UNITED STATES ~~OF AMERICA~~

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________

FORM 10-Q

_________________________


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

For the quarterly period ended March 31, ~~2022~~2023


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

For the transition period from to

Commission file number 1-4881

_________________________

AVON PRODUCTS, INC.

(Exact name of registrant as specified in its charter)

_________________________


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

Lancaster House

Nunn Mills Road, Northampton NN1 5PA

United Kingdom

(Address of principal executive offices)

+44-1904-232425

(Registrant’s telephone number, including area code)

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


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

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

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

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

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

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

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☐

Emerging growth company

☐

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

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

The number of shares of Common Stock (par value $0.01) outstanding at March 31, ~~2022~~2023 was 101.34.

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

TABLE OF CONTENTS


		Page Numbers
Part I. Financial Information

Item 1.	Financial Statements (Unaudited)

	Consolidated Statements of Operations Three Months Ended March 3 1 ~~, 202~~2 31, 2023 and March 3 1 ~~, 20~~21 31, 2022	3





	Consolidated Statements of Comprehensive Income (Loss) Three Months Ended March 31, 2023 and March 31, 2022 ~~and March 31, 20~~21	4



	Consolidated Balance Sheets March 3 1 ~~, 202~~2 31, 2023 and December 31, 20212022	5

	Consolidated Statements of Cash Flows Three Months Ended March 31, 2023 and March 31, 2022 ~~and March 31, 20~~21	6

	Consolidated Statement of Changes in Shareholders’ Deficit Three Months Ended March 31, 2023 and March 31, 2022 ~~and March 31, 20~~21	7 - 8

	Notes to Consolidated Financial Statements	9 - 25

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26 - 3837

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3938

Item 4.	Controls and Procedures	3938

Part II. Other Information

Item 1.	Legal Proceedings	4039

Item 1A.	Risk Factors	4039

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4039

Item 5.	Other Information	4039

Item 6.	Exhibits	4140

	Signature	4241

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AVON PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


		Three Months Ended					Three Months Ended
(In millions)	(In millions)	March 31, 2022		March 31, 2021		(In millions)	March 31, 2023		March 31, 2022
Product sales		$	631.4	$	850.4
Net sales						Net sales	$	550.0	$	631.4
Other revenue	Other revenue	28.2		46.3		Other revenue	26.8		28.2
Revenue from affiliates of Natura &Co	Revenue from affiliates of Natura &Co	3.7		7.7		Revenue from affiliates of Natura &Co	13.7		3.7
Total revenue	Total revenue	663.3		904.4		Total revenue	590.5		663.3
Costs, expenses and other:	Costs, expenses and other:					Costs, expenses and other:
Cost of sales	Cost of sales	(287.4)		(398.3)		Cost of sales	(225.0)		(287.4)
Cost of sales from affiliates of Natura &Co	Cost of sales from affiliates of Natura &Co	(4.2)		(7.1)		Cost of sales from affiliates of Natura &Co	(13.4)		(4.2)
Selling, general and administrative expenses	Selling, general and administrative expenses	(433.9)		(536.1)		Selling, general and administrative expenses	(386.8)		(433.9)

Impairment of goodwill						Impairment of goodwill	(9.1)		—
Operating loss	Operating loss	(62.2)		(37.1)		Operating loss	(43.8)		(62.2)

Interest expense	Interest expense	(13.0)		(14.9)		Interest expense	(7.2)		(13.0)
Interest expense on Loan from affiliates of Natura &Co	Interest expense on Loan from affiliates of Natura &Co	(15.3)		(8.7)		Interest expense on Loan from affiliates of Natura &Co	(38.0)		(15.3)

Interest income	Interest income	.9		.2		Interest income	5.3		0.9
Interest income from affiliates of Natura &Co	Interest income from affiliates of Natura &Co	.7		—		Interest income from affiliates of Natura &Co	1.6		0.7
Other income (expense), net	Other income (expense), net	4.5		(1.3)		Other income (expense), net	1.6		4.5

Total other expenses	Total other expenses	(22.2)		(24.7)		Total other expenses	(36.7)		(22.2)

Loss from continuing operations, before income taxes	Loss from continuing operations, before income taxes	(84.4)		(61.8)		Loss from continuing operations, before income taxes	(80.5)		(84.4)
Income taxes	Income taxes	(4.8)		(7.1)		Income taxes	(12.0)		(4.8)
Loss from continuing operations, net of tax	Loss from continuing operations, net of tax	(89.2)		(68.9)		Loss from continuing operations, net of tax	(92.5)		(89.2)
(Loss) income from discontinued operations, net of tax		(7.8)		5.0
Loss from discontinued operations, net of tax						Loss from discontinued operations, net of tax	(27.4)		(7.8)
Net loss	Net loss	(97.0)		(63.9)		Net loss	(119.9)		(97.0)
Net income (loss) attributable to noncontrolling interests		(.2)		.3
Net loss attributable to noncontrolling interests						Net loss attributable to noncontrolling interests	(0.1)		(0.2)
Net loss attributable to Avon	Net loss attributable to Avon	$	(97.2)	$	(63.6)	Net loss attributable to Avon	$	(120.0)	$	(97.2)

The accompanying notes are an integral part of these statements.

