 3, 2020.

Our business is conducted primarily in the direct-selling channel, with a strategy to expand to omni-channel. During ~~2020,~~2021, we had sales operations in 5554 countries and territories, and distributed products in 2524 more. As at December 31, 2021 we had sales operations in 52 countries and territories. All of our consolidated revenue is derived from operations of subsidiaries outside of the United States ("U.S."). Our reportable segments are based on geographic operations in two regions, Avon International and Avon Latin America. Our product categories are Beauty and Fashion & Home. Beauty consists of skincare, fragrance and color (cosmetics). Fashion & Home consists of fashion apparel, accessories, housewares and leisure products. Sales are made to the ultimate consumer principally through direct selling by Representatives, who are independent contractors and not our employees.

During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, revenue ~~increased 1% with the impact of~~decreased 27%, unfavorably impacted by foreign exchange ~~being broadly neutral as~~variations, primarily driven by the weakening of the U.S. dollar relative to the ~~South African rand, the British pound and the Mexican peso~~Brazilian real, which was partially offset by the strengthening of the U.S. dollar relative to the ~~Russian ruble, the~~ Turkish lira, ~~the Brazilian real~~Russian ruble and the Argentinian peso.

On a Constant $ basis, Adjusted revenue ~~was flat year on year~~decreased 22% driven by ~~a 1% increase~~declines of 10% in Avon International and 33% in Avon Latin America, mostly ~~driven by changes in the severity~~as a result of ~~COVID-19 restrictions in some markets, and~~(i) the sale of Avon Luxembourg on July 1, 2021, ~~partly offset by a 3% decrease in Avon International. Revenue and Constant $ Adjusted revenue was impacted by a decrease~~(ii) decreases in Active Representatives in most markets, (iii) the residual impact of 6%changes in COVID-19 restrictions in multiple markets compared to the same period in the prior-year period and ~~a 6% increase in Average Representative Sales.~~(iv) the impact of the ongoing war between Ukraine and Russia. During the three months ended March 31, 2022, revenues from Russia and Ukraine represented approximately 9% of total revenue, similar to the 9% for the three months ended March 31, 2021.

Constant $ Adjusted revenue excluding the impact of the sale of Avon Luxembourg ~~increased by 4%~~decreased 10% as a ~~10%~~5% increase in Average Representative Sales ~~were partly~~was more than offset by ~~an 6%~~a 15% decrease in Active Representatives.

Units sold decreased ~~9% (decreased 4%~~13% (remaining stable excluding the impact of the sale of Avon Luxembourg) driven by decreases in both Avon International and Avon Latin America.

See "Segment Review" in this Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") for additional information related to changes in revenue by segment.

~~Transaction with Natura Cosméticos S.A~~.COVID-19 Pandemic

~~On January 3, 2020~~A novel strain of coronavirus (COVID-19) was first identified in Wuhan, China in December 2019, and subsequently declared a pandemic by the ~~Company became a fully owned direct subsidiary~~World Health Organization. Due to the uncertain and rapidly evolving nature of ~~Natura &Co Holding following~~current conditions around the ~~consummation~~world, the impacts of COVID-19 most of which are beyond the Company’s control, continue to evolve, and the outcome is uncertain. We are therefore unable to predict accurately the impact that COVID-19 will have on our business going forward.

In 2021 and the first quarter of 2022, the economic disruption caused by the COVID-19 pandemic has resulted in inflationary pressures on the cost of certain raw materials used in the production of essential items due to the increased demand for these inputs worldwide. These inflationary pressures have been compounded by disruptions in global supply chains and climate events that hit electricity generation globally, among others. Moreover, novel strains and variants of COVID-19 emerged in 2021 and the rollout of vaccination programs worldwide have compromised the ability of certain countries to effectively contain the spread and the toll of the Merger Agreement with Natura Cosméticos, Natura &Co Holding and two subsidiaries of Natura &Co Holding (the "Transaction"). In connection with the Transaction, trading of the Company's stock was suspended by the NYSE, and the Company's common stock was subsequently delisted and deregistered.

~~COVID-19 Pandemic~~virus.

We ~~continuously~~continue to monitor the evolution of the COVID-19 pandemic in the markets in which we operate, ~~acting~~especially with regard to restrictive measures adopted by these jurisdictions. We continuously analyze the situation and act to minimize impacts on the operations and on the equity and financial ~~position. Management is~~position of the Company, with the objective of implementing appropriate measures, ~~to ensure~~ensuring the continuity of operations, ~~protect~~hedge cash, improve liquidity and promote the health and safety of ~~all stakeholders.~~

During the third quarter of 2021, most markets in Avon International and many markets in Avon Latin America continued to be impacted by COVID-19 restrictions which resulted in deceleration of the Beauty market growth and a lower representative base. It is unclear if current lockdown measures will continue or be reestablished elsewhere globally which could dampen our recovery from COVID-19.

Considering this scenario, we review the recoverability expectations of our financial and non-financial assets in the preparation of this interim accounting information, considering the most recent information available and reflected in the Company's business plans. In the nine-month period ended September 30, 2021, no deterioration in the Company's liquidity, cash position or leverage that could impact compliance with financial covenants and short-term commitments was identified.all.

3526

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(U.S. dollars in millions, except per share data)

In view of this scenario, we review the recoverability expectations of our financial and non-financial assets in the preparation of these financial statements, considering the most recent information available and reflected in the Company’s business plans. In addition, we also consider possible effects on the financial statements including revenues and the continued transition to the digital environment, allowances for doubtful accounts receivable, impairment of non-financial assets, leases, liquidity and capital resources and going concern.

Natura &Co - Avon Integration

Subsequent to the merger of Natura and Avon in January 2020, an integration plan (the "Avon Integration") was established to create the right global infrastructure to support the future ambitions of the Natura &Co Group while also identifying synergies and opportunities to leverage our combined strength, scale and reach. Synergies will be derived mainly from procurement, manufacturing/distribution and administrative, as well as top line synergies, primarily between Avon LATAM and Natura &Co Latin America.

Open Up Avon, Open Up & Grow ~~and Transformation Plan~~

~~In September 2018, we initiated a new strategy in order to return Avon to growth (~~"Open Up Avon"). The Open Up Avon strategy was integral to our ability to return Avon to growth, built around the necessity of incorporating new approaches to various elements of our business, including increased utilization of third-party providers in manufacturing and technology, a more fit for purpose asset base, and a focus on enabling our Representatives to more easily interact with the company and achieve relevant earnings. In January 2019, we announced significant advancements in this strategy, including a structural reset of inventory processes and a reduction in global workforce.

In May 2020, the new leadership of Avon refreshed our strategy ("Open Up & Grow") which has aims to return Avon to growth over ~~the next~~ three years. Open Up & Grow replaces and builds on the success of the Open Up Avon strategy, launched in 2018 to strengthen competitiveness through enhancing the representative experience, improving brand position and relevance, accelerating digital expansion and improving costs. Over the ~~next~~ three years, savings are expected to continue to be achieved through restructuring actions (that may continue to result in charges related to severance, contract terminations and asset write-offs), as well as other cost-savings strategies that would not result in restructuring charges.

Sale of Avon Luxembourg Holdings S.à r.l

On July 1, 2021, the Company sold Avon Luxembourg, including our Mexican business, to a subsidiary of Natura &Co Holding for ~~$150, with the proceeds used to repay maturing loans of $150 borrowed under the $250 Revolving Credit Facility with a subsidiary of Natura &Co Holding.~~

$150. The sale was accounted for as a transaction under common control in accordance with ASC805 - Business Combinations, with the resulting gain of $148 representing the difference between the proceeds, the net assets of Avon Luxembourg on the date of sale, and the cumulative foreign currency translation adjustment, taken directly to Retained Earnings. For additional information, see the Consolidated Statements of Changes in Shareholders' Deficit.

~~Disposal of Cosmetics Manufacturing Operations in India~~

On September 13, 2021, the Company agreed to sell the business and assets of the Cosmetics Manufacturing Operation in India for a total selling price of approximately $3. The transaction is expected to complete in the fourth quarter of 2021.

NEW ACCOUNTING STANDARDS

Information relating to new accounting standards is included in Note 1, Accounting Policies, to the Consolidated Financial Statements included herein.

RESULTS OF OPERATIONS—THE THREE MONTHS ENDED ~~SEPTEMBER 30, 2021~~MARCH 31, 2022 AS COMPARED TO THE THREE MONTHS ENDED ~~SEPTEMBER 30, 2020~~MARCH 31, 2021

Non-GAAP Financial Measures

To supplement our financial results presented in accordance with accounting principles generally accepted 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, Adjusted revenue, operating profit, Adjusted operating profit, operating margin and Adjusted operating margin. We also refer to these adjusted financial measures as Constant $ items,

~~AVON PRODUCTS, INC.~~

~~MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(U.S. dollars in millions, except per share data)~~

which are Non-GAAP financial measures. We believe these measures provide investors an additional perspective on trends and underlying business results. 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 constant exchange rates, which are updated on an annual basis as part of our budgeting process. Foreign currency impact is determined as the difference between actual growth rates and Constant $ growth rates.

We also present gross margin, SG&A as a percentage of revenue, operating profit, operating margin and income (loss) before taxes on a Non-GAAP basis. We refer to these Non-GAAP financial measures as "Adjusted." We have provided a quantitative

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(U.S. dollars in millions, except per share data)

reconciliation of the difference between the Non-GAAP financial measures and the financial measures calculated and reported in accordance with GAAP. See "Reconciliation of Non-GAAP Financial Measures" within "Results of Operations" in this MD&A for this quantitative reconciliation.

