

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



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

Building 6, Chiswick Park, London W4 5HR

United Kingdom

(Address of principal executive offices)

+~~44-1604-232425~~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 x☒ No ¨☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ 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 ~~and post~~ such files). Yes x☒ 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

x☐

Accelerated filer

¨☐

Non-accelerated filer

¨ ~~(do not check if a smaller reporting company)~~

☒

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 x☒

The number of shares of Common Stock (par value ~~$0.25~~)$0.01) outstanding at September 30, ~~2017~~2020 was ~~439,997,691.~~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.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AVON PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended
(In millions, except per share data) September 30, 2017 September 30, 2016
Net sales $ 1,378.2
$ 1,367.5
Other revenue 39.6
41.3
Total revenue 1,417.8
1,408.8
Costs, expenses and other:
Cost of sales 550.0
550.9
Selling, general and administrative expenses 784.8
745.9
Operating profit 83.0
112.0
Interest expense 34.8
34.4
Gain on extinguishment of debt —
(3.9 )
Interest income (3.4 ) (3.5 )
Other expense, net 3.6
10.4
Total other expenses 35.0
37.4
Income before taxes 48.0
74.6
Income taxes (36.1 ) (38.3 )
Income from continuing operations, net of tax 11.9
36.3
Loss from discontinued operations, net of tax —
(0.7 )
Net income 11.9
35.6
Net loss attributable to noncontrolling interests 0.6
0.4
Net income attributable to Avon $ 12.5
$ 36.0
Earnings per share:
Basic from continuing operations $ 0.01
$ 0.07
Basic from discontinued operations —
—
Basic attributable to Avon 0.01
0.07
Diluted from continuing operations $ 0.01
$ 0.07
Diluted from discontinued operations —
—
Diluted attributable to Avon 0.01
0.07


	Three Months Ended
(In millions)	September 30, 2020		September 30, 2019
Product sales	$	950.1	$	1,117.2
Other revenue	47.0		70.8
Revenue from affiliates of Natura &Co	.9		0
Total revenue	998.0		1,188.0
Costs, expenses and other:
Cost of sales	(440.0)		(468.2)
Selling, general and administrative expenses	(534.2)		(622.1)

Operating income	23.8		97.7

Interest expense	(37.4)		(32.0)
Loss on extinguishment of debt and credit facilities	(4.1)		(8.1)
Interest income	.1		2.1
Other (expense) income, net	(1.0)		57.9
Gain on sale of business/assets	1.4		26.8
Total other (expenses) income	(41.0)		46.7

(Loss) income from continuing operations, before income taxes	(17.2)		144.4
Income taxes	(11.8)		(31.5)
(Loss) income from continuing operations, net of tax	(29.0)		112.9
Loss from discontinued operations, net of tax	(4.5)		(6.3)
Net (loss) income	(33.5)		106.6
Net loss attributable to noncontrolling interests	.7		.3
Net (loss) income attributable to Avon	$	(32.8)	$	106.9

The accompanying notes are an integral part of these statements.

AVON PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Nine Months Ended
(In millions, except per share data) September 30, 2017 September 30, 2016
Net sales $ 4,029.8
$ 4,047.0
Other revenue 117.0
102.6
Total revenue 4,146.8
4,149.6
Costs, expenses and other:
Cost of sales 1,592.1
1,634.7
Selling, general and administrative expenses 2,411.4
2,300.0
Operating profit 143.3
214.9
Interest expense 106.0
100.3
Gain on extinguishment of debt —
(3.9 )
Interest income (11.2 ) (12.8 )
Other expense, net 19.4
142.9
Total other expenses 114.2
226.5
Income (loss) before taxes 29.1
(11.6 )
Income taxes (99.5 ) (72.1 )
Loss from continuing operations, net of tax (70.4 ) (83.7 )
Loss from discontinued operations, net of tax —
(12.9 )
Net loss (70.4 ) (96.6 )
Net loss (income) attributable to noncontrolling interests 0.9
(0.3 )
Net loss attributable to Avon $ (69.5 ) $ (96.9 )
Loss per share:
Basic from continuing operations $ (0.20 ) $ (0.22 )
Basic from discontinued operations —
(0.03 )
Basic attributable to Avon (0.20 ) (0.25 )
Diluted from continuing operations $ (0.20 ) $ (0.22 )
Diluted from discontinued operations —
(0.03 )
Diluted attributable to Avon (0.20 ) (0.25 )


	Nine Months Ended
(In millions)	September 30, 2020		September 30, 2019
Product sales	$	2,423.0	$	3,342.2
Other revenue	136.1		207.5
Revenue from affiliates of Natura &Co	2.7		0
Total revenue	2,561.8		3,549.7
Costs, expenses and other:
Cost of sales	(1,111.5)		(1,482.7)
Selling, general and administrative expenses	(1,578.4)		(1,942.7)

Operating (loss) income	(128.1)		124.3

Interest expense	(100.9)		(95.9)
Loss on extinguishment of debt and credit facilities	(11.9)		(10.1)
Interest income	1.6		5.3
Other (expense) income, net	(20.1)		87.3
Gain on sale of business/assets	1.5		50.3
Total other (expenses) income	(129.8)		36.9

(Loss) income from continuing operations, before income taxes	(257.9)		161.2
Income taxes	(26.7)		(78.2)
(Loss) income from continuing operations, net of tax	(284.6)		83.0
Loss from discontinued operations, net of tax	(14.3)		(29.0)
Net (loss) income	(298.9)		54.0
Net loss attributable to noncontrolling interests	2.3		.7
Net (loss) income attributable to Avon	$	(296.6)	$	54.7

The accompanying notes are an integral part of these statements.

AVON PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

Three Months Ended
(In millions) September 30, 2017 September 30, 2016
Net income $ 11.9
$ 35.6
Other comprehensive income:
Foreign currency translation adjustments 13.6
15.2
Change in derivative losses on cash flow hedges, net of taxes of $0.0 and $0.0 —
1.8
Adjustments of and amortization of net actuarial loss and prior service cost, net of taxes of $0.0 and $0.2 6.5
3.6
Total other comprehensive income, net of taxes 20.1
20.6
Comprehensive income 32.0
56.2
Less: comprehensive loss attributable to noncontrolling interests (0.6 ) (0.6 )
Comprehensive income attributable to Avon $ 32.6
$ 56.8


	Three Months Ended
(In millions)	September 30, 2020		September 30, 2019
Net (loss) income	$	(33.5)	$	106.6
Other comprehensive loss:
Foreign currency translation adjustments	(65.7)		0
Unrealized gain (loss) on revaluation of long-term intercompany balances	40.4		(19.1)
Change in unrealized loss on cash flow hedges, net of taxes of $0.0 and $0.0	0		.1
Adjustments and amortization of net actuarial loss and prior service cost, net of taxes of $0.2 and $0.2	4.4		1.6
Sale of New Avon	0		(3.4)
Total other comprehensive loss, net of income taxes	(20.9)		(20.8)
Comprehensive (loss) income	(54.4)		85.8
Less: comprehensive loss attributable to noncontrolling interests	.5		.3
Comprehensive (loss) income attributable to Avon	$	(53.9)	$	86.1

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, 2017 September 30, 2016
Net loss $ (70.4 ) $ (96.6 )
Other comprehensive income:
Foreign currency translation adjustments 85.1
103.0
Change in derivative losses on cash flow hedges, net of taxes of $0.0 and $0.0 —
2.7
Adjustments of and amortization of net actuarial loss and prior service cost, net of taxes of $0.0 and $10.6 12.7
271.8
Other comprehensive income related to New Avon investment, net of taxes of $0.0 1.2
—
Total other comprehensive income, net of taxes 99.0
377.5
Comprehensive income 28.6
280.9
Less: comprehensive loss attributable to noncontrolling interests (0.7 ) (0.4 )
Comprehensive income attributable to Avon $ 29.3
$ 281.3


	Nine Months Ended
(In millions)	September 30, 2020		September 30, 2019
Net (loss) income	$	(298.9)	$	54.0
Other comprehensive loss:
Foreign currency translation adjustments	(149.7)		1.3
Unrealized gain (loss) on revaluation of long-term intercompany balances	13.8		(19.4)
Change in unrealized gain (loss) on cash flow hedges, net of taxes of $0.0 and $0.0	.6		(2.5)
Adjustments and amortization of net actuarial loss and prior service cost, net of taxes of $0.6 and $0.5	8.4		4.7
Sale of New Avon	0		(3.4)
Total other comprehensive loss, net of income taxes	(126.9)		(19.3)
Comprehensive (loss) income	(425.8)		34.7
Less: comprehensive loss attributable to noncontrolling interests	2.3		.8
Comprehensive (loss) income attributable to Avon	$	(423.5)	$	35.5

The accompanying notes are an integral part of these statements.

AVON PRODUCTS, INC.

CONSOLIDATED BALANCE SHEETS

December 31, 2019 and September 30, 2020 (Unaudited)


(In millions)	September 30, 2020		December 31, 2019
Assets
Current Assets
Cash and cash equivalents	$	321.1	$	650.6
Restricted cash	7.6		2.9
Accounts receivable, net	261.2		280.2
Receivables from affiliates of Natura &Co	3.3		0
Inventories	461.1		452.3
Prepaid expenses and other	210.2		252.1
Assets held for sale	8.5		22.6

Total current assets	1,273.0		1,660.7
Property, plant and equipment, at cost	1,089.9		1,203.0
Less accumulated depreciation	(677.0)		(715.0)
Property, plant and equipment, net	412.9		488.0
Right-of-use assets	153.8		175.4
Goodwill	75.0		86.2
Deferred tax asset	120.2		161.2
Other assets	417.4		514.8

Total assets	$	2,452.3	$	3,086.3
Liabilities, Series C Convertible Preferred Stock and Shareholders’ Deficit
Current Liabilities
Debt maturing within one year	$	30.2	$	1.8
Loans from affiliates of Natura &Co	47.2		0
Accounts payable	660.9		723.3
Payables to affiliates of Natura &Co	92.8		0
Dividends payable	0		8.7
Accrued compensation	92.3		114.5
Other accrued liabilities	314.6		410.7
Sales taxes and taxes other than income	104.2		118.7
Income taxes	1.1		7.4
Current liabilities of discontinued operations	19.2		16.0
Total current liabilities	1,362.5		1,401.1
Long-term debt	1,566.5		1,590.4
Long-term operating lease liability	123.4		143.3
Employee benefit plans	127.6		137.6
Long-term income taxes	104.6		128.7
Other liabilities	96.7		90.5
Total liabilities	3,381.3		3,491.6
Series C convertible preferred stock	0		578.5
Shareholders’ Deficit
Common stock	0		192.6
Additional paid-in capital	527.7		2,321.2
Retained earnings	(294.3)		2,138.9
Accumulated other comprehensive loss	(1,166.9)		(1,040.0)
Treasury stock, at cost	0		(4,603.3)
Total Avon shareholders’ deficit	(933.5)		(990.6)
Noncontrolling interests	4.5		6.8
Total shareholders’ deficit	(929.0)		(983.8)
Total liabilities, series C convertible preferred stock and shareholders’ deficit	$	2,452.3	$	3,086.3

(In millions) September 30,
2017 December 31,
2016
Assets
Current Assets
Cash and cash equivalents $ 663.8
$ 654.4
Accounts receivable, net 473.5
458.9
Inventories 662.5
586.4
Prepaid expenses and other 292.2
291.3
Current assets of discontinued operations 0.5
1.3
Total current assets 2,092.5
1,992.3
Property, plant and equipment, at cost 1,488.3
1,424.1
Less accumulated depreciation (781.8 ) (712.8 )
Property, plant and equipment, net 706.5
711.3
Goodwill 96.8
93.6
Other assets 620.8
621.7
Total assets $ 3,516.6
$ 3,418.9
Liabilities, Series C Convertible Preferred Stock and Shareholders’ Deficit
Current Liabilities
Debt maturing within one year $ 16.1
$ 18.1
Accounts payable 796.7
768.1
Accrued compensation 149.0
129.2
Other accrued liabilities 360.6
401.9
Sales taxes and taxes other than income 137.5
147.0
Income taxes 9.1
10.7
Current liabilities of discontinued operations 2.5
10.7
Total current liabilities 1,471.5
1,485.7
Long-term debt 1,873.0
1,875.8
Employee benefit plans 160.9
164.5
Long-term income taxes 82.9
78.6
Long-term sales taxes and taxes other than income 185.2
124.5
Other liabilities 90.6
81.3
Total liabilities 3,864.1
3,810.4

Commitments and contingencies (Note 8)

Series C convertible preferred stock 461.9
444.7

Shareholders’ Deficit
Common stock 189.7
188.8
Additional paid-in capital 2,290.7
2,273.9
Retained earnings 2,235.4
2,322.2
Accumulated other comprehensive loss (934.6 ) (1,033.2 )
Treasury stock, at cost (4,601.7 ) (4,599.7 )
Total Avon shareholders’ deficit (820.5 ) (848.0 )
Noncontrolling interests 11.1
11.8
Total shareholders’ deficit (809.4 ) (836.2 )
Total liabilities, series C convertible preferred stock and shareholders’ deficit $ 3,516.6
$ 3,418.9

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, 2020		September 30, 2019
Cash Flows from Operating Activities
Net (loss) income	$	(298.9)	$	54.0
Loss from discontinued operations, net of tax	(14.3)		(29.0)
(Loss) income from continuing operations, net of tax	(284.6)		83.0
Adjustments to reconcile net (loss) income from continuing operations to net cash used by operating activities:
Depreciation	43.4		54.6
Amortization	19.3		18.7
Provision for doubtful accounts	64.2		86.9
Provision for obsolescence	28.2		22.2
Share-based compensation	21.8		8.9
Foreign exchange losses (gains)	3.0		(42.8)
Deferred income taxes	21.8		21.7
Impairment loss on assets	1.8		15.4
Gain on sale of business / assets	(1.5)		(50.3)
Certain Brazil indirect taxes	0		(118.3)
Other	22.1		16.7
Changes in assets and liabilities:
Accounts receivable	(84.0)		(56.1)
Inventories	(84.1)		10.1
Prepaid expenses and other	(9.0)		34.1
Accounts payable and accrued liabilities	(85.7)		(232.8)
Income and other taxes	2.8		5.5
Noncurrent assets and liabilities	13.9		(18.9)
Net cash used by operating activities of continuing operations	(306.6)		(141.4)
Cash Flows from Investing Activities
Capital expenditures	(30.0)		(42.8)
Disposal of assets	1.8		1.8
Net proceeds from sale of business / assets	11.3		99.9
Other investing activities	.4		1.0
Net cash (used) provided by investing activities of continuing operations	(16.5)		59.9
Cash Flows from Financing Activities
Cash dividends	(8.6)		0
Debt, net (maturities of three months or less)	12.5		(6.9)
Proceeds from debt	80.8		400.0
Repayment of debt	(48.3)		(275.8)
Repurchase of common stock	(.4)		(1.0)
Costs associated with debt issue / repayment	(3.8)		(25.4)
Settlement of stock options	(25.8)		0
Settlement of derivative contracts	19.5		36.1
Proceeds from sale of PIS/COFINS tax credits	0		19.4
Other financing activities	0		.5
Net cash provided by financing activities of continuing operations	25.9		146.9
Cash Flows from Discontinued Operations
Net cash used by operating activities of discontinued operations	(11.2)		(14.8)


Net cash used by discontinued operations	(11.2)		(14.8)
Effect of exchange rate changes on cash and cash equivalents, and restricted cash	(23.9)		(15.2)

Nine Months Ended
(In millions) September 30, 2017 September 30, 2016
Cash Flows from Operating Activities
Net loss $ (70.4 ) $ (96.6 )
Loss from discontinued operations, net of tax —
12.9
Loss from continuing operations, net of tax $ (70.4 ) $ (83.7 )
Adjustments to reconcile net loss to net cash provided (used) by operating activities:
Depreciation 63.4
62.5
Amortization 22.2
22.4
Provision for doubtful accounts 168.5
114.6
Provision for obsolescence 27.7
26.6
Share-based compensation 22.0
23.1
Foreign exchange losses (gains) 12.0
(0.3 )
Deferred income taxes 15.4
(16.3 )
Loss on deconsolidation of Venezuela —
120.5
Other 37.0
3.0
Changes in assets and liabilities:
Accounts receivable (170.1 ) (167.1 )
Inventories (71.6 ) (109.5 )
Prepaid expenses and other 18.0
(16.8 )
Accounts payable and accrued liabilities (51.1 ) (41.7 )
Income and other taxes (15.3 ) (15.3 )
Noncurrent assets and liabilities 27.3
(26.3 )
Net cash provided (used) by operating activities of continuing operations 35.0
(104.3 )
Cash Flows from Investing Activities
Capital expenditures (66.7 ) (68.2 )
Disposal of assets 3.3
3.3
Distribution from New Avon LLC 22.0
—
Reduction of cash due to Venezuela deconsolidation —
(4.5 )
Other investing activities (0.1 ) 1.6
Net cash used by investing activities of continuing operations (41.5 ) (67.8 )
Cash Flows from Financing Activities
Debt, net (maturities of three months or less) (0.7 ) (31.4 )
Proceeds from debt —
508.7
Repayment of debt (2.3 ) (311.9 )
Repurchase of common stock (6.6 ) (5.3 )
Net proceeds from the sale of series C convertible preferred stock —
426.3
Other financing activities (0.2 ) (17.2 )
Net cash (used) provided by financing activities of continuing operations (9.8 ) 569.2
Cash Flows from Discontinued Operations
Net cash used by operating activities of discontinued operations (7.5 ) (67.6 )
Net cash used by investing activities of discontinued operations —
(94.6 )
Net cash used by discontinued operations (7.5 ) (162.2 )
Effect of exchange rate changes on cash and cash equivalents 33.2
(17.9 )
Net increase in cash and cash equivalents 9.4
217.0
Cash and cash equivalents at beginning of year⁽¹⁾
654.4
684.7
Cash and cash equivalents at end of period $ 663.8
$ 901.7


	Nine Months Ended
(In millions)	September 30, 2020		September 30, 2019
Net decrease in cash and cash equivalents, and restricted cash	(332.3)		35.4
Cash and cash equivalents, and restricted cash at beginning of period(1)	661.0		536.4
Cash and cash equivalents, and restricted cash at end of period (1)	$	328.7	$	571.8

The accompanying notes are an integral part of these statements.

(1)~~Includes~~ The balance at the beginning of the nine month period ended September 30, 2019 includes cash and cash equivalents of ~~discontinued operations~~$3.7 classified as Held for sale assets in our Consolidated Balance Sheets.The balance at the end of ~~$(2.2)~~the nine month period ended Sept 30, 2019 and the balance at the beginning of the ~~year~~nine month period ended September 30, 2020 includes Long-term restricted cash of $7.5 which is presented in ~~2016.~~other assets in our Consolidated

AVON PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT

(Unaudited)


(In millions)	Common Stock			Additional		Retained		Accumulated Other		Treasury Stock			Noncontrolling
	Shares	Amount		Paid-In Capital		Earnings		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	0	$	0	$	523.4	$	(170.1)	$	(1,144.3)	0	$	0	$	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	0	$	0	$	524.2	$	(262.9)	$	(1,145.8)	0	$	0	$	5.0	$	(879.5)
Net loss	—	—		—		(32.8)		—		—	—		(.7)		(33.5)
Gain on common control transaction	—	—		—		1.4		—		—	—		—		1.4
Other comprehensive income	—	—		—		—		(21.1)		—	—		.2		(20.9)
Exercise/ vesting/ expense of share-based compensation	—	—		3.5		—		—		—	—		—		3.5

Balances at September 30, 2020 (3)	0	$	0	$	527.7	$	(294.3)	$	(1,166.9)	0	$	0	$	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). See Note 12, Series C Convertible Preferred Stock.

(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 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 Merger, all of the issued and outstanding common stock of the Company, being 550,890,788, were canceled and converted. See Note 18, Mergers with Natura Cosméticos S.A.,.

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


(In millions)	Common Stock			Additional		Retained		Accumulated Other		Treasury Stock			Noncontrolling
	Shares	Amount		Paid-In Capital		Earnings		Comprehensive Loss		Shares	Amount		Interests		Total
Balances at December 31, 2018	761.8	$	190.3	$	2,303.6	$	2,234.3	$	(1,030.4)	319.4	$	(4,602.3)	$	7.7	$	(896.8)
Net loss	—	—		—		(32.7)		—		—	—		(.8)		(33.5)
Other comprehensive loss	—	—		—		—		(4.0)		—	—		.1		(3.9)
Dividends accrued - Series C convertible preferred stock	—	—		—		(6.2)		—		—	—		—		(6.2)
Exercise/ vesting/ expense of share-based compensation	1.3	.3		(1.5)		—		—		—	—		—		(1.2)

Purchases and sales of noncontrolling interests, net of dividends paid of $0.0	—	—		—		—		—		—	—		.1		.1
Balances at March 31, 2019	763.1	$	190.6	$	2,302.1	$	2,195.4	$	(1,034.4)	319.4	$	(4,602.3)	$	7.1	$	(941.5)
Net (loss) income	—	—		—		(19.5)		—		—	—		.4		(19.1)
Other comprehensive income	—	—		—		—		5.5		—	—		—		5.5
Dividends accrued - Series C convertible preferred stock	—	—		—		(6.4)		—		—	—		—		(6.4)
Exercise/ vesting/ expense of share-based compensation	—	—		5.4		—		—		—	—		—		5.4
Repurchase of common stock	.1	.1		—		—		—		.5	(1.0)		—		(1.0)
Purchases and sales of noncontrolling interests, net of dividends paid of $0.1	—	—		—		—		—		—	—		(.3)		(.3)
Balances at June 30, 2019	763.2	$	190.7	$	2,307.5	$	2,169.5	$	(1,028.9)	319.9	$	(4,603.3)	$	7.2	$	(957.3)
Net income (loss)	—	—		—		106.9		—		—	—		(.3)		106.6
Other comprehensive loss	—	—		—		—		(20.8)		—	—		—		(20.8)
Dividends accrued - Series C convertible preferred stock	—	—		—		(6.4)		—		—	—		—		(6.4)
Exercise/ vesting/ expense of share-based compensation	.3	.3		3.0		—		—		—	—		—		3.3
Repurchase of common stock	(.1)	(.6)		—		—		—		—	—		—		(.6)
Balances at September 30, 2019	763.4	190.4		2,310.5		2,270.0		(1,049.7)		319.9	(4,603.3)		6.9		(875.2)

The accompanying notes are an integral part of these statements.

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 ~~2016~~2019 Annual Report on Form 10-K ("~~2016~~2019 Form 10-K") in preparing these unaudited interim Consolidated Financial ~~Statements.~~ Statements, other than those impacted by new accounting standards as described below. On January 3, 2019, 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"), and two subsidiaries of Natura &Co Holding S.A. ("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 common stock ceased to be traded on the NYSE. As a result, we have excluded disclosures of Earnings per Share from our consolidated financial statements. For additional information, see Note 18, Agreement and Plan of Mergers with Natura Cosméticos S.A.

