

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~~March 31, 2021 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)	March 31, 2021		March 31, 2020
Product sales	$	850.4	$	899.8
Other revenue	46.3		57.5
Revenue from affiliates of Natura &Co	7.7		0
Total revenue	904.4		957.3
Costs, expenses and other:
Cost of sales	(405.4)		(421.0)
Selling, general and administrative expenses	(536.1)		(638.1)

Operating loss	(37.1)		(101.8)

Interest expense	(23.6)		(31.8)
Loss on extinguishment of debt and credit facilities	0		(7.8)
Interest income	.2		1.2
Other expense, net	(1.3)		(18.2)

Total other expenses	(24.7)		(56.6)

Loss from continuing operations, before income taxes	(61.8)		(158.4)
Income taxes	(7.1)		(8.8)
Loss from continuing operations, net of tax	(68.9)		(167.2)
Income (loss) from discontinued operations, net of tax	5.0		(4.7)
Net loss	(63.9)		(171.9)
Net loss attributable to noncontrolling interests	.3		.9
Net loss attributable to Avon	$	(63.6)	$	(171.0)

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 )

~~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)	March 31, 2021		March 31, 2020
Net loss	$	(63.9)	$	(171.9)
Other comprehensive loss:
Foreign currency translation adjustments	(12.2)		(83.8)
Unrealized loss on revaluation of long-term intercompany balances	(32.3)		(23.3)
Change in unrealized loss on cash flow hedges, net of taxes of $0.0 and $0.0	0		.6
Adjustments and amortization of net actuarial loss and prior service cost, net of taxes of $0.2 and $0.2	1.2		2.0

Total other comprehensive loss, net of income taxes	(43.3)		(104.5)
Comprehensive loss	(107.2)		(276.4)
Less: comprehensive loss attributable to noncontrolling interests	.3		1.1
Comprehensive loss attributable to Avon	$	(106.9)	$	(275.3)

The accompanying notes are an integral part of these statements.

AVON PRODUCTS, INC.

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

~~(Unaudited)~~December 31, 2020 and March 31, 2021


(In millions)	March 31, 2021		December 31, 2020
Assets
Current Assets
Cash and cash equivalents	$	239.7	$	364.9
Restricted cash	0		7.8
Accounts receivable, net	248.1		259.1
Receivables from affiliates of Natura &Co	9.2		6.1
Inventories	467.0		459.1
Prepaid expenses and other	210.5		204.2
Assets held for sale	8.4		13.9

Total current assets	1,182.9		1,315.1
Property, plant and equipment, at cost	1,108.3		1,148.5
Less accumulated depreciation	(692.4)		(709.9)
Property, plant and equipment, net	415.9		438.6
Right-of-use assets	127.0		153.1
Goodwill	77.4		83.2
Deferred tax asset	127.6		135.8
Other assets	418.9		438.5

Total assets	$	2,349.7	$	2,564.3
Liabilities and Shareholders’ Deficit
Current Liabilities
Debt maturing within one year	$	38.0	$	28.0
Loans from affiliates of Natura &Co	1,077.4		1,008.6
Accounts payable	623.9		709.4
Payables to affiliates of Natura &Co	3.0		0

Accrued compensation	86.3		89.4
Other accrued liabilities	295.4		334.7
Sales taxes and taxes other than income	80.4		89.9
Income taxes	4.1		5.4
Current liabilities of discontinued operations	20.6		27.1
Liabilities held for sale	0		2.3
Total current liabilities	2,229.1		2,294.8
Long-term debt	676.2		675.4
Long-term operating lease liability	99.0		120.9
Employee benefit plans	126.7		133.3
Long-term income taxes	98.6		101.1
Other liabilities	93.9		106.0
Total liabilities	3,323.5		3,431.5

Shareholders’ Deficit
Common stock(1)	0		0
Additional paid-in capital	623.4		622.8
Retained losses	(424.1)		(360.5)
Accumulated other comprehensive loss	(1,177.1)		(1,133.8)
Treasury stock, at cost(1)	0		0
Total Avon shareholders’ deficit	(977.8)		(871.5)
Noncontrolling interests	4.0		4.3
Total shareholders’ deficit	(973.8)		(867.2)
Total liabilities and shareholders’ deficit	$	2,349.7	$	2,564.3

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

The accompanying notes are an integral part of these statements.

~~AVON PRODUCTS, INC.~~

~~CONSOLIDATED BALANCE SHEETS~~

~~(Unaudited)~~

(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)


	Three Months Ended
(In millions)	March 31, 2021		March 31, 2020
Cash Flows from Operating Activities
Net loss	$	(63.9)	$	(171.9)
Income (loss) from discontinued operations, net of tax	5.0		(4.7)
Loss from continuing operations, net of tax	(68.9)		(167.2)
Adjustments to reconcile net loss from continuing operations to net cash used by operating activities:
Depreciation	13.9		16.3
Amortization	6.0		6.0
Provision for doubtful accounts	17.4		29.7
Provision for obsolescence	7.7		18.6
Share-based compensation	.6		16.9
Foreign exchange losses (gains)	.5		21.9
Deferred income taxes	(1.6)		8.0
Impairment loss on assets	0		.7


Other	.3		10.3
Changes in assets and liabilities:
Accounts receivable	(18.4)		(18.3)
Inventories	(29.5)		(32.8)
Prepaid expenses and other	(21.6)		1.0
Accounts payable and accrued liabilities	(76.8)		(174.0)
Income and other taxes	.8		(24.2)
Noncurrent assets and liabilities	.7		(12.7)
Net cash used by operating activities of continuing operations	(168.9)		(299.8)
Cash Flows from Investing Activities
Capital expenditures	(13.8)		(7.3)
Disposal of assets	1.1		2.4


Net cash used by investing activities of continuing operations	(12.7)		(4.9)
Cash Flows from Financing Activities
Cash dividends	0		(8.6)
Debt, net (maturities of three months or less)	7.9		1.8
Proceeds from debt	76.5		0
Repayment of debt	(12.6)		0


Settlement of stock options	0		(25.8)
Settlement of derivative contracts	(4.8)		5.7

Other financing activities	0		(.6)
Net cash provided (used) by financing activities of continuing operations	67.0		(27.5)
Cash Flows from Discontinued Operations
Net cash used by operating activities of discontinued operations	(1.5)		(6.7)


Net cash used by discontinued operations	(1.5)		(6.7)
Effect of exchange rate changes on cash and cash equivalents, and restricted cash	(17.6)		(20.8)
Net decrease in cash and cash equivalents, and restricted cash	(133.7)		(359.7)
Cash and cash equivalents, and restricted cash at beginning of period(1)	373.4		661.1
Cash and cash equivalents, and restricted cash at end of period (1)	$	239.7	$	301.4

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

(1) The balance at the beginning of the three-month period ended March 31, 2021 includes cash and cash equivalents of $.7 classified as Assets held for sale in the Company's Consolidated Balance Sheets. The balance at the beginning of the three-month period ended March 31, 2020 includes Long-term restricted cash of $7.6 which is presented in other assets in our Consolidated Balance Sheets.

The accompanying notes are an integral part of these statements.

AVON PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT

(Unaudited)


(In millions)	Common Stock			Additional		Retained		Accumulated Other		Noncontrolling
	Shares	Amount		Paid-In Capital		Losses		Comprehensive Loss			Interests		Total
Balances at December 31, 2020	0	$	0	$	622.8	$	(360.5)	$	(1,133.8)		$	4.3	$	(867.2)
Net loss	—	—		—		(63.6)		—			(.3)		(63.9)
Other comprehensive loss	—	—		—		—		(43.3)			—		(43.3)
Exercise/ vesting/ expense of share-based compensation	—	—		.6		—		—			—		.6

Balances at March 31, 2021(1)	0	$	0	$	623.4	$	(424.1)	$	(1,177.1)		$	4.0	$	(973.8)

(1)~~Includes cash and cash equivalents~~ The number of ~~discontinued operations~~shares of ~~$(2.2)~~Common Stock (par value $0.01 per share) outstanding at ~~the beginning~~March 31, 2021 was 101.34.


(In millions)	Common Stock			Additional		Retained		Accumulated Other		Treasury Stock			Noncontrolling
	Shares	Amount		Paid-In Capital		Earnings, (Losses)		Comprehensive Loss		Shares	Amount		Interests		Total
Balances at December 31, 2019	770.0	$	192.6	$	2,321.2	$	2,138.9	$	(1,040.0)	319.9	$	(4,603.3)	$	6.8	$	(983.8)
Credit Losses Cumulative catch up	—	—		—		(2.0)		—		—	—		—		(2.0)
Net loss	—	—		—		(171.0)		—		—	—		(.9)		(171.9)
Other comprehensive loss	—	—		—		—		(104.3)		—	—		(.2)		(104.5)
Conversion of Series C convertible preferred stock (1)	—	—		—		(710.8)		—		(87.0)	1,197.6		—		486.8
Exercise/ vesting/ expense of share-based compensation	—	(.2)		(9.7)		—		—		—	—		—		(9.9)

Exchange of common stock (2)	(770.0)	(192.4)		(1,788.1)		(1,425.2)		—		(232.9)	3,405.7		—		0
Balances at March 31, 2020(3)	0	0		523.4		(170.1)		(1,144.3)		0	0		5.7		(785.3)

(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 ~~year~~Company’s common stock, par value U.S.$0.25 per share, conditioned on the Conversion Condition (as defined below).

(2) In January 2020, subsequent to the Transaction, the Company restated its certificate of incorporation to effect a change in ~~2016.~~capitalization of the Company by changing the number of authorized shares of common stock from 1,525,000,000 shares (of which (i) 1,500,000,000 shares, par value $0.25 per share, were common stock and (ii) 25,000,000 shares, par value $1.00 per share, were preferred stock) to 1,000 shares of common stock, par value $0.01 per share. As a result of the Transaction, all of the issued and outstanding common stock of the Company, being 550,890,788, were canceled and converted. See Note 17, Mergers with Natura Cosméticos S.A.

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

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~~2020 Annual Report on Form 10-K ("~~2016~~2020 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, 2020, we completed the Agreement and Plan of Mergers with Natura Cosméticos S.A., a Brazilian corporation (sociedade anônima) ("Natura Cosméticos"), Natura &Co Holding S.A., a Brazilian corporation (sociedade anônima) ("Natura &Co Holding"), 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's common stock ceased to be traded on the NYSE. The Company files these unaudited interim Consolidated Financial Statements with the SEC as a voluntary filer to comply with the terms of certain debt instruments. For additional information, see Note 17, Agreement and Plan of Mergers with Natura Cosméticos S.A.

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~~2020 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~~for which an effective tax rate cannot be reliably estimated.

Reclassifications

During the ~~reliability~~third quarter of 2020, we identified an immaterial classification error in the Consolidated Statement of Cash Flows relating to the three-month period ended March 31, 2020 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 ~~estimated annual consolidated effective tax rate.~~

~~Venezuela~~

Asunderlying hedged item. However, we have identified that cash flows relating to derivative contracts that economically hedge foreign exchange gains and losses on intercompany loans have been incorrectly classified as operating activities rather than financing activities. We have corrected this reclassification error through a revision to the unaudited interim Consolidated Statement of Cash Flows for the three-month period ended March 31, ~~2016, we deconsolidated our Venezuelan operations,~~2020 to reclassify cash inflows of $5.7 from the settlement of derivative contracts from operating activities to financing activities.

COVID-19 pandemic

A novel strain of coronavirus (COVID-19) was first identified in Wuhan, China in December 2019, and ~~since then, we account for this business using~~subsequently declared a pandemic by the ~~cost method of accounting. The decision to deconsolidate our Venezuelan operations was due~~World Health Organization. Due to the ~~lack~~uncertain and rapidly evolving nature of ~~exchangeability between~~current conditions around the ~~Venezuelan bolivar~~world, the impacts of COVID-19 most of which are beyond the Company’s control, continue to evolve, and the ~~U.S. dollar. This was caused~~outcome is uncertain. We are therefore unable to predict accurately the impact that COVID-19 will have on our business going forward.

In the first quarter of 2021, COVID-19 continued to have a significant impact on our operations as many markets were subject to restrictions. Most markets in Avon Latin America were not significantly impacted by ~~Venezuela's restrictive foreign exchange control regulations~~COVID-19 and ~~our Venezuelan operations' increasingly limited access to U.S. dollars, which restricted our Venezuelan operations' ability to pay dividends~~had revenue growth during the first quarter of 2021. Avon International and ~~settle intercompany obligations.~~

~~As a result of the change to the cost method of accounting,~~Brazil were more significantly impacted by COVID-19 in the first quarter ~~of 2016, we recorded a loss of $120.5~~which resulted in ~~other expense, net. The loss was comprised of $39.2 in net assets~~deceleration of the ~~Venezuelan~~Beauty market growth and a lower representative base. It is unclear if current lockdown measures will continue or be reestablished elsewhere globally which could dampen our recovery from COVID-19.

We continue to closely monitor the COVID-19 pandemic and adapt our actions to minimize 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 assetsdisruptions while ensuring the safety of all the people involved. Since the beginning of the ~~Venezuelan business were comprised of inventories of $23.7, property, plant~~COVID-19 pandemic 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 to the extent that we receive cash for dividends or royalties remitted by Avon Venezuela.

~~Revisions~~

In our 2016 Form 10-K, our Consolidated Statements of Cash Flows presented supplemental information of the cash paid for interest of $87.1 for the year ended December 31, 2016; however, this amount should have been disclosed as $142.8. We determined that the effect of this revision was not material to our 2016 Form 10-K.

~~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.

consequently restrictive measures

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

imposed by governments, such as the closing of non-essential trade and travel restrictions, the Company has implemented new measures in all its operations in line with the official guidelines.

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.

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 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 Consolidated Financial Statements. The Company has received an irrevocable commitment from Natura &Co Holding that it will provide sufficient financial support if and when needed to enable the Company to meet its operating and financing obligations as they come due in the normal course of business for a period of not less than 12 months from the date issuance of the Consolidated Financial Statements. This support also includes the loan originally issued by a subsidiary of Natura &Co Holding to a subsidiary of the Company of $960 that is currently due on November 2, 2021.