The Company uses the Non-GAAP financial measures to evaluate its operating performance. These Non-GAAP measures should not be considered in isolation, or as a substitute for, or superior to, financial measures calculated in accordance with GAAP. The Company believes investors find the Non-GAAP information helpful in understanding the ongoing performance of operations separate from items that may have a disproportionate positive or negative impact on the Company's financial results in any particular period. The Company believes that it is meaningful for investors to be made aware of the impacts of 1) CTI restructuring ~~initiatives; 2) costs related to the Transaction; 3) costs associated with the early termination of debt; 4) certain Brazil indirect taxes.~~

~~(1)~~initiatives, which ~~CTI restructuring initiatives~~ includes the impact on the Consolidated Statements of Operations for all periods presented of net charges incurred on approved restructuring initiatives. See Note 11, Restructuring Initiatives, to the Consolidated Financial Statements contained herein for further information.

~~(2)~~For the nine months ended September 30, 2020, costs related to the Transaction of $86 primarily included professional fees incurred in relation to the Transaction of approximately $44, severance payments of approximately $25 and acceleration of share based compensation of approximately $10 relating to these terminations triggered by change in control provisions. Further information relating to the Transaction is included in Note 17, Merger with Natura, to the Consolidated Financial Statements included herein.

~~(3)During the first quarter of 2020,~~ ~~the Company incurred costs of $8 associated with the early termination of debt.~~

~~(4)~~Th~~e three and nine mont~~h periods ended September 30, 2021 include the impact of certain Brazil indirect taxes of approximately $12 and $24 respectively, which were recorded in product sales, SG&A, other income and interest income. The three and ~~nine~~ month periods ended September 30, 2020 include the impact of certain Brazil indirect taxes, which were recorded in selling, general and administrative expenses, net in the amounts of approximately $11.

Sale of Avon Luxembourg Holdings S.à r.l

On July 1, 2021, the Company sold Avon Luxembourg, including our Mexican business, to a subsidiary of Natura &Co Holding for $150, with the proceeds used to repay maturing loans of $150 borrowed under the $250 Revolving Credit Facility with a subsidiary of Natura &Co Holding. The sale was accounted for as a transaction under common control in accordance with ASC805 - Business Combinations, with the resulting gain of $148 representing the difference between the proceeds, the net assets of Avon Luxembourg on the date of sale, and the cumulative foreign currency translation adjustment, taken directly to Retained Earnings. For additional information, see the Consolidated Statements of Changes in Shareholders' Deficit.

$150. The sale did not qualify for accounting as a discontinued operation in accordance with ASC805 - Business Combinations on the basis that it did not represent a strategic shift having a major effect on the Company's operations and, as a ~~result,~~consequence, the results of operations in prior periods include the results of Avon Luxembourg Holdings S.à r.l. and its subsidiaries. While not a non-GAAP measure, in order to better evaluate the ongoing operating performance of the remaining group, the tables below also identify the prior period impacts of the sale of Avon Luxembourg Holdings S.à r.l. and its subsidiaries, including our Mexican business.

3728

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(U.S. dollars in millions, except per share data)


		Three Months Ended September 30,								Nine Months Ended September 30,									Three Months Ended March 31,
		2021			2020			%/Basis Point Change		2021			2020			%/Basis Point Change			2022			2021			%/Basis Point Change
Select Consolidated Financial Information	Select Consolidated Financial Information																	Select Consolidated Financial Information
Total revenue	Total revenue	$	768.3		$	998.0		(23)	%	$	2,589.7		$	2,561.8		1	%	Total revenue	$	663.3		$	904.4		(27)	%
Cost of sales	Cost of sales	(321.3)			(440.0)			(27)	%	(1,111.7)			(1,111.5)			—	%	Cost of sales	(287.4)			(398.3)			(28)	%
Cost of sales from affiliates of Natura &Co																		Cost of sales from affiliates of Natura &Co	(4.2)			(7.1)			(41)	%
Selling, general and administrative expenses	Selling, general and administrative expenses	(465.9)			(534.2)			(13)	%	(1,553.1)			(1,578.4)			(2)	%	Selling, general and administrative expenses	(433.9)			(536.1)			(19)	%
Operating (loss) income		(18.9)			23.8			*		(75.1)			(128.1)			(41)	%
Operating loss																		Operating loss	(62.2)			(37.1)			68	%
Interest expense	Interest expense	(37.3)			(37.4)			—	%	(87.3)			(100.9)			(13)	%	Interest expense	(13.0)			(14.9)			(13)	%
Loss on extinguishment of debt and credit facilities		—			(4.1)			*		—			(11.9)			*
Interest expense on Loans from affiliates of Natura &Co																		Interest expense on Loans from affiliates of Natura &Co	(15.3)			(8.7)			76	%

Interest income	Interest income	1.1			.1			*		1.2			1.6			(25)	%	Interest income	.9			.2			*
Interest income on Loans to affiliates of Natura &Co																		Interest income on Loans to affiliates of Natura &Co	.7			—			*
Other income (expense), net	Other income (expense), net	.7			(1.0)			*		4.3			(20.1)			*		Other income (expense), net	4.5			(1.3)			*
Gain on sale of business / assets		8.3			1.4			*		9.8			1.5			*

Loss from continuing operations, before income taxes	Loss from continuing operations, before income taxes	(46.1)			(17.2)			*		(147.1)			(257.9)			(43)	%	Loss from continuing operations, before income taxes	(84.4)			(61.8)			37	%
Loss from continuing operations, net of tax	Loss from continuing operations, net of tax	(35.7)			(29.0)			23	%	(162.6)			(284.6)			(43)	%	Loss from continuing operations, net of tax	(89.2)			(68.9)			29	%
Net loss attributable to Avon	Net loss attributable to Avon	$	(42.5)		$	(32.8)		30	%	$	(167.7)		$	(296.6)		(43)	%	Net loss attributable to Avon	$	(97.2)		$	(63.6)		53	%

Advertising expenses(1)	Advertising expenses(1)	$	(15.1)		$	(14.2)		6	%	$	(51.3)		$	(37.0)		39	%	Advertising expenses(1)	$	(20.1)		$	(17.6)		14	%

Reconciliation of Non-GAAP Financial Measures	Reconciliation of Non-GAAP Financial Measures																	Reconciliation of Non-GAAP Financial Measures
Total revenue	Total revenue	$	768.3		$	998.0		(23)	%	$	2,589.7		$	2,561.8		1	%	Total revenue	$	663.3		$	904.4		(27)	%
Certain Brazil taxes		(12.4)			—					(21.8)			—
Adjusted revenue		$	755.9		$	998.0		(24)	%	$	2,567.9		$	2,561.8		—	%

Avon Luxembourg	Avon Luxembourg	—			(115.3)					(249.2)			(311.6)					Avon Luxembourg	—			(121.2)			*
Adjusted revenue excluding Avon Luxembourg	Adjusted revenue excluding Avon Luxembourg	$	755.9		$	882.7		(14)	%	$	2,318.7		$	2,250.2		3	%	Adjusted revenue excluding Avon Luxembourg	$	663.3		$	783.2		(15)	%

Gross margin	Gross margin	58.2		%	55.9		%	230		57.1		%	56.6		%	50		Gross margin	56.0		%	55.2		%	80
CTI restructuring		—			—			—		—			—			—
Certain Brazil taxes		(.7)			(.1)			(60)		(.4)			—			(40)
Adjusted gross margin		57.5		%	55.8		%	170		56.7		%	56.6		%	10

Avon Luxembourg	Avon Luxembourg	—			.9		%	(90)		.6		%	.9		%	*		Avon Luxembourg	—			.7		%	(70)
Adjusted Gross Margin excluding Avon Luxembourg	Adjusted Gross Margin excluding Avon Luxembourg	57.5		%	56.7		%	80		57.3		%	57.5		%	(20)		Adjusted Gross Margin excluding Avon Luxembourg	56.0		%	55.9		%	10

Selling, general and administrative expenses as a % of total revenue	Selling, general and administrative expenses as a % of total revenue	60.6		%	53.5		%	710		60.0		%	61.6		%	(160)		Selling, general and administrative expenses as a % of total revenue	65.4		%	59.3		%	610
CTI restructuring	CTI restructuring	(1.4)			(1.3)			(10)		(2.3)			(.7)			(160)		CTI restructuring	(1.6)			(2.2)			60
Certain Brazil taxes		.8			—			80		.4			.4			—
Costs related to the Transaction		—			—			—		—			(3.4)			340

Adjusted selling, general and administrative expenses as a % of total revenue	Adjusted selling, general and administrative expenses as a % of total revenue	60.0		%	52.2		%	780		58.1		%	57.9		%	20		Adjusted selling, general and administrative expenses as a % of total revenue	63.8		%	57.1		%	670

Avon Luxembourg	Avon Luxembourg	—			1.4		%	(140)		1.7		%	1.9		%	*		Avon Luxembourg	—			2.4		%	(240)
Adjusted selling, general and administrative expenses as a % of total revenue excluding Avon Luxembourg	Adjusted selling, general and administrative expenses as a % of total revenue excluding Avon Luxembourg	60.0		%	53.6		%	640		59.8		%	59.8		%	—		Adjusted selling, general and administrative expenses as a % of total revenue excluding Avon Luxembourg	63.8		%	59.5		%	430

Operating loss	Operating loss	$	(18.9)		$	23.8		*		$	(75.1)		$	(128.1)		(41)	%	Operating loss	$	(62.2)		$	(37.1)		68	%
CTI restructuring	CTI restructuring	10.9			12.4					60.8			17.6					CTI restructuring	10.8			19.5