The Company has updated its reportable segments to align with how the business is operated and managed since the merger with Natura &Co Holding, we have identified 2 reportable segments based on geographic operations: Avon International and Avon Latin America. In prior periods, the Company reported 4 segments: Europe, Middle East and Africa, Asia Pacific, South Latin America and North Latin America. Previously reported segment information has been recast throughout the consolidated financial statements, as applicable, for all periods presented to reflect the changes in the Company’s reportable segments. Refer to Note 9, Segment Information for more information.

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 ~~2016~~2019 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 ~~that reduce the reliability of the estimated annual consolidated~~for which an effective tax ~~rate.~~rate cannot be reliably estimated.

~~Venezuela~~Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation in the Consolidated Balance Sheets. As of ~~March~~September 30, 2020 and December 31, ~~2016, we deconsolidated our Venezuelan operations,~~2019, the Company had tooling, net of amortization of $8.0 and ~~since then, we account for this business using the~~$12.9, respectively. The tooling balance as of December 31, 2019, representing cost ~~method~~ of ~~accounting. The decision to deconsolidate our Venezuelan operations was due to the lack~~$94.4 and accumulated depreciation of exchangeability between the Venezuelan bolivar and the U.S. dollar. This was caused by Venezuela's restrictive foreign exchange control regulations and our Venezuelan operations' increasingly limited access to U.S. dollars, which restricted our Venezuelan operations' ability to pay dividends and settle intercompany obligations.

~~As a result of the change to the cost method of accounting, in the first quarter of 2016, we recorded a loss of $120.5~~$81.5, previously included in other ~~expense, net. The loss was comprised of $39.2 in net~~long-term assets of the Venezuelan business and $81.3 in accumulated foreign currency translation adjustments within accumulated other comprehensive loss ("AOCI") (shareholders' deficit) associated with foreign currency changes before Venezuela was accounted for as a highly inflationary economy. The net assets of the Venezuelan business were comprised of inventories of $23.7,has been reclassified to property, plant and equipment net of $15.0, other assets of $11.4, accounts receivable of $4.6, cash of $4.5, and accounts payable and accrued liabilities of $20.0. Our Consolidated Balance Sheets no longer include the assets and liabilities of our Venezuelan operations. We no longer include the results of our Venezuelan operations in our Consolidated Financial Statements, and will include income relating to ~~our Venezuelan operations only~~conform to the ~~extent that~~current year presentation.

As of September 30, 2020, we ~~receive cash for dividends or royalties remitted by Avon Venezuela.~~

~~Revisions~~

~~In our 2016 Form 10-K, our~~identified an immaterial classification error in the Consolidated ~~Statements~~Statement of Cash Flows ~~presented supplemental information~~relating to the nine month period ended September 30, 2019 with respect to cash flows from the settlement of derivative contracts. Our accounting policy is to classify derivative cash flows as operating, investing or financing consistent with the nature of the underlying hedged item. However, we have identified that cash ~~paid for interest of $87.1 for the year ended December 31, 2016; however, this amount should~~flows relating to derivative contracts that economically hedge foreign exchange gains and losses on intercompany loans have been ~~disclosed~~incorrectly classified as ~~$142.8.~~operating activities rather than financing activities. We ~~determined that~~have corrected this reclassification error through a revision to the ~~effect~~nine month period ended September 30, 2019 to reclassify cash inflows of ~~this revision was not material~~$36.1 from the settlement of derivative contracts from operating activities to ~~our 2016 Form 10-K.~~financing activities.

~~New Accounting Standards Implemented~~

~~In March 2016, the FASB issued ASU 2016-09,~~ ~~Compensation - Stock Compensation~~, which is intended to simplify the accounting for share-based payment transactions. This new guidance changes several aspects of the accounting for share-based payment transactions, including accounting for income taxes, forfeitures and employer-tax withholding requirements. ASU 2016-09 also clarifies the Statements of Cash Flows presentation for certain components of share-based payment awards. We adopted this new accounting guidance in the first quarter of 2017, which did not have a material impact on our Consolidated Financial Statements.

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

COVID-19 pandemic

~~Accounting Standards to be Implemented~~

~~ASU 2014-09, Revenue from Contracts with Customers~~

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers, as~~A novel strain of coronavirus (COVID-19) was first identified in Wuhan, China in December 2019, and subsequently declared a new Topic, Accounting Standards Codification Topic ("ASC") 606. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This new accounting guidance may be adopted either retrospectively or as a cumulative-effect adjustment as of the date of adoption. We intend to adopt this new accounting guidance as a cumulative-effect adjustment as of January 1, 2018. Based on the evaluation completed to-date, we believe that we will need to:

consider some of our sales incentive programs as a separate deliverable and allocate a portion of the sales transaction price to this deliverable, and thus defer a portion of the sales transaction price until the incentive prize is redeemed;

consider some of our prospective discounts achieved based on sales targets as a separate deliverable and allocate a portion of the sales transaction prices to this deliverable, thus deferring a portion of the sales transaction price until future discounts are realized;

~~adjust the manner in which we present our allowance for sales returns in our Consolidated Balance Sheets, to reflect a refund liability and a returns asset;~~

~~reflect fees paid~~pandemic by the ~~Representative~~World Health Organization. Due to the ~~Company for items such as brochures, sales aids~~uncertain and ~~late payments as revenue, rather than as a reduction~~rapidly evolving nature of current conditions around the world, the impacts of COVID-19 most of which are beyond the Company’s control, continue to ~~selling, general~~evolve, and ~~administrative expenses ("SG&A"), as these represent separate performance obligations;~~

~~reflect certain of~~ the ~~costs associated with the fees paid by the Representative in cost of sales, rather than SG&A; and~~

~~recharacterize certain costs related~~outcome is uncertain. We are therefore unable to ~~sales incentives, brochures and sales aids in our Consolidated Balance Sheets from prepaid expenses and other to inventories.~~

~~As a result of adopting this new accounting guidance, we estimate that had we adopted the new standard as of January 1, 2016,~~predict accurately the impact that COVID-19 will have on our ~~full-year 2016 Consolidated Statement~~business going forward.

During the second quarter of ~~Operations would have been:~~

•~~an increase in total revenue by approximately 5%;~~

•~~a decrease in gross margin by approximately 350 to 500 basis points; and~~

•~~a decrease in operating margin by approximately 10 to 30 basis points.~~

These impacts are associated with reclassifications of items in the Consolidated Statements of Operations only, which will have no impact on operating profit. These impacts do not reflect the impact due to the change in timing of recognition of revenue and associated costs that would be deferred until sales incentive programs and prospective discounts are fulfilled, which we do not believe is material to the estimated impacts discussed above. In addition, upon adoption, we do not expect the change in timing of recognition of revenue and associated costs to have2020, COVID-19 had a significant impact on our ~~full-year Consolidated Statements~~operations as many markets were subject to lockdown restrictions which limited our ability to recruit and enroll Representatives, operate manufacturing facilities and distribution centers and to process and deliver orders. Most markets showed signs of ~~Operations; however,~~recovery in the third quarter of 2020 but it is unclear whether this recovery will continue in the remaining of 2020 or if new lockdown measures currently being imposed in parts of Europe will dampen the recovery. We continue to closely monitor the evolution of the COVID-19 pandemic, deciding on actions to minimize impacts, ensure the continuity of operations and promote the safety and health of all the people involved. Since the beginning of the virus spread and the consequent restrictive measures imposed by governments, such as closing non-essential trade and restricting the movement of people across borders, the Company has implemented some measures in all its operations, in line with the official measures:

•Incentives to remote working and adoption of essentiality criteria to limit industrial and logistical operations;

•Adoption of new safety measures for operational workers, such as the use of masks and procedures to distance people between processes;

•Re-planning of sales cycles, prioritizing personal care items;

•Speeding up the digitization of sales channels;

•We communicated social distancing protocols to our Representatives around the world;

•Change in the minimum order criteria, start kit and increased deadline for payment of Representatives - original practices are being restored as the markets are recovering from pandemic; and

•Daily monitoring of suppliers to ensure supply.

As of the date of this report, we are unable to estimate the long term impact of the economic paralysis 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.

Cyber incident

In June 2020, the Company became aware that it was exposed to a cyber incident in its Information Technology ("IT") environment which interrupted some systems and partially affected the Company's operations. We engaged leading external cyber security and IT general controls specialists, launched a comprehensive containment and remediation effort, and started a forensic investigation. By mid-August, the Company had re-established all of its core business processes and resumed operations in all of its markets, including all of its distribution centers.

The cyber incident had a significant impact on our revenue performance for the second quarter of 2020, with the majority of the impact ~~may vary depending on~~(approximately $87 million in sales) being shifted to the ~~types~~third quarter of ~~incentive programs,~~2020 as the ~~volume~~Company fulfilled the order backlog created. The incremental expense incurred as a result of ~~incentives offered,~~the cyber incident was not material.

Although we have no indication that the accuracy and completeness of any financial information was impacted as a result of the incident and the ~~timing~~Company has performed extensive procedures to validate such accuracy and completeness, we believe that, if the incident had gone differently, it could have potentially resulted in a material impact to the Company’s financial statements.

Going concern

Considering the uncertain nature of any possible future COVID-19 impacts which are beyond the Company’s control, we might expect some negative impact on revenue from COVID-19 to continue for the remainder of 2020 and into 2021, 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 ~~programs.~~Consolidated Financial Statements. The ~~cumulative-effect adjustment upon adoption~~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 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 new revenue recognition standard as of January 1, 2018 will depend on open sales incentive programs and prospective discounts existing at December 31, 2017, which cannot be reliably estimated at this time.

~~ASU 2017-07, Compensation - Retirement Benefits~~

~~In March 2017, the FASB issued ASU 2017-07,~~ ~~Compensation - Retirement Benefits~~. This new guidance requires entities to (1) disaggregate the service cost component from the other components of net periodic benefit costs and present it with other current employee compensation costs in the Consolidated Statements of Operations and (2) present the other components of net periodic benefit costs below operating profit in other expense (income), net. We intend to adopt this new accounting guidance effective January 1, 2018. The new accounting guidance is applied retrospectively and will increase our operating profit for the three and nine months ended September 30, 2017 and the full year 2016 by $3.9, $5.8 and $2.1, respectively, but will have no impact on net income (loss).

~~ASU 2016-02, Leases~~

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases~~, which requires all assets and liabilities arising from leases to be recognized in the Consolidated Balance Sheets. We intend to adopt this new accounting guidance effective January 1, 2019. We are currently evaluating the effect that adopting this new accounting guidance will have on our Consolidated Financial Statements.

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Accounting Standards Implemented

ASU 2016-13, Financial Instruments - Credit Losses

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, which requires measurement and recognition of expected credit losses for financial assets held. We adopted this new accounting guidance effective January 1, 2020, using a modified retrospective transition approach. The adoption did not have a material impact on our condensed consolidated financial statements and disclosures and did not significantly impact the Company’s accounting policies or estimation methods related to the allowance for doubtful accounts. The adoption resulted in a cumulative effect decrease to retained earnings of approximately $2 to reflect a change in the allowance for doubtful accounts.

Accounting Standards to be Implemented

ASU 2019-12, Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued 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 intend to implement this new accounting guidance effective January 1, 2021, however early adoption is permitted. We are currently assessing the impact this new accounting guidance will have on our financial statements.

ASU 2018-14, Changes to the Disclosure Requirements for Defined Benefit Plans

In August 2018, the FASB issued ASU 2018-14, Changes to the Disclosure Requirements for Defined Benefit Plans, which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The amendments in ASU 2018-14 remove disclosures that no longer are considered cost beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. The amendments in ASU 2018-14 are effective for public business entities for annual periods ending after December 15, 2020. Early adoption is permitted. An entity should apply the amendments in ASU 2018-14 on a retrospective basis to all periods presented. We do not expect this new accounting guidance to have a material impact on the disclosures in our financial statements.

2. ~~EARNINGS (LOSS) PER SHARE~~DISCONTINUED OPERATIONS, ASSETS AND ~~SHARE REPURCHASES~~LIABILITIES HELD FOR SALE AND DIVESTITURES

~~We compute earnings (loss) per share ("EPS") using~~Discontinued Operations

On December 17, 2015, the two-class method, which is an earnings (loss) allocation formula that determines earnings (loss) per share for common stock, and earnings (loss) allocated to convertible preferred stock and participating securities, as appropriate.Company entered into definitive agreements with affiliates controlled by Cerberus. The ~~earnings allocated to convertible preferred stock are the larger of 1) the preferred dividends accrued~~agreements resulted in the ~~period or 2)~~separation of the ~~percentage~~Company’s 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 ~~earnings~~Cerberus). The Company retained an investment of 19.9% ownership interest in New Avon. These transactions closed on March 1, 2016; from ~~continuing operations allocable~~that date, resolution of contingent liabilities relating to Avon’s ownership and operation of the ~~preferred stock~~North America business prior to its separation from the Company into New Avon have been treated as ~~if they had been converted~~discontinued operations. In April 2019, we signed an agreement with LG Household & Health Care Ltd. to ~~common stock. Our participating securities are~~sell our ~~grants of restricted stock and restricted stock units,~~19.9% ownership interest in New Avon, which contain non-forfeitable rights to dividend equivalents to the extent any dividends are declared and paid on our common stock. We compute basic EPS by dividing net income (loss) allocated to common shareholders by the weighted-average number of shares outstandingwas completed during August 2019.

The Company incurred costs during the ~~period. Diluted EPS is calculated to give effect to all potentially dilutive common shares that were outstanding during the period.~~

Three Months Ended September 30, Nine Months Ended September 30,
(Shares in millions) 2017 2016 2017 2016
Numerator from continuing operations:
Income (loss) from continuing operations, less amounts attributable to noncontrolling interests $ 12.5
$ 36.7
$ (69.5 ) $ (84.0 )
Less: Earnings (loss) allocated to participating securities .2
.5
(.9 ) (1.1 )
Less: Earnings allocated to convertible preferred stock 5.8
6.1
17.2
12.8
Income (loss) from continuing operations allocated to common shareholders 6.5
30.1
(85.8 ) (95.7 )
Numerator from discontinued operations:
Loss from discontinued operations $ —
$ (.7 ) $ —
$ (12.9 )
Less: Loss allocated to participating securities —
—
—
(.2 )
Loss allocated to common shareholders —
(.7 ) —
(12.7 )
Numerator attributable to Avon:
Net income (loss) attributable to Avon $ 12.5
$ 36.0
$ (69.5 ) $ (96.9 )
Less: Earnings (loss) allocated to participating securities .2
.5
(.9 ) (1.3 )
Less: Earnings allocated to convertible preferred stock 5.8
6.1
17.2
12.8
Income (loss) allocated to common shareholders 6.5
29.4
(85.8 ) (108.4 )
Denominator:
Basic EPS weighted-average shares outstanding 440.0
437.4
439.5
436.7
Diluted effect of assumed conversion of stock options —
—
—
—
Diluted effect of assumed conversion of preferred stock —
—
—
—
Diluted EPS adjusted weighted-average shares outstanding 440.0
437.4
439.5
436.7
Earnings (Loss) per Common Share from continuing operations:
Basic $ .01
$ .07
$ (.20 ) $ (.22 )
Diluted .01
.07
(.20 ) (.22 )
Loss per Common Share from discontinued operations:
Basic $ —
$ —
$ —
$ (.03 )
Diluted —
—
—
(.03 )
Earnings (Loss) per Common Share attributable to Avon:
Basic $ .01
$ .07
$ (.20 ) $ (.25 )
Diluted .01
.07
(.20 ) (.25 )

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

~~During the~~ three ~~months ended September 30, 2017~~ and 2016, we did not include stock options to purchase 18.4 million shares and 15.0 million shares, respectively, of Avon common stock in the calculation of diluted EPS because the exercise prices of those options were greater than the average market price, and therefore, their inclusion would be anti-dilutive. During the nine months ended September 30, ~~2017~~2020 and ~~2016, we did not include stock options~~2019 following the resolution of certain contingent liabilities related to ~~purchase 16.9 million shares~~its ownership and ~~14.2~~operation of the North America business prior to its separation into New Avon.

The major classes of financial statement components comprising the loss on discontinued operations, net of tax for New Avon are shown below:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Selling, general and administrative expenses	$	(4.5)	$	(6.3)	$	(14.3)	$	(29.0)
Operating loss	$	(4.5)	$	(6.3)	$	(14.3)	$	(29.0)
Loss from discontinued operations, net of tax	$	(4.5)	$	(6.3)	$	(14.3)	$	(29.0)

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

million shares, respectively, of Avon common stock in the calculation of diluted EPS as we had a loss from continuing operations, net of tax. The inclusion of these shares would decrease the net loss per share, and therefore, their inclusion would be anti-dilutive.

During the three and nine months ended September 30, 2017 and 2016, it is more dilutive to assume the series C convertible preferred stock is not converted into common stock; therefore, the weighted-average shares outstanding were not adjusted by the as-if converted series C convertible preferred stock because the effect would be anti-dilutive. The inclusion of the series C convertible preferred stock would increase the net earnings per shareAssets Held for the three months ended September 30, 2017 and 2016 and decrease the net loss per share for the nine months ended September 30, 2017 and 2016. If the as-if converted series C convertible preferred stock had been dilutive, approximately 87.1 million additional shares would have been included in the diluted weighted average number of shares outstanding for the three and nine months ended September 30, 2017 and 2016. See Note 5, Related Party Transactions.

We purchased approximately 1.5 million shares of Avon common stock for $6.6 during the first nine months of 2017, as compared to approximately 1.3 million shares of Avon common stock for $5.3 during the first ~~nine~~ ~~months of 2016, through acquisition of stock from employees in connection with tax payments upon the vesting of restricted stock units and performance restricted stock units.~~

~~3. DISCONTINUED OPERATIONS~~

On December 17, 2015, the Company entered into definitive agreements with affiliates controlled by Cerberus Capital Management, L.P. ("Cerberus"). The agreements include an investment agreement providing for a $435.0 investment by Cleveland Apple Investor L.P. (“Cerberus Investor”) (an affiliate of Cerberus) in the Company through the purchase of perpetual convertible preferred stock (see Note 5, Related Party Transactions) and a separation and investment agreement providing for the separation of the Company's North America business, which represented the Company's operations in the United States, Canada and Puerto Rico, from the Company into New Avon LLC ("New Avon"), a privately-held company that is majority-owned and managed by Cerberus NA Investor LLC (“Cerberus NA”) (an affiliate of Cerberus). These transactions closed on March 1, 2016.Sale

The major classes of ~~financial statement components~~assets comprising held for sale assets on the ~~loss on discontinued operations, net~~Consolidated Balance Sheets as of ~~tax for North America~~September 30, 2020 and December 31, 2019 are shown ~~below:~~in the following table.

September 30, 2020

December 31, 2019

Current held for sale assets

Property, Plant and Equipment (net)

8.5

22.6

Three Months Ended September 30, Nine Months Ended September 30,
2016 2016
Total revenue $ —
$ 135.2
Cost of sales —
53.2
Selling, general and administrative expenses 1.0
90.0
Operating loss (1.0 ) (8.0 )
Other income items —
.6
Loss from discontinued operations, before tax (1.0 ) (7.4 )
Gain (loss) on sale of discontinued operations, before tax .3
(16.0 )
Income taxes —
10.5
Loss from discontinued operations, net of tax $ (.7 ) $ (12.9 )

~~There were no amounts recorded~~At December 31, 2019, in ~~discontinued operations for the three or nine months ended September 30, 2017.~~

~~4. INVESTMENT IN NEW AVON~~

~~In connection~~line with the ~~separation of the Company's North America business (as discussed in Note 3, Discontinued Operations), which closed on March 1, 2016,~~Open Up Avon strategy the Company ~~retained a 19.9% ownership interest in New Avon. The~~classified 5 properties which met the held for sale criteria under ASC 360 as "held for sale". During the first quarter of 2020, the Company ~~has accounted for its ownership interest in New Avon using~~decided not to proceed with the ~~equity method~~sale of ~~accounting, which resulted~~1 property in the Avon International segment and 1 property in the Avon Latin America segment with a carrying value of $9.1. As a result, the Company ~~recognizing its proportionate share~~reclassified such properties from held for sale to property, plant and equipment during the first quarter of ~~New Avon's income or loss and other comprehensive income or loss. Our~~2020. At the time of reclassification, we recorded ~~investment balance~~a true up on depreciation resulting in ~~New Avon at September 30, 2017 was zero.~~an immaterial impact on our Consolidated Statements of Operations.

During the ~~three~~second quarter of 2020, the Company decided to proceed with the sale of the 1 property in the Avon Latin America segment with a carrying value of $3.0. As a result, the Company reclassified the property from property, plant and ~~nine months ended~~equipment to held for sale and depreciation has ceased.

At September 30, ~~2017,~~2020, assets held for sale include 1 property in Avon International segment and 1 property in the ~~Company's proportionate share~~Avon Latin America Segment.

Divestitures

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 ~~losses~~entity and received proceeds of ~~New Avon~~$2.9. These proceeds are presented as investing activities in the Consolidated Statement of Cash Flows. As the sale was ~~$6.2 and $16.0 respectively,~~to an affiliate under common control of ~~which $1.7 and $11.5, respectively,~~Natura &Co, the gain on sale of ~~these amounts~~$1.4 was recorded ~~within other expense, net.~~ directly to Retained earnings.

Hungary Distribution Center in Gödöllő

In ~~addition, during~~April 2020, we signed an agreement to sell the Hungary Distribution Center in Gödöllő for a 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, which included $3.3 of restricted cash held in escrow.

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 ~~2017, the Company received a cash distribution of $22.0 from New Avon, which reduced our recorded investment balance in New Avon. During the third quarter of 2017,~~2020, we recorded ~~only $1.7~~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.

Rye Office

On June 26, 2019, we completed the sale of the Rye office for a selling price of $23.2, less expenses of approximately $.8, resulting in proceeds of $22.4. These proceeds are presented as investing activities in the Consolidated Statement of Cash Flows.

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

~~Company's proportionate share~~In the second quarter of 2019, we recorded a gain on sale of $9.9 before and after tax, which is reported separately in the Consolidated Statements of Operations. The gain recorded represents the difference between the proceeds and the carrying value of the ~~losses~~Rye office on the date of sale.

Malaysia Maximin

On May 9, 2019, we completed the sale of all of the equity interests in Maximin Corporation Sdn Bhd ("Malaysia Maximin") for a total purchase price of $7.8. The cash proceeds of $7.6, net of expenses, are presented within investing activities in the Consolidated Statement of Cash Flows.

In the second quarter of 2019, we recorded a gain on sale of $3.3 before tax, which is reported separately in the Consolidated Statements of Operations, and $3.0 after tax. The gain recorded represents the difference between the proceeds and the carrying value of Malaysia Maximin 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, are presented as investing activities in the Consolidated Statement of Cash Flows, which includes $7.5 of 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.

In the first quarter of 2019, we recorded a gain on sale of $10.3 before tax, which is reported separately in the Consolidated Statements of Operations, and $8.2 after tax, representing the difference between the proceeds, including the settlement of the intercompany loans, and the carrying value of Avon Manufacturing (Guangzhou), Ltd. on the date of sale.