AVON PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


		Three Months Ended					Three Months Ended
(In millions)	(In millions)	March 31, 2022		March 31, 2021		(In millions)	March 31, 2023		March 31, 2022
Net loss	Net loss	$	(97.0)	$	(63.9)	Net loss	$	(119.9)	$	(97.0)
Other comprehensive income (loss):	Other comprehensive income (loss):					Other comprehensive income (loss):
Foreign currency translation adjustments	Foreign currency translation adjustments	53.8		(12.2)		Foreign currency translation adjustments	(12.0)		53.8
Unrealized loss on revaluation of long-term intercompany balances		(3.0)		(32.3)
Change in unrealized loss on cash flow hedges		.1		—
Adjustments and amortization of net actuarial loss and prior service cost, net of taxes of $0.2 and $0.2		1.3		1.2

Total other comprehensive income (loss), net of income taxes		52.2		(43.3)
Unrealized gains (losses) on revaluation of long-term intercompany balances						Unrealized gains (losses) on revaluation of long-term intercompany balances	4.4		(3.0)
Change in derivative gains (losses) on cash flow hedges						Change in derivative gains (losses) on cash flow hedges	(1.0)		0.1
Adjustments and amortization of net actuarial loss and prior service cost, net of taxes of $0.1 and $0.2						Adjustments and amortization of net actuarial loss and prior service cost, net of taxes of $0.1 and $0.2	0.3		1.3
Total other comprehensive income (loss), net of taxes						Total other comprehensive income (loss), net of taxes	(8.3)		52.2
Comprehensive loss	Comprehensive loss	(44.8)		(107.2)		Comprehensive loss	(128.2)		(44.8)
Less: comprehensive (income) loss attributable to noncontrolling interests	Less: comprehensive (income) loss attributable to noncontrolling interests	(.1)		.3		Less: comprehensive (income) loss attributable to noncontrolling interests	(0.1)		(0.1)
Comprehensive loss attributable to Avon	Comprehensive loss attributable to Avon	$	(44.9)	$	(106.9)	Comprehensive loss attributable to Avon	$	(128.3)	$	(44.9)

The accompanying notes are an integral part of these statements.

AVON PRODUCTS, INC.

CONSOLIDATED BALANCE SHEETS

December 31, ~~2021~~2022 (Audited) and March ~~30, 2021~~31, 2023 (Unaudited)


(In millions)	(In millions)	March 31, 2022		December 31, 2021		(In millions)	March 31, 2023		December 31, 2022
Assets	Assets					Assets
Current Assets	Current Assets					Current Assets
Cash and cash equivalents	Cash and cash equivalents	$	208.5	$	251.5	Cash and cash equivalents	$	244.5	$	367.6

Restricted cash						Restricted cash	0.3		0.3
Accounts receivable, net	Accounts receivable, net	212.1		198.7		Accounts receivable, net	168.4		183.4
Receivables from affiliates of Natura &Co	Receivables from affiliates of Natura &Co	28.5		34.1		Receivables from affiliates of Natura &Co	88.6		72.9
Loans to affiliates of Natura &Co	Loans to affiliates of Natura &Co	45.5		46.6		Loans to affiliates of Natura &Co	93.9		72.2
Inventories	Inventories	421.8		384.1		Inventories	351.9		332.2
Prepaid expenses and other	Prepaid expenses and other	170.6		165.6		Prepaid expenses and other	169.2		127.9
Assets held for sale		—		2.8

Current assets of discontinued operations						Current assets of discontinued operations	—		1.8
Total current assets	Total current assets	1,087.0		1,083.4		Total current assets	1,116.8		1,158.3
Property, plant and equipment, at cost	Property, plant and equipment, at cost	976.1		942.5		Property, plant and equipment, at cost	890.6		881.1
Less accumulated depreciation	Less accumulated depreciation	(606.1)		(578.8)		Less accumulated depreciation	(566.8)		(548.1)
Property, plant and equipment, net	Property, plant and equipment, net	370.0		363.7		Property, plant and equipment, net	323.8		333.0
Right-of-use assets	Right-of-use assets	104.8		111.1		Right-of-use assets	87.8		92.1
Goodwill	Goodwill	74.9		72.1		Goodwill	18.5		25.9
Deferred tax asset	Deferred tax asset	135.8		121.4		Deferred tax asset	49.3		52.1
Loans to affiliates of Natura &Co	Loans to affiliates of Natura &Co	46.7		46.7		Loans to affiliates of Natura &Co	50.3		54.8
Other assets	Other assets	546.3		509.4		Other assets	427.9		445.5