Accounting Standards ~~to be~~ Implemented

ASU ~~2014-09, Revenue from Contracts with Customers~~2019-12, Simplifying the Accounting for Income Taxes

In ~~May 2014,~~December 2019, the FASB issued ASU ~~2014-09,~~ ~~Revenue from Contracts with Customers, as a new Topic, Accounting Standards Codification Topic ("ASC") 606. The core principle~~2019-12, Income Taxes, which is intended to simplify the accounting standard and

improve the usefulness of information provided in 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 befinancial statements. We 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 by the Representative to the Company for items such as brochures, sales aids and late payments as revenue, rather than as a reduction to selling, general 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 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, the impact on our full-year 2016 Consolidated Statement 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~~2021. The adoption did 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 have a ~~significant~~material impact on our full-year Consolidated Statements of Operations; however, the impact may vary depending on the types of incentive programs, the volume of incentives offered, and the timing of the programs. The cumulative-effect adjustment upon adoption 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.

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

Discontinued Operations

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

The major classes of financial statement components comprising the loss on discontinued operations, net of tax for New Avon during the three-month period ended March 31, 2021 and 2020 are shown below:


	Three Months Ended March 31,
	2021		2020
Selling, general and administrative expenses	$	5.0	$	(4.7)
Operating income (loss)	$	5.0	$	(4.7)
Income (loss) from discontinued operations, net of tax	$	5.0	$	(4.7)

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Assets and Liabilities Held for Sale

~~2. EARNINGS (LOSS) PER SHARE AND SHARE REPURCHASES~~

~~We compute earnings (loss) per share ("EPS") using~~The major classes of assets comprising held for sale assets on the ~~two-class method, which is an earnings (loss) allocation formula that determines earnings (loss) per share for common stock,~~Consolidated Balance Sheets as of March 31, 2021 and ~~earnings (loss) allocated to convertible preferred stock and participating securities, as appropriate. The earnings allocated to convertible preferred stock~~December 31, 2020 are ~~the larger of 1) the preferred dividends accrued~~shown in the ~~period or 2)~~following table:


	March 31, 2021		December 31, 2020

Current held for sale assets
Inventories	$	0	$	2.6
Property, Plant & Equipment (net)	8.4		9.2
Cash and cash equivalents	0		.7
Other assets	0		1.4
	$	8.4	$	13.9

Current held for sale liabilities
Accounts payable	$	0	$	.5
Other liabilities	0		1.8
	$	0	$	2.3

At March 31, 2021, assets held for sale include 1 property in Avon International segment and 1 property in the ~~percentage of earnings from continuing operations allocable to~~Avon Latin America Segment. At December 31, 2020, assets held for sale include 1 property and 1 business in Avon International segment and 1 property in the preferred stock as if they had been converted to common stock. Our participating securities are our grants of restricted stock and restricted stock units, 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 outstandingAvon Latin America Segment.

Divestitures

There were no divestitures during the ~~period. Diluted EPS is calculated~~three-month period ended March 31, 2021. The divestitures below took place during 2020.

China Wellness Plant

In March 2020, we signed an agreement to ~~give effect to all potentially dilutive common shares that were outstanding during~~sell 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~~China Wellness Plant for a total selling price of $6.6 before expenses. In the three-month period ended March 31, 2020 we received a deposit of $1.3, presented as investing activities in the ~~table above may not necessarily sum due~~Consolidated Statement of Cash Flows.

China manufacturing

On February 15, 2019, we completed the sale to ~~rounding.~~

~~During~~TheFaceShop Co., Ltd., an affiliate of LG Household & Health Care Ltd. ("TheFaceShop"), of all of the ~~three months ended September 30, 2017 and 2016, we did not include stock options~~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 ~~purchase 18.4 million shares and 15.0 million shares, respectively, of~~outstanding intercompany loans payable to Avon ~~common stock~~Manufacturing (Guangzhou), Ltd. from other Avon subsidiaries that was presented as financing activities in the ~~calculation~~Consolidated Statement of ~~diluted EPS because~~Cash Flows, this was subsequently settled in April 2019. The cash proceeds of $46.4, net of loan amounts, were presented as investing activities in the ~~exercise prices~~Consolidated Statement of ~~those options were greater than~~Cash Flows, which included $7.5 of long-term restricted cash as of December 31, 2019. This was subsequently reclassified to short-term restricted cash in the ~~average market price, and therefore, their inclusion would be anti-dilutive. During~~three-month period ended March 31, 2020. The restriction on this cash was removed in the ~~nine months~~three-month period ended ~~September 30, 2017 and 2016, we did not include stock options to purchase 16.9 million shares and 14.2~~March 31, 2021.

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 and the Instituto Avon in Brazil. There are no other related party transactions.


	Three Months Ended March 31,
	2021		2020
Statement of Operations Data
Revenue from affiliates of Natura &Co(2)	$	7.7	$	0
Gross profit from affiliates of Natura &Co(2)	$	.6	$	0


Interest expense on Loan from affiliates of Natura &Co(4)	$	8.7	$	0


	March 31, 2021		December 31, 2020
Balance Sheet Data
Receivables due from Instituto Avon(1)	$	.8	$	.8
Receivables due from affiliates of Natura &Co(2)	$	9.2	$	6.1
Payables due to affiliates of Natura &Co(3)	$	3.0	$	0
Loans from affiliates of Natura &Co(4)	$	1,077.4	$	1,008.6

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

(2)During the ~~three and nine months ended September 30, 2017 and 2016, it is more dilutive to assume~~second quarter of 2020, the ~~series C convertible preferred stock is not converted~~Company entered 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.~~manufacturing agreements with affiliates of Natura &Co Holding. The ~~inclusion~~Company recorded revenue from related party of ~~the series C convertible preferred stock would increase the net earnings per share for~~$7.7 associated with these agreements during the three months ended ~~September 30, 2017 and 2016 and decrease~~March 31, 2021. The Company recorded gross profit from related party of $.6 associated with these agreements during the ~~net loss per share for the nine~~three months ended ~~September 30, 2017~~March 31, 2021. Receivables due from affiliates of Natura &Co primarily relate to these manufacturing agreements.

(3) During the first quarter of 2021, the nominal cost options related to the grant of the 2018 long-term employee incentive program vested and ~~2016. If~~were automatically exercised. The equity awards were denominated in Natura &Co American Depository Receipts. The payable to Natura &Co is related to vesting and settlement of these awards.

(4) Loans from affiliates of Natura &Co Holding at March 31, 2021 of $1,077.4 include $972.5 outstanding under a Promissory Note between Avon International Operations Inc. and a subsidiary of Natura &Co Holding S.A.. Loans from affiliates of Natura &Co Holding at March 31, 2021 also include $102.9 outstanding under the ~~as-if converted series C convertible preferred stock had been dilutive, approximately 87.1 million additional shares would have been included in~~Revolving Credit Facility between Avon Luxembourg Holdings S.à r.l and Natura &Co International S.à r.l.. Loans from affiliates of Natura &Co Holding at December 31, 2020 of $1,008.6 include $965 outstanding under a Promissory Note between Avon International Operations Inc. and a subsidiary of Natura &Co Holding S.A.. Loans from affiliates of Natura &Co Holding at December 31, 2020 also include $41.6 outstanding under the ~~diluted weighted average number of shares outstanding for the three~~Revolving Credit Facility between Avon Luxembourg Holdings S.à r.l and ~~nine months ended September 30, 2017 and 2016.~~Natura &Co International S.à r.l.. See Note ~~5, Related Party Transactions.~~15, Debt and Other Financing, for further information relating to these loans.

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.

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

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 in discontinued operations for the three or nine months ended September 30, 2017.~~

~~4. INVESTMENT IN NEW AVON~~

In connection with the separation of the Company's North America business (as discussed in Note 3, Discontinued Operations), which closed on March 1, 2016, the Company retained a 19.9% ownership interest in New Avon. The Company has accounted for its ownership interest in New Avon using the equity method of accounting, which resulted in the Company recognizing its proportionate share of New Avon's income or loss and other comprehensive income or loss. Our recorded investment balance in New Avon at September 30, 2017 was zero.

During the three and nine months ended September 30, 2017, the Company's proportionate share of the losses of New Avon was $6.2 and $16.0 respectively, of which $1.7 and $11.5, respectively, of these amounts was recorded within other expense, net. In addition, during 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, we recorded only $1.7 of the

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

~~Company's proportionate share~~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 March 31, 2021
	Avon International		Avon Latin America		Total reportable segments		Affiliates of Natura&Co		Total
Beauty:
Skincare	$	145.3	$	127.0	$	272.3	$	0	$	272.3
Fragrance	119.9		102.1		222.0		0		222.0
Color	63.4		50.5		113.9		0		113.9
Total Beauty	328.6		279.6		608.2		0		608.2
Fashion & Home:
Fashion	67.7		50.8		118.5		0		118.5
Home	16.8		106.9		123.7		0		123.7
Total Fashion & Home	84.5		157.7		242.2		0		242.2
Product sales	413.1		437.3		850.4		0		850.4
Representative fees	17.8		28.3		46.1		0		46.1
Other	0		.2		.2		7.7		7.9
Other revenue	17.8		28.5		46.3		7.7		54.0
Total revenue	$	430.9	$	465.8	$	896.7	$	7.7	$	904.4


	Three Months Ended March 31, 2020
	Avon International		Avon Latin America		Total
Beauty:
Skincare	$	150.8	$	146.0	$	296.8
Fragrance	132.3		116.0		248.3
Color	85.0		63.7		148.7
Total Beauty	368.1		325.7		693.8
Fashion & Home:
Fashion	72.7		43.2		115.9
Home	13.2		76.9		90.1
Total Fashion & Home	85.9		120.1		206.0

Net sales	454.0		445.8		899.8
Representative fees	20.2		30.8		51.0
Other	2.9		3.6		6.5
Other revenue	23.1		34.4		57.5
Total revenue	$	477.1	$	480.2	$	957.3

Contract balances

The timing of revenue recognition generally is different from the timing of a promise made to a Representative. As a result, we have contract liabilities, which primarily relate to the advance consideration received from Representatives prior to transfer of the ~~losses in New Avon,~~related good or service for material rights, such 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, we would not record our proportionate share of such loss. The Company's proportionate share of the losses of New Avon was $4.5loyalty points and ~~$9.0 during the three~~status programs, and ~~seven months ended September 30, 2016, respectively, which was recorded~~are primarily classified within other ~~expense, net. In addition,~~accrued liabilities (with the ~~Company's proportionate share of the post-separation~~long-term portion in 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:~~liabilities) in our Consolidated Balance Sheets.

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)

Generally, we record accounts receivable when we invoice a Representative. In addition, we record an estimate of an allowance for doubtful accounts on receivable balances based on an analysis of historical data and current circumstances, including seasonality, changing trends and the impact of COVID-19. 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 March 31, 2021 and December 31, 2020:


	March 31, 2021		December 31, 2020
Accounts receivable, net of allowances of $47.5 and $51.1	$	248.1	$	259.1
Contract liabilities	$	41.3	$	52.1

The contract liability balances relate to certain material rights (loyalty points, status program and prospective discounts). During the three months ended ~~September 30, 2017 and 2016, respectively. The Company purchased $2.7 and $4.6 from New Avon associated with this agreement~~March 31, 2021, we recognized $31.1 of revenue related to the contract liability balance at the beginning of the three-month period ended March 31, 2021, as the result of performance obligations satisfied. In addition, we deferred an additional $25.3 related to certain material rights granted during the ~~nine months ended September 30, 2017 and 2016, respectively and recorded $3.0 and $4.1 associated with these purchases within cost of sales~~period, for which the performance obligations are not yet satisfied. Of the amount deferred during the ~~nine months ended September 30, 2017~~period, substantially all will be recognized within a year, with the significant majority to be captured within a quarter. The remaining movement in the contract liability balance is attributable to foreign exchange differences arising on the translation of the balance as at March 31, 2021 as compared with December 31, 2020.

5. INVENTORIES


Components of Inventories	March 31, 2021		December 31, 2020
Raw materials	$	119.0	$	131.3
Finished goods	348.0		327.8
Total	$	467.0	$	459.1

6. LEASES

We have operating and ~~2016, respectively.~~finance leases for corporate and market offices, warehouses, automotive and other equipment. Our sublease portfolio consists of the sublease of our previous principal executive office located at 777 Third Avenue, New York, NY.

~~(3)~~

The Company also entered into a transition services agreement to provide certain services to 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 fortable below shows the ~~Company under a similar transition services agreement. The Company~~sublease income recorded ~~a net $7.4 and $10.2 reduction~~in the Consolidated Statement of ~~selling, general and administrative expenses associated with these agreements~~Operations incurred during the three months ended ~~September 30, 2017~~March 31, 2021 and 2016, respectively, and 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.2020:

~~(4)~~ The Company also entered into agreements with an affiliate of Cerberus, which provide 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.


		Three Months Ended March 31,
Lease Costs	Classification	2021	2020
Sublease income	Selling, general and administrative expenses	4.3	4.1

~~(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 of the postretirement benefit plans (related to the U.S.) for the nine months ended September 30, 2016, which are included in discontinued operations. Amounts associated with the pension and postretirement benefit plans in Canada and the postretirement benefit plan in Puerto Rico, which are included in discontinued operations, have been excluded from all amounts in the table above. See Note 3, Discontinued Operations for discussion of the separation of the Company's North America business.

During the nine months ended September 30, 2017, we made approximately $12 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, during the second quarter of 2017, we recorded an $18.2 charge for a loss contingency related 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.

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)~~

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 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 the Company for a term 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 implement a compliance and ethics program designed to prevent and detect violations 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 that the Company has knowingly violated the DPA, the DOJ may commence prosecution or extend the term of the DPA, including the monitoring provisions described above, for up to one year.