New Avon

In April 2019, we signed an agreement with LG Household & Health Care Ltd. to sell our 19.9% ownership interest in New ~~Avon, as this reduced our recorded investment balance in New Avon to zero. If New Avon experiences future losses while our recorded investment balance is zero,~~Avon. During August, 2019, we ~~would not record our proportionate share of such loss. The Company's proportionate share of~~completed the ~~losses~~sale of New Avon ~~was $4.5~~for a selling price of $24.5. Expenses were approximately $1.1, resulting in cash proceeds of $23.4. These proceeds are presented as investing activities in the Consolidated Statement of Cash Flows.

In the third quarter of 2019, we recorded a gain on sale of $26.8 before and ~~$9.0 during~~after tax, which is reported in the ~~three~~Consolidated Statements of Operations as Gain on sale of business/asset. The gain recorded represents the total proceeds and ~~seven months ended September 30, 2016, respectively, which was recorded within other expense, net. In addition,~~ the ~~Company's proportionate share~~release of ~~the post-separation~~accumulated other comprehensive income of ~~New Avon was a benefit of an immaterial amount and $.1 during the three and nine months ended September 30, 2017, respectively, and was recorded within other comprehensive income (loss).~~

The Company also recorded an additional loss of $.5 within other expense, net and a benefit of $1.1 within other comprehensive income (loss), during the nine months ended September 30, 2017, primarily associated with purchase accounting adjustments reported by New Avon.

~~Summarized financial information related to New Avon is shown below:~~$3.4.

Nine Months Ended
September 30, 2017
Seven Months Ended September 30, 2016
Total revenue $ 527.7
$ 523.0
Gross profit $ 322.9
$ 317.4
Net loss $ (80.5 ) $ (45.2 )

~~5. RELATED PARTY TRANSACTIONS~~

The following tables present the related party transactions with New Avon and affiliates of Cerberus. There are no other related party transactions. New Avon is majority owned and managed by Cerberus NA. See Note 3, Discontinued Operations and Note 4, Investment in New Avon for further details.

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Statement of Operations Data
Revenue from sale of product to New Avon⁽¹⁾
$ 8.3
$ 6.9
$ 25.9
$ 20.4
Gross profit from sale of product to New Avon⁽¹⁾
$ .2
$ .5
$ 1.5
$ 1.4

Cost of sales for purchases from New Avon⁽²⁾
$ .9
$ 1.2
$ 3.0
$ 4.1

Selling, general and administrative expenses:
Transition services, intellectual property, research and development and subleases⁽³⁾
$ (7.4 ) $ (10.2 ) $ (22.5 ) $ (25.1 )
Project management team⁽⁴⁾
$ .6
.8
$ 2.2
1.8
Net reduction of selling, general and administrative expenses $ (6.8 ) $ (9.4 ) $ (20.3 ) $ (23.3 )

September 30, 2017 December 31, 2016
Balance Sheet Data
Inventories⁽⁵⁾
$ .4
$ 1.0
Receivables due from New Avon⁽⁶⁾
$ 9.1
$ 11.6
Payables due to New Avon⁽⁷⁾
$ .3
$ .7
Payables due to an affiliate of Cerberus⁽⁸⁾
$ .5
$ .6

~~(1)~~ The Company supplies product to New Avon as part of a manufacturing and supply agreement. The Company recorded revenue of $8.3 and $6.9, within other revenue, and gross profit of $.2 and $.5 associated with this agreement during the three months ended September 30, 2017 and 2016, respectively. The Company recorded revenue of $25.9 and $20.4, within other revenue, and gross profit of $1.5 and $1.4 associated with this agreement during the nine months ended September 30, 2017 and 2016, respectively.

~~(2)~~ New Avon supplies product to the Company as part of the same manufacturing and supply agreement noted above. The Company purchased $.8 and $1.0 from New Avon associated with this agreement during the three months ended September 30, 2017 and 2016, respectively, and recorded $.9 and $1.2 associated with these purchases within cost of sales during the three

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.

The following tables present the related party transactions with Natura &Co and its affiliates, New Avon, affiliates of Cerberus and the Instituto Avon in Brazil. There are no other related party transactions. On August 14, 2019, we sold our investment in New Avon to LG Household & Health Care Ltd. Upon completion of the sale, New Avon was no longer a related party. Furthermore, upon consummation of the Transaction with Natura &Co Holding in January 2020, Cerberus ceased being a related party.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Statement of Operations Data
Revenue from sale of product to New Avon(1)	N/A		$	3.5	N/A		$	12.0
Gross profit from sale of product to New Avon(1)	N/A		$	.1	N/A		$	.2

Cost of sales for purchases from New Avon(2)	N/A		$	.7	N/A		$	2.1

Revenue from affiliates of Natura &Co(8)	$	.9	$	0	$	2.7	$	0
Gross profit from affiliates of Natura &Co(8)	$	.1	$	0	$	.5	$	0

Selling, general and administrative expenses related to New Avon:
Transition services, intellectual property, technical support and innovation and subleases	N/A		$	0	N/A		$	(.2)
Project management team(3)	N/A		$	.6	N/A		$	4.0
Interest income from Instituto Avon(4)	$	0	$	0	$	.1	$	.1
Interest expense on Loan from affiliates of Natura &Co(7)	$	1.3	$	0	$	1.6	$	0


	September 30, 2020		December 31, 2019
Balance Sheet Data
Receivables due from Instituto Avon(4)	$	1.1	$	2.1
Receivables due from affiliates of Natura &Co(8)	$	3.3	$	0
Payables due to an affiliate of Cerberus(5)	N/A		$	2.1
Payables due to affiliates of Natura &Co(6)	$	92.8	$	0
Loans from affiliates of Natura &Co(7)	$	47.2	$	0

(1) The Company supplies product to New Avon as part of a manufacturing and supply agreement. On August 14, 2019, the Company sold its investment in New Avon to LG Household & Health Care Ltd, from that point New Avon was no longer a related party. Transactions entered into with New Avon for the three and nine month periods ended September 30, 2019 have been disclosed above.

(2) New Avon supplies product to the Company as part of the same manufacturing and supply agreement discussed in footnote (1) above. The Company purchased $.5 from New Avon associated with this agreement during the three months ended September 30, ~~2017~~2019, and ~~2016, respectively.~~recorded $.7 associated with these purchases within cost of sales in our Consolidated Statement of Operations during the three months ended September 30, 2019. The Company purchased ~~$2.7 and $4.6~~$1.6 from New Avon associated with this agreement during the nine months ended September 30, ~~2017 and 2016, respectively~~2019, and recorded ~~$3.0 and $4.1~~$2.1 associated with these purchases within cost of sales in our Consolidated Statement of Operations during the nine months ended September 30, ~~2017 and 2016, respectively.~~

~~(3)~~ ~~The Company also~~2019. Transactions entered into ~~a transition services agreement to provide certain services to~~with New Avon ~~as well as an intellectual property ("IP") license agreement, an agreement for research and development and subleases for office space. In addition, New Avon is performing certain services~~ for the ~~Company under a similar transition services agreement. The Company recorded a net $7.4~~three and ~~$10.2 reduction of selling, general and administrative expenses associated with these agreements during the three months~~nine month periods ended September 30, ~~2017 and 2016, respectively, and~~2019 have been disclosed above. On August 14, 2019, the Company sold its investment in New Avon to LG Household & Health Care Ltd; from that point New Avon was no longer a net $22.5 and $25.1 reduction of selling, general and administrative expenses associated with these agreements during the nine months ended September 30, 2017 and 2016, respectively. The net reduction of selling, general and administrative expenses associated with these agreements generally represents a recovery of the related ~~costs.~~party.

~~(4)~~(3) The Company also entered into agreements with an affiliate of Cerberus, which ~~provide~~provided for the secondment of Cerberus affiliate personnel to the Company's project management team responsible for assisting with the execution of the transformation plan (the "Transformation Plan") announced in January 2016. The Company recorded $.6 and $.8 in selling, general and administrative expenses associated with these agreements during the three months ended September 30, 2017 and 2016, respectively, and recorded $2.2 and $1.8 in selling, general and administrative expenses associated with these agreements during the nine months ended September 30, 2017 and 2016, respectively. See Note 12, Restructuring Initiatives for additional information related to the Transformation Plan.

~~(5)~~ Inventories relate to purchases from New Avon, associated with the manufacturing and supply agreement, which have not yet been sold, and were classified within inventories in the Consolidated Balance Sheets.

~~(6)~~ The receivables due from New Avon relate to the agreements for transition services, the IP license, research and development and subleases for office space, as well as the manufacturing and supply agreement, and were classified within prepaid expenses and other in the Consolidated Balance Sheets.

~~(7)~~ ~~The payables due to New Avon relate to the manufacturing and supply agreement, and were classified within other accrued liabilities in the Consolidated Balance Sheets.~~

~~(8)~~ ~~The payables due to an affiliate of Cerberus relate to the agreement for the project management team, and were classified within other accrued liabilities in the Consolidated Balance Sheets.~~

In addition, the Company also issued standby letters of credit to the lessors of certain equipment, a lease for which was transferred to New Avon in connection with the separation of the Company's North America business. As of September 30, 2017, the Company has a liability of $1.6 for the estimated value of such standby letters of credit. The recognition of the initial liability of $2.1 was included in the estimated loss on sale of the North America business in loss from discontinued operations, net of tax during the year ended December 31, 2016.

~~Series C Preferred Stock~~

On March 1, 2016, the Company issued and sold to Cerberus Investor 435,000 shares of newly issued series C preferred stock for an aggregate purchase price of $435.0. Cumulative preferred dividends accrue daily on the series C preferred stock at a rate of 1.25% per quarter. The series C preferred stock had accrued unpaid dividends of $35.6 as of September 30, 2017. There were no dividends declared in the nine months ended September 30, 2017 and 2016.

~~6. INVENTORIES~~

Components of Inventories September 30, 2017 December 31, 2016
Raw materials $ 228.6
$ 179.3
Finished goods 433.9
407.1
Total $ 662.5
$ 586.4

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

~~7. EMPLOYEE BENEFIT PLANS~~

Three Months Ended September 30,
Pension Benefits
Net Periodic Benefit Costs U.S. Plans Non-U.S. Plans Postretirement Benefits
2017 2016 2017 2016 2017 2016
Service cost $ .8
$ 1.3
$ 1.1
$ 1.2
$ —
$ —
Interest cost .7
.8
4.7
4.9
.1
.3
Expected return on plan assets (.8 ) (1.0 ) (7.4 ) (7.5 ) —
—
Amortization of prior service credit —
—
—
—
(.1 ) (.2 )
Amortization of net actuarial losses 1.3
1.5
2.1
1.5
—
.1
Settlements/curtailments —
—
3.3
—
—
—
Net periodic benefit costs⁽¹⁾
$ 2.0
$ 2.6
$ 3.8
$ .1
$ —
$ .2

Nine Months Ended September 30,
Pension Benefits
Net Periodic Benefit Costs U.S. Plans Non-U.S. Plans Postretirement Benefits
2017 2016 2017 2016 2017 2016
Service cost $ 3.5
$ 4.9
$ 3.5
$ 3.8
$ —
$ .1
Interest cost 2.2
5.9
13.5
16.6
.8
1.2
Expected return on plan assets (2.4 ) (7.2 ) (21.0 ) (25.0 ) —
—
Amortization of prior service credit —
(.1 ) (.1 ) —
(.3 ) (1.1 )
Amortization of net actuarial losses 3.8
9.2
5.9
4.9
.1
.2
Settlements/curtailments —
.1
3.3
—
—
—
Net periodic benefit costs⁽¹⁾
$ 7.1
$ 12.8
$ 5.1
$ .3
$ .6
$ .4

⁽¹⁾ ~~Includes $4.4 of U.S. pension and immaterial amounts~~implementation of the ~~postretirement benefit plans (related to~~Company’s strategic initiatives. Furthermore, upon consummation of the ~~U.S.) for~~Transaction with Natura &Co Holding in January 2020, Cerberus ceased being a related party. During the three and nine months ended September 30, ~~2016, which are included~~2019 the Company recorded net costs of $.6 and $4.0, respectively, in ~~discontinued operations. Amounts~~selling, general and administrative expenses associated with these agreements.

(4) During the ~~pension~~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 ~~postretirement benefit plans~~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 ~~Canada~~Brazil and owner of the ~~postretirement benefit plan~~Hospital do Câncer de Barretos), in ~~Puerto Rico, which are included~~order to invest in ~~discontinued~~equipment with the objective of expanding breast cancer prevention and treatment.

(5) Payables due to an affiliate of Cerberus related to the agreement for the project management team, classified within other accrued liabilities in our Consolidated Balance Sheets. Upon the consummation of Transaction with Natura in January 2020, Cerberus ceased their involvement in Company operations ~~have been excluded~~and is no longer a related party.

(6) Upon consummation of the Transaction on January 3, 2020, the Company was acquired by Natura &Co Holding and became a wholly owned direct subsidiary of Natura &Co Holding. Payables due to affiliates of Natura &Co Holding of $92.8 at September 30, 2020 include $91.5 due to Natura &Co Holding related to the amount of accrued dividend paid by Natura &Co Holding in relation to Series C preferred stock. On December 30, 2019, Cerberus elected to convert 435,000 shares of series C preferred stock, representing all shares of series C preferred stock outstanding, into 87,000,000 shares of the Company’s common stock, par value U.S.$0.25 per share, pursuant to the holder of the Company’s series C preferred stock’s rights under the Company’s certificate of incorporation. The foregoing election was conditioned upon the filing of the certificates of merger with respect to the First Merger (the "Conversion Condition"). Upon consummation of the Transaction in January 2020, the Company’s common stock was converted to Natura &Co Holding common stock. In January 2020 Natura &Co Holding paid the accrued unpaid dividends on the shares of series C preferred stock in an amount equal to U.S. $91.5 to Cerberus. See Note 12, Series C Convertible Preferred Stock, for discussion of preferred shares issued to Cleveland Apple Investor L.P. (“Cerberus Investor”). Payables due to affiliates of Natura &Co Holding at September 30, 2020 also include $1.3 of payables from ~~all amounts~~normal operations, primarily previously intercompany balances that became related party balances on the sale of Avon Shanghai Management to an affiliate of Natura &Co Holding in ~~the table above.~~August 2020. See Note 3, Discontinued Operations, Assets and Liabilities Held for ~~discussion~~Sale and Divestitures, for further information relating to this divestiture.

(7) Loans from affiliates of Natura &Co Holding at September 30, 2020 of $47.2 include $40.8 outstanding under the Revolving Credit Facility between Avon Luxembourg Holdings S.à r.l and Natura &Co International S.à r.l., a subsidiary of Natura &Co Holding. Loans from affiliates of Natura &Co Holding at September 30, 2020 also include $4.5 (300 Argentinian Pesos) pursuant to an agreement to receive funding from Natura &Co Holding with respect to our Argentina operations during the second quarter of 2020. See Note 18, Debt for further details of the ~~separation~~terms of these loans. Loans from affiliates of Natura &Co Holding at September 30, 2020 also include a $1.9 previously intercompany balance that became a related party balance on the ~~Company's North America business.~~sale of Avon Shanghai Management to an affiliate of Natura &Co Holding in August 2020. See Note 3, Discontinued Operations, Assets and Liabilities Held for Sale and Divestitures, for further information relating to this divestiture.

(8)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 $.9 and $2.7 associated with these agreements during the three and nine months ended September 30, ~~2017, we made approximately $12~~2020 respectively. The Company recorded gross profit from related party of $.1 and approximately $18 of contributions to the U.S. and non-U.S. defined benefit pension and postretirement benefit plans, respectively. During the remainder of 2017, we anticipate contributing approximately $0 to $3 and approximately $2 to $7 to fund our U.S. and non-U.S. defined benefit pension and postretirement benefit plans, respectively.

~~In addition to the amounts in the table above,~~$.5 associated with these agreements during the ~~second quarter~~three and nine months ended September 30, 2020 respectively. Receivables due from affiliates of ~~2017, we recorded an $18.2 charge for a loss contingency related~~Natura &Co primarily relate to ~~a non-U.S. pension plan, for which an amendment to the plan that occurred in a prior year may not have been appropriately implemented.~~these manufacturing agreements.

~~8. CONTINGENCIES~~

~~Settlements of FCPA Investigations~~

As previously reported, we engaged outside counsel to conduct an internal investigation and compliance reviews focused on compliance with the Foreign Corrupt Practices Act ("FCPA") and related U.S. and foreign laws in China and additional countries. The internal investigation, which was conducted under the oversight of our Audit Committee, began in June 2008 and along with the compliance reviews, was completed in 2014.

Following our voluntary reporting of the internal investigation to both the U.S. Department of Justice (the "DOJ") and the U.S. Securities and Exchange Commission (the "SEC") and our subsequent cooperation with those agencies, the United States District Court for the Southern District of New York (the "USDC") approved in December 2014 a deferred prosecution agreement (“DPA”) entered into between the Company and the DOJ related to charges of violations of the books and records and internal controls provisions of the FCPA. In addition, Avon Products (China) Co. Ltd., a subsidiary of the Company operating in China, pleaded guilty to conspiring to violate the books and records provision of the FCPA and was sentenced by the USDC to pay a $68 fine. The SEC also filed a complaint against the Company charging violations of the books and records

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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, 2020
	Avon International		Avon Latin America		Total reportable segments		Affiliates of Natura&Co		Total
Beauty:
Skincare	$	156.1	$	159.0	$	315.1	$	0	$	315.1
Fragrance	137.2		112.6		249.8		0		249.8
Color	64.5		60.9		125.4		0		125.4
Total Beauty	357.8		332.5		690.3		0		690.3
Fashion & Home:
Fashion	67.6		54.7		122.3		0		122.3
Home	13.9		123.6		137.5		0		137.5
Total Fashion & Home	81.5		178.3		259.8		0		259.8
Product sales	439.3		510.8		950.1		0		950.1
Representative fees	16.7		29.6		46.3		0		46.3
Other	1.1		(.4)		.7		.9		1.6
Other revenue	17.8		29.2		47.0		.9		47.9
Total revenue	$	457.1	$	540.0	$	997.1	$	.9	$	998.0


	Three Months Ended September 30, 2019
	Avon International		Avon Latin America		Total
Beauty:
Skincare	$	153.0	$	173.2	$	326.2
Fragrance	148.3		147.3		295.6
Color	82.0		89.6		171.6
Total Beauty	383.3		410.1		793.4
Fashion & Home:
Fashion	86.9		57.0		143.9
Home	12.4		99.8		112.2
Total Fashion & Home	99.3		156.8		256.1
Certain Brazil indirect taxes	0		67.7		67.7
Net sales	482.6		634.6		1,117.2
Representative fees	21.7		38.9		60.6
Other	1.3		8.9		10.2
Other revenue	23.0		47.8		70.8
Total revenue	$	505.6	$	682.4	$	1,188.0

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	$	0	$	827.9
Fragrance	348.2		299.4		647.6		0		647.6
Color	194.9		154.5		349.4		0		349.4
Total Beauty	972.4		852.5		1,824.9		0		1,824.9
Fashion & Home:
Fashion	178.8		124.9		303.7		0		303.7
Home	34.8		259.6		294.4		0		294.4
Total Fashion & Home	213.6		384.5		598.1		0		598.1
Product sales	1,186.0		1,237.0		2,423.0		0		2,423.0
Representative fees	48.0		78.4		126.4		0		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

~~and internal controls provisions of the FCPA and a consent to settlement (the "Consent") which was approved in a judgment entered by the USDC in~~


	Nine Months Ended September 30, 2019
	Avon International		Avon Latin America		Total
Beauty:
Skincare	$	491.2	$	530.2	$	1,021.4
Fragrance	443.0		453.7		896.7
Color	282.0		259.6		541.6
Total Beauty	1,216.2		1,243.5		2,459.7
Fashion & Home:
Fashion	285.3		179.1		464.4
Home	41.1		309.3		350.4
Total Fashion & Home	326.4		488.4		814.8
Certain Brazil indirect taxes	0		67.7		67.7
Net sales	1,542.6		1,799.6		3,342.2
Representative fees	68.7		117.5		186.2
Other	3.1		18.2		21.3
Other revenue	71.8		135.7		207.5
Total revenue	$	1,614.4	$	1,935.3	$	3,549.7

In January 2015, and included $67 in disgorgement and prejudgment interest. The DPA, the above-mentioned guilty plea and the Consent resolved the SEC’s and the DOJ’s investigations of the Company’s compliance with the FCPA and related U.S. laws in China and additional countries. The fine was paid in December 2014 and the payment to the SEC was made in January 2015.

~~Under the DPA, the DOJ will defer criminal prosecution of~~2020 the Company ~~for~~became a ~~term~~fully owned subsidiary of three years. If the Company remains in compliance with the DPA during its term, the charges against the Company will be dismissed with prejudice. Under the DPA, the Company also represented that it has implemented and agreed that it will continue to implementNatura &Co Holding. As a ~~compliance and ethics program designed to prevent and detect violations~~result of ~~the FCPA and other applicable anti-corruption laws throughout its operations.~~

Under the DPA and the Consent, among other things, the Company agreed to have a compliance monitor (the "monitor"). During July 2015, the Company engaged a monitor, who had been approved by the DOJ and SEC. With the approval of the DOJ and the SEC, the monitor can be replaced by the Company, if the Company agrees to undertake self-reporting obligations for the remainder of the monitoring period. The monitoring period is scheduled to expire in July 2018. There can be no assurance as to whether or when the DOJ and the SEC will approve replacing the monitor with the Company’s self-reporting. If the DOJ determines thatthis transaction, the Company has ~~knowingly violated~~updated its reportable segments to align with how the ~~DPA,~~business is operated and managed since the ~~DOJ may commence prosecution or extend~~merger with Natura &Co Holding, we have identified 2 reportable segments based on geographic operations: Avon International and Avon Latin America. In prior periods, the ~~term of~~Company reported 4 segments: Europe, Middle East and Africa, Asia Pacific, South Latin America and North Latin America. Previously reported segment information has been recast throughout the ~~DPA, including~~consolidated financial statements, as applicable, for all periods presented to reflect the ~~monitoring provisions described above,~~changes in the Company’s reportable segments. Refer to Note 9, Segment Information for ~~up to one year.~~more information.

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Contract balances

The ~~monitor has assessed and monitored~~timing of revenue recognition generally is different from the ~~Company's compliance with the terms~~timing of ~~the DPA and the Consent by evaluating, among other things, the Company's internal accounting controls, recordkeeping and financial reporting policies and procedures as they~~a promise made to a Representative. As a result, we have contract liabilities, which primarily relate to the ~~Company's~~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 ~~ongoing compliance~~the impact of COVID-19. 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, 2020 and December 31, 2019:


	September 30, 2020		December 31, 2019
Accounts receivable, net of allowances of $50.6 and $66.6	$	261.2	$	280.2
Contract liabilities	$	41.1	$	51.0

The contract liability balances relate to certain material rights (loyalty points, status program and prospective discounts). During the nine months ended September 30, 2020, we recognized $38.0 of revenue related to the contract liability balance at the beginning of the nine month period ended September 30, 2020, as the result of performance obligations satisfied. In addition, we deferred an additional $32.1 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 ~~FCPA~~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, 2020 as compared with December 31, 2019.