Adjusted operating income (loss)																		Adjusted operating income (loss)	$	(51.4)		$	(17.6)		*

Avon Luxembourg																		Avon Luxembourg	—			(10.5)			*
Adjusted operating loss excluding Avon Luxembourg																		Adjusted operating loss excluding Avon Luxembourg	$	(51.4)		$	(28.1)		*

Operating margin																		Operating margin	(9.4)		%	(4.1)		%	(530)
CTI restructuring																		CTI restructuring	1.6			2.2			(60)

Adjusted operating margin																		Adjusted operating margin	(7.8)		%	(1.9)		%	(590)

Sale of Avon Luxembourg																		Sale of Avon Luxembourg	—			(1.6)		%	160
Adjusted operating margin excluding Avon Luxembourg																		Adjusted operating margin excluding Avon Luxembourg	(7.8)		%	(3.5)		%	(430)

Change in Constant $ Adjusted operating margin(2)																		Change in Constant $ Adjusted operating margin(2)							(490)

Loss before taxes																		Loss before taxes	$	(84.4)		$	(61.8)		37	%

3829

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(U.S. dollars in millions, except per share data)

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 %/Basis Point
Change 2021 2020 %/Basis Point
Change
Certain Brazil taxes (10.7) — (20.1) (10.6)
Costs related to the Transaction — — — 85.8
Adjusted operating income (loss) $ (18.7) $ 36.2 * $ (34.4) $ (35.3) (3) %
Avon Luxembourg — (8.9) (21.3) (19.2)
Adjusted operating income (loss) excluding Avon Luxembourg $ (18.7) $ 27.3 * $ (55.7) $ (54.5) 2 %
Operating margin (2.5) % 2.4 % (490) (2.9) % (5.0) % 210
CTI restructuring 1.4 1.2 20 2.3 .7 160
Certain Brazil taxes (1.4) — (140) (.7) (.4) (30)
Costs related to the Transaction — — — — 3.3 (330)
Adjusted operating margin (2.5) % 3.6 % (610) (1.3) % (1.4) % 10
Sale of Avon Luxembourg — (.5) % 50 (1.1) % (1.0) % *
Adjusted operating margin excluding Avon Luxembourg (2.5) % 3.1 % (560) (2.4) % (2.4) % —
Change in Constant $ Adjusted operating margin(2)
(610) 10
Loss before taxes $ (46.1) $ (17.2) * $ (147.1) $ (257.9) (43) %
CTI restructuring 2.6 11.0 51.0 16.1
Certain Brazil taxes (12.0) — (23.9) (10.6)
Costs related to the Transaction — — — 85.8
Other items — 4.1 — 11.9
Adjusted loss before taxes $ (55.5) $ (2.1) * $ (120.0) $ (154.7) (22) %
Income taxes $ 10.4 $ (11.8) * $ (15.5) $ (26.7) (42) %
Effective tax rate 22.6 % (68.6) % (10.5) % (10.4) %
Performance Metrics
Change in Active Representatives (29) % (6) %
Change in units sold (34) % (9) %


	Three Months Ended March 31,
	2022			2021			%/Basis Point Change
CTI restructuring	10.8			19.5



Adjusted loss before taxes	$	(73.6)		$	(42.3)		74	%


Income taxes	$	(4.8)		$	(7.1)		(32)	%

Effective tax rate	(5.7)		%	(11.5)		%	*

Performance Metrics
Change in Active Representatives							(26)	%
Change in units sold							(13)	%

* Calculation not meaningful

Amounts in the table above may not necessarily sum due to rounding.

(1)Advertising expenses are recorded in SG&A.

(2)Change in Constant $ Adjusted operating margin for all periods presented is calculated using the current-year Constant $ rates.

Three Months Ended ~~September 30, 2021~~March 31, 2022

Revenue

During the three months ended ~~September 30, 2021,~~March 31, 2022, revenue decreased ~~23% compared to the prior-year period, favorably impacted by the recognition of certain Brazil indirect taxes in the current year. Excluding these items, Adjusted revenue decreased 24% favorably~~27%, unfavorably impacted by foreign exchange variations, primarily driven by the weakening of the U.S. dollar relative to the ~~South African rand, the British pound and the~~ Brazilian real, which was partially offset by the strengthening of the U.S. dollar relative to the Turkish lira, Russian ruble and the Argentinian peso.

On a Constant $ basis, Adjusted revenue decreased ~~25%~~22% driven by declines of ~~16%~~10% in Avon International and ~~34%~~33% in Avon Latin America, mostly ~~driven by changes in the severity~~as a result of ~~COVID-19 restrictions in some markets,~~(i) the sale of Avon Luxembourg on July 1, 2021, (ii) decreases in Active Representatives in most markets, (iii) the residual impact of changes in COVID-19 restrictions in multiple markets compared to the same period in the prior-year period and (iv) the impact of the ~~cyber incident in June 2020 which shifted~~ongoing war between Ukraine and Russia. During the three months ended March 31, 2022, revenues from Russia and Ukraine represented approximately ~~$87~~9% of

~~AVON PRODUCTS, INC.~~

~~MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(U.S. dollars in millions, except per share data)~~

total revenue, similar to the third quarter of 2020. Revenue and Constant $ Adjusted revenue was impacted by a decrease in Active Representatives of 29% in multiple markets and a 4% increase in Adjusted Average Representative Sales.9% for the three months ended March 31, 2021.

Constant $ Adjusted revenue excluding the impact of the sale of Avon Luxembourg decreased ~~15%~~10% as a 5% increase in Average Representative Sales ~~were~~was more than offset by a ~~20%~~15% decrease in Active Representatives.

Units sold decreased ~~34% (decreased 24%~~13% (remaining stable excluding the impact of the sale of Avon Luxembourg) driven by decreases in both Avon International and Avon Latin America.

See "Segment Review" in this MD&A for additional information related to changes in revenue by segment.

Operating Margin

Operating margin decreased by ~~490~~530 basis points including the impact of ~~increased~~lower restructuring expenses ~~and the receipt of certain Brazil taxes~~ during the three month period ended ~~September 30, 2021.~~March 31, 2022. Excluding these items, Adjusted operating margin decreased by ~~610~~590 basis points, compared to the same period of ~~2020,~~2021, as improvements in gross margin were offset by higher SG&A as a percentage of total revenue. The movements in operating margin and Adjusted operating margin are discussed further below in "Gross Margin" and "Selling, General and Administrative Expenses".

Gross Margin

Adjusted gross margin ~~decreased 170~~increased 80 basis points compared to the same period of ~~2020 as the positive impact of price/mix and~~2021 largely due to the favorable impact of foreign currency ~~movements more than offset higher supply chain costs.~~movements.

Selling, General and Administrative Expenses ("SG&A")

SG&A as a percentage of total revenue increased by ~~710~~610 basis points including the impact of increased restructuring expenses ~~and the receipt of certain Brazil taxes~~ during the three month period ended ~~September 30, 2021.~~March 31, 2022. Excluding these items, Adjusted SG&A as a percentage of Adjusted revenue increased ~~780~~670 basis points, compared to the same period of ~~2020.~~2021. The increase in Constant $ Adjusted SG&A as a

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(U.S. dollars in millions, except per share data)

percentage of Adjusted revenue was largely due to the impact of our lower revenue, which resulted in a deleveraging of our fixed expenses, as well as increases in ~~bad debts, sales leader and field investments and~~ advertising expenses.

Other Expenses

~~Interest~~Total interest income increased by approximately $1$2 and total interest expense ~~has remained relatively unchanged~~increased by approximately $4 driven by higher loans from affiliates compared to the prior-year period.

Other income (expense), net, of approximately $1$5 represents a favorable impact of $2$6 compared to the ~~third~~first quarter of ~~2020~~2021 primarily attributable to ~~the recognition of other income of $1 in 2021 relating to certain Brazil taxes.~~

~~Loss on extinguishment of debt and credit facilities of approximately $4 is primarily comprised of the costs of termination of our revolving credit facility~~higher foreign exchange gains in the ~~three month period ended September 30, 2020. Refer to Note 15, Debt, to the Consolidated Financial Statements included herein for more information relating to these extinguishments of debt.~~current period.

Effective Tax Rate

The effective tax rates in ~~2021~~2022 and ~~2020~~2021 continue to be impacted by our inability to recognize additional deferred tax assets in various jurisdictions related to our current-year operating results. In addition, the effective tax rates in ~~2021~~2022 and ~~2020~~2021 continue to be impacted by withholding taxes associated with certain intercompany payments, including royalties, service charges, interest and dividends, which in the aggregate are relatively consistent each year due to the need to repatriate funds to cover U.S. and U.K.-based costs, such as interest on debt and corporate overhead, respectively.

Our effective tax rates for the three months ended ~~September 30,~~March 31, 2022 and 2021 were (5.7)% and ~~2020 were 22.6% and (68.6)~~(11.5)%, respectively. The effective tax rates for the three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were impacted by CTI restructuring charges which could not all be benefited, country mix of earnings and withholding taxes. The effective tax rate in the ~~third~~first quarter of ~~2021~~2022 was ~~favorably~~unfavorably impacted by the ~~accrual of net income tax benefits of $8.9 associated with the release of reserves for uncertain tax positions of $10.4 offset by the net~~ recording of valuation allowances of ~~$1.5.~~$3.1 and other miscellaneous net tax expense of $5.0. The effective tax rate ~~for~~ in the ~~third~~first quarter of ~~2020~~2021 was ~~favorably~~unfavorably impacted by the accrual of net income tax benefits of $5.7 associated with the release of income tax reserves of $10.8 associated with our uncertain tax positions, net of recording a valuation allowance of $4.3 and other miscellaneous income tax expense of ~~$.8.~~approximately $2.4.