The monitor has assessed and monitored the Company's compliance with the terms 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 relate to the Company's current and ongoing compliance with the FCPA and other applicable anti-corruption laws. The monitor has recommended some changes to our policies and procedures that we have substantially adopted and are in the process 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 the DOJ and the SEC may or may not accept.

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.

Brazilian Tax Assessments

Tax on Manufactured Products – minimum pricing rules

In ~~2002,~~December 2012 and in October 2017, our Brazilian subsidiary, Avon Industrial LTDA (Avon Brazil Manufacturing) received an excise tax ~~(IPI) assessment from the Brazilian tax authorities~~("IPI") assessments 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)~~ 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.~~ 2014.

As in prior IPI cases that have been resolved in Avon’s favor, the ~~2002 IPI case, the 2012 IPI assessment asserts~~assessments assert that the establishment in 1995 of separate manufacturing and distribution companies in Brazil was done without a valid business purpose and that Avon Brazil

AVON PRODUCTS, INC.

Manufacturing did not observe minimum pricing rules to define the taxable basis of ~~excise tax.~~the tax on manufactured products. The structure adopted in 1995 is comparable to that used by many other companies in Brazil. We believe that our Brazilian corporate structure is appropriate, both operationally and legally, and that the ~~2012 IPI assessment is~~assessments are 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~~contested at the ~~first~~ administrative ~~level~~court, where proceedings are currently in progress. As of March 31, 2021 and ~~we appealed this decision to the second administrative level. The 2012 IPI assessment totals approximately $356, including penalties and accrued interest.~~

~~On October 3, 2017, Avon Brazil received a new tax assessment notice regarding IPI for 2014, in~~December 31, 2020, the total amount ~~of approximately $270, including penalties~~under discussion classified as reasonably possible was $346 and accrued interest. In line with the other assessments 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, and presented the first defense on November 1, 2017.$378, respectively.

In the event that the 2012 and the 2017 IPI assessments are upheld, it may be necessary for us to provide security to pursue further appeals, which, depending on the circumstances, may result in a charge to earnings and an adverse effect on the 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 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 will be upheld is reasonably possible. As stated above, we believe that the 2012 and 2017 IPI assessments are unfounded. At September 30, 2017, we have not recognized a liability for the 2012 or 2017 IPI assessments.

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

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 Tax Authority. As of March 31, 2021 and December 31, 2020, the total amount under discussion classified as reasonably possible was $216 and $231, respectively.

~~From May 2015 through April 2016, Avon Brazil remitted~~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 ~~taxes associated~~Company sold in the past were contaminated with ~~this IPI tax increase into~~asbestos. Many of these actions involve a ~~judicial deposit which would be remitted~~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 March 31, 2021, there were 109 individual cases pending against the Company. During the three months ended March 31, 2021, 27 new cases were filed and 82 cases were dismissed, settled or otherwise resolved. The value of the settlements was not material, either individually or in the aggregate, to the ~~taxing authorities~~Company’s results of operations for the three months ended March 31, 2021. 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 ~~the event that we~~these cases are not successful in our objection to the tax increase. In May 2016, Avon Brazil received a favorable preliminary decision on its objection to the tax and was granted a preliminary injunction. As a result, beginning in May 2016, Avon Brazil is no longer required to remit the taxes associated with IPI into a judicial deposit. As the IPI tax increase remains in effect, Avon Brazil is continuing to recognize the IPI taxes associated with the May 2015 Executive Decree as a liability. At September 30, 2017, the liability to the taxing authorities for this IPI tax increase was approximately $185 and was classified within long-term sales taxes and taxes other than income

in our Consolidated Balance Sheets, and the judicial deposit was approximately $76 and was classified within other assets in our Consolidated Balance Sheets. The net liability that does not have a corresponding judicial deposit was approximately $109 at September 30, 2017, and the interest associated with this net liability has beenwithout merit. We are defending vigorously against these claims and will continue to do so. To date, the Company has not proceeded to trial in any case filed against it and there have been no findings of liability enforceable against the Company. However, nationwide trial results in similar cases filed against other manufacturers of cosmetic talc products have ranged from outright dismissals to very large jury awards of both compensatory and punitive damages. Given the inherent uncertainties of litigation, we cannot predict the outcome of all individual cases pending against the Company, and we are only able to make a specific estimate for a small number of individual cases that have advanced to the later stages of legal proceedings. For the remaining cases, we provide an estimate of exposure on an aggregated and ongoing basis, which takes into account the historical outcomes of all cases we have resolved to date. Any accruals currently recorded on the Company’s balance sheet with respect to these cases are not material. However, any adverse outcomes, either in an individual case or in the aggregate, could be ~~recognized~~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 ~~other expense, net.~~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 ~~cash flow from operations has benefited as compared~~practice continues to be to recognize a liability based on our ~~earnings as~~assessment of historical payments in similar cases. Our best estimate of the probable loss for such cases at March 31, 2021 and December 31, 2020 was approximately $7 and $8, respectively. 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 ~~expense~~United States District Court for the Southern District of New York against the Company and ~~associated interest related~~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, ~~this IPI tax~~among other things, changes made to Avon’s credit terms for Representatives in ~~our Consolidated Statements of Operations; however, since May 2016, we have not made~~Brazil. Avon and the individual defendants filed a ~~corresponding cash payment into~~motion to dismiss which the court denied. During 2020, the parties reached an agreement on a ~~judicial deposit.~~

~~An unfavorable ruling to our objection~~settlement of this ~~IPI tax increase would have an adverse effect on~~class action. The terms of settlement include releases by members of the ~~Company's Consolidated Statements~~class of ~~Cash Flows as Avon Brazil would have to remit~~claims against the ~~liability owed to~~Company and the ~~taxing authorities. This amount would be partially offset~~individual defendants and payment of $14.5 million. Approximately $2 million of the settlement was paid by the ~~amount~~Company (which represented the remaining deductible under the Company’s applicable insurance policies) and

AVON PRODUCTS, INC.

the remainder of the ~~judicial deposit held~~settlement was paid by ~~Avon Brazil. We are not able to reliably predict~~ the ~~timing~~Company’s insurers. On August 31, 2020, the court granted preliminary approval of the ~~outcome~~settlement, and on February 3, 2021, the court entered an order and judgment granting final approval of ~~our objection to this tax increase.~~the settlement.This judgement is now final.

Other Matters

Various other lawsuits and claims, arising in the ordinary course of business or related to businesses previously sold, are pending or threatened against Avon. In ~~management's~~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,~~March 31, 2021, is not expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows.

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~~March 31, 2021 and ~~2016:~~2020:


Three Months Ended March 31, 2021	Foreign Currency Translation Adjustments		Net Investment Hedges		Pension and Postretirement Benefits		Total
Balance at December 31, 2020	$	(1,038.2)	$	(4.3)	$	(91.3)	$	(1,133.8)
Other comprehensive loss other than reclassifications	(44.5)		0		0		(44.5)
Reclassifications into earnings:
Amortization of net actuarial loss and prior service cost, net of tax of $0.2(1)	—		—		1.2		1.2
Total reclassifications into earnings	0		0		1.2		1.2
Balance at March 31, 2021	$	(1,082.7)	$	(4.3)	$	(90.1)	$	(1,177.1)

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 March 31, 2020	Foreign Currency Translation Adjustments		Cash Flow Hedges		Net Investment Hedges		Pension and Postretirement Benefits		Total
Balance at December 31, 2019	$	(942.7)	$	(.6)	$	(4.3)	$	(92.4)	$	(1,040.0)
Other comprehensive loss other than reclassifications	(106.9)		0		0		0		(106.9)
Reclassifications into earnings:
Derivative loss 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 $0.2(1)	—		—		—		2.0		2.0
Total reclassifications into earnings	0		.6		0		2.0		2.6
Balance as March 31, 2020	$	(1,049.6)	$	0	$	(4.3)	$	(90.4)	$	(1,144.3)

~~AVON PRODUCTS, INC.~~For further details on Other Comprehensive loss other than reclassifications see the Consolidated Statement of Comprehensive Loss.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

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 )

(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 reclassified to interest expense, and related taxes reclassified to income taxes.~~

~~A foreign~~Foreign exchange net ~~gain~~losses of ~~$5.0~~$2.0 and ~~net loss of $1.9~~$3.8 for the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016, respectively, and a foreign exchange net gain of $14.8 and net loss of $12.8 for the nine months ended September 30, 2017 and 2016,~~2020, respectively, resulting from the translation of actuarial losses and prior service cost recorded in AOCI, are included in foreign currency translation adjustments in our Consolidated Statements of Comprehensive ~~Income (Loss).~~Loss.

AVON PRODUCTS, INC.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~10.~~9. SEGMENT INFORMATION

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

We determine segment profit by deducting the related costs and expenses from segment revenue. ~~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 March 31,
Total Revenue	2021		2020
Avon International	$	430.9	$	477.1
Avon Latin America	465.8		480.2
Total revenue from reportable segments (1)	896.7		957.3
Revenue from affiliates to Natura &Co	7.7		0
Total revenue(1)	904.4		957.3

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 March 31,
Operating (Loss) Profit	2021		2020
Segment (Loss) Profit
Avon International	$	(7.0)	$	2.7
Avon Latin America	(4.6)		(17.2)
Total loss from reportable segments (2)	$	(11.6)	$	(14.5)
Unallocated global expenses(3)	(6.0)		0

CTI restructuring initiatives	(19.5)		(1.8)
Costs related to the Transaction (4)	0		(85.5)
Operating loss	$	(37.1)	$	(101.8)

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 $1.9 and $6.4 for the ~~first quarter of 2016 results of Venezuela, as it was deconsolidated effective~~three months ended March 31, ~~2016, as well as markets that have been exited. Effective in the first quarter of 2017, given that we exited Thailand during 2016, the results of Thailand are now reported in~~2021 and 2020, 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.

(2)Total loss from reportable segments also includes profit from other business activities and central expenses allocated to Avon International and Avon Latin America segments. Other business activities of $.1 and $2.9 for the three months ended March 31, 2021 and 2020, respectively, include profit from the sale of products to New Avon since the separation of the Company’s North America business into New Avon on March 1, 2016 and ongoing royalties from the licensing of our name and products. Central expenses of $60.2 and $63.7 for the three months ended March 31, 2021 and 2020, respectively, include corporate general and administrative expenses allocated to Avon International and Avon Latin America to the extent they support the operating activity of the segment. Previously reported amounts has been allocated to segments to conform to the current year presentation.

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

(4)For the three months ended March 31, 2020, costs related to the Transaction primarily include professional fees of approximately $44, severance payments of approximately $25 and acceleration of share based compensation of approximately $10 relating to these terminations triggered by change in control provisions. Refer to Note 17, Merger with Natura for more information relating to the Natura transaction.

AVON PRODUCTS, INC.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~11.~~10. SUPPLEMENTAL BALANCE SHEET INFORMATION

At ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~,2020, 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	March 31, 2021		December 31, 2020
Prepaid taxes and tax refunds receivable	$	107.4	$	99.3	Prepaid taxes and tax refunds receivable	$	119.3	$	117.6
Receivables other than trade					Receivables other than trade	32.1		34.9
Prepaid brochure costs, paper and other literature	72.6		73.2		Prepaid brochure costs, paper and other literature	9.3		12.0
Receivables other than trade	55.8		68.3
Other	56.4		50.5		Other	49.8		39.7
Prepaid expenses and other	$	292.2	$	291.3	Prepaid expenses and other	$	210.5	$	204.2

At ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, other assets included the following:


Components of Other Assets	March 31, 2021		December 31, 2020
Net overfunded pension plans	$	106.4	$	103.0
Capitalized software	72.7		76.0
Judicial deposits	44.6		50.9
Long-term receivables	144.7		157.0
Trust assets associated with supplemental benefit plans	33.2		33.7
Other	17.3		17.9
Other assets	$	418.9	$	438.5

Prepaid taxes and tax refunds receivable and Long-term receivables include approximately $100 and $112 related to certain Brazil indirect taxes as of March 31, 2021 and December 31, 2020, respectively. At the time of approval for issuance of these interim Consolidated Financial Statements, a Motion for Clarification which may impact the recoverability of these receivables is pending judgment by the Brazilian Supreme Federal Court. The extent of the risk is not estimable, however, we do not believe an unfavorable outcome is probable.

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, as well as top line synergies, primarily between Avon LATAM and Natura &Co Latin America.

Open Up Avon, Open Up & Grow and Transformation Plan

In 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 ~~we identified certain actions, that we believe will reduce ongoing costs, primarily consisting~~as, beginning in the third quarter of global headcount reductions relating to operating model changes, as well as the closure of Thailand, a smaller, under-performing market. These operating model changes include the streamlining of our corporate functions to align with the current and future needs of the business and an information technology infrastructure outsourcing initiative.

~~As a result of these~~2018, all new restructuring actions approved ~~to-date,~~operate under our new Open Up Avon plan described below.

In September 2018, we ~~have recorded total costs~~initiated a new strategy in order to ~~implement these restructuring initiatives~~return Avon to growth ("Open Up Avon"). The Open Up Avon strategy was integral to our ability to return Avon to growth, built around the necessity of ~~$143.6 before taxes,~~incorporating new approaches to various elements of ~~which $37.5 was recorded during the nine months ended September 30, 2017,~~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 ~~Consolidated Statements of Operations. The additional charges not yet incurred associated~~Representatives to more easily interact with the ~~restructuring actions approved to-date~~company and achieve relevant earnings. In January 2019, we announced significant advancements in this strategy, including a structural reset of ~~approximately $5~~inventory processes and a reduction in global workforce.

In May 2020, the new leadership of Avon International refreshed our strategy ("Open Up & Grow") which aims to ~~$10 before taxes are expected~~return Avon International to ~~be recorded primarily~~growth over the next three years. Open Up & Grow replaces and builds on the success of the Open Up Avon strategy, launched in ~~2018. At this time we are unable~~2018, to ~~quantify~~strengthen competitiveness through enhancing 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 actions to be taken.~~

representative experience, improving brand

AVON PRODUCTS, INC.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

position and relevance, accelerating digital expansion and improving costs. Over the next three years, savings are expected to continue to be achieved through restructuring actions (that may continue to result in charges related to severance, contract terminations and asset write-offs), as well as other cost-savings strategies that would not result in restructuring charges.