Contract costs

Incremental costs to obtain contracts, such as bonuses or commissions, are recognized as an asset if the entity expects to recover them. However, ASC 340-40, Other Assets and Deferred Costs, offers a practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less. We elected the practical expedient and expense costs to obtain contracts when incurred because our amortization period is one year or less.

Costs to fulfill contracts with Representatives are composed of shipping and handling (including order processing) and payment processing services, which are expensed as incurred. The fees for these services are included in the transaction price.

5. INVENTORIES


Components of Inventories	September 30, 2020		December 31, 2019
Raw materials	$	136.6	$	130.6
Finished goods	324.5		321.7
Total	$	461.1	$	452.3

AVON PRODUCTS, INC.

6. LEASES

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

The ~~monitor has recommended some changes to our policies and procedures that we have substantially adopted and are~~table below shows the sublease income recorded in the ~~process~~Consolidated Statement of ~~completing. The monitor may make additional recommendations that we must adopt unless they are unduly burdensome or otherwise inadvisable, in which case we may propose alternatives, which~~Operations incurred during the ~~DOJ~~three and ~~the SEC may or may not accept.~~nine months ended September 30, 2020 and 2019:

The third-party costs incurred in connection with ongoing compliance with the DPA and the Consent, including the monitorship, have not been material to date and we do not anticipate material costs going forward. We currently cannot estimate the costs that we are likely to incur in connection with self-reporting, if applicable, and any additional costs of implementing the changes, if any, to our policies and procedures required by the monitor.


		Three months ended September 30,		Nine months ended September 30,
Lease Costs	Classification	2020	2019	2020	2019
Sublease income	Selling, general and administrative expenses	3.1	2.5	11.7	8.3

7. CONTINGENCIES

Brazilian Tax Assessments

In ~~2002,~~December 2012, our Brazilian subsidiary, Avon Industrial LTDA (Avon Brazil Manufacturing) received an excise tax ~~(IPI)~~("IPI") assessment from the Brazilian tax authorities for alleged tax deficiencies during the years 1997-1998, which was officially closed in favor of Avon Brazil in July 2017. In December 2012, additional assessments were received for the year ~~2008 with respect to excise tax (IPI)~~2008. The assessment totals approximately $174, including penalties and ~~taxes charged on gross receipts (PIS and COFINS). In the second quarter of 2014, the PIS and COFINS assessments were officially closed in favor of Avon Brazil.~~accrued interest. As in ~~the 2002~~prior IPI ~~case, the 2012 IPI~~cases that have been resolved in Avon’s favor, this assessment asserts 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 excise tax. 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 2012 IPI assessment is unfounded.

These matters are being vigorously contested. In ~~January 2013, we filed a protest seeking a first administrative level review with respect to the 2012 IPI assessment. In~~ July 2013, the 2012 IPI assessment was upheld at the first ~~administrative level and we appealed this decision to~~administrative. In April 2018, Avon received official notification that the second administrative level has issued a partially favorable and partially unfavorable decision. In this decision, the original assessment was reduced by approximately $46 (including associated penalty and interest). In December 2019, we received an unfavorable decision in the third administrative level. ~~The 2012 IPI assessment totals approximately $356, including penalties and accrued interest.~~In October 2020, Avon was formally notified about the December unfavorable decision that rejected the Motion for Clarification. Avon will appeal to the administrative decision that denied the motion for clarification in court.

OnIn October 3, 2017, Avon Brazil Manufacturing received a new tax assessment notice regarding IPI for the year 2014 inon grounds similar to the ~~total amount of~~2012 assessment. The 2017 IPI assessment totals approximately ~~$270,~~$173, including penalties and accrued interest. In ~~line with~~April 2018, Avon was notified of an unfavorable decision at the ~~other assessments~~first administrative level. In February, 2019, this IPI assessment was upheld at the second administrative level and in April 2019 we appealed this decision to the third administrative level. In December 2019, Avon received ~~in the past, the Brazilian tax authorities assert that the structure adopted in 2005 has no valid business purpose. Avon will vigorously contest this assessment,~~an unfavorable decision and presented ~~the first defense on November 1, 2017.~~an appeal.

In the event that the 2012 and the 2017 IPI assessments are upheld in the third and final administrative level, it may be necessary ~~for us~~ to provide ~~security~~a guarantee letter or a deposit in the total amount of the debt to ~~pursue further appeals, which, depending~~move the discussion in the judicial sphere. Depending on the circumstances, this may result in ~~a charge to earnings and~~ an adverse effect on the ~~Company's~~Company’s Consolidated Statements of Cash Flows. It is not possible to reasonably estimate the likelihood or potential amount of assessments that may be issued for subsequent periods (tax years up through ~~2010~~2014 are closed by statute). However, other similar IPI assessments involving different periods (1998-2001) have been canceled and officially closed in our favor by the second administrative level and in July 2017 we received the official cancellation of the 2002 assessment pursuant to the

~~AVON PRODUCTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~favorable decision discussed above.~~ We believe ~~that the likelihood~~ that the 2012 and the 2017 IPI assessments are unfounded. However, based on the likelihood that these will be upheld, iswe assess the risks as disclosed above as reasonably possible. As ~~stated above, we believe that the 2012 and 2017 IPI assessments are unfounded. At~~of September 30, ~~2017,~~2020, we have not recognized a liability for the 2012 or 2017 IPI assessments.

Brazil IPI Tax on Cosmetics

In May 2015, an ~~Executive Decree on certain cosmetics went into effect in Brazil which increased~~executive decree established the ~~amount~~levy of IPI ~~taxes that are to be remitted by Avon Brazil to the taxing authority~~ on the sales of cosmetic products ~~subject to IPI.~~by Avon Brazil. Avon Brazil filed an objection to this ~~IPI tax increase~~levy on the basis that it is not ~~constitutional.~~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 tax ~~authorities.~~federal authority.

From May 2015 through April 2016, Avon Brazil ~~remitted~~deposited in Court the ~~taxes associated with this IPI tax increase into a judicial deposit which would be remitted~~amount relating to the ~~taxing authorities in the event that we are not successful in our objection to the tax increase.~~IPI being discussed. In May 2016, Avon Brazil ~~received a favorable preliminary decision on its objection~~obtained an injunction authorizing the Company not to pay the ~~tax and was granted a preliminary injunction.~~IPI. As a result, ~~beginning~~ in ~~May 2016,~~June 2018, Avon Brazil ~~is no longer required~~received a decision authorizing the Company to ~~remit~~withdraw the ~~taxes associated~~amount deposited in Court and replace it with ~~IPI into~~ a letter of guarantee. In June 2018, the tax authorities presented an appeal against that decision. In July 2018, the amount deposited was withdrawn. In September 2018, due in part to contemporaneous judicial ~~deposit. As~~decisions in favor of taxpayers in the cosmetics

AVON PRODUCTS, INC.

industry and other developments, and supported by our legal counsel’s opinion, we assessed the IPI ~~tax increase remains in effect, Avon Brazil is continuing~~according to ~~recognize~~ASC 450, Contingencies and determined that the risk of loss was reasonably possible but not probable. Accordingly, we released the associated liability as of September 30, 2018 of approximately $195 and stopped accruing the IPI ~~taxes associated with the May 2015 Executive Decree as a liability. At September 30, 2017, the~~from October 1, 2018. The liability ~~to the taxing authorities for this IPI tax increase was approximately $185 and was~~had been classified within long-term sales taxes and taxes other than income

in our Consolidated Balance ~~Sheets,~~Sheet, and the ~~judicial deposit~~release was recorded in product sales and other income (expense), net in the amounts of approximately ~~$76~~$168 and ~~was classified within other assets~~approximately $27, respectively, in our Consolidated ~~Balance Sheets. The net liability that does not have a corresponding judicial deposit was approximately $109 at~~Income Statements for the quarter ended September 30, 2017, and the interest associated with this net liability has been and will continue to be recognized in other expense, net. Our cash flow from operations has benefited as compared to our earnings as we have recognized the expense and associated interest related to this IPI tax in our Consolidated Statements of Operations; however, since May 2016, we have not made a corresponding cash payment into a judicial deposit.2018.

An unfavorable ruling to our objection of this IPI tax increase would have an adverse effect on the ~~Company's~~Company’s Consolidated Income Statements and Consolidated Statements of Cash Flows as Avon Brazil would have to remit the ~~liability owed~~reasonably possible amount of $203 to the taxing ~~authorities. This amount would be partially offset by the amount of~~authorities (including the judicial deposit ~~held by Avon Brazil.~~that was returned to us on July 30, 2018). We are not able to reliably predict the timing of the outcome of our objection to this tax increase.

A favorable judicial ruling to our objection of this IPI tax would also have an adverse effect on the Company’s Consolidated Statements of Cash Flows as Avon Brazil would have to remit all or a portion of the associated income tax liability to the taxing authorities. The Company is accruing a tax reserve, which amounts to approximately $69 at September 30, 2020. This reserve would be settled on final adjudication of the law through a combination of cash and use of deferred tax assets.

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, 2020, there were 143 individual cases pending against the Company. During the three months ended September 30, 2020, 17 new cases were filed and 13 cases were dismissed, settled or otherwise resolved. The value of our settlements in this area thus far has not been material, either individually or in the aggregate. Additional similar cases arising out of the use of the Company’s talc products are reasonably anticipated.

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 reasonable 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. Other than these accruals, we are at this time unable to estimate our reasonably possible or probable losses. 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 current cases at September 30, 2020 is approximately $8 and, accordingly, we have recognized a liability for this amount.

Shareholder Litigation

On February 14, 2019, a purported shareholder’s class action complaint (Bevinal v. Avon Products, Inc., et al., No. 19-cv-1420) was filed in the United States District Court for the Southern District of New York against the Company and certain former officers 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 Representatives in Brazil. Avon and the individual defendants filed a motion to dismiss which the court denied. The parties have 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

AVON PRODUCTS, INC.

will be paid by the Company (which represents the remaining deductible under the Company’s applicable insurance policies) and the remainder of the settlement will be paid by the Company’s insurers. On August 31, 2020, the court granted preliminary approval of the settlement and scheduled a hearing on January 20, 2021 to consider final approval. In the event the settlement is not approved by the court, or is otherwise terminated before it is finalized, the Company will be unable to predict the outcome of this matter. Furthermore, in that event, it is reasonably possible that the Company may incur a loss in connection with this matter, which the Company is unable to reasonably estimate.

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~~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, ~~2017,~~2020, is not expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows.

9.8. 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, ~~2017~~2020 and ~~2016:~~2019:


Three Months Ended September 30, 2020	Foreign Currency Translation Adjustments		Net Investment Hedges		Pension and Postretirement Benefits		Total
Balance at June 30, 2020	$	(1,053.1)	$	(4.3)	$	(88.4)	$	(1,145.8)
Other comprehensive (loss) income other than reclassifications	(25.5)		0		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	0		0		2.0		2.0
Balance at September 30, 2020	$	(1,078.6)	$	(4.3)	$	(84.0)	$	(1,166.9)


Three Months Ended September 30, 2019	Foreign Currency Translation Adjustments		Cash Flow Hedges		Net Investment Hedges		Pension and Postretirement Benefits		Investment in New Avon (2)		Total
Balance at June 30, 2019	$	(935.2)	$	(2.1)	$	(4.3)	$	(90.7)	$	3.4	$	(1,034.4)
Other comprehensive loss other than reclassifications	(19.1)		(.1)		—		—		—		(19.2)
Reclassifications into earnings:
Derivative loss on cash flow hedges, net of tax of $0.0	—		.2		—		—		—		.2
Amortization of net actuarial loss and prior service cost, net of tax of $0.21)	—		—		—		1.6		—		1.6
Sale of New Avon	—		—		—		—		(3.4)		(3.4)
Total reclassifications into earnings	0		.2		0		1.6		(3.4)		(1.6)
Balance as September 30, 2019	$	(954.3)	$	(2.0)	$	(4.3)	$	(89.1)	$	0	$	(1,049.7)

Three Months Ended September 30, 2017: Foreign Currency Translation Adjustments Net Investment Hedges Pension and Postretirement Benefits Investment in New Avon Total
Balance at June 30, 2017 $ (839.7 ) $ (4.3 ) $ (114.0 ) $ 3.4
$ (954.6 )
Other comprehensive income other than reclassifications 13.5
—
—
—
13.5
Reclassifications into earnings:
Amortization of net actuarial loss and prior service cost, net of tax of $0.0⁽¹⁾
—
—
6.5
—
6.5
Total reclassifications into earnings —
—
6.5
—
6.5
Balance at September 30, 2017 $ (826.2 ) $ (4.3 ) $ (107.5 ) $ 3.4
$ (934.6 )

AVON PRODUCTS, INC.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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


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) income other than reclassifications	(135.9)		0		0		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	0		.6		0		6.0		6.6
Balance at September 30, 2020	$	(1,078.6)	$	0	$	(4.3)	$	(84.0)	$	(1,166.9)

Three Months Ended September 30, 2016: Foreign Currency Translation Adjustments Cash Flow Hedges Net Investment Hedges Pension and Postretirement Benefits Total
Balance at June 30, 2016 $ (862.7 ) $ (.4 ) $ (4.3 ) $ (142.4 ) $ (1,009.8 )
Other comprehensive income other than reclassifications 15.4
—
—
.7
16.1
Reclassifications into earnings:
Derivative losses on cash flow hedges, net of tax of $0.0⁽²⁾
—
1.8
—
—
1.8
Amortization of net actuarial loss and prior service cost, net of tax of $.2⁽¹⁾
—
—
—
2.9
2.9
Total reclassifications into earnings —
1.8
—
2.9
4.7
Balance at September 30, 2016 $ (847.3 ) $ 1.4
$ (4.3 ) $ (138.8 ) $ (989.0 )


Nine Months Ended September 30, 2019	Foreign Currency Translation Adjustments		Cash Flow Hedges		Net Investment Hedges		Pension and Postretirement Benefits		Investment in New Avon (2)		Total
Balance at December 31, 2018	$	(936.2)	$	.5	$	(4.3)	$	(93.8)	$	3.4	$	(1,030.4)
Other comprehensive (loss) other than reclassifications	(18.1)		(3.6)		—		—		—		(21.7)
Reclassifications into earnings:
Derivative loss on cash flow hedges, net of tax of $0.0	—		1.1		—		—		—		1.1
Amortization of net actuarial loss and prior service cost, net of tax of $0.51)	—		—		—		4.7		—		4.7
Sale of New Avon	—		—		—		—		(3.4)		(3.4)
Total reclassifications into earnings	0		1.1		0		4.7		(3.4)		2.4
Balance as September 30, 2019	$	(954.3)	$	(2.0)	$	(4.3)	$	(89.1)	$	0	$	(1,049.7)

Nine Months Ended September 30, 2017: Foreign Currency Translation Adjustments Net Investment Hedges Pension and Postretirement Benefits Investment in New Avon Total
Balance at December 31, 2016 $ (910.9 ) $ (4.3 ) $ (120.2 ) $ 2.2
$ (1,033.2 )
Other comprehensive income other than reclassifications 84.7
—
—
1.2
85.9
Reclassifications into earnings:
Amortization of net actuarial loss and prior service cost, net of tax of $0.0⁽¹⁾
—
—
12.7
—
12.7
Total reclassifications into earnings —
—
12.7
—
12.7
Balance at September 30, 2017 $ (826.2 ) $ (4.3 ) $ (107.5 ) $ 3.4
$ (934.6 )

For further details on Other Comprehensive loss other than reclassifications see the Consolidated Statement of Comprehensive Loss.

Nine Months Ended September 30, 2016: Foreign Currency Translation Adjustments Cash Flow Hedges Net Investment Hedges Pension and Postretirement Benefits Total
Balance at December 31, 2015 $ (950.0 ) $ (1.3 ) $ (4.3 ) $ (410.6 ) $ (1,366.2 )
Other comprehensive income (loss) other than reclassifications 31.4
—
—
(10.6 ) 20.8
Reclassifications into earnings:
Derivative losses on cash flow hedges, net of tax of $0.0⁽²⁾
—
2.7
—
—
2.7
Amortization of net actuarial loss and prior service cost, net of tax of $.6⁽¹⁾
—
—
—
12.4
12.4
Deconsolidation of Venezuela, net of tax of $0.0 81.3
—
—
.8
82.1
Separation of North America, net of tax of $10.2 (10.0 ) —
—
269.2
259.2
Total reclassifications into earnings 71.3
2.7
—
282.4
356.4
Balance at September 30, 2016 $ (847.3 ) $ 1.4
$ (4.3 ) $ (138.8 ) $ (989.0 )

(1) Gross amount reclassified to ~~pension and postretirement expense, within selling, general & administrative expenses,~~other income (expense), net in our Consolidated Statements of Operations, and related taxes reclassified to income ~~taxes.~~taxes in our Consolidated Statements of Operations.

(2) ~~Gross amount~~ In April 2019, Avon and Cerberus signed an agreement with LG Household & Health Care Ltd. for the sale of New Avon, including our 19.9% ownership interest. In April 2019, Avon and Cerberus signed an agreement with LG Household & Health Care Ltd. for the sale of New Avon, including our 19.9% ownership interest. This transaction closed on August 14, 2019 and the related balance was reclassified ~~to interest expense, and related taxes reclassified to income taxes.~~into earnings.

~~A foreign~~Foreign exchange net gain of ~~$5.0~~$5.6 and net loss of ~~$1.9~~$5.1 for the three months ended September 30, ~~2017~~2020 and ~~2016,~~2019, respectively, and a foreign exchange net gain of ~~$14.8~~$1.7 and net loss of ~~$12.8~~$5.8 for the nine months ended September 30, ~~2017~~2020 and ~~2016,~~2019, 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 ~~Income (Loss).~~Loss.

AVON PRODUCTS, INC.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~10.~~9. SEGMENT INFORMATION

The Company has updated its reportable segments to align with how the business is operated and managed since the merger with Natura &Co Holding. We have identified 2 reportable segments based on geographic operations: Avon International and Avon Latin America. In prior periods, the Company reported 4 segments: Europe, Middle East and Africa, Asia Pacific, South Latin America and North Latin America. Previously reported segment information has been recast throughout the consolidated financial statements, as applicable, for all periods presented to reflect the changes in the Company’s reportable segments.

We determine segment profit by deducting the related costs and expenses from segment revenue. ~~In order to ensure comparability between periods, segment~~Segment profit includes an allocation of ~~global marketing~~central expenses ~~based on actual revenues.~~to the extent they support the operating activity of the segment. Segment profit excludes ~~global expenses other than the allocation of marketing, costs to implement ("CTI")~~certain CTI restructuring initiatives, ~~(see Note 12, Restructuring Initiatives), a loss contingency related to a non-U.S. pension plan (see Note 7, Employee Benefit Plans),~~ certain significant asset impairment charges, and other ~~items,~~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	2020		2019		2020		2019
Avon International	$	457.1	$	505.6	$	1,239.2	$	1,614.4
Avon Latin America (5)	540.0		682.4		1,319.9		1,935.3
Total revenue from reportable segments (1)	997.1		1,188.0		2,559.1		3,549.7
Revenue from affiliates to Natura &Co	.9		0		2.7		0
Total revenue(1)	998.0		1,188.0		2,561.8		3,549.7

Three Months Ended September 30, Nine Months Ended September 30,
Total Revenue 2017 2016 2017 2016
Europe, Middle East & Africa $ 482.8
$ 476.4
$ 1,484.9
$ 1,517.7
South Latin America 589.7
594.8
1,647.0
1,556.9
North Latin America 206.0
196.8
607.0
625.9
Asia Pacific 130.1
131.4
379.0
406.4
Total revenue from reportable segments 1,408.6
1,399.4
4,117.9
4,106.9
Other operating segments and business activities 9.2
9.4
28.9
42.7
Total revenue $ 1,417.8
$ 1,408.8
$ 4,146.8
$ 4,149.6


	Three Months Ended September 30,				Nine Months Ended September 30,
Operating Profit	2020		2019		2020		2019
Segment Profit
Avon International	$	17.4	$	35.4	$	15.7	$	129.9
Avon Latin America(5)	22.0		108.0		(46.0)		174.4
Total profit from reportable segments (2)	$	39.4	$	143.4	$	(30.3)	$	304.3
Unallocated global expenses(3)	(3.2)		(8.9)		(5.0)		(26.9)
Certain Brazil indirect taxes(6)	0		0		10.6		0
CTI restructuring initiatives	(12.4)		(17.5)		(17.6)		(116.7)
Costs related to the Transaction (4)	0		(19.3)		(85.8)		(36.4)
Operating profit	$	23.8	$	97.7	$	(128.1)	$	124.3

Three Months Ended September 30, Nine Months Ended September 30,
Operating Profit 2017 2016 2017 2016
Segment Profit
Europe, Middle East & Africa $ 65.9
$ 66.2
$ 222.5
$ 218.3
South Latin America 66.3
73.8
124.8
157.9
North Latin America 17.2
24.4
56.0
85.0
Asia Pacific 13.0
12.9
34.1
43.1
Total profit from reportable segments $ 162.4
$ 177.3
$ 437.4
$ 504.3
Other operating segments and business activities 1.1
(1.0 ) 3.9
3.2
Unallocated global expenses (74.3 ) (77.5 ) (243.3 ) (249.6 )
CTI restructuring initiatives (6.2 ) (14.0 ) (36.5 ) (70.2 )
Loss contingency —
—
(18.2 ) —
Legal settlement —
27.2
—
27.2
Operating profit $ 83.0
$ 112.0
$ 143.3
$ 214.9

~~Other operating segments and~~(1)Total revenue also includes revenue from other business activities ~~include~~of $2.8 and $4.7 for the ~~first quarter of 2016 results of Venezuela, as it was deconsolidated effective March 31, 2016, as well as markets that have been exited. Effective in~~three months ended September 30, 2020 and 2019 and $11.6 and $14.7 for the ~~first quarter of 2017, given that we exited Thailand during 2016, the results of Thailand are now reported in~~nine months ended September 30, 2020 and 2019, respectively, allocated to Avon International and Avon Latin America segments. Other ~~operating segments and~~ business activities ~~for all periods presented, while previously the results had been reported in Asia Pacific. Other operating segments and business activities also~~ include revenue from the sale of products to New Avon since the separation of the ~~Company's~~Company’s North America business into New Avon on March 1, 2016 and ongoing royalties from the licensing of our name and products. Previously reported amount has been allocated to Avon International and Avon Latin America segments to conform to the current year presentation.

(2)Total profit 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 $1.3 and $.9 for the three months ended September 30, 2020 and 2019 and $5.4 and $2.0 for the nine months ended September 30, 2020 and 2019, 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 $50.2 and $58.8 for the three months ended September 30, 2020 and 2019 and $153.2 and $187.2 for the nine months ended September 30, 2020 and 2019, 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. Previously reported amounts has been allocated to segments to conform to the current year presentation.

AVON PRODUCTS, INC.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

(3)For the three and nine months ended September 30, 2020 and the three and nine months ended September 30, 2019, unallocated global expenses primarily include stewardship and other expenses not directly attributable to reportable segments.