Our Adjusted effective tax rates for the three months ended ~~September 30,~~March 31, 2022 and 2021 were (7.8)% and ~~2020 were 27.5% and (580.9)~~(21.0)%, respectively. The Adjusted effective tax rates in ~~2021~~2022 and ~~2020~~2021 were impacted by country mix of earnings and withholding taxes. The Adjusted effective tax rate for the ~~third~~first quarter of 2022 was unfavorably impacted by the recording of valuation allowances of $3.1 and other miscellaneous net tax expense of $5.0. The effective tax rate in the first quarter of 2021 was ~~favorably~~unfavorably impacted by ~~the accrual of net income tax~~

~~AVON PRODUCTS, INC.~~

~~MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(U.S. dollars in millions, except per share data)~~

benefits of $12.8 associated with the release of reserves for uncertain tax positions of $10.4 and the release of valuation allowances of $2.4. The Adjusted effective tax rate for the third quarter of 2020 was favorably impacted by the accrual of net income tax benefits of $5.7 associated with the release of income tax reserves of $10.8 associated with our uncertain tax positions, net of recording a valuation allowance of $4.3 and other miscellaneous income tax expense of ~~$.8.~~approximately $2.4.

In prior years, we had previously recorded valuation allowances against certain deferred tax assets associated with the U.S. and various foreign jurisdictions. We intend to continue maintaining these valuation allowances on our deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change on the basis of the level of profitability that we are able to achieve. The Company continuously monitors its operational and capital structure changes, business performance, tax planning actions and tax planning strategies that could potentially allow for the recognition of deferred tax assets which are currently subject to a valuation allowance. There is the possibility that in the foreseeable future, certain deferred tax assets could be recognized, which may be material, related to changes in business operations and associated financing of such operations.

We monitor the realizability of our deferred tax assets on a continuous basis. Should macroeconomic and sociopolitical conditions change or our business operations do not improve, approximately $75 of deferred tax assets could potentially need to be offset with the recording of a valuation allowance during the next 12 months. The deferred tax assets are associated with Avon subsidiary operations that suffered a loss in earnings before tax during 2021.

See Note 16, Income Taxes, to the Consolidated Financial Statements included herein for more information on the effective tax rate, and Note 11, Restructuring Initiatives, to the Consolidated Financial Statements included herein for more information on CTI restructuring.

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(U.S. dollars in millions, except per share data)

Impact of Foreign Currency

As compared to the prior-year period, foreign currency has impacted our consolidated financial results in the form of:

•foreign currency transaction losses (classified within cost of sales and SG&A in our Consolidated Statements of Operations), which had an unfavorable impact to operating profit and Adjusted operating profit of less than $5, or less than 50 basis points to both operating margin and Adjusted operating margin;

•foreign currency translation, which had an unfavorable impact to operating profit and Adjusted operating profit of ~~less than $5, or less than 50 basis points on both operating margin and Adjusted operating margin; and~~

•foreign exchange net gains, on our working capital (classified within other income (expense), net in our Consolidated Statements of Operations) as compared to gains in the prior year, resulting in a unfavorable impact of approximately $10 before tax on both a reported and Adjusted basis.

~~Nine Months Ended September 30, 2021~~

~~Revenue~~

During the nine months ended September 30, 2021, revenue increased 1% with the impact of foreign exchange being broadly neutral as the weakening of the U.S. dollar relative to the South African rand, the British pound and the Mexican peso was offset by the strengthening of the U.S. dollar relative to the Russian ruble, the Turkish lira, the Brazilian real and the Argentinian peso.

On a Constant $ basis, Adjusted revenue was flat year on year driven by a 1% increase in Avon Latin America, mostly driven by changes in the severity of COVID-19 restrictions in some markets, and the sale of Avon Luxembourg on July 1, 2021, partly offset by a 3% decrease in Avon International. Revenue and Constant $ Adjusted revenue was impacted by a decrease in Active Representatives of 6% in multiple markets and a 6% increase in Average Representative Sales.

Constant $ Adjusted revenue excluding the impact of the sale of Avon Luxembourg increased by 4% as a 10% increase in Average Representative Sales were partly offset by an 6% decrease in Active Representatives.

~~AVON PRODUCTS, INC.~~

~~MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(U.S. dollars in millions, except per share data)~~

~~Units sold decreased 9% (decreased 4% excluding the impact of the sale of Avon Luxembourg) driven by decreases in both Avon International and Avon Latin America.~~

~~See "Segment Review" in this MD&A for additional information related to changes in revenue by segment.~~

~~Operating Margin~~

Operating margin increased by 210 basis points, significantly benefiting from costs related to the Natura transaction in the nine month period ended September 30, 2020 not repeating in the current year. This benefit was partially offset by increased restructuring expenses in the nine month period ended September 30, 2021. Excluding these items, Adjusted operating margin remained stable compared to the same period of 2020. The impact of foreign exchange on Adjusted operating margin was broadly neutral and Constant $ Adjusted Operating Margin improved slightly mostly driven by the increase in gross margin. The movements in operating margin and Adjusted operating margin are discussed further below in "Gross Margin" and "Selling, General and Administrative Expenses".

~~Gross Margin~~

Adjusted gross margin increased 10 basis points, compared to the same period of 2020 as the positive impact of price/mix more than offset unfavorable impact of foreign currency movements and higher supply chain costs.

~~Selling, General and Administrative Expenses ("SG&A")~~

SG&A as a percentage of total revenue decreased 160 basis points, significantly impacted by costs related to the Natura transaction in the nine month period ended September 30, 2021. This benefit was partially offset by increased restructuring expenses in the nine month period ended September 30, 2021. Excluding these items, Adjusted SG&A as a percentage of Adjusted revenue decreased 20 basis points, compared to the same period of 2020 as higher advertising costs were offset by lower sales leader and field investments and bad debts.

~~Other Expenses~~

~~Interest expense decreased by approximately $14 and interest income increased by approximately $1 compared to the prior-year period.~~

Loss on extinguishment of debt and credit facilities of approximately $12 is primarily comprised of the costs of termination of our revolving credit facility in the nine month period ended September 30, 2020. Refer to Note 15, Debt, to the Consolidated Financial Statements included herein for more information relating to these extinguishments of debt.

Other income (expense), net, of approximately $4 represents a favorable impact of $24 compared to the nine month period ended September 30, 2020 primarily attributable to the unfavorable impact of foreign exchange net losses in the nine month period ended September 30, 2020 which were not repeated in the nine month period ended September 30, 2021 and recognition of other income of $4 in 2021 relating to certain Brazil taxes.

~~Effective Tax Rate~~

The effective tax rates in 2021 and 2020 continue to be impacted by our inability to recognize additional deferred tax assets in various jurisdictions related to our current-year operating results. In addition, the effective tax rates in 2021 and 2020 continue to be impacted by withholding taxes associated with certain intercompany payments, including royalties, service charges, interest and dividends, which in the aggregate are relatively consistent each year due to the need to repatriate funds to cover U.S. and U.K. based costs, such as interest on debt and corporate overhead, respectively.

Our effective tax rates for the nine months ended September 30, 2021 and 2020 were (10.5)% and (10.4%), respectively. The effective tax rates for the nine months ended September 30, 2021 and 2020 were impacted by CTI restructuring charges which could not all be benefited, country mix of earnings and withholding taxes. The effective tax rate in the nine months ended September 30, 2021 was unfavorably impacted by the accrual of net tax expense of $.4 due to the net release of reserves for uncertain tax positions of $7.8, the net recording of valuation allowances of $7.5, and miscellaneous income tax expense of approximately $.7. The effective tax rate in the nine months ended September 30, 2020 was favorably impacted by the accrual of net income tax benefits of approximately $1.8 associated with the release of income tax reserves of approximately $11.2 associated with our uncertain tax positions, net of recording a valuation allowance of $4.3 and other miscellaneous income tax expense of approximately $5.1.

Our Adjusted effective tax rates for the nine months ended September 30, 2021 and 2020 were (8.1%) and (15.3%), respectively. The Adjusted effective tax rates in 2021 and 2020 were impacted by country mix of earnings and withholding taxes. The Adjusted effective tax rate in the nine months ended September 30, 2021 was favorably impacted by the accrual of income tax benefit of $3.5 due to the net release of reserves for uncertain tax positions of $7.8 offset by the net recording of

~~AVON PRODUCTS, INC.~~

~~MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(U.S. dollars in millions, except per share data)~~

valuation allowances of $3.6 and miscellaneous income tax expense of $.7. The Adjusted effective tax rate for the nine months ended September 30, 2020 was favorably impacted by the accrual of net income tax benefits of approximately $1.8 associated with the release of income tax reserves of $11.2 associated with our uncertain tax positions, net of recording a valuation allowance of $4.3 and other miscellaneous income tax expense of $5.1.

In prior years, we had previously recorded valuation allowances against certain deferred tax assets associated with the U.S. and various foreign jurisdictions. We intend to continue maintaining these valuation allowances on our deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change on the basis of the level of profitability that we are able to achieve. The Company continuously monitors its operational and capital structure changes, business performance, tax planning actions and tax planning strategies that could potentially allow for the recognition of deferred tax assets which are currently subject to a valuation allowance. There is the possibility that in the foreseeable future, certain deferred tax assets could be recognized, which may be material, related to changes in business operations and associated financing of such operations.