Costs to Implement Restructuring ~~Charges~~Initiatives - Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2021 and 2020

During the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2021, we recorded net costs to implement of ~~$6.5~~$19.5, of which $6.1 related to Avon Integration, $14.2 related to Open Up & Grow and ~~$37.5, respectively,~~a benefit of $.8 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 recorded in selling, general and administrative expenses. Of the total costs to implement during the nine months ended September 30, 2017, $37.6 was recorded in selling, general and administrative expenses and a benefit of $.1 was recorded in cost of sales.

~~Restructuring Charges - Three and Nine Months Ended September 30, 2016~~

~~During the three and nine months ended September 30, 2016,~~March 31, 2020, we recorded costs to implement of ~~$14.0~~$1.8 of which $4.9 related to Open Up & Grow, and ~~$71.5, respectively,~~a net benefit of $3.1 related to the Transformation Plan, in ~~the~~our Consolidated ~~Statement~~Statements of Operations.

The costs during the three months ended March 31, 2021 and 2020 consisted of the following:

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


	Three Months Ended March 31,
	2021		2020
CTI recorded in operating profit - COGS

Inventory write-off	.2		(.1)
	.2		(.1)

CTI recorded in operating profit - SG&A
Net charges for employee-related costs, including severance benefits	9.3		(2.3)
Implementation costs, primarily related to professional service fees	4.1		(.5)
Dual running costs	.3		.6
Contract termination and other net benefits	5.0		2.5
Impairment of other assets	0		.7
Accelerated depreciation	0		.4
Variable lease charges	.6		.5
	19.3		1.9

Total CTI	19.5		1.8






Avon Integration	$	6.1	$	0
Open Up & Grow	$	14.2	$	4.9
Transformation Plan	$	(.8)	$	(3.1)

The following liability balances 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~~restructuring initiatives such as professional services fees, dual running costs, accelerated depreciation and gain on sale of business.

The liability balance included in other accrued liabilities in our Consolidated Balance Sheet for the ~~three months ended September 30, 2016, all $14.0 was recorded~~restructuring actions associated with Avon Integration at March 31, 2021 and December 31, 2020 is $3.6 and $.7, respectively, related to employee related costs.

AVON PRODUCTS, INC.

The liability balance included in ~~selling, general and administrative expenses. Of~~other accrued liabilities in our Consolidated Balance Sheet for 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 cost of sales.~~restructuring actions associated with Open Up & Grow at March 31, 2021 is as follows:


	Employee-Related Costs		Inventory/Assets Write-offs		Contract Terminations/Other		Total
Balance at December 31, 2020	$	9.0	$	0	$	2.8	$	11.8
2021 charges	7.7		.1		1.5		9.3

Cash payments	(9.1)		0		(2.1)		(11.2)
Non-cash write-offs	0		(.1)		0		(.1)
Foreign exchange	(.2)		0		0		(.2)
Balance at March 31, 2021	$	7.4	$	0	$	2.2	$	9.6

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~~at March 31, 2021 and December 31, 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
$.5 and $3.5, respectively, related to employee related costs.

The majority of cash payments, if applicable, associated with ~~these charges~~the year-end liability are expected to be made during ~~2017.~~2021.

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	$	12.1	$	0	$	.2	$	0	$	12.3
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	$	12.1	$	0	$	.2	$	0	$	12.3

Open Up & Grow											Open Up & Grow
Charges incurred to-date											Charges incurred to-date	$	90.9	$	106.6	$	13.8	$	(10.9)	$	200.4
Estimated charges to be incurred on approved initiatives											Estimated charges to be incurred on approved initiatives	0		0		.8		0		.8
Total expected charges on approved initiatives											Total expected charges on approved initiatives	$	90.9	$	106.6	$	14.6	$	(10.9)	$	201.2

Transformation Plan											Transformation Plan
Charges incurred to-date											Charges incurred to-date	$	122.4	$	2.5	$	40.9	$	3.4	$	169.2
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	$	122.4	$	2.5	$	40.9	$	3.4	$	169.2

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 & Grow 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:

The charges above are not included in segment profit, as this excludes costs to implement restructuring initiatives. ~~We expect our total costs to implement restructuring on approved initiatives to be an estimated $150 to $155 before taxes under the Transformation Plan.~~ The amounts shown in the tables above as charges recorded to-date relate to initiatives that have been approved and recorded in the consolidated financial statements, as the costs are probable and estimable. The amounts shown in the tables above as total expected charges on approved initiatives represent charges recorded to-date plus charges yet to be recorded for approved initiatives as the relevant accounting criteria for recording an expense have not yet been met. In addition to the charges included in the tables above, we have incurred and will continue to incur other costs 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, associated 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"), 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.


	Avon International		Avon Latin America		Total


Net balance at December 31, 2020	$	20.0	$	63.2	$	83.2

Changes during the period ended March 31, 2021:


Foreign exchange	(1.0)		(4.8)		(5.8)



Net balance at March 31, 2021	$	19.0	$	58.4	$	77.4

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~~as of March 31, 2021:


	Level 1		Level 2		Total
Assets:
Available-for-sale securities	$	4.1	$	0	$	4.1
Foreign exchange forward contracts	$	0	$	1.4	$	1.4
Total	$	4.1	$	1.4	$	5.5
Liabilities:
Foreign exchange forward contracts	$	0	$	.5	$	.5
Total	$	0	$	.5	$	.5


	Level 1		Level 2		Total
Assets:
Available-for-sale securities	$	4.2	$	0	$	4.2
Foreign exchange forward contracts	$	0	$	2.8	$	2.8
Total	$	4.2	$	2.8	$	7.0
Liabilities:
Foreign exchange forward contracts	$	0	$	6.0	$	6.0
Total	$	0	$	6.0	$	6.0

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~~March 31, 2021 and December 31, ~~2016,~~2020, respectively, consisted of the following:

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

~~15.~~14. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

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

We do not enter into derivative financial instruments for trading or speculative purposes, nor are we a party to leveraged derivatives. ~~The master agreements~~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~~March 31, 2021:


	Asset			Liability
	Balance Sheet Classification	Fair Value		Balance Sheet Classification	Fair Value



Derivatives not designated as hedges:
Foreign exchange forward contracts	Prepaid expenses and other	$	1.4	Accounts payable	$	.5
Total derivatives		$	1.4		$	.5

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.~~2020:


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



Total derivatives		$	2.8		$	6.0

A portion of our borrowings is subject to interest rate risk. In the past we have used interest-rate swap agreements, 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,At March 31, 2021 and December 31, 2020, we do not have any interest-rate swap agreements. Approximately 1%5% and 4% of our debt portfolio at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020, respectively, was exposed to floating interest ~~rates.~~

~~In January 2013, we terminated eight of~~rates, which relates to 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~~short-term 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.~~portfolio.

Foreign Currency Risk

We may use foreign exchange forward contracts to manage a portion of our foreign currency exchange rate exposures. At ~~September 30, 2017,~~March 31, 2021, we had outstanding foreign exchange forward contracts with notional amounts totaling approximately ~~$26~~$170 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.~~balance sheet items. The change in fair value of these ~~contracts~~items is immediately recognized in earnings and substantially offsets the foreign currency translation impact recognized in earnings relating to the associated ~~intercompany loans.~~balance sheet items. During the three ~~and nine~~ months ended ~~September 30, 2017~~,March 31, 2021 and 2020, we recorded ~~gains~~a loss of ~~$.6~~$.7 and ~~$2.8,~~a gain of $10.6, 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 first quarter of 2020. Our designated hedges did not have a material impact on our Consolidated Financial Statements for the three ~~and nine~~ months ended ~~September 30, 2017, we recorded losses of $1.2 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 of $1.2 and $8.7, respectively, in other expense, net in our Consolidated Statements of Operations related to these undesignated foreign exchange forward contracts. Also during the three and nine months ended September 30, 2016, we recorded gains of $.1 and $5.5, resp~~ectively, related to the associated intercompany loans, caused by changes in foreign currency exchange rates.~~March 31, 2020.

Natura Revolving Credit Facility

In ~~June 2015,~~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 initial amount of $100, such amount increased to $250 in March 2021, 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. As at March 31, 2021, $103 including interest was outstanding under the Facility. See Note 18, Subsequent Events, for information related to changes subsequent to March 31, 2021.

Other loans from affiliates of Natura &Co

In November 2020, Avon International Operations, Inc. ("AIO") entered into a Promissory Note with a subsidiary of Natura &Co Holding S.A. and an affiliate of the Company in the amount of $960. The Promissory Note bears interest at a rate per annum of 3.13% and matures on November 2, 2021 (“the Natura &Co Loan”). As at March 31, 2021, $972.5 including accrued interest of $12.5 was outstanding under the Promissory Note.

Loans from affiliates of Natura &Co Holding at March 31, 2021 also include a $2.0 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.

Other short-term financing

In addition, at March 31, 2021, we utilized approximately $38 of short-term financing from third-party banks across multiple markets.

2019 Revolving Credit Facility

In February 2019, Avon International Capital, p.l.c. ("AIC"), a ~~wholly-owned 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

related cash outflow is presented in other financing activities within the ~~2015~~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 17, 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 March 31, 2021, 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.~~Moody’s. As described in the indenture, the interest rates on the 2013 Notes increase or decrease by .25% for each one-notch ~~downgrade~~movement below investment grade on each of ~~our long-term~~the credit ratings assigned to the 2013 Notes by S&P or Moody's. These adjustments are limited to a total increase of 2% above the respective interest rates in effect on the date of issuance of the 2013 Notes. ~~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.~~

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~~repurchases, and $.3 for the ~~anticipated interest payments on the 5.75% Notes, $1.0 of deal costs and 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, 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~~In July 2019, AIC issued $400.0 in aggregate principal amount of 6.5% Senior Secured Notes ~~is payable semi-annually on February 15 and~~due August 15, 2022 (the "2019 Notes").

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

~~All obligations~~In connection with the redemption, we incurred a loss on extinguishment of ~~AIO under~~debt of $25.6 before tax in the ~~Senior Secured Notes are unconditionally guaranteed by each current and future wholly-owned domestic restricted subsidiary~~fourth quarter of 2020 consisting of the ~~Company that is a guarantor under the 2015 facility and fully guaranteed on an unsecured basis by the Company. The obligations of AIO~~$17.7 premiums, and the ~~subsidiary guarantors are secured by first priority liens~~write-off of $7.9 of debt issuance costs related to the initial issuances of the notes that were redeemed.

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

Our quarterly income tax provision is calculated using an estimated annual effective income tax approach. The quarterly effective tax rate can differ from our estimated annual effective tax rate as the Company cannot apply an effective tax rate approach for all of ~~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~~March 31, 2021, our annual effective tax rate, excluding discrete items, is 26.5%, as compared to ~~certain exceptions.~~27.2% as of March 31, 2020.

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 2021 and 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 a~~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 March 31, 2021 and 2020 was $7.1 and $8.8, respectively. Our effective tax rates for the three months ended March 31, 2021 and 2020 were (11.5)% and (5.6)%, respectively.

The effective tax rates for the three months ended March 31, 2021 and 2020 were impacted by CTI restructuring charges which could not all be benefited, country mix of earnings and withholding taxes. The effective tax rate in the first quarter of 2021 was unfavorably impacted by reserves for uncertain tax positions of $1.2 legislative changes of $.8 and miscellaneous income tax expense of approximately $.4. The effective tax rate in the first quarter of 2020 was unfavorably impacted by miscellaneous income tax expense of approximately $1.5.

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 change on the basis of the level of profitability that we are able to actually achieve. The Company continuously monitors its operational and capital structure changes, business performance, tax planning actions and tax planning strategies that could potentially allow for the recognition of deferred tax assets which are currently subject to a valuation allowance. There is the possibility that, in the foreseeable future, certain ~~qualifications.~~ deferred tax assets could be recognized, which may be material, related to changes in business operations and associated financing of such operations.

Further, the Company continuously assesses available positive and negative evidence to estimate whether sufficient future taxable income will be generated to utilize our existing deferred tax assets that are not subject to a valuation allowance. As of March 31, 2021, the COVID-19 pandemic is negative evidence the Company must consider. As of March 31, 2021, the negative evidence associated with COVID-19 has not required the recording of additional valuation allowances against deferred tax assets that are expected to be realized in future periods. The Company will continue to monitor the COVID-19 pandemic and other effects that could impact the conclusions regarding the realizability of its remaining deferred tax assets. Potential negative evidence, including such things as the worsening of the economies in the markets we ~~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~~the Transaction was converted into the ultimate right to receive, (i) 0.300 validly issued and allotted, fully paid-up American Depositary Shares of Natura &Co Holding, ("Natura &Co Holding ADSs") against the deposit of 2 shares of common stock of Natura &Co Holding ("Natura &Co Holding Shares", subject to adjustment in accordance with the terms of the Merger Agreement, and any cash in lieu of fractional Natura &Co Holding ADSs or (ii) 0.600 validly issued and allotted, fully paid-up Natura &Co Holding Shares, subject to adjustment in accordance with the terms of the Merger Agreement, and any cash in lieu of fractional Natura &Co Holding Shares. The Company’s Series C Preferred Stock held by Cerberus Investor were converted to common stock prior to consummation of the Transaction and were therefore automatically converted into common stock of Natura &Co. In January 2020, Natura &Co Holding paid the accrued dividend of $91.5 to Cerberus.

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

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

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

During January 2020, it was announced that the employment of certain senior officers of the Company would be terminated, in connection with the Transaction. The Company incurred severance of approximately $25 and acceleration of share based compensation of approximately $10 relating to these terminations triggered by change in control ~~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~~the performance conditions. As such, the replacement awards contain only a service vesting condition.