Total assets	Total assets	$	2,365.5	$	2,307.8	Total assets	$	2,074.4	$	2,161.7
Liabilities and Shareholders’ Deficit	Liabilities and Shareholders’ Deficit					Liabilities and Shareholders’ Deficit
Current Liabilities	Current Liabilities					Current Liabilities
Debt maturing within one year	Debt maturing within one year	$	561.4	$	32.6	Debt maturing within one year	$	45.4	$	5.7
Loans from affiliates of Natura &Co	Loans from affiliates of Natura &Co	458.3		371.7		Loans from affiliates of Natura &Co	599.4		537.2
Accounts payable	Accounts payable	496.7		522.8		Accounts payable	433.1		461.5
Payables to affiliates of Natura &Co	Payables to affiliates of Natura &Co	34.6		29.4		Payables to affiliates of Natura &Co	57.8		58.1

Accrued compensation	Accrued compensation	69.5		81.5		Accrued compensation	66.7		77.2
Other accrued liabilities	Other accrued liabilities	244.7		273.4		Other accrued liabilities	217.9		247.4
Sales taxes and taxes other than income	Sales taxes and taxes other than income	73.4		66.8		Sales taxes and taxes other than income	68.7		67.9
Income taxes	Income taxes	13.1		11.6		Income taxes	9.6		5.2
Current liabilities of discontinued operations	Current liabilities of discontinued operations	33.9		31.7		Current liabilities of discontinued operations	81.0		79.9

Total current liabilities	Total current liabilities	1,985.6		1,421.5		Total current liabilities	1,579.6		1,540.1
Long-term debt	Long-term debt	214.9		676.0		Long-term debt	214.9		214.8
Loans from affiliates of Natura &Co	Loans from affiliates of Natura &Co	721.0		736.3		Loans from affiliates of Natura &Co	1,437.5		1,427.2
Long-term operating lease liability	Long-term operating lease liability	80.7		87.5		Long-term operating lease liability	67.4		71.5
Employee benefit plans	Employee benefit plans	88.6		84.6		Employee benefit plans	58.6		58.1
Long-term income taxes	Long-term income taxes	90.7		81.5		Long-term income taxes	28.1		33.0
Other liabilities	Other liabilities	81.1		75.1		Other liabilities	53.6		58.2
Total liabilities	Total liabilities	3,262.6		3,162.5		Total liabilities	3,439.7		3,402.9

Shareholders’ Deficit	Shareholders’ Deficit					Shareholders’ Deficit

Common stock - par value $0.01 per share - 101.34 outstanding at each period end						Common stock - par value $0.01 per share - 101.34 outstanding at each period end	—		—
Additional paid-in capital	Additional paid-in capital	633.6		631.2		Additional paid-in capital	643.9		639.8
Retained losses		(501.4)		(404.2)
Retained earnings						Retained earnings	(952.3)		(832.3)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(1,033.2)		(1,085.5)		Accumulated other comprehensive loss	(1,060.5)		(1,052.2)

Total Avon shareholders’ deficit	Total Avon shareholders’ deficit	(901.0)		(858.5)		Total Avon shareholders’ deficit	(1,368.9)		(1,244.7)
Noncontrolling interests	Noncontrolling interests	3.9		3.8		Noncontrolling interests	3.6		3.5
Total shareholders’ deficit	Total shareholders’ deficit	(897.1)		(854.7)		Total shareholders’ deficit	(1,365.3)		(1,241.2)
Total liabilities and shareholders’ deficit	Total liabilities and shareholders’ deficit	$	2,365.5	$	2,307.8	Total liabilities and shareholders’ deficit	$	2,074.4	$	2,161.7

The accompanying notes are an integral part of these statements.