Further, the Company continuously assesses available positive and negative evidence to estimate whether sufficient future taxable income will be generated to utilize our existing deferred tax assets that are not subject to a valuation allowance. As of September 30, 2021, the global COVID-19 pandemic is a piece of negative evidence the Company must consider. As of September 30, 2021, the increase in negative evidence due to COVID-19 has not resulted in any changes to the Company’s conclusions regarding the realizability of existing deferred tax assets that are not subject to a valuation allowance. The Company will continue to monitor the evolution of the COVID-19 pandemic and other effects that could impact the conclusions regarding the realizability of its deferred tax assets. Potential negative evidence, including worsening of the economies in the markets we operate in and reduced profitability of our markets could give rise to a need for a valuation allowance to reduce our deferred tax assets in upcoming quarters.

~~Impact of Foreign Currency~~

~~As compared to the prior-year period, foreign currency has impacted our consolidated financial results in the form of:~~

•foreign currency transaction losses (classified within cost of sales and SG&A in our Consolidated Statements of Operations), which had an unfavorable impact to operating profit and Adjusted operating profit of approximately $25, or approximately 100 basis points to both operating margin and Adjusted operating margin;

•~~foreign currency translation, which had an unfavorable impact to operating profit and Adjusted operating profit of~~ approximately $5, or ~~less than 50~~approximately 100 basis points on both operating margin and Adjusted operating margin; and

•foreign exchange net gains, on our working capital (classified within other income (expense), net in our Consolidated Statements of Operations) as compared to gains in the prior year, resulting in a favorable impact of approximately ~~$10~~$5 before tax on both a reported and Adjusted basis.

Segment Review

We determine segment profit by deducting the related costs and expenses from segment revenue. Segment profit includes an allocation of central expenses to the extent they support the operating activity of the segment. Segment profit excludes certain CTI restructuring initiatives, certain significant asset impairment charges, and other expenses, which are not allocated to a particular segment, if applicable. This is consistent with the manner in which we assess our performance and allocate resources. See Note 9, Segment Information, to the Consolidated Financial Statements included herein for a reconciliation of segment profit to operating profit.

~~AVON PRODUCTS, INC.~~

~~MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(U.S. dollars in millions, except per share data)~~

Avon International


		Three Months Ended September 30,										Nine Months Ended September 30,											Three Months Ended March 31,
								%/Basis Point Change										%/Basis Point Change											%/Basis Point Change
		2021			2020			US$		Constant $		2021			2020			US$		Constant $			2022			2021			US$		Constant $
Total revenue	Total revenue	$	392.6		$	457.1		(14)	%	(16)	%	$	1,239.9		$	1,239.2		—	%	(3)	%	Total revenue	$	353.3		$	430.9		(18)	%	(10)	%
Segment profit		2.0			17.4			89	%	(77)	%	$	(4.4)		15.7			128	%	(96)	%
Segment loss																						Segment loss	(.9)			(7.0)			87	%	100	%

Segment margin	Segment margin	.5		%	3.8		%	(330)		(270)		(.4)		%	1.3		%	(170)		(100)		Segment margin	(.3)		%	(1.6)		%	130		200

Change in Active Representatives	Change in Active Representatives									(22)	%									(13)	%	Change in Active Representatives									(18)	%
Change in units sold	Change in units sold									(19)	%									(9)	%	Change in units sold									(16)	%

Amounts in the table above may not necessarily sum due to rounding.

Three Months Ended ~~September 30, 2021~~March 31, 2022

Total revenue decreased ~~14%~~18% compared to the prior-year period, including the ~~favorable~~unfavorable impact of foreign exchange which was primarily driven by the ~~weakening~~strengthening of the U.S. dollar relative to the ~~South African rand~~Turkish lira and the ~~British pound.~~Russian ruble. On a Constant $ basis, revenue decreased ~~16%~~10% driven by an increase in Average Representative Sales which was more than offset by a ~~22%~~18% decrease in Active ~~Representatives.~~

Representatives across most markets in Europe, Middle East & Africa and Asia Pacific. The decrease in Revenue and Constant $ revenue was ~~mostly driven by changes~~also due, in ~~COVID-19 restrictions in many markets compared~~part, to the ~~same period~~ongoing war between Ukraine and Russia which affected revenues in the prior year, with some markets remaining materially impacted by COVID-19 restrictions and yet to show signs of recovery. Revenue and Constant $ revenue growth were also negatively impacted by the cyber incident in June 2020 which shifted approximately $12 of revenue to the third quarter of 2020.

The contribution of Active Representatives and Average Representative Sales into Total revenue was also impacted by a reduction in the frequency of campaign cycles as part of our strategy to simplify our business, with all markets now on a monthly campaign cycle.this region.

Segment margin ~~decreased 330~~increased 130 basis points, or ~~270~~200 on a Constant $ basis, ~~mostly~~ driven by the combination of a slight decrease in the Constant $ Adjusted gross margin and higher SG&A as a percentage of total revenue.

Constant $ Adjusted gross margin ~~increased~~decreased slightly as the ~~positive~~favorable impact of price/mix was offset ~~the impact of~~by higher supply chain costs.

The increase in Constant $ Adjusted SG&A as a percentage of Adjusted revenue was largely due to the decline in our revenue which resulted in deleveraging of our fixed expenses.

~~Nine Months Ended September 30, 2021~~

Total revenue was relatively unchanged compared to the prior-year period, including the favorable impact of foreign exchange which was primarily driven by the weakening of the U.S. dollar relative to the South African rand and the British pound, partially offset by the strengthening of the U.S. dollar relative to the Russian ruble and the Turkish lira. On a Constant $ basis, revenue decreased 3% driven by an increase in Average Representative Sales which was more than offset by a 13% decrease in Active Representatives.

The decrease in Revenue and Constant $ revenue was mostly driven by changes in COVID-19 restrictions in many markets compared to the same period in the prior year, with some markets remaining materially impacted by COVID-19 restrictions and yet to show signs of recovery.

~~Segment margin decreased 170 basis points, or 100 basis points on a Constant $ basis, mostly driven by higher SG&A as a percentage of total revenue.~~

~~Constant $ Adjusted gross margin increased as the positive impact of price/mix offset the unfavorable impact of foreign currency movements and the impact of higher supply chain costs.~~

~~The increase in Constant $ Adjusted SG&A as a percentage of Adjusted revenue was largely due to the decline in our revenue which resulted in deleveraging of our fixed expenses.~~

4432

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(U.S. dollars in millions, except per share data)

Avon Latin America


		Three Months Ended September 30,										Nine Months Ended September 30,											Three Months Ended March 31,
								%/Basis Point Change										%/Basis Point Change											%/Basis Point Change
		2021			2020			US$		Constant $		2021			2020			US$		Constant $			2022			2021			US$		Constant $
Total revenue	Total revenue	$	369.2		$	540.0		(32)	%	(31)	%	$	1,326.9		$	1,319.9		1	%	3	%	Total revenue	$	306.3		$	465.8		(34)	%	(33)	%
Certain Brazil taxes		(12.4)			—			*		*		(21.8)			—			*		*
Adjusted revenue		356.8			540.0			(34)	%	(34)	%	1,305.1			1,319.9			(1)	%	1	%

Avon Luxembourg	Avon Luxembourg	—			(115.3)			*		*		(249.2)			(311.6)			*		*		Avon Luxembourg	—			(121.2)			*		*
Adjusted revenue excluding Avon Luxembourg	Adjusted revenue excluding Avon Luxembourg	356.8			424.7			(16)	%	(15)	%	1,055.9			1,008.3			5	%	10	%	Adjusted revenue excluding Avon Luxembourg	306.3			344.6			(11)	%	(10)	%

Segment profit (loss)		(4.1)			22.0			*		*		8.9			(46.0)			*		*
Certain Brazil taxes		(10.7)			—			*		*		(20.1)			(10.6)			90	%	84	%
Adjusted segment profit (loss)		(14.8)			22.0			*		*		(11.2)			(56.6)			(80)	%	(81)	%
Segment loss																						Segment loss	(44.6)			(4.6)			*		*

Avon Luxembourg	Avon Luxembourg	—			(8.9)			*		*		(21.4)			(19.3)			*		*		Avon Luxembourg	—			(10.5)			*		*
Adjusted segment profit (loss) excluding Avon Luxembourg	Adjusted segment profit (loss) excluding Avon Luxembourg	(14.8)			13.1			*		*		(32.6)			(75.9)			(57)	%	(56)	%	Adjusted segment profit (loss) excluding Avon Luxembourg	(44.6)			(15.1)			*		*

Segment margin	Segment margin	(1.1)		%	4.1		%	(520)		(550)		.7		%	(3.5)		%	420		370		Segment margin	(14.6)		%	(1.0)		%	(1,360)		(1,330)
Certain Brazil taxes		3.0		%	—		%	(300)		(320)		1.6		%	.8		%	(70)		(70)
Adjusted segment margin		(4.1)		%	4.1		%	(820)		(870)		(.9)		%	(4.3)		%	340		300

Avon Luxembourg	Avon Luxembourg	—		%	(1.0)		%	100		90		(2.2)		%	(3.2)		%	*		*		Avon Luxembourg	—		%	(3.4)		%	340		340
Adjusted segment margin excluding Avon Luxembourg	Adjusted segment margin excluding Avon Luxembourg	(4.1)		%	3.1		%	(720)		(780)		(3.1)		%	(7.5)		%	440		410		Adjusted segment margin excluding Avon Luxembourg	(14.6)		%	(4.4)		%	(1,020)		(990)

Change in Active Representatives	Change in Active Representatives									(33)	%									(1)	%	Change in Active Representatives									(31)	%
Change in units sold	Change in units sold									(42)	%									(9)	%	Change in units sold									(12)	%

*Calculation not meaningful

Amounts in the table above may not necessarily sum due to rounding.