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

In January 2020, upon completion of 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~~Transaction, the Company’s revolving credit ~~ratings will have a material impact on our near-term liquidity. However, any rating agency reviews could result in a~~facility was canceled, triggered by change in ~~outlook or downgrade, which could further limit our~~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 ~~new financing, particularly short-term financing, reduce our flexibility~~certain tax attributes of approximately $546 to approximately $616 in certain taxing jurisdictions. These tax attributes had been formerly reflected as deferred tax assets which were subject to a full valuation allowance and as a result, there was no impact to net income in 2020 from the write-off of the deferred tax asset and the associated valuation allowances.

During April 2021, the Company borrowed an additional $40 under the $250 Revolving Credit Facility with ~~respect to working capital needs, affect~~a subsidiary of Natura &Co Holding S.A.,.

the accrued interest.

~~AVON PRODUCTS, INC.~~

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

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

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

OVERVIEW

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,~~2020, we had sales operations in 5755 countries and territories, and distributed products in 1825 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~~three months ended ~~September 30, 2017,~~March 31, 2021, revenue ~~was relatively unchanged~~decreased 6% compared to the prior-year period, ~~partially benefiting from~~unfavorably impacted by foreign exchange, ~~while~~which was driven by the strengthening of the U.S. dollar relative to multiple currencies, primarily the Brazilian real and the Argentinian peso. Constant $ revenue decreased 2%1%. ~~Our~~

Revenue and Constant $ revenue ~~decline was primarily driven~~were impacted by ~~declines~~a decrease in ~~Russia, Brazil,~~Active Representatives of 6%, across most markets. Average Representative Sales were relatively unchanged on a reported basis, unfavorably impacted by foreign exchange and ~~the United Kingdom, partially offset by growth in Argentina and South Africa.~~ Constant $ Adjusted Average Representative Sales increased 5%.

The decline in Constant $ revenue was ~~primarily due~~driven by Avon International and was largely offset by growth in Avon Latin America. Constant $ revenue in Avon International decreased 11% and continues to be affected by the COVID-19 pandemic, resulting in a ~~3% decrease~~slowdown in Beauty market growth and a lower representative base compared to the prior year period. In Avon Latin America Constant $ revenue increased 8% driven by an increase in Active Representatives and to a lesser extent an increase in Average Representative Sales. Growth in the region was driven by most markets which ~~was partially~~more than offset ~~by higher average order. The decrease~~the decline 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%4%, ~~primarily~~mainly due to ~~declines~~decreases 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.~~Avon International.

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~~Transaction 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 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.

COVID-19 pandemic

A novel strain of coronavirus (COVID-19) was first identified in Wuhan, China in December 2019, and subsequently declared a pandemic by the World Health Organization. Due to the uncertain and 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 evolve, and the outcome is uncertain. We are therefore unable to predict accurately the impact that COVID-19 will have on our business going forward.

In ~~January 2016, we initiated~~the first quarter of 2021, COVID-19 continued to have a ~~transformation plan (the “Transformation Plan”)~~significant impact on our operations as many markets were subject to restrictions. Most markets in ~~order to enable us to achieve our long-term goals of mid-single-digit Constant $~~Avon Latin America were not significantly impacted by COVID-19 and had revenue growth during the first quarter of 2021. Avon International and low double-digit operating margin. The Transformation Plan includes three pillars: invest in growth, reduce costs in an effort to continue to improve our cost structure and improve our financial resilience.

~~The Transformation Plan was designed to focus on cost savings and financial resilience~~Brazil were more significantly impacted by COVID-19 in the first ~~year,~~quarter which resulted in ~~order~~deceleration of the Beauty market growth and a lower representative base. It is unclear if current lockdown measures will continue or be reestablished elsewhere globally which could dampen our recovery from COVID-19.

We continue to ~~support future investment~~closely monitor the COVID-19 pandemic and adapt our actions to minimize business disruptions while ensuring the safety of all the people involved. Since the beginning of the COVID-19 pandemic and consequently restrictive measures imposed by governments, such as the closing of non-essential trade and travel restrictions, the Company has implemented new measures in ~~growth. In 2016 we estimate that we achieved cost savings of $120 before taxes, and we significantly strengthened~~all its operations in line with 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 a performance-based culture. This will increase our ability to drive results and deliver steady execution going forward. While we are addressing challenges in the business, we are moving forward with urgency, focusing on the following key elements of our roadmap to growth:

~~Deliver a seamless, competitive Representative experience - investment to upgrade systems and drive mobile connectivity in our markets to make doing business easier for our Representatives;~~

Insightful data and analytics - improve our ability to support the Representative and help her run her business more effectively through deeper insight and analytics into Representative behavior and needs;official guidelines.

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

~~Rigorous performance management -~~As of the ~~new executive team is a key enabler~~date of this report, we are unable to ~~driving a performance-based culture for ownership~~estimate the long-term impact of ~~results;~~the economic paralysis arising from efforts to curb the spread of the COVID-19 virus and

~~Relentless focus~~ the expected reduction in activity on ~~execution capabilities - focus on developing a service mindset,~~our business, results of operations and ~~enable the implementation changes,~~financial condition. We will continue to review our revenue, investments, expenses and cash outflows, as well as adjusting our relationships with ~~minimal disruptions, through pilot programs that cover service from end to end.~~

~~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" included in Item 1A of our 2020 Annual Report.

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

In May 2020, the new leadership of Avon refreshed our strategy ("Open Up & Grow") which has aims to ~~realize annualized~~return Avon to growth over the next three years. Open Up & Grow replaces and builds on the success of the Open Up Avon strategy, launched in 2018 to strengthen competitiveness through enhancing the representative experience, improving brand position and relevance, accelerating digital expansion and improving costs. Over the next three years, savings ~~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 and~~ are expected to ~~achieve the majority of the annualized savings~~continue to be achieved through restructuring actions (that may continue to result in ~~2017. In addition, we have realized savings from~~charges related to severance, contract terminations and asset write-offs), as well as other cost-savings strategies that ~~did~~would not result in restructuring charges. For the market closures, the expected annualized savings represented the operating loss no longer included within Avon's operating results as a result of no longer operating in the respective market. For actions that did 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.

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.

NEW ACCOUNTING STANDARDS

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

RESULTS OF OPERATIONS—THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER 30, 2017~~MARCH 31, 2021 AS COMPARED TO THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER 30, 2016~~MARCH 31, 2020

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

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

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~~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) chargescosts related to the deconsolidation of our Venezuelan operations as of March 31, 2016 ("Venezuelan special items"); 5) a net gain related to the extinguishment of debt ("Gain on extinguishment of debt"); and, as it relates to our effective tax rate discussion, 6) income tax benefits realized in the first quarter of 2016 as a result of tax planning strategies and in the second quarter of 2016 primarily due to the release of a valuation allowanceTransaction; 3) costs associated with ~~Russia ("Special tax items").~~the early termination of debt.

~~The Loss contingency~~

(1)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 quarter~~Consolidated Financial Statements contained herein for further information.

(2)For the three months ended March 31, 2020, costs related to the Transaction of ~~2017 caused by a charge~~$86 primarily included professional fees incurred in relation to the Transaction of approximately ~~$18 for a loss contingency related~~$44, severance payments of approximately $25 and acceleration of share based compensation of approximately $10 relating to ~~a non-U.S. pension plan, for which an amendment~~these terminations triggered by change in control provisions. Further information relating to the ~~plan that occurred~~Transaction is included in ~~a prior year may not have been appropriately implemented.~~Note 17, Merger with Natura, to the Consolidated Financial Statements included herein.

(3)During the three months ended March 31, 2020, the Company incurred costs of $8 associated with the 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 March 31,
	2021			2020			%/Basis Point Change
Select Consolidated Financial Information
Total revenue	$	904.4		$	957.3		(6)	%
Cost of sales	(405.4)			(421.0)			(4)	%
Selling, general and administrative expenses	(536.1)			(638.1)			(16)	%
Operating loss	(37.1)			(101.8)			(64)	%
Interest expense	(23.6)			(31.8)			(26)	%
Loss on extinguishment of debt and credit facilities	—			(7.8)			(100)	%
Interest income	.2			1.2			(83)	%
Other expense, net	(1.3)			(18.2)			(93)	%

Loss from continuing operations, before income taxes	(61.8)			(158.4)			(61)	%
Loss from continuing operations, net of tax	(68.9)			(167.2)			(59)	%
Net loss attributable to Avon	$	(63.6)		$	(171.0)		(63)	%

Advertising expenses(1)	$	17.6		$	15.7		12	%

Reconciliation of Non-GAAP Financial Measures
Total revenue	$	904.4		$	957.3		(6)	%



Gross margin	55.2		%	56.0		%	(80)
CTI restructuring	—			(.1)			10

Adjusted gross margin	55.2		%	55.9		%	(70)

Selling, general and administrative expenses as a % of total revenue	59.3		%	66.7		%	(740)
CTI restructuring	(2.2)			(.2)			(200)

Costs related to the Transaction	—			(8.9)			890

Adjusted selling, general and administrative expenses as a % of total revenue	57.1		%	57.6		%	(50)

Operating loss	$	(37.1)		$	(101.8)		(64)	%
CTI restructuring	19.5			1.8

Costs related to the Transaction	—			85.5

Adjusted operating loss	$	(17.6)		$	(14.5)		21	%

Operating margin	(4.1)		%	(10.6)		%	650
CTI restructuring	2.2			.2			200

Costs related to the Transaction	—			8.9			(890)

Adjusted operating margin	(1.9)		%	(1.5)		%	(40)

Change in Constant $ Adjusted operating margin(2)							10

Loss before taxes	$	(61.8)		$	(158.4)		(61)	%
CTI restructuring	19.5			1.8

Costs related to the Transaction	—			85.5
Other items	—			7.8
Adjusted loss before taxes	$	(42.3)		$	(63.3)		(33)	%

Income taxes	$	(7.1)		$	(8.8)		(19)	%

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 March 31,
	2021		2020		%/Basis Point Change

Effective tax rate	(11.5)	%	(5.6)	%






Performance Metrics
Change in Active Representatives					(6)	%
Change in units sold					(4)	%

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 )%

* Calculation not meaningful

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


~~(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.~~

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

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

Three Months Ended March 31, 2021

Revenue

During the three months ended March 31, 2021, revenue decreased 6% compared to the prior-year period, unfavorably impacted by foreign exchange, primarily the Brazilian real, the Argentinian peso and the Mexican peso. Constant $ Adjusted revenue decreased 1%.

Revenue and Constant $ revenue were impacted by a decrease in Active Representatives of 6%, across multiple markets. Average Representative Sales were relatively unchanged on a reported basis, unfavorably impacted by foreign exchange and Constant $ Adjusted Average Representative Sales increased 5%.

The decline in Constant $ revenue was driven by Avon International and was largely offset by growth in Avon Latin America. Constant $ revenue in Avon International decreased 11% and continues to be affected by the COVID-19 pandemic, resulting in a slowdown in Beauty market growth and a lower representative base compared to the prior year period. In Avon Latin America Constant $ revenue increased 8% driven by an increase in Active Representatives and to a lesser extent an increase in Average Representative Sales. Growth in the region was driven by most markets which more than offset the decline in Brazil.

Units sold decreased 4%, mainly due to decreases in Avon International.

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

Operating Margin

Operating margin increased by 650 basis points, significantly benefiting from costs related to the Natura transaction in the three-month period ended March 31, 2020 not repeating in the current year. This benefit was partially offset by increased restructuring expenses in the three-month period ended March 31, 2021. Excluding these items, Adjusted operating margin decreased by 40 basis points, compared to the same period of 2020. Adjusted operating margin performance was impacted unfavorably by foreign exchange translation losses as constant $ Adjusted operating Margin increased by 10 basis points driven by improved SG&A as a percentage of total revenue offsetting the decline in gross margin. The movements in operating margin and Adjusted operating margin are discussed further below in "Gross Margin" and "Selling, General and Administrative Expenses".

Gross Margin

Adjusted gross margin decreased 70 basis points, compared to the same period of 2020, due to the unfavorable impact of foreign currency, partially offset by the favorable net impact of price/mix.

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

SG&A as a percentage of total revenue decreased 740 basis points, significantly impacted by costs related to the Natura transaction in the three-month period ended March 31, 2020. This benefit was partially offset by increased restructuring expenses in the three-month period ended March 31, 2021. Excluding these items, Adjusted SG&A as a percentage of Adjusted revenue decreased 50 basis points, compared to the same period of 2020, as savings from lower bad debt more than offset investments in advertising expense to boost brand perception in Brazil, and higher sales leader and field investments. The reduction of bad debt expense was a result of the prior year period having an unfavorable impact on trade receivables

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

recoverability from COVID-19 which was not seen in the current period. Tight cost management reduced the absolute value of our fixed expenses compared to the prior year period and resulted in them being the same percentage of total revenue as the prior year period.

~~Three Months Ended September 30, 2017~~

~~Revenue~~Other Expenses

~~During the three months ended September 30, 2017, revenue increased 1%~~Interest expense decreased by approximately $8 and interest income decreased by approximately $1 compared to the prior-year ~~period, benefiting from foreign exchange, while Constant $ revenue was relatively unchanged. Constant $ revenue growth in Argentina~~period.

Loss on extinguishment of debt 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 sales from reportable segments and associated growth rates were as follows:~~

Three Months Ended September 30, %/Point Change
2017 2016 US$ Constant $
Beauty:
Skincare $ 397.1
$ 396.7
— % (2 )%
Fragrance 389.8
373.2
4
4
Color 246.3
243.9
1
—
Total Beauty 1,033.2
1,013.8
2
1
Fashion & Home:
Fashion 195.2
201.9
(3 ) (4 )
Home 149.8
150.4
—
(1 )
Total Fashion & Home 345.0
352.3
(2 ) (2 )
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
—

* Calculation not meaningful

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

~~Operating Margin~~

Operating margin and Adjusted operating margin decreased 210 basis points and 70 basis points, respectively, compared to the same period of 2016. The decreases in operating margin and Adjusted operating margin include the benefits associated with the Transformation Plan, primarily reductions in headcount, as well as other cost reductions. These savings were largely offset by the inflationary impact on costs outpacing revenue growth. The decreases in operating margin and Adjusted operating margin are discussed further below in "Gross Margin" and "Selling, General and Administrative Expenses."