~~11.~~(4)For the nine months ended September 30, 2020, costs related to the Transaction primarily include professional fees of approximately $46, severance payments of approximately $25 and acceleration of share based compensation of approximately $10 relating to these terminations triggered by change in control provisions. For the three months and nine month ended September 30, 2019, costs related to the Transaction primarily include professional fees and other impairment losses on assets. Refer to Note 18, Merger with Natura for more information relating to the Natura transaction.

(5)The three and nine month periods ended September 30, 2019 include the impact of certain Brazil indirect taxes, which were recorded in revenue in the amount of approximately $68.

(6)The nine month period ended September 30, 2020 includes the impact of certain Brazil indirect taxes, which were recorded in selling, general and administrative expenses, net in the amounts of approximately $11.

10. SUPPLEMENTAL BALANCE SHEET INFORMATION

At September 30, ~~2017~~2020 and December 31, ~~2016~~,2019, prepaid expenses and other included the following:


Components of Prepaid Expenses and Other	September 30, 2017		December 31, 2016		Components of Prepaid Expenses and Other	September 30, 2020		December 31, 2019
Prepaid taxes and tax refunds receivable	$	107.4	$	99.3	Prepaid taxes and tax refunds receivable	$	115.5	$	141.1
Receivables other than trade(1)					Receivables other than trade(1)	48.1		51.4
Prepaid brochure costs, paper and other literature	72.6		73.2		Prepaid brochure costs, paper and other literature	10.3		13.1
Receivables other than trade	55.8		68.3
Other	56.4		50.5		Other	36.3		46.5
Prepaid expenses and other	$	292.2	$	291.3	Prepaid expenses and other	$	210.2	$	252.1

At (1) As of September 30, ~~2017~~2020, the Company has recognized insurance receivables of $12 related to a contingent liability of approximately $15 for Shareholder Litigation, recognized in the Consolidated Balance Sheet under Other Accrued Liabilities. See Note 7, Contingencies.

At September 30, 2020 and December 31, ~~2016,~~2019, other assets included the following:


Components of Other Assets(1)	September 30, 2020		December 31, 2019
Net overfunded pension plans	$	100.5	$	100.6
Capitalized software	69.5		83.1
Judicial deposits	47.4		70.1
Long-term receivables	145.7		196.1
Trust assets associated with supplemental benefit plans	35.5		37.3
Other	18.8		27.6
Other assets	$	417.4	$	514.8

(1) As of September 30, 2020 and December 31, 2019, the Company had tooling, net of amortization of $8.0 and $12.9, respectively. Tooling balance as of December 31, 2019 previously included in other long-term assets has been reclassified to property, plant and equipment to conform to the current year presentation.

Components of Other Assets September 30, 2017 December 31, 2016
Deferred tax assets $ 162.9
$ 162.1
Judicial deposits other than Brazil IPI tax (see below) 84.3
78.0
Capitalized software 81.4
83.9
Long-term receivables 81.4
78.9
Judicial deposit for Brazil IPI tax on cosmetics (Note 8) 75.6
69.0
Net overfunded pension plans 73.0
54.8
Trust assets associated with supplemental benefit plans 36.7
35.2
Tooling (plates and molds associated with our beauty products) 13.2
14.7
Investment in New Avon (Note 4) —
32.8
Other 12.3
12.3
Other assets $ 620.8
$ 621.7

~~12.~~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, including new top line synergies at Natura &Co Latin America, as well as cost synergies at Avon International.

AVON PRODUCTS, INC.

Open Up Avon, Open Up & Grow and Transformation Plan

In January 2016, we ~~announced the~~ initiated a transformation plan (the "Transformation Plan, which includes cost reduction efforts to continue to improve our cost structure and to enable us to reinvest in growth. As a result of this plan, we have targeted pre-tax annualized cost savings of approximately $350 after three years, with an estimated $200 from supply chain reductions and an estimated $150 from other cost reductions, which are expected to be achieved through restructuring actions, as well as other cost-savings strategies that will not result in restructuring charges. We plan to reinvest a portion of these cost savings in growth initiatives, including media, social selling and information technology systems that will help us modernize our business. We initiated the Transformation PlanPlan"), in order to enable us to achieve our long-term goals of mid-single-digit Constant $ revenue growth and low double-digit operating ~~margin and mid single-digit constant-dollar revenue growth. As part of the~~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 ~~identified certain~~initiated a new strategy in order to return Avon to growth ("Open Up Avon"). The Open Up Avon strategy is 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. These savings have been and are expected to continue to be achieved through restructuring actions ~~that we believe will reduce ongoing costs, primarily consisting of global headcount reductions relating~~(that have may continue to ~~operating model changes,~~result in charges related to severance, contract terminations and inventory and other asset write-offs), as well as other cost-savings strategies that would not result in restructuring charges. 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 ~~closure~~new leadership of ~~Thailand, a smaller, under-performing market. These operating model changes include~~Avon refreshed our strategy ("Open Up & Grow") which aims to return Avon to growth over the ~~streamlining of our corporate functions to align with~~next three years. Open Up & Grow replaces and builds on the ~~current and future needs~~success of the ~~business~~Open Up Avon strategy, launched in 2018 to strengthen competitiveness through enhancing the representative experience, improving brand position and ~~an information technology infrastructure outsourcing initiative.~~

~~As a result of these restructuring actions approved to-date, we have recorded total costs to implement these restructuring initiatives of $143.6 before taxes, of which $37.5 was recorded during~~relevance, accelerating digital expansion and improving costs. Over the nine months ended September 30, 2017, in our Consolidated Statements of Operations. The additional charges not yet incurred associated with the restructuring actions approved to-date of approximately $5 to $10 before taxesnext three years, savings are expected to be recorded primarily in 2018. At this time we are unable to quantify the total costs to implement the restructuring initiatives that will be incurred through the time the Transformation Plan is fully implemented as we have not yet identified all actionscontinue to be ~~taken.~~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.

~~AVON PRODUCTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

Costs to Implement Restructuring ~~Charges~~Initiatives - Three and Nine Months Ended September 30, ~~2017~~2020 and 2019

During the three ~~and nine~~ months ended September 30, ~~2017,~~2020, we recorded net costs to implement of ~~$6.5~~$10.9, of which $11.1 related to Avon Integration, $0.7 related to Open Up & Grow and ~~$37.5, respectively,~~a benefit of $.9 related to the Transformation Plan, in our Consolidated Statements of Operations. ~~The costs consisted of the following:~~

~~net charges of $2.3 and $19.4, respectively, for employee-related costs, including severance benefits;~~

~~contract termination and other net charges of $2.0 and $14.2, respectively, associated with vacating our previous corporate headquarters, including the impairment of fixed assets;~~

~~implementation costs of $1.8 and $2.5, respectively, primarily related to professional service fees; and~~

~~accelerated depreciation of $.4 and $1.4, respectively.~~

~~Of the total costs to implement during~~During the three months ended September 30, ~~2017, all $6.5 was~~2019, we recorded ~~in selling, general and administrative expenses. Of the total~~ costs to implement ~~during~~of $17.5 of which $10.8 related to Open Up Avon, $6.7 related to the Transformation Plan, in our Consolidated Statements of Operations.

During the nine months ended September 30, ~~2017, $37.6 was~~2020, we recorded ~~in selling, general and administrative expenses~~net costs to implement of $16.1, of which $12.7 related to Avon Integration, $7.6 related to Open Up & Grow and a benefit of ~~$.1 was recorded~~$4.2 related to the Transformation Plan, in ~~cost~~our Consolidated Statements of ~~sales.~~

~~Restructuring Charges - Three and Nine Months Ended~~Operations. During the nine months ended September 30, ~~2016~~2019, we recorded costs to implement of $93.2 of which $84.1 related to Open Up Avon, $9.0 related to the Transformation Plan, and $.1 related to other restructuring initiatives, in our Consolidated Statements of Operations.

~~During~~

AVON PRODUCTS, INC.

The costs during the three and nine months ended September 30, ~~2016, we recorded costs to implement of $14.0~~2020 and ~~$71.5, respectively, related to the Transformation Plan, in the Consolidated Statement of Operations. The costs~~2019 consisted of the following:

~~net charges of $11.8 and $61.7, respectively, for~~


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
CTI recorded in operating profit - COGS
Manufacturing asset write-offs	$	0	$	1.1	$	0	$	10.9
Inventory write-off	(.8)		(2.1)		(1.1)		1.0
	(.8)		(1.0)		(1.1)		11.9

CTI recorded in operating profit - SG&A
Net charges for employee-related costs, including severance benefits	5.7		3.2		4.0		51.9
Implementation costs, primarily related to professional service fees	5.9		7.8		6.7		33.7
Dual running costs	.8		3.7		2.3		8.2
Contract termination and other net benefits	.4		(.1)		3.4		4.5
Impairment of other assets	0		.1		.7		2.4
Accelerated depreciation	0		2.3		.4		2.6
Variable lease charges	.4		1.5		1.3		1.5
	13.2		18.5		18.8		104.8

CTI recorded in operating profit	12.4		17.5		17.7		116.7

CTI recorded in other (expense) income
(Gain) loss on sale of business / assets	(1.5)		0		(1.6)		(23.5)

Total CTI	$	10.9	$	17.5	$	16.1	$	93.2

Avon Integration	$	11.1	$	0	$	12.7	$	0
Open Up & Grow	$	.7	$	10.8	$	7.6	$	84.1
Transformation Plan	$	(.9)	$	6.7	$	(4.2)	$	9.0
Other	$	0	$	0			$	.1

The tables below include restructuring costs such as employee-related costs, ~~including severance benefits;~~

inventory and asset write-offs, foreign currency translation write-offs and contract ~~termination~~terminations, and do not include other ~~net charges of $1.0 and $5.6, respectively;~~

~~implementation costs of $1.1 and $2.6, respectively, primarily related to professional service fees;~~

~~accelerated depreciation of $.1 and $1.3, respectively; and~~

~~inventory write-offs of $.3 for the nine months ended September 30, 2016.~~

~~Of the total~~ costs to implement ~~during the three months ended September 30, 2016, all $14.0 was recorded in selling, general~~restructuring initiatives such as professional services fees, dual running costs, accelerated depreciation and administrative expenses. Of the total costs to implement during the nine months ended September 30, 2016, $71.2 was recorded in selling, general and administrative expenses and $.3 was recorded in costgain on sale of ~~sales.~~business.

The liability balance included in other accrued liabilities in our Consolidated Balance Sheet for the restructuring actions associated with Avon Integration at September 30, 2020 is $.7 related to employee related costs.

AVON PRODUCTS, INC.

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, 2020 is as follows:


	Employee-Related Costs		Inventory/Assets Write-offs		Contract Terminations/Other		Total
Balance at December 31, 2019	$	17.8	$	0	$	6.4	$	24.2
2020 charges	2.3		(.5)		3.0		4.8
Adjustments	(2.6)		0		.3		(2.3)
Cash payments	(7.8)		0		(6.9)		(14.7)
Non-cash write-offs	0		.5		0		.5
Foreign exchange	(.6)		0		(.1)		(.7)
Balance at September 30, 2020	$	9.1	$	0	$	2.7	$	11.8

The liability balance included in other accrued liabilities in our Consolidated Balance Sheet for the restructuring actions associated with our Transformation Plan as of September 30, ~~2017~~2020 is as follows:

Employee-Related Costs Contract Terminations/Other Total
Balance at December 31, 2016 $ 48.6
$ 2.8
$ 51.4
2017 charges 21.7
—
21.7
Adjustments (2.3 ) 14.2
11.9
Cash payments (28.2 ) (.1 ) (28.3 )
Non-cash write-offs —
(14.0 ) (14.0 )
Foreign exchange .5
—
.5
Balance at September 30, 2017 $ 40.3
$ 2.9
$ 43.2


	Employee-Related Costs		Contract Terminations/Other		Total
Balance at December 31, 2019	$	8.4	$	1.5	$	9.9
2020 charges	(.2)		0		(.2)
Adjustments	(4.3)		0		(4.3)
Cash payments	(.4)		(1.3)		(1.7)
Foreign exchange	(.1)		(.1)		(.2)
Balance at September 30, 2020	$	3.4	$	.1	$	3.5

The majority of cash payments, if applicable, associated with ~~these charges~~the year-end liability are expected to be made during ~~2017.~~2020.

The following table presents the restructuring charges incurred to date, under, Avon Integration, 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 ~~plan:~~

plans:


												Employee- Related Costs		Inventory/ Asset Write-offs		Contract Terminations/Other		Foreign Currency Translation Adjustment Write-offs		Total
	Employee- Related Costs		Inventory Write-offs		Foreign Currency Translation Adjustment Write-offs		Contract Terminations/Other		Total
Avon Integration											Avon Integration
Charges incurred to-date	$	103.4	$	.4	$	2.7	$	22.9	$	129.4	Charges incurred to-date	$	8.8	$	0	$	0	$	0	$	8.8
Estimated charges to be incurred on approved initiatives	6.3		—		—		1.2		7.5		Estimated charges to be incurred on approved initiatives	0		0		0		0		0
Total expected charges on approved initiatives	$	109.7	$	.4	$	2.7	$	24.1	$	136.9	Total expected charges on approved initiatives	$	8.8	$	0	$	0	$	0	$	8.8

Open Up & Grow											Open Up & Grow
Charges incurred to-date											Charges incurred to-date	$	83.3	$	107.1	$	11.9	$	(10.9)	$	191.4
Estimated charges to be incurred on approved initiatives											Estimated charges to be incurred on approved initiatives	0		0		2.5		0		2.5
Total expected charges on approved initiatives											Total expected charges on approved initiatives	$	83.3	$	107.1	$	14.4	$	(10.9)	$	193.9

Transformation Plan											Transformation Plan
Charges incurred to-date											Charges incurred to-date	$	122.6	$	2.5	$	40.9	$	3.4	$	169.4
Estimated charges to be incurred on approved initiatives											Estimated charges to be incurred on approved initiatives	0		0		0		0		0
Total expected charges on approved initiatives											Total expected charges on approved initiatives	$	122.6	$	2.5	$	40.9	$	3.4	$	169.4

AVON PRODUCTS, INC.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

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


																		Avon International*		Avon Latin America*		Total
	Europe, Middle East & Africa			South Latin America			North Latin America			Asia Pacific			Global & Other Operating Segments		Total
2015	$	—		$	—		$	—		$	—		$	21.4	$	21.4
2016	30.9			13.2			4.4			11.7			14.2		74.4
First quarter 2017	3.0			2.7			(.1		)	(.5		)	3.9		9.0
Second quarter 2017	(.1		)	3.0			—			(.1		)	17.5		20.3
Third quarter 2017	(.1		)	(.1		)	—			—			4.5		4.3
Avon Integration																	Avon Integration
Second quarter 2020																	Second quarter 2020	$	1.5	$	0	$	1.5
Third quarter 2020																	Third quarter 2020	4.5		2.8		7.3
Charges incurred to-date	33.7			18.8			4.3			11.1			61.5		129.4		Charges incurred to-date	6.0		2.8		8.8
Estimated charges to be incurred on approved initiatives	1.2			—			—			—			6.3		7.5		Estimated charges to be incurred on approved initiatives	0		0		0
Total expected charges on approved initiatives	$	34.9		$	18.8		$	4.3		$	11.1		$	67.8	$	136.9	Total expected charges on approved initiatives	$	6.0	$	2.8	$	8.8

Open Up & Grow																	Open Up & Grow
2018																	2018	$	52.8	$	64.3	$	117.1
2019																	2019	34.7		36.9		71.6
First quarter 2020																	First quarter 2020	3.7		(.1)		3.6
Second quarter 2020																	Second quarter 2020	(.3)		(.1)		(.4)
Third quarter 2020																	Third quarter 2020	(.2)		(.3)		(.5)
Charges incurred to-date																	Charges incurred to-date	90.7		100.7		191.4
Estimated charges to be incurred on approved initiatives																	Estimated charges to be incurred on approved initiatives	2.5		0		2.5
Total expected charges on approved initiatives																	Total expected charges on approved initiatives	$	93.2	$	100.7	$	193.9

Transformation Plan																	Transformation Plan
2015																	2015	$	21.4	$	0	$	21.4
2016																	2016	56.8		17.6		74.4
2017																	2017	49.8		5.0		54.8
2018																	2018	19.0		4.7		23.7
2019																	2019	(1.0)		.6		(.4)
First quarter 2020																	First quarter 2020	(2.9)		.1		(2.8)
Second quarter 2020																	Second quarter 2020	(.2)		0		(.2)
Third quarter 2020																	Third quarter 2020	(1.6)		.1		(1.5)
Charges incurred to-date																	Charges incurred to-date	141.3		28.1		169.4
Estimated charges to be incurred on approved initiatives																	Estimated charges to be incurred on approved initiatives	0		0		0
Total expected charges on approved initiatives																	Total expected charges on approved initiatives	$	141.3	$	28.1	$	169.4

On March 1, 2016, the Company issued and sold to Cerberus Investor 435,000 shares of newly issued series C preferred stock for an aggregate purchase price of $435 pursuant to an Investment Agreement, dated as of December 17, 2015, between the Company and Cerberus Investor. In ~~addition~~connection with the issuance of the series C preferred stock, the Company incurred direct and incremental expenses of $8.7, composed of financial advisory fees and legal expenses, which reduced the carrying value of the series C preferred stock. Cumulative preferred dividends accrue daily on the series C preferred stock at a rate of 1.25% per quarter. The series C preferred stock had accrued unpaid dividends of $91.3 as of December 31, 2019.

On December 19, 2019, the Company and Natura &Co Holding announced that as of such date, all regulatory approvals required by the Merger Agreement to complete the Transactions have been obtained. As a result, the series C preferred stock were probable of becoming redeemable and the redemption value was adjusted. Subsequently, on December 30, 2019, Cerberus elected to convert the series C preferred stock, and the series C preferred stock was no longer probable of becoming redeemable. We recognize changes in redemption value immediately as they occur and the carrying value of the security is adjusted to equal what the redemption amount would be as if redemption were to occur at the end of the reporting date based on the conditions that exist as of that date. As a result, we recognized an increase of $60.9 in the carrying value of the series C preferred stock for the year ended December 31, 2019.

On December 30, 2019, Cerberus elected to convert 435,000 shares of series C preferred stock, representing all shares of series C preferred stock outstanding, into 87,000,000 shares of the Company’s common stock, par value U.S.$0.25 per share, pursuant to the ~~charges included~~holder of the Company’s series C preferred stock’s rights under the Company’s certificate of incorporation. The foregoing election was conditioned upon the filing of the certificates of merger with respect to the First Merger (the "Conversion Condition").

On January 3, 2020, the Company consummated the Transaction to become a wholly owned direct subsidiary of Natura &Co Holding. Upon consummation of the Transaction, the Company’s common stock was converted to Natura &Co Holding common stock. After the effective time of the Second Merger and in January 2020, Natura &Co Holding elected to pay the ~~tables above, we have incurred and will continue~~accrued dividends on the shares of series C preferred stock in an amount equal to ~~incur other costs~~$91.5 to ~~implement restructuring initiatives such as professional services fees and accelerated depreciation.~~

~~Other Restructuring Initiatives~~

During the three and nine months ended September 30, 2017, we recorded net benefits of $.3 and $1.0, respectively, in selling, general and administrative expenses, in the Consolidated Statements of Operations, associatedCerberus. See Note 18, Mergers with ~~the restructuring programs launched in 2005 and 2009, the restructuring initiatives launched in 2012 (including the cost savings initiative known as the "$400M Cost Savings Initiative")~~Natura Cosméticos S.A., and the restructuring actions identified during 2015 (collectively, the "Other Restructuring Initiatives"), which are substantially complete. During the three and nine months ended September 30, 2016, we recorded an immaterial amount and a net benefit of $1.3, respectively, in selling, general and administrative expenses, in the Consolidated Statements of Operations, associated with the Other Restructuring Initiatives. The liability balance associated with the Other Restructuring Initiatives, which primarily consists of employee-related costs, as of September 30, 2017 is not material.Note 3, Related Party Transactions.

~~Goodwill~~


	Avon International		Avon Latin America		Total


Net balance at December 31, 2019*	$	20.0	$	66.2	$	86.2

Changes during the period ended September 30, 2020:


Foreign exchange	(1.0)		(10.2)		(11.2)



Net balance at September 30, 2020	$	19.0	$	56.0	$	75.0

*In January 2020 the Company became a fully owned subsidiary of Natura &Co Holding. As a result of this transaction, the Company has updated its reportable segments to align with Natura &Co Holding operations. Previously reported segment information has been recast throughout the financial statements, as applicable, for all periods presented to reflect the changes in the Company’s reportable segments. Refer to Note 9, Segment Information for more information.

Europe, Middle East & Africa
South Latin
America

Asia
Pacific
Total
Net balance at December 31, 2016 $ 18.7
$ 72.3
$ 2.6
$ 93.6
Changes during the period ended September 30, 2017:
Foreign exchange 1.6
1.6
—
3.2
Net balance at September 30, 2017 $ 20.3
$ 73.9
$ 2.6
$ 96.8

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 ~~were immaterial at~~as of September 30, ~~2017~~2020:


	Level 1		Level 2		Total
Assets:
Available-for-sale securities	$	4.2	$	0	$	4.2
Foreign exchange forward contracts	$	0	$	0	$	0
Total	$	4.2	$	0	$	4.2
Liabilities:
Foreign exchange forward contracts	$	0	$	24.8	$	24.8
Total	$	0	$	24.8	$	24.8


	Level 1		Level 2		Total
Assets:
Available-for-sale securities	$	4.3	$	0	$	4.3
Foreign exchange forward contracts	$	0	$	5.6	$	5.6
Total	$	4.3	$	5.6	$	9.9
Liabilities:
Foreign exchange forward contracts	$	0	$	3.8	$	3.8
Total	$	0	$	3.8	$	3.8

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

~~AVON PRODUCTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

carrying value for cash and cash equivalents, accounts receivable, accounts ~~payable~~payable, debt maturing within one year and short-term investments approximate fair value because of the short-term nature of these instruments.

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, ~~2017~~2020 and December 31, ~~2016,~~2019, respectively, consisted of the following:

(1)The carrying value of ~~debt maturing within one year and~~ long-term debt is presented net of debt issuance costs and includes any related discount or ~~premium and unamortized deferred gains on terminated interest-rate swap agreements, as applicable.~~premium.

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

15. 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. The master 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 ~~merger.~~Transaction.

Derivatives are recognized in the Consolidated Balance Sheets at their fair values. The following table presents the fair value of derivative instruments ~~outstanding were immaterial~~ at September 30, ~~2017~~ ~~and~~2020:


	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	$	0	Accounts payable	$	24.8
Total derivatives		$	0		$	24.8

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, ~~2016.~~2019:


	Asset			Liability
	Balance Sheet Classification	Fair Value		Balance Sheet Classification	Fair Value
Derivatives designated as hedges:
Foreign exchange forward contracts	Prepaid expenses and other	$	0	Accounts payable	$	.6

Derivatives not designated as hedges:
Foreign exchange forward contracts	Prepaid expenses and other	$	5.6	Accounts payable	$	3.2
Total derivatives		$	5.6		$	3.8

~~A portion~~At September 30, 2020 and December 31, 2019, our exposure to floating interest rate risk was minimal as over 98% of our borrowings ~~is subject to interest rate risk. In the past we have used interest-rate swap agreements,~~are at fixed rates of interest. Only our short-term debt, which effectively converted the fixed rate on long-term debt to a floating interest rate, to manage our interest rate exposure. The agreements were designated as fair value hedges. As of September 30, 2017, we do not have any interest-rate swap agreements. Approximately 1%represents approximately 2% of our debt portfolio, at ~~September 30, 2017~~ ~~and December 31, 2016 was~~is exposed to floating interest rates.