AVON PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


		Three Months Ended					Three Months Ended
(In millions)	(In millions)	March 31, 2022		March 31, 2021		(In millions)	March 31, 2023		March 31, 2022
Cash Flows from Operating Activities	Cash Flows from Operating Activities					Cash Flows from Operating Activities
Net loss	Net loss	$	(97.0)	$	(63.9)	Net loss	$	(119.9)	$	(97.0)
Loss from discontinued operations, net of tax	Loss from discontinued operations, net of tax	(7.8)		5.0		Loss from discontinued operations, net of tax	(27.4)		(7.8)
Loss from continuing operations, net of tax	Loss from continuing operations, net of tax	(89.2)		(68.9)		Loss from continuing operations, net of tax	(92.5)		(89.2)
Adjustments to reconcile net loss from continuing operations to net cash used by operating activities:	Adjustments to reconcile net loss from continuing operations to net cash used by operating activities:					Adjustments to reconcile net loss from continuing operations to net cash used by operating activities:
Depreciation	Depreciation	10.9		13.9		Depreciation	13.3		10.9
Amortization	Amortization	4.8		6.0		Amortization	4.7		4.8
Provision for doubtful accounts	Provision for doubtful accounts	14.1		17.4		Provision for doubtful accounts	10.2		14.1
Provision for obsolescence	Provision for obsolescence	6.4		7.7		Provision for obsolescence	4.2		6.4
Share-based compensation	Share-based compensation	2.4		.6		Share-based compensation	4.2		2.4
Foreign exchange (gains) losses	Foreign exchange (gains) losses	(7.3)		.5		Foreign exchange (gains) losses	(5.6)		(7.3)
Deferred income taxes	Deferred income taxes	(2.5)		(1.6)		Deferred income taxes	5.0		(2.5)

Impairment loss on assets						Impairment loss on assets	9.1		—

Other	Other	(.6)		.3		Other	3.1		(0.6)
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Accounts receivable	Accounts receivable	(20.6)		(18.4)		Accounts receivable	4.7		(20.6)
Inventories	Inventories	(33.1)		(29.5)		Inventories	(21.0)		(33.1)
Prepaid expenses and other	Prepaid expenses and other	9.4		(21.6)		Prepaid expenses and other	(49.7)		9.4
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	(65.4)		(76.8)		Accounts payable and accrued liabilities	(43.2)		(65.4)
Income and other taxes	Income and other taxes	3.2		.8		Income and other taxes	(6.2)		3.2
Noncurrent assets and liabilities	Noncurrent assets and liabilities	(.9)		.7		Noncurrent assets and liabilities	25.9		(0.9)
Net cash used by operating activities of continuing operations	Net cash used by operating activities of continuing operations	(168.4)		(168.9)		Net cash used by operating activities of continuing operations	(133.8)		(168.4)
Cash Flows from Investing Activities	Cash Flows from Investing Activities					Cash Flows from Investing Activities
Capital expenditures	Capital expenditures	(13.6)		(13.8)		Capital expenditures	(15.7)		(13.6)
Disposal of assets		2.7		1.1
Proceeds from disposal of assets						Proceeds from disposal of assets	.3		2.7

Net cash used by investing activities of continuing operations(1)	Net cash used by investing activities of continuing operations(1)	(10.9)		(12.7)		Net cash used by investing activities of continuing operations(1)	(15.4)		(10.9)
Cash Flows from Financing Activities	Cash Flows from Financing Activities					Cash Flows from Financing Activities

Debt, net (maturities of three months or less)	Debt, net (maturities of three months or less)	86.8		7.9		Debt, net (maturities of three months or less)	41.6		86.8
Proceeds from debt	Proceeds from debt	68.6		76.5		Proceeds from debt	30.2		68.6
Repayment of debt	Repayment of debt	(18.9)		(12.6)		Repayment of debt	(1.7)		(18.9)
Repayment of debt to affiliates of Natura &Co	Repayment of debt to affiliates of Natura &Co	(10.7)		—		Repayment of debt to affiliates of Natura &Co	(52.5)		(10.7)
Repayment of debt by affiliates of Natura &Co		11.7		—
Repayment of debt from affiliates of Natura &Co						Repayment of debt from affiliates of Natura &Co	38.2		11.7

Settlement of derivative contracts	Settlement of derivative contracts	1.3		(4.8)		Settlement of derivative contracts	—		1.3

Net cash provided by financing activities of continuing operations(1)	Net cash provided by financing activities of continuing operations(1)	138.8		67.0		Net cash provided by financing activities of continuing operations(1)	55.8		138.8
Cash Flows from Discontinued Operations	Cash Flows from Discontinued Operations					Cash Flows from Discontinued Operations
Net cash used by operating activities of discontinued operations	Net cash used by operating activities of discontinued operations	(5.6)		(1.5)		Net cash used by operating activities of discontinued operations	(24.6)		(5.6)

Net cash used by discontinued operations	Net cash used by discontinued operations	(5.6)		(1.5)		Net cash used by discontinued operations	(24.6)		(5.6)
Effect of exchange rate changes on cash and cash equivalents, and restricted cash	Effect of exchange rate changes on cash and cash equivalents, and restricted cash	3.1		(17.6)		Effect of exchange rate changes on cash and cash equivalents, and restricted cash	(5.1)		3.1
Net decrease in cash and cash equivalents, and restricted cash		(43.0)		(133.7)
Net (decrease) increase in cash and cash equivalents, and restricted cash						Net (decrease) increase in cash and cash equivalents, and restricted cash	(123.1)		(43.0)
Cash and cash equivalents, and restricted cash at beginning of period	Cash and cash equivalents, and restricted cash at beginning of period	251.5		373.4		Cash and cash equivalents, and restricted cash at beginning of period	367.9		251.5
Cash and cash equivalents, and restricted cash at end of period	Cash and cash equivalents, and restricted cash at end of period	$	208.5	$	239.7	Cash and cash equivalents, and restricted cash at end of period	$	244.8	$	208.5

The accompanying notes are an integral part of these statements.