~~Gross Margin~~

~~Gross margin and Adjusted gross margin both increased 30 basis points compared to the same period of 2016, in each case primarily due to the following:~~

~~an increase of 80 basis points due to the favorable net impact of mix and pricing, primarily due to inflationary pricing in South Latin America.~~

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

~~a decrease of 20 basis points due to higher supply chain costs, primarily in North Latin America due to higher obsolescence and material costs, partially offset by lower distribution costs; and~~

~~a decrease~~credit facilities of approximately ~~20 basis points due to~~$8 is primarily comprised of the ~~net unfavorable impact~~costs of ~~foreign currency transaction losses and foreign currency translation.~~

~~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~~termination of revenue and Adjusted selling, general, and administrative expenses as a percentage of revenue increased 250 basis points and 100 basis points, respectively, compared to the same period of 2016. The selling, general and administrative expenses as a percentage of revenue comparison was impacted by approximately 190 basis points for the approximate $27 of net proceeds recognized as a result of a legal settlementour revolving credit facility in the ~~third quarter of 2016, partially offset by approximately 60 basis for lower CTI restructuring. See~~three-month period ended March 31, 2020. Refer to Note ~~12, Restructuring Initiatives,~~15, Debt, to the Consolidated Financial Statements included herein for more information ~~on CTI restructuring.~~

~~The remaining increase in selling, general and administrative expenses as a percentage~~relating to these extinguishments 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 due to the following:~~

~~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;~~

an increase of 100 basis points primarily due to higher Representative, sales leader and field expense, most significantly in Brazil to support efforts to activate the field and improve Representative recruitment; and

~~an increase of 40 basis points from higher transportation costs, most significantly in Russia which was driven by new delivery rates.~~

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

~~a decrease of 80 basis points due to lower expenses associated with employee incentive compensation plans;~~

a decrease of 20 basis points primarily due to lower fixed expenses, including the benefits associated with the Transformation Plan, primarily reductions in headcount, as well as other cost reductions; and

various other insignificant items that partially offset the increase in selling, general and administrative expenses as a percentage of revenue and Adjusted selling, general, and administrative expenses as a percentage of revenue.

debt.

Other ~~Expenses~~

~~Interest expense and interest~~(expense) income, ~~each increased by less than $1~~net, of approximately ($1) represents a favorable impact of $17 compared to the ~~prior-year period.~~

~~Other expense, net, decreased by approximately $7 compared~~first quarter of 2020 primarily attributable to the ~~prior-year period, primarily due to~~unfavorable impact of foreign exchange ~~net gains in the current year as compared to~~ net losses in the ~~prior year, resulting~~first quarter of 2020 which were not repeated in ~~a year-over-year favorable impact~~the first quarter 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.2021.

Effective Tax Rate

The effective tax rates in ~~2017~~2021 and ~~2016~~2020 continue to be impacted by our inability to recognize additional deferred tax assets in various jurisdictions related to our current-year operating results. In addition, the effective tax rates in ~~2017~~2021 and ~~2016~~2020 continue to be impacted by withholding taxes associated with certain intercompany payments, including royalties, service charges, interest and dividends, which in the aggregate are relatively consistent each year due to the need to repatriate funds to cover ~~U.S.-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 March 31, 2021 and ~~2016.~~

2020 were (11.5)% and (5.6)%, respectively. The effective tax rates ~~in 2017~~for the three months ended March 31, 2021 and ~~2016~~2020 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 first quarter of 2021 was ~~also~~unfavorably impacted by reserves for uncertain tax positions of $1.2, legislative changes of $.8, and miscellaneous income tax expense of approximately $.4. The effective tax rate for in the ~~benefit from the net proceeds recognized as a result~~first quarter of ~~a legal settlement.~~2020 was unfavorably impacted by miscellaneous income tax expense of approximately $1.5.

~~In addition, the~~Our Adjusted effective tax rates for the three months ended March 31, 2021 and ~~the~~2020 were (21.0)% and (13.8)%, respectively. The Adjusted effective tax rates in ~~2017~~2021 and ~~2016~~2020 were ~~negatively~~ impacted by ~~the~~ country mix of ~~earnings.~~earnings and withholding taxes. The Adjusted effective tax rate for the first quarter of 2021 was unfavorably impacted by reserves for uncertain tax positions of $1.2, legislative changes of $.8 and miscellaneous income tax expense of approximately $.4. The Adjusted effective tax rate in the first quarter of 2020 was unfavorably impacted by miscellaneous income tax expense of approximately $1.5.

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

~~See Note 12, Restructuring Initiatives,~~ 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 ~~the Consolidated Financial Statements included herein~~a need for ~~more information on CTI restructuring.~~

a valuation allowance to reduce our deferred tax assets in upcoming quarters.

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

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

Impact of Foreign Currency

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

•foreign currency transaction losses (classified within cost of sales and ~~selling, general and administrative expenses)~~SG&A in our Consolidated Statements of Operations), which had an unfavorable impact to operating profit and Adjusted operating profit of ~~an estimated $10,~~approximately $20, or approximately 30200 basis points to both operating margin and Adjusted operating margin;

•foreign currency translation, which had ~~a favorable~~an impact of approximately $5 to operating profit and Adjusted operating profit, or an unfavorable impact of approximately ~~$5, or approximately 10~~50 basis points toon both operating margin and Adjusted operating margin; and

•foreign exchange net gains, on our working capital (classified within other ~~expense, net)~~income (expense), net in our Consolidated Statements of Operations) as compared to ~~net losses~~gains in the prior year, resulting in a ~~year-over-year~~ favorable impact of approximately $4$15 before tax on both a reported and Adjusted basis.

~~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.~~

~~Nine Months Ended September 30, 2017~~

~~Revenue~~

During the nine months ended September 30, 2017, revenue was 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.

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

Nine Months Ended September 30, %/Point Change
2017 2016 US$ Constant $
Beauty:
Skincare $ 1,182.0
$ 1,175.9
1 % (2 )%
Fragrance 1,101.3
1,065.2
3
2
Color 724.3
743.7
(3 ) (5 )
Total Beauty 3,007.6
2,984.8
1
(2 )
Fashion & Home:
Fashion 591.8
615.0
(4 ) (5 )
Home 430.3
428.6
—
(1 )
Total Fashion & Home 1,022.1
1,043.6
(2 ) (3 )
Net sales from reportable segments $ 4,029.7
$ 4,028.4
—
(2 )
Net sales from Other operating segments and business activities .1
18.6
*
*
Net sales $ 4,029.8
$ 4,047.0
—
(2 )

* Calculation not meaningful

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

~~Operating Margin~~

Operating margin and Adjusted operating margin decreased 170 basis points and 140 basis points, respectively, compared to the same period of 2016. The decreases in operating margin and Adjusted operating margin include 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 on costs outpacing revenue growth. The decreases in operating margin and Adjusted operating margin are discussed further below in "Gross Margin" and "Selling, General and Administrative Expenses."

~~Gross Margin~~

~~Gross margin and Adjusted gross margin both increased 100 basis points compared to the same period of 2016, in each case primarily due to the following:~~

~~an increase of 110 basis points due to the favorable net impact of mix and pricing, primarily due to inflationary pricing in South Latin America and Europe, Middle East & Africa.~~

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

a decrease of 20 basis points due to higher supply chain costs, primarily in South Latin America and North Latin America due to higher material and overhead costs, which was partially offset by lower distribution and material costs in Europe, Middle East & Africa.

~~Selling, General and Administrative Expenses~~

Selling, general and administrative expenses as a percentage of revenue and Adjusted selling, general, and administrative expenses as a percentage of revenue increased 280 basis points and 240 basis points, respectively, compared to the same period of 2016. The selling, general and administrative expenses as a percentage of revenue comparison was impacted by approximately 70 basis points for the approximate $27 of net proceeds recognized as a result of a legal settlement in the third quarter of 2016 and approximately 40 basis points for a loss contingency related to a non-U.S. pension plan as discussed above, partially offset by approximately 80 basis for lower CTI restructuring. See Note 7, Employee Benefit Plans, to the Consolidated Financial Statements included herein for more information on the loss contingency related to a non-U.S. pension plan and Note 12, Restructuring Initiatives, to the Consolidated Financial Statements included herein for more information on CTI restructuring.

The remaining increase in selling, general and administrative expenses as a percentage of revenue and the increase of 240 basis points in Adjusted selling, general and administrative expenses as a percentage of revenue were, in each case, primarily due to the following:

an increase of 120 basis points from higher bad debt expense, driven by Brazil due to the lower than anticipated collection of receivables, primarily impacted by the macroeconomic environment, as well as resulting from an adjustment to credit terms available to new Representatives during 2016;

an increase of 60 basis points primarily due to the impact of the Constant $ revenue decline causing deleverage of our fixed expenses, partially offset by lower fixed expenses, including the benefits associated with the Transformation Plan, primarily reductions in headcount, as well as other cost reductions;

~~an increase of 50 basis points from higher transportation costs, primarily in Russia which was driven by new delivery rates;~~

an increase of 50 basis points primarily due to higher Representative, sales leader and field expense, most significantly in Brazil to support efforts to activate the field and improve Representative recruitment; and

~~an increase of 30 basis points from higher advertising expense, primarily in Brazil.~~

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

~~a decrease of approximately 50 basis points due to the favorable impact of foreign currency translation and foreign currency transaction gains; and~~

~~a decrease of 50 basis points due to lower expenses associated with employee incentive compensation plans.~~

~~Other Expenses~~

Interest expense increased by approximately $6 compared to the prior-year period, primarily due to the interest associated with $500 of 7.875% Senior Secured Notes issued in August 2016 and lower amortization of gains associated with the termination of interest rate swaps. These items were partially offset by the interest savings associated with prepayment of the remaining principal amount of our 4.20% Notes and 5.75% Notes in November 2016, the August 2016 cash tender offers and the October 2016 and December 2016 repurchases of certain of our outstanding public notes. Refer to Note 16, Debt, and Note 15, Derivative Instruments and Hedging Activities, to the Consolidated Financial Statements included herein for additional information.

~~AVON PRODUCTS, INC.~~

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

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

Gain on extinguishment of debt in the first nine months of 2016 of approximately $4 was associated with the cash tender offers in August 2016. Refer to Note 16, Debt, to the consolidated financial statements included herein for additional information.

~~Interest income decreased by approximately $2 compared to the prior-year period.~~

Other expense, net, decreased by approximately $123 compared to the prior-year period, primarily due to the deconsolidation of our Venezuelan operations, as we recorded a loss of approximately $120 in the first quarter of 2016. In addition, other expense, net was positively impacted by foreign exchange net gains in the current year as compared to net losses in the prior year, resulting in a year-over-year benefit of approximately $9. These items were partially offset by the unfavorable impact of the amounts recorded for our proportionate share of New Avon's loss, which increased approximately $3 as compared to the prior-year period. See "Venezuela Discussion" in this MD&A and Note 1, Accounting Policies, to the Consolidated Financial Statements included herein for further discussion of our Venezuela operations, and see Note 4, Investment in New Avon, to the Consolidated Financial Statements included herein for more information on New Avon.

~~Effective Tax Rate~~

The effective tax rates in 2017 and 2016 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 and 2016 continue to be impacted by withholding taxes associated with certain intercompany payments, including royalties, service charges and dividends, which in the aggregate are relatively consistent each year due to the need to repatriate funds to cover U.S.-based costs, such as interest on debt and corporate overhead. These factors resulted in unusual effective tax rates in 2017 and 2016.

The effective tax rate in 2017 was impacted by a loss contingency related to a non-U.S. pension plan and CTI restructuring. The effective tax rate in 2016 was impacted by the deconsolidation of our Venezuelan operations and CTI restructuring, partially offset by a benefit of approximately $29 as a result of the implementation of foreign tax planning strategies, a net benefit of approximately $7 primarily due to the release of a valuation allowance associated with Russia and a benefit from the net proceeds recognized as a result of a legal settlement.

~~In addition, the effective tax rates and the Adjusted effective tax rates in 2017 and 2016 were negatively impacted by the country mix of earnings.~~

See Note 7, Employee Benefit Plans, to the Consolidated Financial Statements included herein for more information on the loss contingency related to a non-U.S. pension plan, Note 12, Restructuring Initiatives, to the Consolidated Financial Statements included herein for more information on CTI restructuring and "Venezuela Discussion" in this MD&A and Note 1, Accounting Policies, to the Consolidated Financial Statements included herein for further discussion of our Venezuela operations.

~~Impact of Foreign Currency~~

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

foreign currency transaction gains (classified within cost of sales, and selling, general and administrative expenses), which had a favorable impact to operating profit and Adjusted operating profit of an estimated $10, or approximately 30 basis points to operating margin and Adjusted operating margin;

foreign currency translation, which had a favorable impact to operating profit and Adjusted operating profit of approximately $15, or approximately 30 basis points to operating margin and approximately 20 basis points to Adjusted operating margin; and

foreign exchange net gains on our working capital (classified within other expense, net) as compared to net losses in the prior year, resulting in a year-over-year benefit of approximately $9 before tax on both a reported and Adjusted basis.

~~Discontinued Operations~~

Loss from discontinued operations, net of tax was approximately $13 for 2016. During the first nine months of 2016, we recorded charges of approximately $16 before tax ($6 after tax) in the aggregate associated with the sale of the North America business which closed on March 1, 2016. See Note 3, Discontinued Operations, to the Consolidated Financial Statements included herein for more information.

~~Venezuela Discussion~~

As of March 31, 2016, we deconsolidated our Venezuelan operations, and since then, we account for this business using the cost method of accounting. The decision to deconsolidate our Venezuelan operations was due to the lack of exchangeability between the Venezuelan bolivar and the U.S. dollar. This was caused by Venezuela's restrictive foreign exchange control

~~AVON PRODUCTS, INC.~~

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

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

~~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 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 AOCI associated with foreign currency movements before Venezuela was accounted for as a highly inflationary economy. The net assets of the Venezuelan business were comprised of inventories of approximately $24, property, plant and equipment, net of approximately $15, other assets of approximately $11, accounts receivable of approximately $5, cash of approximately $4, and accounts payable and accrued liabilities of approximately $20. 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 to the extent that we receive cash for dividends or royalties remitted by Avon Venezuela.