~~In January 2013, we terminated eight of our interest-rate swap agreements previously designated as fair value hedges, with notional amounts totaling $1,000. As of the interest-rate swap agreements’ termination date, the aggregate favorable adjustment to the carrying value (deferred gain) of our debt was $90.4~~, which was amortized as a reduction to interest expense over the remaining term of the underlying debt obligations. The net impact of the gain amortization was $11.7 and $19.1, respectively, for the three and nine months ended September 30, 2016, both of which included $9.2 related to the extinguishment of debt (see Note 16, Debt). At September 30, 2017, there is no unamortized deferred gain associated with the January 2013 interest-rate swap termination, as the underlying debt obligations have been paid.

~~In March 2012, we terminated two of our interest-rate swap agreements previously designated as fair value hedges, with notional amounts totaling $350. As of the interest-rate swap agreements’ termination date, the aggregate favorable adjustment to the carrying value (deferred gain) of our debt was $46.1, which is being amortized as a reduction to interest expense over the~~

~~AVON PRODUCTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

remaining term of the underlying debt obligations through March 2019. The net impact of the gain amortization was $1.2 and $3.6 for the three and nine months ended September 30, 2017, respectively, and $5.1 and $8.5 for the three and nine months ended September 30, 2016, respectively, both of which included $3.6 related to extinguishment of debt (see Note 16, Debt). At ~~September 30, 2017, the unamortized deferred gain associated with the March 2012 interest-rate swap termination was $7.2, and was classified within long-term debt in our Consolidated Balance Sheets.~~

Foreign Currency Risk

We may use foreign exchange forward contracts to manage a portion of our foreign currency exchange rate exposures. At September 30, ~~2017,~~2020, we had outstanding foreign exchange forward contracts with notional amounts totaling approximately ~~$26~~$417 for various ~~currencies.~~currencies, 0ne of which were designated as cash flow hedges.

We may use foreign exchange forward contracts to manage foreign currency exposure of certain intercompany loans. ~~These contracts are not designated as hedges.~~ The change in fair value of these contracts is immediately recognized in earnings and substantially offsets the foreign currency translation impact recognized in earnings relating to the associated intercompany loans. During the three ~~and nine~~ months ended September 30, ~~2017~~,2020 and 2019, we recorded ~~gains~~a loss of ~~$.6~~$13.9 and ~~$2.8,~~a gain of $35.1, respectively, in other ~~expense,~~(expense) income, net in our Consolidated Statements of Operations related to these undesignated foreign exchange forward contracts. ~~Also during~~During the ~~three and~~ nine months ended September 30, ~~2017,~~2020 and 2019, we recorded ~~losses~~a loss of ~~$1.2~~$7.1 and ~~$4.7, respectively, related to the associated intercompany loans, caused by changes in foreign currency exchange rates.~~ ~~During the three and nine months ended September 30, 2016, we recorded losses~~a gain of ~~$1.2 and $8.7,~~$57.0, respectively, in other ~~expense,~~(expense) income, net in our Consolidated Statements of Operations related to these undesignated foreign exchange forward contracts. ~~Also~~

During the first quarter of 2019, we discontinued our program to hedge foreign exchange risk relating to forecasted operational transactions. The last of our designated cash flow hedges expired during the ~~three and~~first quarter of 2020. Our designated hedges did not have a material impact on our Consolidated Financial Statements for the nine months ended September 30, ~~2016, we recorded gains of $.1~~2020 and ~~$5.5, respectively, related to the associated intercompany loans, caused by changes in foreign currency exchange rates.~~2019.

Natura Revolving Credit Facility

In May 2020, the Company’s subsidiary, Avon Luxembourg Holdings S.à r.l entered into a Revolving Credit Facility Agreement with Natura &Co International S.à r.l,. a subsidiary of Natura &Co Holding S.A. and an affiliate of the Company in the amount of $100 which may be used for working capital and other general corporate purposes (the "Facility"). Any borrowings under the Facility will bear interest at a rate per annum of LIBOR plus 7.7% and the Facility will mature on May 31, 2022. During the third quarter of 2020, we drew down $59.7 and repaid $19.8 including interest. As at September 30, 2020, $40.8 including interest was outstanding under the Facility.

Other loans from affiliates of Natura &Co

During the second quarter of 2020, the Company’s subsidiary, Cosmeticos Avon S.A.C.I entered into an agreement to receive funding from Natura Cosmeticos S.A., a subsidiary of Natura &Co Holding S.A and an affiliate of the Company in the amount of 300 million Argentine Peso which may be used for working capital and other general corporate purposes (the "Argentina Facility"). Any borrowings under the Argentina Facility will bear interest at a rate per annum of 29.81% and has a six-month maturity. At September 30, 2020 the balance outstanding under this loan is $4.5.

Loans from affiliates of Natura &Co Holding at September 30, 2020 also include a $1.9 previously intercompany balance that became a related party balance on the sale of Avon Shanghai Management to an affiliate of Natura &Co Holding in August 2020. See Note 3, Discontinued Operations, Assets and Liabilities Held for Sale and Divestitures, for further information relating to this divestiture.

Other short-term financing

In addition, at September 30, 2020, we utilized approximately $30 of short-term financing from third-party banks across multiple markets.

2019 Revolving Credit Facility

In ~~June 2015, the Company and~~February 2019, Avon International ~~Operations, Inc.~~Capital, p.l.c. ("~~AIO"~~AIC"), a ~~wholly-owned domestic~~wholly owned foreign subsidiary of the Company, entered into a ~~five-year $400.0~~three year €200.0 senior secured revolving credit facility (the ~~“2015 facility”~~"2019 facility")~~. Borrowings under~~ and capitalized $11.0 of issuance costs, the ~~2015~~related cash outflow is presented in other financing activities within the 10-K Consolidated Statement of Cash Flows. The 2019 facility bear interest, at our option, at a rate per annum equal to LIBOR plus 250 basis points or a floating base rate plus 150 basis points, in each case subject to adjustment based upon a leverage-based pricing grid. was available for general corporate and working capital purposes.

As of ~~September 30, 2017,~~December 31, 2019, there were no0 amounts outstanding under the ~~2015 facility.~~

~~All obligations of AIO under the 2015~~2019 facility ~~are (i) unconditionally guaranteed by each material domestic restricted subsidiary of the Company (other than AIO, the borrower), in each case, subject to certain exceptions~~ and ~~(ii) fully guaranteed~~ on an unsecured basis by the Company. The obligations of AIO and the subsidiary guarantors are secured by first priority liens on and security interest in substantially all of the assets of AIO and the subsidiary guarantors, in each case, subject to certain exceptions.

~~The 2015 facility will terminate in June 2020; provided, however, that it shall terminate on the 91~~^st ~~day prior to the maturity of the 6.50% Notes (as defined below) and the 4.60% Notes (as defined below), if on such 91~~^st ~~day, the applicable notes are not redeemed, repaid, discharged, defeased or otherwise refinanced in full.~~

The 2015 facility contains affirmative and negative covenants, which are customary for secured financings of this type, as well as financial covenants (interest coverage and total leverage ratios). As of September 30, 2017, we were in compliance with our interest coverage and total leverage ratios under the 2015 facility. The amount ofJanuary 3, 2020, the facility ~~available to be drawn down is reduced by any standby letters~~was automatically canceled upon change of ~~credit granted by AIO, which,~~control, and as a result $7.8 of ~~September 30, 2017, was approximately $39. As of September 30, 2017, based on then applicable interest rates, approximately $130 could have been drawn down without violating any covenant.~~unamortized issuance costs were written off, see Note 18, Mergers with Natura Cosméticos S.A.,.

~~Public~~Unsecured Notes

In March 2013, we issued in a ~~public offering, $250.0~~series of unsecured notes (the "2013 Notes"). As of September 30, 2020, the following 2013 Notes remain outstanding; $461.9 aggregate principal amount of ~~2.375% Notes due March 15, 2016 (the "2.375% Notes"), $500.0 principal amount of 4.60% Notes due March 15, 2020 (the "4.60% Notes"), $500.0 principal amount of 5.00%~~5% Notes due March 15, 2023 ~~(the "5.00% Notes")~~ and ~~$250.0~~$216.1 aggregate principal amount of 6.95% Notes due March 15, ~~2043 (the "6.95% Notes") (collectively, the "2013 Notes"). In March 2008, we issued $350.0 principal amount of 6.50% Notes due March 1, 2019 (the "6.50% Notes").~~2043. Interest on the 2013 Notes is payable ~~semi-annually~~semiannually on March 15 and September 15 of each ~~year, and interest on the 6.50% Notes are payable semi-annually on March 1 and September 1 of each~~ year.

In August 2015, we prepaid the entire principal amount of our 2.375% Notes plus accrued interest and a make-whole premium. In 2016, we completed cash tender offers totaling to a $300.6 reduction for certain of our outstanding public notes, repurchased

~~AVON PRODUCTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

$180.5 of certain of our outstanding public notes, and prepaid the remaining principal amounts totaling $238.4 of our 4.20% Notes due July 15, 2018 and our 5.75% Notes due March 1, 2018, plus accrued interest and a make-whole premium (the "2016 debt transactions").

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~~Moody’s. The interest ~~rates~~rate on the 2013 Notes ~~increase by .25% for each one-notch downgrade below investment grade on each of our long-term credit ratings assigned to~~is currently at the ~~2013 Notes by S&P or Moody's. These adjustments are limited to a total increase~~maximum allowable level of 2% above the respective interest rates in effect on ~~the~~ date of issuance of the 2013 Notes. As a result of the long-term credit rating downgrades by S&P and Moody's since issuance of the 2013 Notes, the interest rates on these notes have increased by the maximum allowable increase.issuance.

In ~~August 2016,~~September 2020, we ~~completed cash tender offers which resulted in a reduction of principal of $108.6~~repurchased $27.8 of our ~~5.75%~~6.95% Notes due March ~~1, 2018 (the "5.75% Notes"), $73.8~~15, 2043. The aggregate repurchase price was equal to the principal amount of ~~our 4.20% Notes due July 15, 2018 (the "4.20% Notes"), $68.1~~the notes, plus a premium of ~~our 6.50% Notes due March 1, 2019 (the "6.50% Notes")~~$3.8 and ~~$50.1~~accrued interest of ~~our 4.60% Notes.~~$1.2. In connection with the ~~cash tender offers,~~repurchase, we incurred a ~~gain~~loss on extinguishment of debt of ~~$3.9~~$4.1 before tax in the third quarter of ~~2016,~~2020 consisting of ~~a deferred gain of $12.8 associated with~~ the ~~March 2012 and January 2013 interest-rate swap agreement terminations (see Note 15, Derivative Instruments and Hedging Activities), partially offset by the $5.8 of early tender~~$3.8 premium paid for

the ~~cash tender offers, $1.2 of a deferred loss associated with treasury lock agreements designated as cash flow hedges of the anticipated interest payments on the 5.75% Notes, $1.0 of deal costs~~repurchases, and $0.3 for the write-off ~~of $.9~~ of debt issuance costs and discounts related to the initial ~~issuances~~issuance of the notes that were ~~the subject of the cash tender offers.~~

The indentures governing our outstanding notes described above contain certain customary covenants and customary events of default and cross-default provisions. Further, we would be required to make an offer to repurchase all of our outstanding notes described above at a price equal to 101% of their aggregate principal amount plus accrued and unpaid interest in the event of a change in control involving Avon and, at such time, the outstanding notes are rated below investment grade.repurchased.

Senior Secured Notes

In August 2016, ~~AIO~~Avon International Operations, Inc. ("AIO"), issued ~~in a private placement exempt from registration under the Securities Act of 1933, as amended,~~ $500.0 in aggregate principal amount of 7.875% Senior Secured Notes ~~which will mature on~~due August 15, 2022 (the ~~"Senior Secured~~"2016 Notes"). Interest on the ~~Senior Secured~~2016 Notes is payable semi-annually on February 15 and August 15 of each year.

~~All obligations~~In July 2019, AIC issued $400.0 in aggregate principal amount of ~~AIO under the~~6.5% Senior Secured Notes ~~are unconditionally guaranteed by~~due August 15, 2022 (the "2019 Notes"). Interest on the 2019 Notes is payable semi-annually on February 15 and August 15 of each ~~current~~year.

On November 2, 2020, AIO and ~~future wholly-owned domestic restricted subsidiary~~AIC redeemed the 2016 Notes and the 2019 Notes, respectively. See Note 19, Subsequent Events, for additional information.

For a more detailed description of the Company’s debt agreements, refer to Note 8, Debt and Other Financing of our Annual Report on Form 10-K for the year ended December 31, 2019.

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 ~~that is a guarantor under the 2015 facility and fully guaranteed on~~cannot apply an ~~unsecured basis by the Company. The obligations of AIO and the subsidiary guarantors are secured by first priority liens on and security interest in substantially~~effective tax rate approach for all of ~~the assets~~its operations. For those entities that can apply an effective tax rate approach, as of ~~AIO and the subsidiary guarantors, in each case, subject~~September 30, 2020, our annual effective tax rate, excluding discrete items, is 25.9% for 2020, as compared to ~~certain exceptions.~~25.2% as of September 30, 2019.

The ~~indenture governing our Senior Secured Notes contains certain customary covenants and restrictions~~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 ~~well as customary events~~ of ~~default and cross-default provisions. The indenture also contains a covenant requiring AIO and its restricted subsidiaries to, at~~ the end of each quarter and are excluded from the effective tax rate approach. The estimated annual effective tax rate for 2020 also excludes the unfavorable impact of withholding taxes associated with certain intercompany payments, including royalties, service charges, interest and dividends, which in the aggregate are relatively consistent each year ~~own at least~~due to the need to repatriate 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, 2020 and 2019 was $11.8 and $31.5, respectively. Our effective tax rates for the three months ended September 30, 2020 and 2019 were (68.6)% and 21.8%, respectively. The provision for income taxes for the nine months ended September 30, 2020 and 2019 were $26.7 and $78.2, respectively. Our effective tax rates for the nine months ended September 30, 2020 and 2019 were (10.4)% and 48.5%.

The effective tax rates for the three months ended September 30, 2020 and 2019 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 quarter of 2020 was unfavorably impacted by the accrual of net income tax benefits of approximately $5.7 associated with the release of income tax reserves of approximately $10.8 associated with our uncertain tax positions, net of recording a valuation allowance of $4.3 and other miscellaneous income tax expense of approximately $.8. The effective tax rate for the third quarter of 2019 was also favorably impacted by the accrual of miscellaneous income tax benefits of approximately $2.3.

The effective tax rates for the nine months ended September 30, 2020 and 2019 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, 2020 was also unfavorably 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. The effective tax rate in the nine months ended September 30, 2019, was also favorably impacted by the accrual of net income tax benefits of approximately $5.2 associated with our uncertain tax positions and other net, miscellaneous income tax benefits of approximately $2.2.

In prior years, we had previously recorded valuation allowances against certain ~~percentage~~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 ~~total~~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 ~~API and its restricted subsidiaries,~~the valuation allowance release are subject to ~~certain qualifications.~~ change on the basis of the level of profitability that we are able to actually achieve.

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, 2020, the COVID-19 pandemic is negative evidence the Company must consider. As of September 30, 2020, the increase in negative evidence due to COVID-19, primarily lower revenue and profit performance, resulted in approximately $4.3 of valuation allowances being recorded against deferred tax assets.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 ~~would be required to make an offer to repurchase all~~operate in and reduced profitability of our ~~Senior Secured Notes,~~markets could give rise to a need for a valuation allowance to reduce our deferred tax assets in upcoming quarters.

On May 22, 2019, the Company entered into the Agreement and Plan 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 S.A., 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").

The Transaction was consummated on January 3, 2020, and at this time, the Company became a ~~price equal~~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 ~~101%~~the consummation of ~~their aggregate principal amount plus accrued~~the Transaction was converted into the ultimate right to receive, (i) 0.300 validly issued and ~~unpaid interest,~~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 ~~event~~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; see Note 12, Series C Convertible Preferred Stock.

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 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 and $44 in relation to the Transaction, primarily professional fees during the nine months ended September 30, 2020 and the year ended December 31, 2019, respectively.

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 $24 and acceleration of share based compensation of approximately $10 relating to these terminations triggered by change in control ~~involving Avon.~~provisions.

~~Long-Term Credit Ratings~~

~~Our long-term credit ratings are: Moody’s ratings~~As a result of ~~Stable Outlook with B1~~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 ~~corporate family debt, B3 for senior unsecured debt,~~awards of Natura &Co Holding. The replacement awards contain substantially the same terms and ~~Ba1~~conditions of the original awards except for the ~~Senior Secured Notes; S&P ratings~~removal of ~~Stable Outlook with B for corporate family debt and senior unsecured debt and BB- for~~ the ~~Senior Secured Notes; and Fitch rating of Negative Outlook with B+, each of which are below investment grade. We do not believe these long-term credit ratings will have~~performance conditions. As such, the replacement awards contain only a material impact on our near-term liquidity. However, any rating agency reviews could result in a change in outlook or downgrade, which could further limit our access to new financing, particularly short-term financing, reduce our flexibility with respect to working capital needs, affect the market price of some or all of our outstanding debt securities, and likely result in an increase in financing costs, and less favorable covenants and financial terms under our financing arrangements.

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 $480 to approximately $550 in certain taxing jurisdictions.

In November 2020, the Company’s subsidiary, Avon International Operations Inc. entered into a Promissory Note with Natura &Co International S.à r.l, a subsidiary of Natura &Co Holding S.A. and an affiliate of the Company in the amount of $960. The loan agreement will bear interest at a rate per annum of 3.13% and will mature on November 2, 2021 (“the Natura &Co Loan”).

In November 2020, in connection with the Natura & Co Loan, we redeemed the remaining principal amount of our 2016 Notes due August 15, 2022 and the remaining 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 remaining 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 remaining principal amount of $400, plus a premium of $7.9 and accrued interest of $5.6.

In connection with the redemption, we expect to incur 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.

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

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.

We are a global manufacturer and marketer of beauty and related products. Our business is conducted primarily in the direct-selling ~~channel.~~channel, with a strategy to expand to omni-channel. During ~~2016,~~2019, we had sales operations in 5754 countries and territories, and distributed products in 1824 more. 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 ~~four regions: Europe, Middle East & Africa; South~~two regions, Avon International and Avon Latin ~~America; North Latin America; and Asia Pacific.~~America. Our product categories are Beauty and Fashion & Home. Beauty consists of skincare, ~~(which includes personal care),~~ fragrance and color (cosmetics). Fashion & Home consists of fashion ~~jewelry, watches,~~ apparel, ~~footwear,~~ accessories, ~~gift and decorative products,~~ housewares ~~entertainment~~ and leisure ~~products, children’s products and nutritional~~ 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 months ended September 30, ~~2017,~~2020, revenue decreased 28% compared to the prior-year period, impacted by certain indirect taxes recognized in Brazil in the nine month period ended September 30, 2019. Excluding these items, Adjusted revenue decreased 26%, unfavorably impacted by foreign exchange, which was driven by the strengthening of the U.S. dollar relative to multiple currencies, primarily the Brazilian real, the Argentinian peso and the Mexican peso. Constant $ Adjusted revenue decreased 17%.

Revenue and Constant $ Adjusted revenue were impacted by a decrease in Active Representatives of 16%, across all markets. Average Representative Sales decreased 12% on a reported basis, unfavorably impacted by foreign exchange and Constant $ Adjusted Average Representative Sales decreased 1%. The decline in Revenue and Constant $ revenue was affected by the COVID-19 pandemic, which negatively impacted the initial signs of recovery coming from a lower Representative base in 2019, with the third quarter showing revenue growth in Brazil and signs of recovery from the pandemic in most markets. See below for further

details related to COVID-19.

Units sold decreased 15%, across all markets, with Brazil relatively unchanged compared to the prior-year period, partially benefiting from foreign exchange, while Constant $ revenue decreased 2%. Our Constant $ revenue decline was primarily driven by declines in Russia, Brazil, and the United Kingdom, partially offset by growth in Argentina and South Africa. The decline in Constant $ revenue was primarily due to a 3% decrease in Active Representatives, which was partially offset by higher average order. The decrease in Active Representatives was primarily due to South Latin America (driven by Brazil) and Europe, Middle East & Africa. The net impact of price and mix increased 4%, primarily due to the inflationary impact on pricing in Argentina and Brazil. Units sold decreased 6%, primarily due to declines in Russia and Brazil. The revenue performance was negatively impacted most significantly by a decline in Color sales, as we experienced issues in some markets as we have begun the segmentation of our Color category into three distinct brands. The timing of innovation also contributed to the decline in Color sales; however, we expect to strengthen our Color category in the last quarter of 2017 through innovation.

~~Ending Representatives decreased by 2%. The decrease in Ending Representatives at September 30, 2017 as compared to the prior-year period was most significantly due to a decline in Brazil.~~prior year period.

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.

~~Transformation Plan~~Mergers with Natura Cosméticos S.A.

On January 3, 2020 the Company became 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"). In ~~January 2016, we initiated~~connection with the Transaction, trading of the Company's stock was suspended by the NYSE, the Company's common stock was subsequently delisted and deregistered.

A novel strain of coronavirus (COVID-19) was first identified in Wuhan, China in December 2019, and subsequently declared a ~~transformation plan (the “Transformation Plan”) in order~~pandemic by the World Health Organization. Due to ~~enable us to achieve our long-term goals~~the uncertain and rapidly evolving nature of ~~mid-single-digit Constant $ revenue growth and low double-digit operating margin. The Transformation Plan includes three pillars: invest in growth, reduce costs in an effort to~~current conditions around the world, the impacts of COVID-19 most of which are beyond the Company’s control, continue to ~~improve our cost structure~~evolve, and ~~improve our financial resilience.~~

~~The Transformation Plan was designed~~the outcome is uncertain. We are therefore unable to ~~focus~~predict accurately the impact that COVID-19 will have on cost savings and financial resilience in the first year, in order to support future investment in growth. In 2016 we estimate that we achieved cost savings of $120 before taxes, and we significantly strengthened the balance sheet. In 2017, our cost savings target related to the Transformation Plan is $230 before taxes when comparing to our costs in 2015, which includes both run-rate savings from 2016, along with in-year savings from current year initiatives. Based on the estimated cost savings of $205 before taxes realized through the first nine months of 2017, we believe we are on track to achieve this target.

~~To achieve the Transformation Plan, we recognize the need to focus on the foundations of~~ our business ~~and drive~~going forward.