Three Months Ended ~~September 30, 2021~~March 31, 2022

Total revenue and adjusted revenue decreased ~~32%~~34% compared to the prior-year period ~~favorably impacted by the recognition of certain Brazil indirect taxes in the current year. Excluding these items, Adjusted revenue decreased 34%~~ with the impact of foreign exchange being broadly neutral as the weakening of the U.S. dollar relative to the Brazilian real offset by the strengthening of the U.S. dollar relative to the Argentinian peso. On a Constant $ basis, Adjusted revenue decreased ~~34%~~33% which includes the impact from the sale of Avon Luxembourg, including our Mexican business, on July 1, 2021. Constant $ Adjusted revenue excluding the impact of the sale of Avon Luxembourg decreased ~~15%~~10% as ~~increased~~increases in Average Representative Sales were more than offset by an ~~18%~~14% decrease in Active Representatives.

Revenue decreased in most markets driven by decreases in Active Representatives and the ongoing impact of COVID-19 restrictions in many countries. ~~Revenue and Constant $ revenue growth were also negatively impacted by the cyber incident in June 2020 which shifted approximately $75 of revenue to the third quarter of 2020.~~

Revenue in Brazil decreased ~~23%~~14% compared to the prior year period, ~~despite the favorable impact coming of the recognition of certain Brazil indirect taxes in the current year. Excluding these items, Adjusted revenue decreased 28%~~ favorably impacted by foreign exchange. On an Adjusted Constant $ basis, revenue decreased ~~31%~~19% primarily driven by a decrease in Active Representatives, ~~due to the~~continued impact of ~~the cyber incident~~COVID-19 restrictions and changes in ~~June 2020 which shifted revenue to the third quarter of 2020.~~macro-economic conditions.

Segment margin decreased ~~520~~1,360 basis points, or ~~870~~1,330 basis points on a Constant $ Adjusted segment margin basis, ~~primarily driven by increases in SG&A.~~was largely due to the impact of revenue decline causing deleverage of our fixed expenses.

Constant $ Adjusted gross margin increased slightly as ~~the positive impact of price/mix and~~ the favorable impact of foreign currency movements offset the impact of higher supply chain costs.

~~AVON PRODUCTS, INC.~~

~~MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(U.S. dollars in millions, except per share data)~~

The increase in Constant $ Adjusted SG&A as a percentage of Adjusted revenue was largely due to the impact of revenue decline, causing a deleveraging of our fixed expenses, as well as increases in bad debts ~~sales leader and field investments~~ and advertising expenses, primarily in Brazil.

~~Nine Months Ended September 30, 2021~~

Total revenue increased 1% compared to the prior-year period, favorably impacted by the recognition of certain Brazil indirect taxes in the current year. Excluding these items, Adjusted revenue decreased 1% unfavorably impacted by foreign exchange, which was driven by the strengthening of the U.S. dollar relative to the Brazilian real and the Argentinian peso, partially offset by the weakening of the U.S. dollar relative to the Mexican peso. On a Constant $ basis, Adjusted revenue increased 1% which includes the impact from the sale of Avon Luxembourg, including our Mexican business, on July 1, 2021. Constant $ Adjusted revenue excluding the impact of the sale of Avon Luxembourg increased 10% primarily driven by an increase in Average Representative Sales.

Revenue in Brazil decreased 8% compared to the prior year period, despite the favorable impact coming of the recognition of certain Brazil indirect taxes in the current year. Excluding these items, Adjusted revenue decreased 12% unfavorably impacted by foreign exchange. On an Adjusted Constant $ basis, revenue decreased 8% primarily driven by decrease in Active Representatives.

~~Segment margin increased 420 basis points, or 300 basis points on a Constant $ Adjusted segment margin basis, primarily driven by decreases in SG&A.~~

~~Constant $ Adjusted gross margin decreased slightly as the positive impact of price/mix and the favorable impact of foreign currency movements were offset by the impact of higher supply chain costs.~~

~~The decrease in Constant $ Adjusted SG&A as a percentage of Adjusted revenue was driven by lower bad debt and lower sales leader and field investments, primarily in Brazil.~~

4633

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(U.S. dollars in millions, except per share data)

LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of funds historically have been cash flows from operations, public offerings of notes, bank financings, issuance of commercial paper, borrowings under lines of credit and private placement of notes. Furthermore, since January 3, 2020, we are part of the Natura &Co ~~grou~~pgroup of companies which gives us access to intercompany funding. See Note 15, Debt for information on our debt, including the loans from Natura &Co and its affiliates maturing within 1 year.

The Company has cash on hand of approximately ~~$225~~$209 as of ~~September 30, 2021.~~March 31, 2022.

COVID-19, ~~pandemic~~Russia-Ukraine war and going concern

Considering the uncertain nature of any possible future COVID-19 impacts which are beyond the ~~Company's~~Company’s control and the ongoing war between Russia and Ukraine, we ~~might~~ expect some negative impact on revenue ~~from COVID-19 to continue for the remainder of 2021,~~in 2022, which will, in turn, result in lower cash generation from activities. If the downturn is deeper or for longer than we anticipate, the Company could take certain further actions to ease the pressure of certain cash outflows, such as reducing discretionary expenditure, selling non-core assets, accessing government pandemic initiatives or arranging borrowing facilities with third-party banks and affiliate companies. Our projections indicate that we should have sufficient liquidity to meet our obligations to parties other than Natura &Co and its affiliates for a period of not less than 12 months from the issuance date of the Consolidated Financial Statements contained herein.

The Company has received an irrevocable commitment from Natura &Co Holding that it will provide sufficient financial support if and when needed to enable the Company to meet its ~~operating and financing~~ obligations as they come due in the normal course of business for a period of not less than 12 months from the date issuance of the Consolidated Financial Statements. This ~~support also~~ includes the ~~loan originally issued by a subsidiary~~obligations related to the $462 5.00% Notes, which are due to be repaid in March 2023, and the amount of $209 outstanding under the Natura &Co ~~Holding~~Loan due to ~~a subsidiary of the Company of $960, part of which was~~be repaid in ~~July 2021 with the proceeds from a loan maturing in 2028, with the balance now due on~~ November 2, 2022. As a result, the outstanding loan balances due to subsidiaries of Natura &Co Holding on September 30, 2021 stood at $149 maturing within one year, $206 maturing in November 2022 and $767 maturing in 2028.

~~Oth~~erOther liquidity matters

We may seek to retire our outstanding debt in open market purchases, through existing call mechanisms, privately negotiated transactions, through derivative instruments, cash tender offers or otherwise. Repurchases of debt may be funded by cash or the incurrence of additional debt and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors, and the amounts involved may be material. We may also elect to incur additional debt to finance ongoing operations or to meet our other liquidity needs. However, our credit ratings remain below investment grade which may impact our ability to access such transactions on favorable terms, if at all. For more information, see ~~"Risk~~"Item 1A. Risk Factors - Risks Related to Financial Matters - Our credit ratings are below investment grade, which could limit our access to financing, affect the market price of our financing and increase financing costs. A downgrade in our credit ratings may adversely affect our access to liquidity," and "Risk Factors - Our indebtedness and any future inability to meet any of our obligations under our indebtedness, could adversely affect us by reducing our flexibility to respond to changing business and economic conditions" and "RiskGeneral Risk Factors - A general economic downturn, a recession globally or in one or more of our geographic regions or markets or sudden disruption in business conditions or other challenges may adversely affect our business, our access to liquidity and capital, and our credit ratings" included in Item 1A of our ~~2020~~2021 Annual Report.

Our liquidity could also be negatively impacted by restructuring initiatives, dividends, capital expenditures, acquisitions, and certain contingencies, including any legal or regulatory settlements, described more fully in Note 7, Contingencies, to the Consolidated Financial Statements included herein. See our Cautionary Statement for purposes of the "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995 contained in this report.

Off balance sheet arrangements

At March 31, 2022, the Company has issued a number of guarantees totaling $201 that it could be required to make in the event of adverse judgments in a number of lawsuits in Brazil. See Note 7, Contingencies, to the Consolidated Financial Statements included herein for more information. The company has no other material off balance sheet arrangements at March 31, 2022.

Cash Flows

Net Cash Used by Operating Activities of Continuing Operations

Net cash used by operating activities of continuing operations during the first ~~nine~~three months of ~~2021~~2022 was approximately ~~$298~~$168 as compared to net cash used by operating activities of continuing operations of approximately ~~$307~~$169 during the first ~~nine~~three months of ~~2020,~~2021, a decreased cash outflow of approximately ~~$9. The decrease~~$1. This was primarily driven by movements in working capital, partially offset by increased losses in the first three months of 2021.

Net Cash Used by Investing Activities of Continuing Operations

Net cash used by continuing investing activities during the first three months of 2022 was approximately $11, as compared to net cash used by ~~operating~~continuing investing activities ~~was primarily due to one-time transaction costs in~~of approximately $13 during the first ~~quarter~~three months of 2020, related to the acquisition by Natura &Co Holding. Cash outflows related to the Transaction included professional fees, senior officer severance and other expenses. Further information relating to the Transaction is included in Note 17, Merger with Natura Cosméticos S.A., to the Consolidated Financial Statements included herein.2021. The approximate $2

4734

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(U.S. dollars in millions, except per share data)

~~Net Cash Used by Investing Activities of Continuing Operations~~

Net cash used by continuing investing activities during the first nine months of 2021 was approximately $32, as compared to net cash used by continuing investing activities of approximately $17 during the first nine months of 2020. The approximate $15 increasedecrease to net cash used by continuing investing activities was primarily driven by ~~an increase in capital expenditure~~higher proceeds from the disposal of assets in the first ~~nine~~three months of ~~2021~~2022 compared to the first ~~nine~~three months of 2020. In contrast, in the nine month period ended, September 30, 2021, net proceeds of $15 were received from the sale of the Spanish Distribution Center. In the nine month period ended, September 30, 2020, net proceeds of $10 were received from the sale of the Hungary Distribution Center in Gödöllő and deposits received for the sale of the China Wellness Plant.2021.