AVON PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT

(Unaudited)

(In millions) Common Stock Additional Retained Accumulated Other Noncontrolling
Shares Amount Paid-In Capital Losses Comprehensive Loss Interests Total
Balances at December 31, 2021 — $ — $ 631.2 $ (404.2) $ (1,085.5) $ 3.8 $ (854.7)
Net (loss) income — — — (97.2) — .2 (97.0)
Other comprehensive income — — — — 52.3 (.1) 52.2
Exercise/ vesting/ expense of share-based compensation — — 2.4 — — — 2.4
Balances at March 31, 2022(1)
— $ — $ 633.6 $ (501.4) $ (1,033.2) $ 3.9 $ (897.1)

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


(In millions)	Common Stock			Additional		Retained		Accumulated Other		Noncontrolling
	Shares	Amount		Paid-In Capital		Losses		Comprehensive Loss			Interests		Total
Balances at December 31, 2022	—	$	—	$	639.8	$	(832.3)	$	(1,052.2)		$	3.5	$	(1,241.2)
Net (loss) income	—	—		—		(120.0)		—			0.1		(119.9)
Other comprehensive income	—	—		—		—		(8.3)			—		(8.3)
Exercise/ vesting/ expense of share-based compensation	—	—		4.1		—		—			—		4.1
Balances at March 31, 2023	—	$	—	$	643.9	$	(952.3)	$	(1,060.5)		$	3.6	$	(1,365.3)

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 — $ — $ 622.8 $ (360.5) $ (1,133.8) $ 4.3 $ (867.2)
Net loss — — — (63.6) — (.3) (63.9)
Other comprehensive loss — — — — (43.3) — (43.3)
Exercise/ vesting/ expense of share-based compensation — — .6 — — — .6
Balances at March 31, 2021(1)
— $ — $ 623.4 $ (424.1) $ (1,177.1) $ 4.0 $ (973.8)

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


(In millions)	Common Stock			Additional		Retained		Accumulated Other		Noncontrolling
	Shares	Amount		Paid-In Capital		Losses		Comprehensive Loss			Interests		Total
Balances at December 31, 2021	—	$	—	$	631.2	$	(404.2)	$	(1,085.5)		$	3.8	$	(854.7)
Net (loss) income	—	—		—		(97.2)		—			0.2		(97.0)
Other comprehensive loss	—	—		—		—		52.3			(0.1)		52.2
Exercise/ vesting/ expense of share-based compensation	—	—		2.4		—		—			—		2.4
Balances at March 31, 2022	—	$	—	$	633.6	$	(501.4)	$	(1,033.2)		$	3.9	$	(897.1)

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 of America ("GAAP"). We consistently applied the accounting policies described in our ~~2021~~2022 Annual Report on Form 10-K ("~~2021~~2022 Form 10-K") in preparing these unaudited interim Consolidated Financial Statements, other than those impacted by new accounting standards as described below. ~~On January 3, 2020, we completed the Agreement and Plan of Mergers with Natura Cosméticos S.A., a Brazilian corporation (sociedade anônima) ("Natura Cosméticos"), Natura &Co Holding S.A., a Brazilian corporation (sociedade anônima~~) ("Natura &Co Holding") or ("Natura &Co), and two subsidiaries of Natura &Co Holding 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 contained in our 2021 Form 10-K.year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP.

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 ~~2021~~2022 Form 10-K. When used in this report, the terms "Avon," "Company," "we" or "us" mean Avon Products, Inc. We are a wholly owned subsidiary of Natura &Co Holding S.A., a Brazilian corporation (sociedade anônima) ("Natura &Co Holding" or "Natura &Co).

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

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

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

•withholding taxes recognized associated with cash repatriations; and

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

COVID-19 pandemic and Russia-Ukraine war

Beginning in the first quarter and ~~ongoing concern~~

continuing throughout the rest of 2020, the worldwide impact of the COVID-19 pandemic caused many markets to become subject to lockdown restrictions to varying degrees, which limited our ability to recruit and enroll Representatives, operate manufacturing facilities and distribution centers and to process and deliver orders. In 2021 and 2022 and continuing into the first quarter of ~~2022,~~2023, the continuing economic disruption caused by the COVID-19 pandemic ~~has~~also resulted in inflationary pressures on the cost of certain raw materials used in the production of essential items due to the increased demand for these inputs worldwide.