Segment Review

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,~~certain CTI restructuring initiatives, 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. See Note ~~10,~~9, Segment Information, to the Consolidated Financial Statements included herein for a reconciliation of segment profit to operating profit.

~~Europe, Middle East & Africa~~

Avon International


	Three Months Ended September 30,										Nine Months Ended September 30,											Three Months Ended March 31,
							%/Point Change										%/Point Change											%/Basis Point Change
	2017			2016			US$		Constant $		2017			2016			US$		Constant $			2021			2020			US$		Constant $
Total revenue	$	482.8		$	476.4		1	%	(2	)%	$	1,484.9		$	1,517.7		(2	)%	(4	)%	Total revenue	$	430.9		$	477.1		(10)	%	(11)	%
Segment profit	65.9			66.2			—	%	(9	)%	222.5			218.3			2	%	(3	)%	Segment profit	(7.0)			2.7			(359)	%	(442)	%

Segment margin	13.6		%	13.9		%	(.3	)	(.9	)	15.0		%	14.4		%	.6		.2		Segment margin	(1.6)		%	.6		%	(220)		(160)

Change in Active Representatives									(2	)%									(3	)%	Change in Active Representatives									(20)	%
Change in units sold									(5	)%									(9	)%	Change in units sold									(13)	%
Change in Ending Representatives									1	%									1	%

Three Months Ended ~~September 30, 2017~~March 31, 2021

In Russia, revenue increased 3%, benefiting significantly from the favorable impact of foreign exchange. On a Constant $ basis, Russia's revenue declined 6%, primarily due to a decrease in Active Representatives, as well as lower average order. The Constant $ revenue ~~decline~~were affected by the COVID-19 pandemic, resulting in ~~Russia~~a slowdown in Beauty market growth.

Segment margin decreased 220 basis points, or ~~12%~~160 on a Constant $ basis, ~~primarily due to~~mostly driven by higher SG&A as a ~~decrease in Active Representatives. In South Africa, revenue grew 17%, which was favorably impacted by foreign exchange. On a~~ percentage of total revenue.

Constant $ ~~basis, South Africa’s revenue grew 8%, driven by an increase in Active Representatives, partially~~Adjusted gross margin marginally increased as the positive impact of price/mix fully offset ~~by lower average order.~~the unfavorable impact of foreign currency transaction losses.

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

~~Segment margin decreased .3 points, or .9 points on a~~The increase in Constant $ ~~basis, in each case primarily~~Adjusted SG&A as a ~~result of:~~


	Three Months Ended March 31,
							%/Basis Point Change
	2021			2020			US$		Constant $
Total revenue	$	465.8		$	480.2		(3)	%	8	%



Segment profit	(4.6)			(17.2)			73	%	79	%



Segment margin	(1.0)		%	(3.6)		%	260		320



Change in Active Representatives									6	%
Change in units sold									2	%

Amounts in the ~~United Kingdom pension plan which negatively impacted segment margin by .7 points; and~~

~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2021

Total revenue decreased 2%3% compared to the prior-year period, ~~despite the favorable impact of~~unfavorably impacted by foreign exchange, which was ~~primarily~~ driven ~~by the weakening of the U.S. dollar relative to the Russian ruble and the South African rand, partially offset~~ by the strengthening of the U.S. dollar relative to multiple currencies, primarily the ~~British pound~~Brazilian real and the ~~Turkish lira.~~Argentinian Peso. On a Constant $ basis, revenue ~~decreased 4%, most significantly impacted by declines in Russia and the United Kingdom, partially offset by growth in South Africa. The segment's Constant $ revenue decline was primarily~~increased 8% driven by ~~a decrease in Active Representatives.~~

~~In Russia, revenue increased 8%, benefiting significantly from the favorable impact of foreign exchange. On a Constant $ basis, Russia's revenue declined 8%, primarily due to a decrease~~an increase in Active Representatives ~~along with lower average order. The Constant $ revenue~~and to a lesser extent an increase in Average Representative Sales. Growth in the region was driven by most markets which more than offset the decline in ~~Russia was impacted by competitive pressures which negatively impacted Active Representatives, as well as a comparison~~Brazil.

Revenue in Brazil decreased 21% compared to ~~strong volume growth in~~ the ~~prior-year~~prior year period, which benefited primarily from a pricing lag during an inflationary period. In addition, Constant $ revenue in Russia was impacted by service issues related to our delivery provider, particularly in the first quarter of 2017 and the early part of the second quarter of 2017. In the United Kingdom, revenue declined 17%, which was unfavorably impacted by foreign exchange. On a Constant $ basis, ~~the United Kingdom's~~ revenue ~~declined 10%,~~decreased 3% primarily ~~due to~~driven by a decrease in ~~Active Representatives, as well as lower average order. The Constant $ revenue decline~~Average Representative Sales which were considerably impacted by a deceleration in consumption in the ~~United Kingdom was partially due~~Beauty category, in the midst of a new wave of COVID-19 and the cessation of certain government support to the anniversary of the launch of Matte lipstick in the first quarter of 2016 as well as the strong product launches in the second quarter of 2016. In South Africa, revenue grew 27%, which was favorably impacted by foreign exchange. On a Constant $ basis, South Africa’s revenue grew 12%, primarily due to an increase in Active Representatives, partially offset by lower average order.general population.

Segment margin increased .6260 basis points, or .2320 basis points on a Constant $ basis, primarily driven by improvements in ~~each case~~SG&A.

Constant $ Adjusted gross margin marginally declined primarily ~~as a result of:~~

The decrease in Constant $ Adjusted SG&A as a percentage of Adjusted revenue was driven by lower ~~supply chain costs. Supply chain~~fixed costs ~~benefited primarily~~resulting from ~~lower distribution~~synergy initiatives and ~~material costs, partially due to productivity initiatives;~~

a decline of .4 points primarily due to the impact of the Constant $ revenue decline causing deleverage of our fixed expenses, partially offset by lower fixed expenses, including the benefits associated with the Transformation Plan, primarily reductions in headcount, as well as other cost reductions. In addition, fixed expenses benefited from lower expenses associated with employee incentive compensation plans; and

~~a decline of .3 points related to the net impact of declining revenue with respect to Representative, sales leader and field expense.~~

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

~~South Latin America~~

Three Months Ended September 30, Nine Months Ended September 30,
%/Point Change %/Point Change
2017 2016 US$ Constant $ 2017 2016 US$ Constant $
Total revenue $ 589.7
$ 594.8
(1 )% — % $ 1,647.0
$ 1,556.9
6 % 1 %
Segment profit 66.3
73.8
(10 )% (9 )% 124.8
157.9
(21 )% (22 )%

Segment margin 11.2 % 12.4 % (1.2 ) (1.1 ) 7.6 % 10.1 % (2.5 ) (2.2 )

Change in Active Representatives (6 )% (4 )%
Change in units sold (7 )% (5 )%
Change in Ending Representatives (6 )% (6 )%

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

~~Three Months Ended September 30, 2017~~

Total revenue decreased 1% compared to the prior-year period, primarily due to the unfavorable impact of foreign exchange. On a Constant $ basis revenue was relatively unchanged compared to the prior year, primarily driven by a decrease in Active Representatives, offset by higher average order which was driven by inflationary pricing in Argentina. The decline in Ending Representatives was primarily driven by declines in Brazil, and to a lesser extent, Colombia.

Revenue in Brazil decreased 3%, favorably impacted by foreign exchange. Brazil’s Constant $ revenue declined 5%, primarily due to a decrease in Active Representatives, partially offset by higher average order. On a Constant $ basis, Brazil’s sales from Beauty products and Fashion & Home products declined 2% and 9%, respectively. The decline in Constant $ Beauty sales in Brazil was driven by weaker performance in Color. Revenue in Brazil, as well as Active Representatives and Ending Representatives, continued to be impacted by a difficult macroeconomic environment combined with the application of stricter credit requirements for the acceptance of new Representatives as compared to the requirements in the prior year. Revenue in Argentina grew 4%, or 19% on a Constant $ basis, which was primarily due to higher average order which was impacted by the inflationary impact on pricing, and to a lesser extent, an increase in Active Representatives.

~~Segment margin decreased 1.2 points, or 1.1 points on a Constant $ basis, in each case primarily as a result of:~~

~~Nine Months Ended September 30, 2017~~

Total revenue increased 6% compared to the prior-year period, primarily due to the favorable impact of foreign exchange which was primarily driven by the weakening of the U.S. dollar relative to the Brazilian real. On a Constant $ basis, revenue increased 1%. The segment's Constant $ revenue benefited from higher average order, which was driven by inflationary pricing in Argentina, partially offset by a decrease in Active Representatives.

Revenue in Brazil increased 8%, favorably impacted by foreign exchange. Brazil’s Constant $ revenue declined 2%, primarily due to a decrease in Active Representatives, partially offset by higher average order. On a Constant $ basis, Brazil’s sales from Beauty products and Fashion & Home products decreased 2% and 4%, respectively. The decline in Constant $ Beauty sales in Brazil was driven by weaker performance in Color. Revenue in Brazil, as well as Active Representatives and Ending Representatives, continued to be impacted by a difficult macroeconomic environment combined with the application of stricter credit requirements for the acceptance of new Representatives as compared to the requirements in the prior year. Revenue in Argentina grew 9%, or 22% on a Constant $ basis, which was primarily due to higher average order which was impacted by the inflationary impact on pricing.

~~AVON PRODUCTS, INC.~~

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

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

~~Segment margin decreased 2.5 points, or 2.2 points on a Constant $ basis, in each case primarily as a result of:~~

~~North Latin America~~

Three Months Ended September 30, Nine Months Ended September 30,
%/Point Change %/Point Change
2017 2016 US$ Constant $ 2017 2016 US$ Constant $
Total revenue $ 206.0
$ 196.8
5 % 2 % $ 607.0
$ 625.9
(3 )% — %
Segment profit 17.2
24.4
(30 )% (28 )% 56.0
85.0
(34 )% (31 )%

Segment margin 8.3 % 12.4 % (4.1 ) (3.5 ) 9.2 % 13.6 % (4.4 ) (4.1 )

Change in Active Representatives 1 % (1 )%
Change in units sold (3 )% (2 )%
Change in Ending Representatives 1 % 1 %

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

~~Three Months Ended September 30, 2017~~

North Latin America consists largely of our Mexico business. Total revenue for the segment increased 5% compared to the prior-year period, partially due to the favorable impact of foreign exchange which was primarily driven by the weakening of the U.S. dollar relative to the Mexican peso. On a Constant $ basis, revenue increased 2%, primarily due to higher average order and an increase in Active Representatives, despite the impact of product fulfillment shortfalls in the region. The segment's Constant $ revenue increase was primarily due to growth in Central America, partially offset by a Constant $ revenue decline in Mexico. Revenue in Mexico increased 4%, and was favorably impacted by foreign exchange. On a Constant $ basis, Mexico's revenue declined 1%, primarily due to a decrease in Active Representatives. We anticipate that the earthquake in Mexico in late September 2017 will adversely impact Mexico's fourth quarter 2017 results.

~~Segment margin decreased 4.1 points, or 3.5 points on a Constant $ basis, in each case primarily as a result of:~~

~~AVON PRODUCTS, INC.~~

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

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

~~Nine Months Ended September 30, 2017~~

Total revenue for the segment decreased 3% compared to the prior-year period, primarily due to the unfavorable impact from foreign exchange which was primarily driven by the strengthening of the U.S. dollar relative to the Mexican peso. On a Constant $ basis, revenue was relatively unchanged compared to the prior year, as higher average order was offset by a decrease in Active Representatives. In addition, Constant $ revenue was impacted by product fulfillment shortfalls in the region. The segment's Constant $ revenue benefited from growth in Central America, offset by a Constant $ revenue decline in Mexico. Revenue in Mexico declined 5%, and was unfavorably impacted by foreign exchange. On a Constant $ basis, Mexico's revenue declined 2%, primarily due to a decrease in Active Representatives.

~~Segment margin decreased 4.4 points, or 4.1 points on a Constant $ basis, in each case primarily as a result of:~~

Three Months Ended September 30, Nine Months Ended September 30,
%/Point Change %/Point Change
2017 2016 US$ Constant $ 2017 2016 US$ Constant $
Total revenue $ 130.1
$ 131.4
(1 )% 3 % $ 379.0
$ 406.4
(7 )% (3 )%
Segment profit 13.0
12.9
1 % 15 % 34.1
43.1
(21 )% (13 )%

Segment margin 10.0 % 9.8 % .2
1.1
9.0 % 10.6 % (1.6 ) (1.0 )

Change in Active Representatives — % (5 )%
Change in units sold 3 % (1 )%
Change in Ending Representatives (3 )% (3 )%

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

Effective in the first quarter of 2017, given that we exited Thailand during 2016, the results of Thailand are now reported in Other operating segments and business activities for all periods presented, while previously the results had been reported in Asia Pacific. The impact was not material to Asia Pacific or Other operating segments and business activities and is consistent with how we present other market exits.

~~Three Months Ended September 30, 2017~~

Total revenue decreased 1% compared to the prior-year period, primarily due to the unfavorable impact from foreign exchange. On a Constant $ basis, revenue increased 3%, primarily due to higher average order. The decrease in Ending Representatives was impacted by declines in all markets except the Philippines, most significantly in Malaysia. Revenue in the Philippines increased 4%, or 12% on a Constant $ basis, primarily due to higher average order and an increase in Active Representatives. Revenue growth in the Philippines was driven by strong commercial offers, including pricing, which, along with television advertising associated with our Color category, helped drive momentum in the field. In addition, actions implemented to improve inventory availability provided benefits to revenue growth.