Net Cash Provided by Financing Activities of Continuing Operations

Net cash provided by continuing financing activities during the first ~~nine~~three months of ~~2021~~2022 was approximately ~~$206,~~$139, as compared to cash provided by continuing financing activities of ~~$26~~$67 in the first ~~nine~~three months of ~~2020.~~2021. The approximate ~~$180~~$72 increase to net cash from financing activities was primarily driven by ~~debt~~ proceeds ~~and repayment~~ of short term debt ~~from affiliates of Natura &Co~~ during the first ~~nine~~three months of ~~2021 and the settlement of stock options in the prior year period.~~2022.

4835

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(U.S. dollars in millions, except per share data)

FINANCIAL INSTRUMENTS AND RISK MANAGEMENT STRATEGIES

Interest Rate Risk

Approximately 7%13% of our debt portfolio, our short-term debt, is exposed to floating interest rates. Our long-term borrowings are all at fixed rates of interest.

Foreign Currency Risk

We conduct business globally, with operations in various locations around the world. Since 2016, all of our consolidated revenue has been derived from operations of subsidiaries outside of the U.S. The functional currency for most of our foreign operations is their local currency. We may reduce our exposure to fluctuations in cash flows associated with changes in foreign exchange rates by creating offsetting positions, including through the use of derivative financial instruments.

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Statements in this report (or in the documents it incorporates by reference) that are not historical facts or information may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "estimate," "project," "forecast," "plan," "believe," "may," "expect," "anticipate," "intend," "planned," "potential," "can," "expectation," "could," "will," "would" and similar expressions, or the negative of those expressions, may identify forward-looking statements. They include, among other things, statements regarding our anticipated or expected results, future financial performance, various strategies and initiatives (including our Open Up & Grow and Avon Integration plans, stabilization strategies, digital strategies, cost savings initiatives, restructuring and other initiatives and related actions), costs and cost savings, competitive advantages, impairments, the impact of foreign currency, including devaluations, and other laws and regulations, government investigations, results of litigation, contingencies, taxes and tax rates, potential alliances or divestitures, liquidity, cash flow, uses of cash and financing, hedging and risk management strategies, pension, postretirement and incentive compensation plans, supply chain, the legal status of the Representatives, and the anticipated impact of the evolving COVID-19 pandemic and related responses from governments and private sector participants on the Company, its supply chain, third-party suppliers, project development timelines, costs, revenue, margins, liquidity and financial condition, the anticipated timing, speed and magnitude of recovery from these COVID-19 pandemic related impacts and the Company’s planned actions and responses to this pandemic. Such forward-looking statements are based on management's reasonable current assumptions, expectations, plans and forecasts regarding the Company's current or future results and future business and economic conditions more generally. Such forward-looking statements involve risks, uncertainties and other factors, which may cause the actual results, levels of activity, performance or achievement of Avon to be materially different from any future results expressed or implied by such forward-looking statements, and there can be no assurance that actual results will not differ materially from management's expectations. Therefore, you should not rely on any of these forward-looking statements as predictors of future events. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:

•the COVID-19 pandemic is adversely affecting, and is expected to continue to adversely affect, our operations, manufacturing, supply chains and distribution systems. There is uncertainty around the duration and breadth of the COVID-19 pandemic and the effectiveness of responses to ~~it.~~it, including as a result of the emergence of new variants, the rollout of vaccination campaigns and uncertainty as to whether existing vaccines and treatments will be effective against these new variants. As a result, we cannot reasonably estimate at this time the continued impact, that COVID-19 may have on our business or operations. The extent to which COVID-19 impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact including on financial markets or otherwise. See also "Item 1A. Risk Factors—The COVID-19 pandemic is adversely affecting, and is expected to continue to adversely affect, our operations, manufacturing, supply chains and distribution systems, and we have experienced and expect to continue to experience unpredictable negative effects associated with the pandemic" included in Item 1A of our ~~2020~~2021 Annual ~~Report.~~Report;

•general economic and business conditions in our markets, including social, economic and political uncertainties, such as the ongoing war between Ukraine and Russia or elsewhere, and any existing and potential sanctions, restrictions or responses to such conditions imposed by other markets in which we operate. See also “Item 1A. Risk Factors—Risks Related to Our International Operations— Our ability to conduct business in our international markets may be affected by economic, political, legal, tax and regulatory risks” and “Item 1A. Risk Factors—Risks Related to Our International Operations—The ongoing war between Ukraine and Russia may have a material adverse effect on our business, financial condition and results of operations” included in Item 1A of our 2021 Annual Report;

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(U.S. dollars in millions, except per share data)

•our ability to improve our financial and operational performance and execute fully our global business strategy, including our ability to implement the key initiatives of, and/or realize the projected benefits (in the amounts and time schedules we expect) from Open Up & Grow and Avon Integration plans, stabilization strategies, cost savings initiatives, restructuring and other initiatives, product mix and pricing strategies, enterprise resource planning, customer service initiatives, sales and operation planning process, outsourcing strategies, digital strategies, Internet platform and technology strategies including e-commerce, marketing and advertising strategies, information technology and related system enhancements and cash management, tax, foreign currency hedging and risk management strategies, and any plans to invest these projected benefits ahead of future growth;

~~AVON PRODUCTS, INC.~~

~~MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(U.S. dollars in millions, except per share data)~~

•our broad-based geographic portfolio, which is heavily weighted towards emerging markets, a general economic downturn, a recession globally or in one or more of our geographic regions or markets, such as Brazil, Mexico or Russia, or sudden disruption in business conditions, and the ability to withstand an economic downturn, recession, cost inflation, commodity cost pressures, economic or political instability (including fluctuations in foreign exchange rates), competitive or other market pressures or conditions;

•the effect of economic factors, including inflation and fluctuations in interest rates and foreign currency exchange rates; as well as the designation of Argentina as a highly inflationary economy, and the potential effect of such factors on our business, results of operations and financial condition;

•the possibility of business disruption in connection with our Open Up & Grow and Avon Integration plans, stabilization strategies, cost savings initiatives, or restructuring and other initiatives;

•our ability to reverse declining revenue, to improve margins and net income, or to achieve profitable growth, particularly in our largest markets and developing and emerging markets, such as Brazil, Mexico, Russia and the United Kingdom;

•our ability to improve working capital and effectively manage doubtful accounts and inventory and implement initiatives to reduce inventory levels, and the potential impact on cash flows and obsolescence;

•our ability to reverse declines in Active Representatives, to enhance our sales leadership programs, to generate Representative activity, to increase the number of consumers served per Representative and their engagement online, to enhance branding and the Representative and consumer experience and increase Representative productivity through field activation and segmentation programs and technology tools and enablers, to invest in the direct-selling channel, to offer a more social selling experience, and to compete with other direct-selling organizations to recruit, retain and service Representatives and to continue to innovate the direct-selling model;

•general economic and business conditions in our markets, including social, economic and political uncertainties, such as in Russia and Ukraine or elsewhere, and any potential sanctions, restrictions or responses to such conditions imposed by other markets in which we operate;

•the effect of economic, political, legal, tax, including changes in tax rates, and other regulatory risks imposed on us abroad and in the U.S., our operations or the Representatives, including foreign exchange, pricing, environmental rules and regulations in areas related to our activities, including with regard to climate change, data privacy or other restrictions, the adoption, interpretation and enforcement of foreign laws, including in jurisdictions such as Brazil and Russia, and any changes thereto, as well as reviews and investigations by government regulators that have occurred or may occur from time to time, including, for example, local regulatory scrutiny;

•competitive uncertainties in our markets, including competition from companies in the consumer packaged goods industry, some of which are larger than we are and have greater resources;

•the impact of the adverse effect of volatile energy, commodity and raw material prices, changes in market trends, purchasing habits of our consumers and changes in consumer preferences, particularly given the global nature of our business and the conduct of our business in primarily one channel;

•our ability to attract and retain key personnel;

•disruptions to our manufacturing operations, supply chains and distribution systems;

•other sudden disruption in business operations beyond our control as a result of events such as acts of terrorism or war, natural disasters, pandemic situations, large-scale power outages and similar events;

•key information technology systems, process or site outages and disruptions, and any cybersecurity breaches, including any security breach of our systems or those of a third-party provider that results in the theft, transfer or unauthorized disclosure of Representative, customer, employee or Company information or compliance with information security and privacy laws and regulations in the event of such an incident which could disrupt business operations, result in the loss of critical and confidential information, and adversely impact our reputation and results of operations, and related costs to address such malicious intentional acts and to implement adequate preventative measures against cybersecurity ~~breaches. This includes the cyber incident which occurred~~breaches;

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(U.S. dollars in ~~the second quarter of 2020, see Note 1, Accounting Policies, to the Consolidated Financial Statements included herein and Item 4, Controls and Procedures;~~millions, except per share data)

•our ability to comply with various data privacy laws affecting the markets in which we do business;

•the risk of product or ingredient shortages resulting from our concentration of sourcing in fewer suppliers;