These inflationary pressures ~~have been~~were compounded in 2022 and in the first quarter of 2023 by the ongoing war between ~~Russia and~~ Ukraine and ~~by disruptions in global supply chains~~Russia, which adversely impacted energy prices around the globe and climate events that hit electricity generation globally, among other events. Moreover, novel strains and variants of COVID-19 emerged in 2021 against which existing vaccines and acquired immunity may not be effective, and the rollout of vaccination programs worldwide have compromised the ability of certain countries to effectively contain the spread and the toll of the virus. While some restrictions have been lifted in the markets in which we operate, they may be reimplemented if the contagion does not subside, suppressing economic activity.

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

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

~~AVON PRODUCTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

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

See also “Item 1A. Risk Factors—General 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 ~~2021 Annual Report.~~2022 Form 10-K.

Going Concern

Considering the uncertain nature of any possible future impact of the COVID-19 ~~impacts which are beyond the Company’s control~~pandemic and the ongoing war between Ukraine and Russia, ~~and Ukraine,~~both of which are beyond the Company's control, we expect ~~some negative impact on revenue in 2022,~~these factors to continue to adversely affect our operations, which ~~will,~~could in turn result in lower revenues and lower cash generation from activities. If ~~the downturn is deeper~~these effects are more significant or ~~for longer~~enduring 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.

~~The~~

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

In May 2023, the Company ~~has~~ received ~~an irrevocable~~a commitment from Natura &Co Holding in the form of a letter of support that itwas effective through to May 31, 2024, a period more than 12 months from the date of the issuance of the consolidated financial statements. The letter states that Natura &Co will provide ~~sufficient~~ financial support in the form of loans (which loans shall be secured to the extent legally permissible) if and when needed to enable the Company to meet its obligations as they come due in the ~~normal~~ordinary course of business, which excludes Discontinued Operations obligations as detailed in Note 2 in excess of those reasonably forecasted by management. Management considers that it has reasonably forecasted its exposure to cash outflows for ongoing discontinued operations, which included a ~~period of not less than 12 months~~contingency for expenditures considered possible though unlikely, and that management believes the Company has sufficient liquidity based on the support from the date issuance of the Consolidated Financial Statements. This includes the obligations related to the $462 5.00% Notes, which are due to be repaid in March 2023, and the amount of $209 outstanding under the Natura ~~&Co Loan due to be repaid in November 2022.~~&Co.

Accounting Standards Implemented

ASU ~~2021-08, Business Combinations~~2022-04, Disclosure supplier finance program (Topic ~~805)~~405-50)

In ~~October 2021,~~September 2022, the FASB issued ASU ~~2021-08, Business Combinations (Topic 805)~~2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50): ~~Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,~~Disclosure of Supplier Finance Program Obligations, which requires ~~entities to apply Topic 606 to recognize and measure contract assets and contract liabilities~~a buyer in a ~~business combination.~~ supplier finance program to disclose sufficient information about the program to allow a user of the financial statements to understand the program's nature, activity during the period, changes from period to period, and potential magnitude. Disclosures will include key terms of the program, including payment terms, along with the amount of related obligations, the financial statement caption that includes such obligations, and a rollforward of activity related to the obligations during the period.

ASU ~~2021-08 will be~~2022-04 is effective for ~~our fiscal year~~Company beginning ~~after December 15, 2022. The adoption~~with the quarter ending March 31, 2023, except for the roll forward requirement which is ~~not expected to have~~effective for the Company beginning with the quarter ending March 31, 2024. No impact will arise on the Company's financial condition, results of operations or cash flows as a ~~material impact on our Consolidated Financial Statements.~~result of the application of this accounting standard.

Please see note 17 for Supplier Financing arrangement disclosure.

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 Company incurred costs and recognized contingent liabilities during the quarters ended March 31, 2023 and 2022 related to its ownership and operation of the North America business prior to its separation into New Avon, including talc-related and environmental related litigation as well as other costs as detailed in Note 7, Contingencies, to the Consolidated Financial Statements.