During the second quarter of 2020, COVID-19 had a ~~performance-based culture. This will increase~~significant impact on our operations as many markets were subject to lockdown restrictions which limited our ability to ~~drive results~~recruit and enroll Representatives, operate manufacturing facilities and distribution centers and to process and deliver ~~steady execution going forward. While we are addressing challenges~~orders. Most markets showed signs of recovery in the ~~business, we are moving forward~~third quarter of 2020 but it

is unclear whether this recovery will continue in the remaining of 2020 or if new lockdown measures currently being imposed

in parts of Europe will dampen the recovery. We continue to closely monitor the evolution of the COVID-19 pandemic, deciding on actions to minimize impacts, ensure the continuity of operations and promote the safety and health of all the people involved. Since the beginning of the virus spread and the consequent restrictive measures imposed by governments, such as closing non-essential trade and restricting the movement of people across borders, the Company has implemented some measures in all its operations, in line with ~~urgency, focusing on~~ the ~~following key elements~~official measures:

•Incentives to remote working and adoption of ~~our roadmap~~essentiality criteria to ~~growth:~~

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

•Adoption of new safety measures for operational workers, such as the use of masks and procedures to distance people between processes;

~~Rigorous performance management~~•Re-planning of sales cycles, prioritizing personal care items;

•Speeding up the digitization of sales channels;

•We communicated social distancing protocols to our Representatives around the world;

•Change in the minimum order criteria, start kit and increased deadline for payment of Representatives - original practices are being restored as the ~~new executive team is a key enabler~~markets are recovering from pandemic; and

•Daily monitoring of suppliers to ~~driving a performance-based culture for ownership~~ensure supply.

As of ~~results;~~the date of this report, we are unable to estimate the long term impact of the economic paralysis arising from efforts to curb the spread of the COVID-19 virus and

~~In connection 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—The COVID-19 pandemic is adversely affecting, and ~~associated savings discussed above,~~is expected to continue to adversely affect, our operations, manufacturing, supply chains and distribution systems, and we have ~~incurred costs~~

experienced and expect to ~~implement ("CTI") restructuring initiatives of approximately $144 before taxes~~continue to experience unpredictable negative effects associated with the pandemic".

In June 2020, the Company became aware that it was exposed to a cyber incident in its Information Technology ("IT") environment which interrupted some systems and partially affected the Company's operations. We engaged leading external cyber security and IT general controls specialists, launched a comprehensive containment and remediation effort and started a forensic investigation. By mid-August, the Company had re-established all of its core business processes and resumed operations in all of its markets, including all of its distribution centers.

The cyber incident had a significant impact on our revenue performance for the second quarter of 2020, with the majority of the impact (approximately $87 million in sales) being shifted to the third quarter of 2020 as the Company fulfilled the order backlog created. The incremental expense incurred as a result of the cyber incident was not material.

Although we have no indication that the accuracy and completeness of any financial information was impacted as a result of the incident and the Company has performed extensive procedures to validate such accuracy and completeness, we believe that, if the incident had gone differently, it could have potentially resulted in a material impact to the Company’s financial statements. Refer to Item 4. Controls and Procedures for conclusions related to internal controls.

Natura &Co - Avon Integration

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 ~~to-date. In connection with~~as, beginning in the third quarter of 2018, all new restructuring actions approved ~~to-date associated~~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 is 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 ~~Transformation Plan, we expect to realize annualized~~company and achieve relevant earnings. These savings ~~of an estimated $105 to $115 before taxes. During the first nine months of 2017, we~~ have ~~realized an estimated $55 before taxes of savings associated with the restructuring actions~~been and are expected to ~~achieve the majority of the annualized savings~~continue to be achieved through restructuring actions (that have may continue to result in ~~2017. In addition, we have realized savings from~~charges related to severance, contract terminations and inventory and other asset write-offs), as well as other cost-savings strategies that ~~did~~would not result in restructuring charges. ~~For~~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 ~~market closures,~~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,

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

accelerating digital expansion and improving costs. Over the next three years, savings are expected ~~annualized savings represented the operating loss no longer included within Avon's operating results~~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 ~~a result of no longer operating in the respective market. For actions~~well as other cost-savings strategies that ~~did~~would not result in ~~the closure of a market, the annualized savings represent the net reduction of expenses that will no longer be incurred by Avon.~~restructuring charges.

For additional details on restructuring initiatives, see Note 12, Restructuring Initiatives, to the Consolidated Financial Statements included herein. For additional details on strengthening the balance sheet, see Note 16, Debt, to the Consolidated Financial Statements included herein and "Liquidity and Capital Resources" in this MD&A for additional information.

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 AND NINE MONTHS ENDED SEPTEMBER 30, ~~2017~~2020 AS COMPARED TO THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, ~~2016~~2019

Non-GAAP Financial Measures

To supplement our financial results presented in accordance with accounting principles generally accepted ~~accounting principles~~ in the United States ("GAAP"), we disclose operating results that have been adjusted to exclude the impact of changes due to the translation of foreign currencies into U.S. dollars, including changes in: revenue, Adjusted revenue, operating profit, Adjusted operating profit, operating margin and Adjusted operating margin. We also refer to these adjusted financial measures as Constant $ items, which are Non-GAAP financial measures. We believe these measures provide investors an additional perspective on trends 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, ~~selling, general and administrative expenses~~SG&A as a percentage of revenue, operating profit, operating margin and ~~effective tax rate~~income (loss) before taxes on a Non-GAAP basis. We refer to these Non-GAAP financial measures as "Adjusted." We have provided a quantitative reconciliation of the difference between the Non-GAAP financial measures and the financial measures calculated and reported in accordance with GAAP. See "Reconciliation of Non-GAAP Financial Measures" within "Results of ~~Operations - Consolidated"~~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~~certain Brazil indirect taxes 2) CTI restructuring initiatives; ~~2) a charge for a loss contingency related to a non-U.S. pension plan ("Loss contingency");~~ 3) ~~the net proceeds recognized as a result of settling claims relating to professional services ("Legal settlement"); 4) charges~~costs related to the ~~deconsolidation~~Transaction; 4) costs associated with the early termination of debt.

(1)The three and nine month periods ended September 30, 2019 include the impact of certain Brazil indirect taxes, which

~~The Loss contingency~~

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

(3)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 $46, severance payments of approximately $25 and acceleration of share based compensation of approximately $10 relating to these terminations triggered by change in control provisions. In three and nine month periods ended September 30, 2019, the Company recorded approximately $19 and $36 respectively, of costs related to the Transaction, primarily professional fees and impairment losses on assets. Further information relating to the Transaction is included in Note 18, Merger with Natura, to the Consolidated Financial Statements included herein.

(4)During the three and nine month periods ended September 30, 2020, the Company incurred costs of $4 and $12, respectively, associated with the early termination of debt. During the third quarter of ~~2017 caused by a charge~~2019, the Company incurred costs of ~~approximately $18 for a loss contingency related to a non-U.S. pension plan, for which an amendment to~~$8 associated with the ~~plan that occurred in a prior year may not have been appropriately implemented.~~early termination of debt.

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

The Legal settlement includes the impact on the Consolidated Statements of Operations during the third quarter of 2016 associated with the net proceeds of approximately $27 recognized as a result of settling claims relating to professional services that had been provided to the Company prior to 2013 in connection with a previously disclosed legal matter.

The Venezuelan special items include the impact on the Consolidated Statements of Operations during the first quarter of 2016 caused by the deconsolidation of our Venezuelan operations for which we recorded a loss of approximately $120 in other expense, net. The loss was comprised of approximately $39 in net assets of the Venezuelan business and approximately $81 in accumulated foreign currency translation adjustments within accumulated other comprehensive loss ("AOCI") associated with foreign currency changes before Venezuela was accounted for as a highly inflationary economy.

The Gain on extinguishment of debt includes the impact on the Consolidated Statements of Operations during the third quarter of 2016 due to a net gain on extinguishment of debt caused by the deferred gain associated with interest-rate swap agreement terminations, partially offset by the early tender premium paid, the deferred loss associated with treasury lock agreements, deal costs and the write-off of debt issuance costs and discounts associated with the cash tender offers in August 2016.

In addition, the effective tax rate discussion includes Special tax items, including the impact on the provision for income taxes in the Consolidated Statements of Operations during the second quarter of 2016 primarily due to the release of a valuation allowance associated with Russia of approximately $7. Special tax items also include the impact on the provision for income taxes in the Consolidated Statements of Operations during the first quarter of 2016 due to an income tax benefit of approximately $29 recognized as the result of the implementation of foreign tax planning strategies.

See Note 12, Restructuring Initiatives, Note 7, Employee Benefit Plans, Note 1, Accounting Policies, Note 16, Debt, to the Consolidated Financial Statements included herein and "Venezuela Discussion" and "Effective Tax Rate" in this MD&A for more information on these items.


	Three Months Ended September 30,								Nine Months Ended September 30,
	2020			2019			%/Basis Point Change		2020			2019			%/Basis Point Change
Select Consolidated Financial Information
Total revenue	$	998.0		$	1,188.0		(16)	%	$	2,561.8		$	3,549.7		(28)	%
Cost of sales	(440.0)			(468.2)			(6)	%	(1,111.5)			(1,482.7)			(25)	%
Selling, general and administrative expenses	(534.2)			(622.1)			(14)	%	(1,578.4)			(1,942.7)			(19)	%
Operating (loss) income	23.8			97.7			(76)	%	(128.1)			124.3			*
Interest expense	(37.4)			(32.0)			17	%	(100.9)			(95.9)			5	%
Loss on extinguishment of debt and credit facilities	(4.1)			(8.1)			(49)	%	(11.9)			(10.1)			18	%
Interest income	.1			2.1			(95)	%	1.6			5.3			(70)	%
Other (expense) income, net	(1.0)			57.9			*		(20.1)			87.3			*
Gain on sale of business / assets	1.4			26.8			(95)	%	1.5			50.3			(97)	%
(Loss) income from continuing operations, before income taxes	(17.2)			144.4			*		(257.9)			161.2			*
Loss from continuing operations, net of tax	(29.0)			112.9			*		(284.6)			83.0			*
Net loss attributable to Avon	$	(32.8)		$	106.9		*		$	(296.6)		$	54.7		*

Advertising expenses(1)	$	14.2		$	22.7		(37)	%	$	37.0		$	50.4		(27)	%

Reconciliation of Non-GAAP Financial Measures
Total revenue	$	998.0		$	1,188.0		(16)	%	$	2,561.8		$	3,549.7		(28)	%
Certain Brazil Indirect taxes	—			(67.7)					—			(67.7)
Adjusted revenue	$	998.0		$	1,120.3		(11)	%	$	2,561.8		$	3,482.0		(26)	%

Gross margin	55.9		%	60.6		%	(470)		56.6		%	58.2		%	(160)
CTI restructuring	(.1)			(.1)			—		—			.3			(30)
Certain Brazil Indirect taxes	—			(2.4)			240		—			(.7)			70
Adjusted gross margin	55.8		%	58.1		%	(230)		56.6		%	57.8		%	(120)

Selling, general and administrative expenses as a % of total revenue	53.5		%	52.4		%	110		61.6		%	54.7		%	690
CTI restructuring	(1.3)			(1.6)			30		(.7)			(3.0)			230
Certain Brazil Indirect taxes	—			3.0			(300)		.4			1.0			(60)
Costs related to the Transaction	—			(1.6)			160		(3.4)			(1.0)			(240)

Adjusted selling, general and administrative expenses as a % of total revenue	52.2		%	52.2		%	—		57.9		%	51.7		%	620

Operating (loss) income	$	23.8		$	97.7		(76)	%	$	(128.1)		$	124.3		(203)	%
CTI restructuring	12.4			17.5					17.6			116.7
Certain Brazil Indirect taxes	—			(67.7)					(10.6)			(67.7)
Costs related to the Transaction	—			19.2					85.8			36.4

Adjusted operating (loss) profit	$	36.2		$	66.7		(46)	%	$	(35.3)		$	209.7		(117)	%

Operating margin	2.4		%	8.2		%	(580)		(5.0)		%	3.5		%	(850)
CTI restructuring	1.2			1.5			(30)		.7			3.3			(260)
Certain Brazil Indirect taxes	—			(5.3)			530		(.4)			(1.8)			140
Costs related to the Transaction	—			1.6			(160)		3.3			1.0			230

Adjusted operating margin	3.6		%	6.0		%	(240)		(1.4)		%	6.0		%	(740)

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,
2017 2016
%/Point
Change
2017 2016
%/Point
Change
Select Consolidated Financial Information
Total revenue $ 1,417.8
$ 1,408.8
1 % $ 4,146.8
$ 4,149.6
— %
Cost of sales 550.0
550.9
— % 1,592.1
1,634.7
(3 )%
Selling, general and administrative expenses 784.8
745.9
5 % 2,411.4
2,300.0
5 %
Operating profit 83.0
112.0
(26 )% 143.3
214.9
(33 )%
Interest expense 34.8
34.4
1 % 106.0
100.3
6 %
Gain on extinguishment of debt —
(3.9 ) *
—
(3.9 ) *
Interest income (3.4 ) (3.5 ) (3 )% (11.2 ) (12.8 ) (13 )%
Other expense, net 3.6
10.4
(65 )% 19.4
142.9
(86 )%
Income (loss) before taxes 48.0
74.6
(36 )% 29.1
(11.6 ) *
Income (loss) from continuing operations, net of tax 11.9
36.3
(67 )% (70.4 ) (83.7 ) 16 %
Net income (loss) attributable to Avon $ 12.5
$ 36.0
(65 )% $ (69.5 ) $ (96.9 ) 28 %

Diluted earnings (loss) per share from continuing operations $ .01
$ .07
(86 )% $ (.20 ) $ (.22 ) 9 %
Diluted earnings (loss) per share attributable to Avon $ .01
$ .07
(86 )% $ (.20 ) $ (.25 ) 20 %

Advertising expenses⁽¹⁾
$ 29.5
$ 30.3
(3 )% $ 93.2
$ 78.6
19 %

Reconciliation of Non-GAAP Financial Measures
Gross margin 61.2 % 60.9 % .3
61.6 % 60.6 % 1.0
CTI restructuring —
—
—
—
—
—
Adjusted gross margin 61.2 % 60.9 % .3
61.6 % 60.6 % 1.0

Selling, general and administrative expenses as a % of total revenue 55.4 % 52.9 % 2.5
58.2 % 55.4 % 2.8
CTI restructuring (.4 ) (1.0 ) .6
(.9 ) (1.7 ) .8
Loss contingency —
—
—
(.4 ) —
(.4 )
Legal settlement —
1.9
(1.9 )
—
.7
(.7 )
Adjusted selling, general and administrative expenses as a % of total revenue 54.9 % 53.9 % 1.0
56.8 % 54.4 % 2.4

Operating profit $ 83.0
$ 112.0
(26 )% $ 143.3
$ 214.9
(33 )%
CTI restructuring 6.2
14.0

36.5
70.2

Loss contingency —
—
18.2
—

Legal settlement —
(27.2 ) (27.2 )
Adjusted operating profit $ 89.2
$ 98.8
(10 )% $ 198.0
$ 257.9
(23 )%

Operating margin 5.9 % 8.0 % (2.1 ) 3.5 % 5.2 % (1.7 )
CTI restructuring .4
1.0
(.6 ) .9
1.7
(.8 )
Loss contingency —
—
—
.4
—
.4
Legal settlement —
(1.9 ) 1.9
—
(.7 ) .7
Adjusted operating margin 6.3 % 7.0 % (.7 ) 4.8 % 6.2 % (1.4 )

Change in Constant $ Adjusted operating margin⁽²⁾
(.8 ) (1.4 )

Performance Metrics
Change in Active Representatives (3 )% (3 )%
Change in units sold (5 )% (6 )%
Change in Ending Representatives (2 )% (2 )%


	Three Months Ended September 30,								Nine Months Ended September 30,
	2020			2019			%/Basis Point Change		2020			2019			%/Basis Point Change
Change in Constant $ Adjusted operating margin(2)							(110)								(650)

Loss before taxes	$	(17.2)		$	144.4		(112)	%	$	(257.9)		$	161.2		(260)	%
CTI restructuring	11.0			17.5					16.1			93.2
Certain Brazil Indirect taxes	—			(118.3)					(10.6)			(118.3)
Costs related to the Transaction	—			26.7					85.8			43.9
Other items	4.1			—					11.9			—
Adjusted (loss) income before taxes	$	(2.1)		$	70.3		(103)	%	$	(154.7)		$	180.0		(186)	%

Income taxes	$	(11.8)		$	(31.5)		(63)	%	$	(26.7)		$	(78.2)		(66)	%



Effective tax rate	(68.6)		%	21.8		%			(10.4)		%	48.5		%






Performance Metrics
Change in Active Representatives							(4)	%							(16)	%
Change in units sold							5	%							(15)	%

* Calculation not meaningful

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

During the three months ended September 30, 2020, revenue decreased 16% compared to the prior-year period, significantly impacted by certain indirect tax items recognized in Brazil in the prior year. Excluding these items, Adjusted revenue decreased 11%, unfavorably impacted by foreign exchange, primarily the Brazilian real, the Argentinian peso and the Mexican peso. Constant $ Adjusted revenue increased 1%.

Revenue and Constant $ Adjusted revenue were impacted by a decrease in Active Representatives of 4%, across multiple markets. Average Representative Sales decreased 12% on a reported basis, unfavorably impacted by foreign exchange and Constant $ Adjusted Average Representative Sales increased 5%. Revenue and Constant $ Adjusted revenue benefited from the shift of approximately $87 in revenue from the prior quarter as the company fulfilled the order backlog caused by the cyber incident in June 2020. Excluding the benefit of the order backlog shift, Constant $ Adjusted revenue growth was primarily seen in Brazil, driven by pricing strategies and a significant increase in the Fashion & Home category. Constant $ Adjusted revenue growth in Brazil was more than offset by declines elsewhere, although there were signs of recovery from the pandemic in most markets.

Units sold increased 5%, driven by Brazil.

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, 2017~~

During the three months ended September 30, 2017, revenue increased 1% compared to the prior-year period, benefiting from foreign exchange, while Constant $ revenue was relatively unchanged. Constant $ revenue growth in Argentina and the Philippines was offset by declines in Brazil and the United Kingdom. Constant $ revenue was impacted by a 3% decrease in Active Representatives which was offset by higher average order. The decrease in Active Representatives was primarily driven by a decline in Brazil. The net impact of price and mix increased 5%, primarily due to the inflationary impact on pricing in Argentina and Brazil. Units sold decreased 5%, driven by declines in Brazil, Mexico, Russia and the United Kingdom.

~~Ending Representatives decreased by 2%. The decrease in Ending Representatives at September 30, 2017 as compared to the prior-year period was most significantly due to a decline in Brazil.~~

On a category basis, our ~~net~~product sales from reportable segments and associated growth rates were as follows:

Operating margin ~~and~~decreased by 580 basis points, significantly impacted by certain indirect taxes recognized in Brazil in the three month period ended September 30, 2019. Excluding these items, Adjusted operating margin decreased ~~210~~by 240 basis points, ~~and 70 basis points, respectively,~~ compared to the same period of ~~2016.~~2019. The ~~decreases~~declines in operating margin and Adjusted operating margin ~~include the benefits associated with the Transformation Plan, primarily reductions in headcount,~~were driven by gross margin performance as ~~well~~SG&A as ~~other cost reductions. These savings were largely offset by the inflationary impact on costs outpacing~~a percentage of total revenue ~~growth.~~remained relatively unchanged. The ~~decreases~~movements in operating margin and Adjusted operating margin are discussed further below in "Gross Margin" and "Selling, General and Administrative Expenses."

Gross margin ~~and~~decreased 470 basis points, significantly impacted by the effects of certain indirect taxes recognized in Brazil in the three month period ended September 30, 2019. Excluding these items, Adjusted gross margin ~~both increased 30~~decreased 230 basis points, compared to the same period of ~~2016, in each case primarily due to the following:~~

~~This item was partially offset by the following:~~

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

SG&A as a percentage of total revenue increased 110 basis points, significantly impacted by certain indirect taxes recognized in Brazil and costs related to the Natura transaction ~~losses~~in the three month period ended September 30, 2019. Excluding these items, Adjusted SG&A as a percentage of Adjusted revenue remained relatively unchanged, compared to the same period of 2019, as the impact of revenue reduction causing deleverage of our fixed expenses was offset by lower bad debt and ~~foreign currency translation.~~advertising expenses, primarily in Latin America. Reduction of bad debt expense was driven by continued improvements in credit control and collections processes in Brazil, while actions were taken to reduce advertising expense following the pandemic.

Interest expense increased by approximately $5 and interest income decreased by approximately $2 compared to the prior-year period.

Loss on extinguishment of debt and credit facilities of approximately $4 in the three month period ended September 30, 2020 related to the repurchase of a portion of our 6.95% Notes due March 15, 2043. The loss on extinguishment of debt and credit facilities of approximately $8 in the three month period ended September 30, 2019 was primarily comprised of the costs of termination of a portion of the 2020 bonds. Refer to Note 16, Debt, to the Consolidated Financial Statements included herein for more information relating to these extinguishments of debt.

Other (expense) income, net, of approximately ($1) represents an unfavorable impact of $59 compared to the third quarter of 2019 primarily attributable to the impact of interest on certain indirect tax items recognized in Brazil of approximately $50 in the third quarter of 2019.

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

~~Selling, General and Administrative Expenses~~

~~Selling, general and administrative expenses as a percentage~~Gain on sale of ~~revenue and Adjusted selling, general, and administrative expenses as a percentage~~business/assets of ~~revenue increased 250 basis points and 100 basis points, respectively, compared~~approximately $1 in the three month period ended September 30, 2020 related to the ~~same period~~sale of ~~2016.~~the China Wellness Plant in August 2020. The ~~selling, general and administrative expenses as a percentage~~gain on sale of ~~revenue comparison was impacted by approximately 190 basis points for the approximate $27 of net proceeds recognized as a result of a legal settlement~~business/assets in the ~~third quarter of 2016, partially offset by approximately 60 basis for lower CTI restructuring. See Note 12, Restructuring Initiatives,~~three month period ended September 30, 2019 related to the ~~Consolidated Financial Statements included herein~~sale of our investment in New Avon in August 2019. Refer to Note 3, Discontinued Operations, Assets and Liabilities Held for Sale and Divestitures, for more information ~~on CTI restructuring.~~

The remaining increase in selling, general and administrative expenses as a percentage of revenue and the increase of 100 basis points in Adjusted selling, general and administrative expenses as a percentage of revenue were, in each case, primarily duerelating to the ~~following:~~sale of these businesses and assets.

~~an increase of 110 basis points from higher bad debt expense, driven by Brazil due to the lower collection of receivables, primarily impacted by the macroeconomic environment;~~

~~These items were partially offset by the following:~~

~~Interest expense and interest income each increased by less than $1 compared to the prior-year period.~~

Other expense, net, decreased by approximately $7 compared to the prior-year period, primarily due to foreign exchange net gains in the current year as compared to net losses in the prior year, resulting in a year-over-year favorable impact of approximately $4. In addition, other expense, net was favorably impacted by the amounts recorded for our proportionate share of New Avon's loss, which decreased approximately $3 as compared to the prior-year period. See Note 4, Investment in New Avon, to the Consolidated Financial Statements included herein for more information on New Avon.