~~AVON PRODUCTS, INC.~~

~~MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(U.S. dollars in millions, except per share data)~~

•any changes to our credit ratings and the impact of such changes on our financing costs, rates, terms, debt service obligations, access to lending sources and working capital needs;

•the impact of our indebtedness, our access to cash and financing, and our ability to secure financing or financing at attractive rates and terms and conditions;

•our ability to successfully identify new business opportunities, strategic alliances and strategic alternatives and identify and analyze alliance candidates, secure financing on favorable terms and negotiate and consummate alliances;

•disruption in our supply chain or manufacturing and distribution operations;

•the quality, safety and efficacy of our products;

•the success of our research and development activities;

•our ability to protect our intellectual property rights, including in connection with the separation of the North America business;

•the risk of an adverse outcome in any material pending and future litigation or with respect to the legal status of Representatives; and,

•other risks and uncertainties include the possibility that the expected synergies and value creation from the Transaction (as defined in “Item 2 Management’s Discussion ~~And~~and Analysis Ofof Financial Condition ~~And~~and Results Ofof Operations—~~Overview—Transaction with Natura Cosméticos S.A.”~~Overview”) will not be realized or will not be realized within the expected time period; the risk that the businesses of the Company and Natura &Co Holding will not be integrated successfully; disruption from the Transaction making it more difficult to maintain business and operational relationships; the possibility that the intended accounting and tax treatments of the Transaction are not achieved; the effect of the consummation of the Transaction on customers, employees, representatives, suppliers and partners and operating results; as well as more specific risks and uncertainties.

Additional information identifying such factors is contained in Item 1A of our ~~2020~~2021 Form 10-K for the year ended December 31, ~~2020,~~2021, and in Item 1A of this 10-Q. We undertake no obligation to update any such forward-looking statements.

5138

AVON PRODUCTS, INC.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in market risk from the information provided in Item 7A, Quantitative and Qualitative Disclosures About Market Risk, of our ~~2020~~2021 Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, our principal executive and principal financial officers carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 of the Exchange Act. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply its judgment in evaluating and implementing possible controls and procedures. Based upon their evaluation, the principal executive and principal financial officers concluded that our disclosure controls and procedures were effective as of ~~September 30, 2021,~~March 31, 2022, at the reasonable assurance level. Disclosure controls and procedures are designed to ensure that information relating to Avon (including our consolidated subsidiaries) required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the United States Securities and Exchange Commission’s rules and forms and to ensure that information required to be disclosed is accumulated and communicated to management to allow timely decisions regarding disclosure.

Changes in Internal Control over Financial Reporting

Our management has evaluated, with the participation of our principal executive and principal financial officers, whether any changes in our internal control over financial reporting that occurred during the quarter ended ~~September 30, 2021~~March 31, 2022 have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on the evaluation we conducted, our management has concluded that no such changes have occurred.

5239

AVON PRODUCTS, INC.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 7, Contingencies, to the Consolidated Financial Statements included herein.

ITEM 1A. RISK FACTORS

For a discussion of the risk factors affecting the Company, see "Risk Factors" in Item 1A of our ~~2020~~2021 Annual Report.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

5340

AVON PRODUCTS, INC.

ITEM 6. EXHIBITS



~~2.1~~			~~Share Sale and Purchase~~ ~~Agreement, dated as of~~ ~~July 1, 20~~21 ~~, among~~ ~~Avon Cosmetics Limited and~~ ~~Natura~~ ~~&Co UK Holdings P.L.C., in the presence of Avon Luxembourg Holdings S.À R.L.~~

31.1			Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2			Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1			Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, As adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2			Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, As adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101			The following materials formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Statements of Operations, (ii) Consolidated Statements of Comprehensive ~~Loss,~~Income (Loss), (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements

5441

AVON PRODUCTS, INC.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		AVON PRODUCTS, INC.
		(Registrant)

Date:	~~November 12, 2021~~May 6, 2022	/s/ Samantha Hutchison
		Samantha Hutchison
		Controller - Principal Accounting Officer

		Signed both on behalf of the
		registrant and as chief
		accounting officer.

5542


	Nine Months Ended
(In millions)	September 30, 2021		September 30, 2020
Product sales	$	2,443.9	$	2,423.0
Other revenue	122.9		136.1
Revenue from affiliates of Natura &Co	22.9		2.7
Total revenue	2,589.7		2,561.8
Costs, expenses and other:
Cost of sales	(1,111.7)		(1,111.5)
Selling, general and administrative expenses	(1,553.1)		(1,578.4)

Operating loss	(75.1)		(128.1)

Interest expense	(87.3)		(100.9)
Loss on extinguishment of debt and credit facilities	—		(11.9)
Interest income	1.2		1.6
Other income (expense), net	4.3		(20.1)
Gain on sale of business/assets	9.8		1.5
Total other expenses	(72.0)		(129.8)

Loss from continuing operations, before income taxes	(147.1)		(257.9)
Income taxes	(15.5)		(26.7)
Loss from continuing operations, net of tax	(162.6)		(284.6)
Loss from discontinued operations, net of tax	(6.5)		(14.3)
Net loss	(169.1)		(298.9)
Net loss attributable to noncontrolling interests	1.4		2.3
Net loss attributable to Avon	$	(167.7)	$	(296.6)


(In millions)	September 30, 2021		December 31, 2020
Assets
Current Assets
Cash and cash equivalents	$	225.3	$	364.9
Restricted cash	—		7.8
Accounts receivable, net	210.0		259.1
Receivables from affiliates of Natura &Co	22.7		6.1
Loans to affiliates of Natura &Co	44.9		—
Inventories	424.5		459.1
Prepaid expenses and other	162.9		204.2
Assets held for sale	4.6		13.9

Total current assets	1,094.9		1,315.1
Property, plant and equipment, at cost	950.3		1,148.5
Less accumulated depreciation	(587.7)		(709.9)
Property, plant and equipment, net	362.6		438.6
Right-of-use assets	112.1		153.1
Goodwill	75.2		83.2
Deferred tax asset	118.6		135.8
Loans to affiliates of Natura &Co	51.1		—
Other assets	459.8		438.5

Total assets	$	2,274.3	$	2,564.3
Liabilities and Shareholders’ Deficit
Current Liabilities
Debt maturing within one year	$	35.5	$	28.0
Loans from affiliates of Natura &Co	148.7		1,008.6
Accounts payable	486.2		709.4
Payables to affiliates of Natura &Co	27.4		—

Accrued compensation	91.4		89.4
Other accrued liabilities	262.1		334.7
Sales taxes and taxes other than income	74.0		89.9
Income taxes	8.4		5.4
Current liabilities of discontinued operations	26.1		27.1
Liabilities held for sale	—		2.3
Total current liabilities	1,159.8		2,294.8
Long-term debt	675.8		675.4
Loans from affiliates of Natura &Co	972.8		—
Long-term operating lease liability	88.1		120.9
Employee benefit plans	107.0		133.3
Long-term income taxes	85.5		101.1
Other liabilities	83.8		106.0
Total liabilities	3,172.8		3,431.5

Shareholders’ Deficit
Common stock	—		—
Additional paid-in capital	632.1		622.8
Retained losses	(379.8)		(360.5)
Accumulated other comprehensive loss	(1,153.5)		(1,133.8)

Total Avon shareholders’ deficit	(901.2)		(871.5)
Noncontrolling interests	2.7		4.3
Total shareholders’ deficit	(898.5)		(867.2)
Total liabilities and shareholders’ deficit	$	2,274.3	$	2,564.3


	Nine Months Ended September 30, 2021
	Avon International		Avon Latin America		Total reportable segments		Affiliates of Natura&Co		Total
Beauty:
Skincare	$	426.5	$	370.6	$	797.1	$	—	$	797.1
Fragrance	352.7		293.3		646.0		—		646.0
Color	175.1		145.0		320.1		—		320.1
Total Beauty	954.3		808.9		1,763.2		—		1,763.2
Fashion & Home:
Fashion	188.7		133.3		322.0		—		322.0
Home	46.7		290.2		336.9		—		336.9
Total Fashion & Home	235.4		423.5		658.9		—		658.9
Certain Brazil indirect taxes*	—		21.8		21.8		—		21.8
Product sales	1,189.7		1,254.2		2,443.9		—		2,443.9
Representative fees	50.1		72.3		122.4		—		122.4
Other	.1		.4		.5		22.9		23.4
Other revenue	50.2		72.7		122.9		22.9		145.8
Total revenue	$	1,239.9	$	1,326.9	$	2,566.8	$	22.9	$	2,589.7


	Nine Months Ended September 30, 2020
	Avon International		Avon Latin America		Total reportable segments		Affiliates of Natura&Co		Total
Beauty:
Skincare	$	429.3	$	398.6	$	827.9	$	—	$	827.9
Fragrance	348.2		299.4		$	647.6	—		647.6
Color	194.9		154.5		$	349.4	—		349.4
Total Beauty	972.4		852.5		1,824.9		—		1,824.9
Fashion & Home:
Fashion	178.8		124.9		$	303.7	—		303.7
Home	34.8		259.6		$	294.4	—		294.4
Total Fashion & Home	213.6		384.5		598.1		—		598.1
Product sales	1,186.0		1,237.0		2,423.0		—		2,423.0
Representative fees	48.0		78.4		$	126.4	—		126.4
Other	5.2		4.5		$	9.7	2.7		12.4
Other revenue	53.2		82.9		136.1		2.7		138.8
Total revenue	$	1,239.2	$	1,319.9	$	2,559.1	$	2.7	$	2,561.8