The major classes of financial statement components comprising the loss on discontinued operations, net of tax for New Avon during the three-month periods ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively, are shown below:


		Three Months Ended March 31,				Three Months Ended March 31,
		2022		2021				2023		2022
Selling, general and administrative expenses	Selling, general and administrative expenses	$	(7.8)	$	5.0		Selling, general and administrative expenses	$	(27.4)	$	(7.8)
Operating (loss) income	Operating (loss) income	$	(7.8)	$	5.0		Operating (loss) income	$	(27.4)	$	(7.8)
(Loss) income from discontinued operations, net of tax	(Loss) income from discontinued operations, net of tax	$	(7.8)	$	5.0		(Loss) income from discontinued operations, net of tax	$	(27.4)	$	(7.8)

Divestitures

There were no divestitures during the quarters ended March 31, 2023 and 2022. On April 1, 2023, the Company disposed of its investment in its Avon business operations in Peru, which was acquired by a wholly owned subsidiary of Natura &Co. The sale was accounted for as a common-control transaction with the resulting gain or loss taken directly to Retained Earnings.

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

~~Assets and Liabilities Held for Sale~~

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

~~March 31, 2022~~

~~December 31, 2021~~

~~Current held for sale assets~~

~~Property, Plant & Equipment (net)~~

—

~~2.8~~

—

~~2.8~~

~~At March 31, 2022, there are were no assets held for sale. At December 31, 2021, assets held for sale included 1 property in the Avon Latin America Segment.~~

~~Divestitures~~

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

~~Disposal of Avon Beauty Arabia in Saudi Arabia~~

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

~~Disposal of Cosmetics Manufacturing Operations in India~~

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

~~Sale of Avon Luxembourg Holdings S.à r.l~~

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

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

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.~~affiliates:


		Three Months Ended March 31,				Three Months Ended March 31,
		2022		2021				2023		2022
Statement of Operations Data	Statement of Operations Data						Statement of Operations Data
Revenue from affiliates of Natura &Co(2)(1)	Revenue from affiliates of Natura &Co(2)(1)	$	3.7	$	7.7		Revenue from affiliates of Natura &Co(2)(1)	$	13.7	$	3.7
Cost of sales from affiliates of Natura &Co(2)(1)	Cost of sales from affiliates of Natura &Co(2)(1)	$	(4.2)	$	(7.1)		Cost of sales from affiliates of Natura &Co(2)(1)	$	(13.4)	$	(4.2)
Gross profit from affiliates of Natura &Co(2)(1)	Gross profit from affiliates of Natura &Co(2)(1)	$	(.5)	$	.6		Gross profit from affiliates of Natura &Co(2)(1)	$	0.3	$	(0.5)

Interest expense on Loan from affiliates of Natura &Co(4)	Interest expense on Loan from affiliates of Natura &Co(4)	$	(15.3)	$	(8.7)		Interest expense on Loan from affiliates of Natura &Co(4)	$	(38.0)	$	(15.3)
Interest income on Loan to affiliates of Natura &Co(5)		$	.7	$	—
Interest income on Loan to affiliates of Natura &Co(4)							Interest income on Loan to affiliates of Natura &Co(4)	$	1.6	$	0.7


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Balance Sheet Data	Balance Sheet Data					Balance Sheet Data

Trade Receivables due from affiliates of Natura &Co(1)	Trade Receivables due from affiliates of Natura &Co(1)	$	25.4	$	32.7	Trade Receivables due from affiliates of Natura &Co(1)	$	42.5	$	30.7
Derivative Receivables due from affiliates of Natura &Co(7)	Derivative Receivables due from affiliates of Natura &Co(7)	$	1.1	$	—	Derivative Receivables due from affiliates of Natura &Co(7)	$	8.2	$	9.5
Other receivables due from affiliates of Natura &Co(6)	Other receivables due from affiliates of Natura &Co(6)	$	1.9	$	1.4	Other receivables due from affiliates of Natura &Co(6)	$	37.9	$	32.7
Loans to affiliates of Natura &Co maturing within one year(6)	Loans to affiliates of Natura &Co maturing within one year(6)	$	45.5	$	46.6	Loans to affiliates of Natura &Co maturing within one year(6)	$	93.9	$	72.2
Loans to affiliates of Natura &Co maturing after one year(6)	Loans to affiliates of Natura &Co maturing after one year(6)	$	46.7	$	46.7	Loans to affiliates of Natura &Co maturing after one year(6)	$	50.3	$	54.8
Right-of-use asset from affiliates of Natura &Co(8)						Right-of-use asset from affiliates of Natura &Co(8)	$	6.0	$	6.0
Trade Payables due to affiliates of Natura &Co(6)	Trade Payables due to affiliates of Natura &Co(6)	$	(25.4)	$	(24.5)	Trade Payables due to affiliates of Natura &Co(6)	$	(36.9)	$	(33.7)
Derivative Payables due to affiliates of Natura &Co~~(6)~~(7)	Derivative Payables due to affiliates of Natura &Co~~(6)~~(7)	$	(1.0)	$	—	Derivative Payables due to affiliates of Natura &Co~~(6)~~(7)	$	(8.9)	$	(12.9)
Other payables due to affiliates of Natura &Co(3)	Other payables due to affiliates of Natura &Co(3)	$	(8.2)	$	(4.9)	Other payables due to affiliates of Natura &Co(3)	$	(12.0)	$	(11.5)
Loans from affiliates of Natura &Co maturing within one year(4)	Loans from affiliates of Natura &Co maturing within one year(4)	$	(458.3)	$	(371.7)	Loans from affiliates of Natura &Co maturing within one year(4)	$	(599.4)	$	(537.2)
Loans from affiliates of Natura &Co maturing after one year(4)	Loans from affiliates of Natura &Co maturing after one year(4)	$	(721.0)	$	(736.3)	Loans from affiliates of Natura &Co maturing after one year(4)	$	(1,437.5)	$	(1,427.2)