The effective tax rates in ~~2017~~2020 and ~~2016~~2019 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 ~~2017~~2020 and ~~2016~~2019 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.-based~~U.S. and U.K.-based costs, such as interest on debt and corporate overhead. ~~These factors resulted in unusual~~

Our effective tax rates ~~in 2017~~for the three months ended September 30, 2020 and ~~2016.~~

2019 were (68.6)% and 21.8%, respectively. The effective tax rates ~~in 2017~~for the three months ended September 30, 2020 and ~~2016~~2019 were impacted by CTI ~~restructuring.~~restructuring charges which could not all be benefited, country mix of earnings and withholding taxes. The effective tax rate in ~~2016~~the third quarter of 2020 was ~~also~~favorably impacted by the ~~benefit from~~accrual of net income tax benefits of approximately $5.7 associated with the release of income tax reserves of approximately $10.8 associated with our uncertain tax positions, net ~~proceeds recognized as~~of recording a ~~result~~valuation allowance of ~~a legal settlement.~~$4.3 and other miscellaneous income tax expense of approximately $0.8. The effective tax rate for in the third quarter of 2019 was also favorably impacted by the accrual of miscellaneous income tax benefits of approximately $2.3.

~~In addition, the~~

Our Adjusted effective tax rates for the three months ended September 30, 2020 and ~~the~~2019 were (580.9)% and 14.2%, respectively. The Adjusted effective tax rates in ~~2017~~2020 and ~~2016~~2019 were ~~negatively~~impacted by country mix of earnings and withholding taxes. The Adjusted effective tax rate for the third quarter of 2020 was favorably impacted by the ~~country mix~~accrual of ~~earnings.~~net income tax benefits of approximately $5.7 associated with the release of income tax reserves of approximately $10.8 associated with our uncertain tax positions, net of recording a valuation allowance of $4.3 and other miscellaneous income tax expense of approximately $0.8. The Adjusted effective tax rate in the third quarter of 2019 was also favorably impacted by the accrual of miscellaneous income tax benefits of approximately $2.3.

Further, the ~~extent that~~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, 2020, the global COVID-19 pandemic is negative evidence the Company must consider. As of September 30, 2020, the increase in ~~our subsidiaries is less favorable than currently projected, we may be required~~negative evidence due to ~~recognize additional~~COVID-19 resulted in approximately $4.3 of valuation allowances ~~on our subsidiaries’~~being recorded against deferred tax assets. 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.

See Note ~~12,~~17, 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.

Impact of Foreign Currency

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

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:~~

~~Discontinued Operations~~

~~Loss from discontinued operations, net of tax was approximately $1 for 2016. See Note 3, Discontinued Operations, to the Consolidated Financial Statements included herein for more information.~~

Revenue and Constant $ Adjusted revenue were impacted by a decrease in Active Representatives of 16%, across all markets. Average Representative Sales decreased 12% on a reported basis, unfavorably impacted by foreign exchange and Constant $ Adjusted Average Representative Sales decreased 1%. Revenue and Constant $ Adjusted revenue were affected by the COVID-19 pandemic, which negatively impacted the initial signs of recovery coming from a lower Representative base in 2019, with the third quarter showing revenue growth in Brazil and signs of recovery from the pandemic in most markets.

Units sold decreased 15%, across all markets, with Brazil relatively unchanged compared to the prior-year period, partially benefiting from foreign exchange, while Constant $ revenue decreased 2%. Our Constant $ revenue decline was primarily driven by declines in Russia, Brazil, and the United Kingdom, partially offset by growth in Argentina and South Africa. The decline in Constant $ revenue was primarily due to a 3% decrease in Active Representatives, which was partially offset by higher average order. The decrease in Active Representatives was primarily due to South Latin America (driven by Brazil) and Europe, Middle East & Africa. The net impact of price and mix increased 4%, primarily due to the inflationary impact on pricing in Argentina and Brazil. Units sold decreased 6%, primarily due to declines in Russia and Brazil. The revenue performance was negatively impacted most significantly by a decline in Color sales, as we experienced issues in some markets as we have begun the segmentation of our Color category into three distinct brands. The timing of innovation also impacted the decline in Color sales; however, we expect to strengthen our Color category in the last quarter of 2017 through innovation.prior year period.

On a category basis, our ~~net~~product sales from reportable segments and associated growth rates were as follows:

Operating margin ~~and~~decreased by 850 basis points, impacted by certain indirect taxes recognized in Brazil in the nine month period ended September 30, 2019. Excluding the impact of these items, Adjusted operating margin decreased ~~170~~by 740 basis points, ~~and 140 basis points, respectively,~~ compared to the same period of ~~2016.~~2019. The ~~decreases~~declines in operating margin and Adjusted operating margin ~~include~~were mostly due to the ~~benefits associated with the Transformation Plan, primarily reductions in headcount, as well as other cost reductions. These savings were largely offset by~~

~~AVON PRODUCTS, INC.~~

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

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

~~the inflationary~~ impact of lower revenue on ~~costs outpacing revenue growth.~~SG&A expenses. The ~~decreases~~movements in operating margin and Adjusted operating margin are discussed further below in "Gross Margin" and "Selling, General and Administrative Expenses."

Gross margin ~~and~~decreased by 160 basis points, impacted by certain indirect tax items recognized in Brazil in the nine month period ended September 30, 2019. Excluding these items, Adjusted gross margin ~~both increased 100~~decreased 120 basis points, compared to the same period of ~~2016, in each case primarily due to the following:~~


					Page Numbers
Part I. Financial Information

Item 1.			Financial Statements (Unaudited)

				~~Page~~ ~~Numbers~~
~~Part I. Financial Information~~

~~Item 1.~~	~~Financial Statements (Unaudited)~~

	Consolidated Statements of Operations Three ~~and Nine~~ Months Ended ~~September~~Sep tember 30, ~~2017~~2020 and September 30, ~~2016~~2019	3 - 4

			Consolidated Statements of Operations Nine Months Ended September 30, 2020 and September 30, 2019		4

			Consolidated Statements of Comprehensive Income ~~(Loss)~~(Loss) Three ~~and~~ & Nine Months Ended September 30, ~~2017~~2020 and September 30, ~~2016~~2019		5 ~~- 6~~

			Consolidated Balance Sheets September ~~30, 2017~~ 3 0 , 20 20 and December 31, ~~2016~~2019		7

			Consolidated Statements of Cash Flows Nine Months Ended September 3 0 , 20 20 and September 30, ~~2017 and September 30, 2016~~2019		8

			Consolidated Statement of Changes in Shareholders’Deficit Three & Nine Months Ended September 3 0 , 20 20 and September 30, 2019		10

			Notes to Consolidated Financial Statements		912 - 2538

Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations		2639 - 4455

Item 3.			Quantitative and Qualitative Disclosures About Market Risk		4556

Item 4.			Controls and Procedures		4556

Part II. Other Information

Item 1.			Legal Proceedings		4657

Item 1A.			Risk Factors		57

Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds		4659

Item 6.5.			Other Information		~~Exhibits~~60	46

Item 6.			~~Signature~~Exhibits		4760

			Signature		61



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



	Three Months Ended
(In millions, except per share data)	September 30, 2017			September 30, 2016
Net sales	$	1,378.2		$	1,367.5
Other revenue	39.6			41.3
Total revenue	1,417.8			1,408.8
Costs, expenses and other:
Cost of sales	550.0			550.9
Selling, general and administrative expenses	784.8			745.9
Operating profit	83.0			112.0
Interest expense	34.8			34.4
Gain on extinguishment of debt	—			(3.9		)
Interest income	(3.4		)	(3.5		)
Other expense, net	3.6			10.4
Total other expenses	35.0			37.4
Income before taxes	48.0			74.6
Income taxes	(36.1		)	(38.3		)
Income from continuing operations, net of tax	11.9			36.3
Loss from discontinued operations, net of tax	—			(0.7		)
Net income	11.9			35.6
Net loss attributable to noncontrolling interests	0.6			0.4
Net income attributable to Avon	$	12.5		$	36.0
Earnings per share:
Basic from continuing operations	$	0.01		$	0.07
Basic from discontinued operations	—			—
Basic attributable to Avon	0.01			0.07
Diluted from continuing operations	$	0.01		$	0.07
Diluted from discontinued operations	—			—
Diluted attributable to Avon	0.01			0.07



(In millions)	September 30, 2017			December 31, 2016
Assets
Current Assets
Cash and cash equivalents	$	663.8		$	654.4
Accounts receivable, net	473.5			458.9
Inventories	662.5			586.4
Prepaid expenses and other	292.2			291.3
Current assets of discontinued operations	0.5			1.3
Total current assets	2,092.5			1,992.3
Property, plant and equipment, at cost	1,488.3			1,424.1
Less accumulated depreciation	(781.8		)	(712.8		)
Property, plant and equipment, net	706.5			711.3
Goodwill	96.8			93.6
Other assets	620.8			621.7
Total assets	$	3,516.6		$	3,418.9
Liabilities, Series C Convertible Preferred Stock and Shareholders’ Deficit
Current Liabilities
Debt maturing within one year	$	16.1		$	18.1
Accounts payable	796.7			768.1
Accrued compensation	149.0			129.2
Other accrued liabilities	360.6			401.9
Sales taxes and taxes other than income	137.5			147.0
Income taxes	9.1			10.7
Current liabilities of discontinued operations	2.5			10.7
Total current liabilities	1,471.5			1,485.7
Long-term debt	1,873.0			1,875.8
Employee benefit plans	160.9			164.5
Long-term income taxes	82.9			78.6
Long-term sales taxes and taxes other than income	185.2			124.5
Other liabilities	90.6			81.3
Total liabilities	3,864.1			3,810.4

Commitments and contingencies (Note 8)
Series C convertible preferred stock	461.9			444.7

Shareholders’ Deficit
Common stock	189.7			188.8
Additional paid-in capital	2,290.7			2,273.9
Retained earnings	2,235.4			2,322.2
Accumulated other comprehensive loss	(934.6		)	(1,033.2		)
Treasury stock, at cost	(4,601.7		)	(4,599.7		)
Total Avon shareholders’ deficit	(820.5		)	(848.0		)
Noncontrolling interests	11.1			11.8
Total shareholders’ deficit	(809.4		)	(836.2		)
Total liabilities, series C convertible preferred stock and shareholders’ deficit	$	3,516.6		$	3,418.9



	Three Months Ended September 30,					Nine Months Ended September 30,
(Shares in millions)	2017		2016			2017			2016
Numerator from continuing operations:
Income (loss) from continuing operations, less amounts attributable to noncontrolling interests	$	12.5	$	36.7		$	(69.5	)	$	(84.0	)
Less: Earnings (loss) allocated to participating securities	.2		.5			(.9		)	(1.1		)
Less: Earnings allocated to convertible preferred stock	5.8		6.1			17.2			12.8
Income (loss) from continuing operations allocated to common shareholders	6.5		30.1			(85.8		)	(95.7		)
Numerator from discontinued operations:
Loss from discontinued operations	$	—	$	(.7	)	$	—		$	(12.9	)
Less: Loss allocated to participating securities	—		—			—			(.2		)
Loss allocated to common shareholders	—		(.7		)	—			(12.7		)
Numerator attributable to Avon:
Net income (loss) attributable to Avon	$	12.5	$	36.0		$	(69.5	)	$	(96.9	)
Less: Earnings (loss) allocated to participating securities	.2		.5			(.9		)	(1.3		)
Less: Earnings allocated to convertible preferred stock	5.8		6.1			17.2			12.8
Income (loss) allocated to common shareholders	6.5		29.4			(85.8		)	(108.4		)
Denominator:
Basic EPS weighted-average shares outstanding	440.0		437.4			439.5			436.7
Diluted effect of assumed conversion of stock options	—		—			—			—
Diluted effect of assumed conversion of preferred stock	—		—			—			—
Diluted EPS adjusted weighted-average shares outstanding	440.0		437.4			439.5			436.7
Earnings (Loss) per Common Share from continuing operations:
Basic	$	.01	$	.07		$	(.20	)	$	(.22	)
Diluted	.01		.07			(.20		)	(.22		)
Loss per Common Share from discontinued operations:
Basic	$	—	$	—		$	—		$	(.03	)
Diluted	—		—			—			(.03		)
Earnings (Loss) per Common Share attributable to Avon:
Basic	$	.01	$	.07		$	(.20	)	$	(.25	)
Diluted	.01		.07			(.20		)	(.25		)



	Nine Months Ended September 30, 2017			Seven Months Ended September 30, 2016
Total revenue	$	527.7		$	523.0
Gross profit	$	322.9		$	317.4
Net loss	$	(80.5	)	$	(45.2	)



	Three Months Ended September 30,
	Pension Benefits
Net Periodic Benefit Costs	U.S. Plans						Non-U.S. Plans						Postretirement Benefits
	2017			2016			2017			2016			2017			2016
Service cost	$	.8		$	1.3		$	1.1		$	1.2		$	—		$	—
Interest cost	.7			.8			4.7			4.9			.1			.3
Expected return on plan assets	(.8		)	(1.0		)	(7.4		)	(7.5		)	—			—
Amortization of prior service credit	—			—			—			—			(.1		)	(.2		)
Amortization of net actuarial losses	1.3			1.5			2.1			1.5			—			.1
Settlements/curtailments	—			—			3.3			—			—			—
Net periodic benefit costs⁽¹⁾	$	2.0		$	2.6		$	3.8		$	.1		$	—		$	.2



Three Months Ended September 30, 2017:	Foreign Currency Translation Adjustments			Net Investment Hedges			Pension and Postretirement Benefits			Investment in New Avon		Total
Balance at June 30, 2017	$	(839.7	)	$	(4.3	)	$	(114.0	)	$	3.4	$	(954.6	)
Other comprehensive income other than reclassifications	13.5			—			—			—		13.5
Reclassifications into earnings:
Amortization of net actuarial loss and prior service cost, net of tax of $0.0⁽¹⁾	—			—			6.5			—		6.5
Total reclassifications into earnings	—			—			6.5			—		6.5
Balance at September 30, 2017	$	(826.2	)	$	(4.3	)	$	(107.5	)	$	3.4	$	(934.6	)



Three Months Ended September 30, 2016:	Foreign Currency Translation Adjustments			Cash Flow Hedges			Net Investment Hedges			Pension and Postretirement Benefits			Total
Balance at June 30, 2016	$	(862.7	)	$	(.4	)	$	(4.3	)	$	(142.4	)	$	(1,009.8	)
Other comprehensive income other than reclassifications	15.4			—			—			.7			16.1
Reclassifications into earnings:
Derivative losses on cash flow hedges, net of tax of $0.0⁽²⁾	—			1.8			—			—			1.8
Amortization of net actuarial loss and prior service cost, net of tax of $.2⁽¹⁾	—			—			—			2.9			2.9
Total reclassifications into earnings	—			1.8			—			2.9			4.7
Balance at September 30, 2016	$	(847.3	)	$	1.4		$	(4.3	)	$	(138.8	)	$	(989.0	)



Nine Months Ended September 30, 2017:	Foreign Currency Translation Adjustments			Net Investment Hedges			Pension and Postretirement Benefits			Investment in New Avon		Total
Balance at December 31, 2016	$	(910.9	)	$	(4.3	)	$	(120.2	)	$	2.2	$	(1,033.2	)
Other comprehensive income other than reclassifications	84.7			—			—			1.2		85.9
Reclassifications into earnings:
Amortization of net actuarial loss and prior service cost, net of tax of $0.0⁽¹⁾	—			—			12.7			—		12.7
Total reclassifications into earnings	—			—			12.7			—		12.7
Balance at September 30, 2017	$	(826.2	)	$	(4.3	)	$	(107.5	)	$	3.4	$	(934.6	)



Nine Months Ended September 30, 2016:	Foreign Currency Translation Adjustments			Cash Flow Hedges			Net Investment Hedges			Pension and Postretirement Benefits			Total
Balance at December 31, 2015	$	(950.0	)	$	(1.3	)	$	(4.3	)	$	(410.6	)	$	(1,366.2	)
Other comprehensive income (loss) other than reclassifications	31.4			—			—			(10.6		)	20.8
Reclassifications into earnings:
Derivative losses on cash flow hedges, net of tax of $0.0⁽²⁾	—			2.7			—			—			2.7
Amortization of net actuarial loss and prior service cost, net of tax of $.6⁽¹⁾	—			—			—			12.4			12.4
Deconsolidation of Venezuela, net of tax of $0.0	81.3			—			—			.8			82.1
Separation of North America, net of tax of $10.2	(10.0		)	—			—			269.2			259.2
Total reclassifications into earnings	71.3			2.7			—			282.4			356.4
Balance at September 30, 2016	$	(847.3	)	$	1.4		$	(4.3	)	$	(138.8	)	$	(989.0	)



Components of Other Assets	September 30, 2017		December 31, 2016
Deferred tax assets	$	162.9	$	162.1
Judicial deposits other than Brazil IPI tax (see below)	84.3		78.0
Capitalized software	81.4		83.9
Long-term receivables	81.4		78.9
Judicial deposit for Brazil IPI tax on cosmetics (Note 8)	75.6		69.0
Net overfunded pension plans	73.0		54.8
Trust assets associated with supplemental benefit plans	36.7		35.2
Tooling (plates and molds associated with our beauty products)	13.2		14.7
Investment in New Avon (Note 4)	—		32.8
Other	12.3		12.3
Other assets	$	620.8	$	621.7



	Europe, Middle East & Africa		South Latin America		Asia Pacific		Total
Net balance at December 31, 2016	$	18.7	$	72.3	$	2.6	$	93.6
Changes during the period ended September 30, 2017:
Foreign exchange	1.6		1.6		—		3.2
Net balance at September 30, 2017	$	20.3	$	73.9	$	2.6	$	96.8


	September 30, 2020				December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Available-for-sale securities	$	4.2	$	4.2	$	4.3	$	4.3
Debt maturing within one year	(30.2)		(30.2)		(1.8)		(1.8)
Long-term debt(1)	(1,566.8)		(1,654.7)		(1,590.4)		(1,748.1)
Foreign exchange forward contracts	(24.8)		(24.8)		1.8		1.8


~~(1)~~	~~Advertising expenses are recorded in selling, general and administrative expenses.~~


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


	Three Months Ended September 30,				%/Point Change					Three Months Ended September 30,				% Change
	2017		2016		US$		Constant $			2020		2019		US$		Constant $
Beauty:									Beauty:
Skincare	$	397.1	$	396.7	—	%	(2	)%	Skincare	$	315.1	$	326.2	(3)	%	9	%
Fragrance	389.8		373.2		4		4		Fragrance	249.8		295.6		(15)		(5)
Color	246.3		243.9		1		—		Color	125.4		171.6		(27)		(17)
Total Beauty	1,033.2		1,013.8		2		1		Total Beauty	690.3		793.4		(13)		(2)
Fashion & Home:									Fashion & Home:
Fashion	195.2		201.9		(3	)	(4	)	Fashion	122.3		143.9		(15)		(7)
Home	149.8		150.4		—		(1	)	Home	137.5		112.2		23		48
Total Fashion & Home	345.0		352.3		(2	)	(2	)	Total Fashion & Home	259.8		256.1		1		17
Net sales from reportable segments	$	1,378.2	$	1,366.1	1		—
Net sales from Other operating segments and business activities	—		1.4		*		*
Net sales	$	1,378.2	$	1,367.5	1		—
Certain Brazil indirect taxes									Certain Brazil indirect taxes	—		67.7		(100)		(100)

Product sales									Product sales	$	950.1	$	1,117.2	(15)		(4)


	Three Months Ended September 30,										Nine Months Ended September 30,
							%/Basis Point Change										%/Basis Point Change
	2020			2019			US$		Constant $		2020			2019			US$		Constant $
Total revenue	$	540.0		$	682.4		(21)	%	(3)	%	$	1,319.9		$	1,935.3		(32)	%	(18)	%
Certain Brazil indirect tax benefit	—			(67.7)			*		*		—			(67.7)			*		*
Adjusted revenue	540.0			614.7			(12)	%	8	%	1,319.9			1,867.6			(29)	%	(15)	%

Segment profit	22.0			108.0			(80)	%	(65)	%	(46.0)			174.4			(126)	%	(111)	%
Certain Brazil indirect tax benefit	—			(67.7)			*		*		—			(67.7)			*		*
Adjusted segment profit	22.0			40.3			(45)	%	(8)	%	(46.0)			106.7			(143)	%	(117)	%

Segment margin	4.1		%	15.8		%	(1,170)		(1,080)		(3.5)		%	9.0		%	(1,250)		(1,100)
Certain Brazil indirect tax benefit	—		%	9.2		%	*		*		—		%	3.3		%	*		*
Adjusted segment margin	4.1		%	6.6		%	(250)		(110)		(3.5)		%	5.7		%	(920)		(740)

Change in Active Representatives									3	%									(14)	%
Change in units sold									14	%									(12)	%



	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
7/1 - 7/31/17	25,137	⁽¹⁾	$	5.38	*	*
8/1 - 8/31/17	5,944	⁽¹⁾	3.47		*	*
9/1 - 9/30/17	—		—		*	*
Total	31,081		$	5.02	*	*


*	~~These amounts are not applicable as the Company does not have a share repurchase program in effect.~~


~~(1)~~	All shares were repurchased by the Company in connection with employee elections to use shares to pay withholding taxes upon the vesting of their restricted stock units and performance restricted stock units.



4.1**10.1		~~Indenture,~~Credit Agreement, dated ~~August 15, 2016, among~~May 13 ,2020, between Natura &Co International S.à r.l, as lender, and Avon ~~International Operations, Inc., the guarantors party thereto and Deutsche Bank Trust Company Americas,~~L uxembourg Holdings S.à r.l, as ~~trustee and collateral agent.~~borrower
~~10.1~~		Letter Agreement, by and between Avon Products, Inc. and Sherilyn McCoy, dated as of August 2, 2017 (incorporated by reference to Exhibit 10.1 to Avon’s Current Report on Form 8-K filed on August 4, 2017).
~~10.2~~31.1		~~Severance Benefit Letter Agreement and General Release of Claims, by and between Avon Products, Inc. and James Scully, dated as of August 12, 2017.~~
~~10.3~~	~~Termination Agreement by and between Avon Products, Inc., Avon Cosmetics GmbH and John Higson, dated as of September 19, 2017.~~
~~10.4~~	~~Severance Benefit Letter Agreement and General Release of Claims, by and between Avon Products, Inc. and Fernando Acosta, dated as of August 31, 2017.~~
~~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~~pursuant to 18 U.S.C. Section 1350, As ~~Adopted Pursuant~~adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer ~~Pursuant~~pursuant to 18 U.S.C. Section 1350, As ~~Adopted Pursuant~~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 ~~Income (Loss),~~Loss, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements


**	~~This indenture was filed as exhibit 4.1 to Form 8-K filed with the SEC on August 16, 2016 and inadvertently omitted the language found in section 4.16.~~


			AVON PRODUCTS, INC.
			(Registrant)

Date:		November 13, 2020	~~AVON PRODUCTS, INC.~~/s/ Elena Casap
			~~(Registrant)~~Elena Casap
			Controller - Principal Accounting Officer
~~Date:~~		~~November 2, 2017~~	~~/s/ Robert Loughran~~
			~~Robert Loughran~~
	~~Group Vice President and~~
	~~Chief Accounting Officer~~

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