~~AVON PRODUCTS, INC.~~

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

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

~~Segment margin increased .2 points, or 1.1 points on a Constant $ basis, in each case primarily as a result of:~~

~~Nine Months Ended September 30, 2017~~

Total revenue decreased 7% compared to the prior-year period, partially due to the unfavorable impact from foreign exchange. On a Constant $ basis, revenue decreased 3%, primarily due to a decrease in Active Representatives, most significantly in Malaysia, partially offset by higher average order. Revenue in the Philippines decreased 3%, or increased 3% on a Constant $ basis, primarily due to a higher average order and an increase in Active Representatives. Revenue growth in the Philippines was driven by the third quarter of 2017, as strong commercial offers, including pricing, which, along with television advertising associated with our Color category, helped drive momentum in the field. In addition, actions implemented to improve inventory availability provided benefits to revenue growth.

~~Segment margin decreased 1.6 points, or 1.0 point on a Constant $ basis, in each case primarily as a result of:~~

~~Earlier this year, we completed the review of our China operations and have determined that we will retain China in our portfolio of businesses.~~

LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of funds historically have been cash flows from operations, public offerings of notes, bank financings, issuance of commercial paper, borrowings under lines of credit and a private placement of notes. ~~At September 30, 2017,~~Furthermore, since January 3, 2020, we ~~had~~are part of the Natura &Co group of companies which gives us access to intercompany funding.

The Company has cash on hand of approximately $240 as of March 31, 2021.

COVID-19 pandemic and 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 2021, which will, in turn, result in lower cash ~~equivalents totaling approximately $664. We believe~~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 ~~sources~~obligations to parties other than Natura &Co and its affiliates for a period of ~~funding~~not less than 12 months from the issuance date of the Consolidated Financial Statements contained herein. The Company has received an irrevocable commitment from Natura &Co Holding that it will beprovide sufficient financial support if and when needed to ~~satisfy our~~enable the Company to meet its operating and financing obligations as they come due in the normal course of business for a period of not less than 12 months from the date issuance of the Consolidated Financial Statements. This support also includes the loan originally issued by a subsidiary of Natura &Co Holding to a subsidiary of the Company of $960 that is currently anticipated cash requirements through at least the next twelve months. For more information with respect to currency restrictions, see "Segment Review - South Latin America" in this MD&A above, and "Risk Factors - We are subject to financial risks related to our international operations, including exposure to foreign currency fluctuations and the impact of foreign currency restrictions" contained in our 2016 Form 10-K.due on November 2, 2021.

Other liquidity matters

We may seek ~~to repurchase our equity or~~ to retire our outstanding debt in open market purchases, through existing call mechanisms, privately negotiated transactions, through derivative instruments, cash tender offers or otherwise. Repurchases of ~~equity and~~ debt may be funded by cash or the incurrence of additional debt ~~or the issuance of equity (including shares of preferred stock) or convertible securities~~ and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors, and the amounts involved may be material. We may also elect to incur additional debt ~~or issue equity (including shares of preferred stock) or convertible securities~~ to finance ongoing operations or to meet our other liquidity needs. ~~Any issuances of equity (including shares of preferred stock) or convertible securities could have a dilutive effect on the ownership interest of~~However, our ~~current shareholders and may adversely impact earnings per share in future periods.Our~~ credit ratings ~~were downgraded during the past several years,~~remain below investment grade which may impact our ability to access such transactions on favorable terms, if at all. For more information, see "Risk Factors - Our credit ratings ~~were downgraded in each of the last three years,~~are below investment grade, which could limit our access to

~~AVON PRODUCTS, INC.~~

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

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

financing, affect the market price of our financing and increase financing costs. A ~~further~~ downgrade in our credit ratings may adversely affect our access to liquidity," "Risk Factors - Our indebtedness and any future inability to meet any of our obligations under our indebtedness, could adversely affect us by reducing our flexibility to respond to changing business and economic ~~conditions,"~~conditions" and "Risk Factors - A general economic downturn, a recession globally or in one or more of our geographic regions or markets or sudden disruption in business conditions or other challenges may adversely affect our business, our access to liquidity and capital, and our credit ratings" ~~contained~~included in Item 1A of our ~~2016 Form 10-K.~~2020 Annual Report.

Our liquidity could also be negatively impacted by restructuring initiatives, dividends, capital expenditures, acquisitions, and certain contingencies, including any legal or regulatory settlements, described more fully in Note 8,7, Contingencies, to the Consolidated Financial Statements included herein. See our Cautionary Statement for purposes of the ~~“Safe Harbor”~~"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995 contained in this report.

Three months ended March 31, 2021

Net cash ~~provided~~used by ~~continuing~~ operating activities of continuing operations during the first ~~nine~~three months of ~~2017~~2021 was approximately ~~$35,~~$169 as compared to net cash used by ~~continuing~~ operating activities of continuing operations of approximately ~~$104~~$300 during the first ~~nine~~three months of ~~2016.~~

2020, a decreased cash outflow of approximately $131. The ~~year-over-year comparison benefited from an injunction we received~~decrease in ~~May 2016 for~~net cash ~~deposits associated~~used by operating activities was primarily due to one-time transaction costs in the first quarter of 2020, related to the acquisition by Natura &Co Holding. Cash outflows related to the Transaction included professional fees, senior officer severance and other expenses. Further information relating to the Transaction is included in Note 17, Merger with Industrial Production Tax (“IPI”) in Brazil. As a result, we were not required to make cash deposits in 2017, while we paid approximately $19 for these cash deposits in 2016, prior to May. See Note 8, Contingencies,Natura Cosméticos S.A., to the Consolidated Financial Statements included ~~herein for additional information on the IPI taxes.~~

The remaining approximate $120 benefit to the year-over-year comparison of net cash provided (used) by continuing operating activities was primarily due to improvements in working capital, most significantly from lower purchases of inventory and the timing of payments, as well as lower net receivables. herein.

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

Net cash used by continuing investing activities during the first ~~nine~~three months of ~~2017~~2021 was approximately ~~$42,~~$13, as compared ~~to approximately $68 during the first nine months of 2016. The approximate $26 decrease~~ to net cash used by continuing investing activities ~~was primarily due to an approximate $22 cash distribution received from New Avon in the third quarter~~ of ~~2017. Capital expenditures for the full year 2017 are estimated to be~~ approximately $100 and are expected to be funded by cash from operations. See Note 4, Investment in New Avon, to the Consolidated Financial Statements included herein for more information on the cash distribution received from New Avon.

~~Net Cash (Used) Provided by Continuing Financing Activities~~

~~Net cash used by continuing financing activities~~$5 during the first ~~nine~~three months of ~~2017 was approximately $10, as compared to net cash provided by continuing financing activities of approximately $569 during the first nine months of 2016.~~2020. The approximate $579 decrease to net cash (used) provided by continuing financing activities was primarily due to the net proceeds related to the $500 principal amount of 7.875% Senior Secured Notes issued in the third quarter of 2016 and the net proceeds from the sale of Series C Preferred Stock, partially offset by the payments for the August 2016 cash tender offers of approximately $301. See Note 16, Debt, and Note 5, Related Party Transactions, to the Consolidated Financial Statements included herein for more information.

~~Capital Resources~~

~~Revolving Credit Facility~~

In June 2015, the Company and Avon International Operations, Inc. ("AIO"), a wholly-owned domestic subsidiary of the Company, entered into a five-year $400.0 senior secured revolving credit facility (the “2015 facility”). Borrowings under the 2015 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. As of September 30, 2017, there were no amounts outstanding under the 2015 facility.

All obligations of AIO under the 2015 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.

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

~~The 2015 facility will terminate~~increase to net cash used by continuing investing activities was driven by an increase in ~~June 2020; provided, however, that it shall terminate on~~capital expenditure in the 91^st ~~day prior~~first three months of 2021 compared to the ~~maturity~~first three months of ~~6.50% Notes due March 1, 2019 and 4.60% Notes due March 15, 2020, if on such 91~~^st ~~day,~~2020.

Net Cash Provided (used) by Financing Activities of Continuing Operations

Net cash provided by continuing financing activities during 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~~first three months 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 of the facility available to be drawn down is reduced by any standby letters of credit granted by AIO, which, as of September 30, 2017,2021 was approximately ~~$39. As~~$67, as compared to cash used by continuing financing activities of ~~September 30, 2017, based on then applicable interest rates, approximately $130 could have been drawn down without violating any covenant. Depending on our business results (including~~$28 in the ~~impact~~first three months of ~~any adverse foreign exchange movements~~2020. The approximate $95 increase to net cash from financing activities was driven by debt proceeds from affiliates of Natura &Co in 2021 and ~~significant restructuring charges), it is possible that we may be non-compliant with our interest coverage or total leverage ratio absent~~ the ~~Company undertaking other alternatives to avoid noncompliance, such as obtaining amendments to~~settlement of stock options in the 2015 facility or repurchasing certain debt. If we were to be non-compliant with our interest coverage or total leverage ratio, we would no longer have access to our 2015 facility and our credit ratings may be downgraded. As of September 30, 2017, there were no amounts outstanding under the 2015 facility.prior year period.

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

FINANCIAL INSTRUMENTS AND RISK MANAGEMENT STRATEGIES

In the past we have used interest-rate swaps to manage our interest rate exposure. The interest-rate swaps were used to either convert our fixed rate borrowing to a variable interest rate or to unwind an existing variable interest-rate swap on a fixed rate borrowing. As of ~~September 30, 2017, we do not have any interest-rate swap agreements.~~ Approximately 1%5% of our debt portfolio, ~~at September 30, 2017 and December 31, 2016 was~~our short-term debt, is exposed to floating interest rates. Our long-term borrowings are all at fixed rates of interest.

Foreign Currency Risk

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

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

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

•our ability to improve our financial and operational performance and execute fully our global business strategy, including our ability to implement the key initiatives of, and/or realize the projected benefits (in the amounts and time schedules we expect) from ~~our Transformation Plan,~~Open Up & Grow and Avon Integration plans, stabilization strategies, cost savings initiatives, restructuring and other initiatives, product mix and pricing strategies, enterprise resource planning, customer service initiatives, sales and operation planning process, outsourcing strategies, digital strategies, Internet platform and technology strategies including e-commerce, marketing and

~~AVON PRODUCTS, INC.~~

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

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

advertising strategies, information technology and related system enhancements and cash management, tax, foreign currency hedging and risk management strategies, and any plans to invest these projected benefits ahead of future growth;

~~our ability to achieve the anticipated benefits of our strategic partnership with Cerberus Capital Management, L.P. ("Cerberus");~~

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

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

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

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

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

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

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

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

developments in or consequences of any investigations and compliance reviews, and any litigation related thereto, including the investigations and compliance reviews of Foreign Corrupt Practices Act and related United States ("U.S.") and foreign law matters in China and additional countries, as well as any disruption or adverse consequencesresulting from such investigations, reviews, related actions or litigation, including the retention of a compliance monitor as required by the deferred prosecution agreement with the U.S. Department of Justice and a consent to settlement with the Securities and Exchange Commission ("SEC"), any changes in Company policy or procedure suggested by the compliance monitor or undertaken by the Company, the duration of the compliance monitor and whether and when the Company will be permitted to undertake self-reporting, the Company’s compliance with the deferred prosecution agreement and whether and when the charges against the Company are dismissed with prejudice;

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

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

•our ability to attract and retain key personnel;

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

•key information technology systems, process or site outages and disruptions, and any ~~cyber security~~cybersecurity breaches, including any security breach of our systems or those of a third-party provider that results in the theft, transfer or unauthorized disclosure of Representative, customer, employee or Company information or compliance with information security and privacy laws and regulations in the event of such an incident which could disrupt business operations, result in the loss of

~~AVON PRODUCTS, INC.~~

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

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

critical and confidential information, and adversely impact our reputation and results of operations, and related costs to address such malicious intentional acts and to implement adequate preventative measures against cybersecurity breaches. This includes the cyber ~~security breaches;~~incident which occurred in the second quarter of 2020, see Note 1, Accounting Policies, to the Consolidated Financial Statements included herein and Item 4, Controls and Procedures;

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

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

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

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

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

the impact of a continued decline in our business results, which includes the impact of any adverse foreign exchange movements, significant restructuring charges and significant legal settlements or judgments, on our ability to comply with certain covenants in our revolving credit facility;

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

•the quality, safety and efficacy of our products;

•the success of our research and development activities;

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

~~our ability to repurchase the Series C Preferred Stock (as defined herein) in connection with a change of control; and~~

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


					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 30, 2017~~March 31 , 202 1 and ~~September 30, 2016~~March 3 1 , 2020	3 - 4



			Consolidated Statements of Comprehensive Income ~~(Loss)~~(Loss) Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2021 and ~~September 30, 2016~~March 31, 2020		54 ~~- 6~~

			Consolidated Balance Sheets ~~September 30, 2017~~March 31 , 20 2 1 and December 31, ~~2016~~2020		75

			Consolidated Statements of Cash Flows Three~~Nine~~ Months Ended ~~September 30, 2017~~March 31 , 20 2 1 and ~~September 30, 2016~~March 31 , 2020		87

			Consolidated Statement of Changes in Shareholders’Deficit Three Months Ended March 31 , 20 2 1 and March 31 , 2020		9

			Notes to Consolidated Financial Statements		910 - 2528

Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations		2629 - 4441

Item 3.			Quantitative and Qualitative Disclosures About Market Risk		4542

Item 4.			Controls and Procedures		4542

Part II. Other Information

Item 1.			Legal Proceedings		4643

Item 1A.			Risk Factors		43

Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds		4643

Item 6.5.			~~Exhibits~~Other Information		4643

Item 6.			~~Signature~~Exhibits		4744

			Signature		45



¨☐			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



	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		)



(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	)



	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



	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**31.1		~~Indenture, dated August 15, 2016, among Avon International Operations, Inc., the guarantors party thereto and Deutsche Bank Trust Company Americas, as trustee and collateral agent.~~
~~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~~	~~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:		May 12, 2021	~~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.