Lease liability to affiliates of Natura &Co(8)						Lease liability to affiliates of Natura &Co(8)	$	(6.0)	$	(6.0)
Investments in affiliates of Natura &Co(5)	Investments in affiliates of Natura &Co(5)	$	.1	$	.1	Investments in affiliates of Natura &Co(5)	$	0.1	$	0.1

(1) During the second quarter of 2020, the Company entered into manufacturing agreements with affiliates of Natura &Co Holding. The Company recorded revenue from related party of ~~$3.5~~$13.7 and ~~$7.7~~$3.5 associated with these agreements during the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively. The Company recorded gross ~~loss~~profit (loss) from related party of ~~$.7~~$0.3 and ~~gross profit from related party of $.6~~$(0.7) associated with these agreements during the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively. Trade receivables due from affiliates of Natura &Co primarily relate to these manufacturing agreements.

(2) The Company is party to a license agreement with Avon Mexico, whereby Avon Mexico pays the Company a variable royalty. The Company recorded revenue and gross profit from related party of ~~$.2~~nil associated with these agreements during the three months ended March 31, ~~2022,~~2023, respectively. The Company recorded revenue and gross profit of $0.2 and $0.2, respectively, from related ~~party of $.2~~parties associated with these agreements during the three months ended March 31, 2022, respectively.

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

(4) Loans from affiliates of Natura &Co Holding at March 31, ~~2022~~2023 of ~~$1,179.3~~$2,036.9 include ~~$721.0 outstanding under a Promissory Note between Avon Beauty Limited and a subsidiary of Natura &Co Holding, and $208.9~~$702.5 outstanding under a Promissory Note with Avon Beauty Limited with a ~~subsidiary~~maturity date of ~~Natura &Co Holding~~December 6, 2028, $405.0 outstanding under a Promissory Note with Avon Products, Inc. with a maturity date of May 17, 2029 and ~~an affiliate~~$330.0 outstanding under two Promissory Notes with Avon Cosmetics Limited with maturity dates of ~~the Company.~~May 17, 2029 and June 28, 2029. In addition, loans from affiliates of Natura &Co Holding at March 31, ~~2022~~2023 of ~~$249.4 includes~~$599.4 include a number of intercompany loans between ~~Natura &Co~~Avon Luxembourg ~~Natura Cosméticos~~ and Avon Products, Inc. ~~and its affiliates. Loans from~~ affiliates that, following the sale of Avon Luxembourg to a subsidiary of Natura &Co Holding ~~at December 31,~~on July 1, 2021, ~~of $1,108.0 include $736.3 outstanding under a Promissory Note between Avon Beauty Limited and a subsidiary of Natura &Co~~were

1211

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

redesignated as loans from affiliates of Natura & Co Holding. Loans from affiliates of Natura &Co Holding ~~and $207.3~~at December 31, 2022 of $1,964.4 include $692.2 outstanding under a Promissory Note with Avon Beauty Limited with a ~~subsidiary~~maturity date of ~~Natura &Co Holding~~December 6, 2028, $405.0 outstanding under a Promissory Note with Avon Products, Inc. with a maturity date of May 17, 2029 and ~~an affiliate~~$330.0 outstanding under two Promissory Notes with Avon Cosmetics Limited with maturity dates of ~~the Company.~~May 17, 2029 and June 28, 2029. In addition, loans from affiliates of Natura &Co Holding at December 31, ~~2021~~2022 of $537.2 include ~~$164.4~~a number of intercompany loans between Avon Luxembourg and Avon Products, Inc. affiliates that, following the sale of Avon Luxembourg to a subsidiary of Natura &Co Holding on July 1, 2021, were redesignated as loans from affiliates of Natura & Co Holding.

(5) During the second quarter of 2021, Avon Cosméticos LTDA., made an investment of R$.50.5 in Natura &Co Pay Holding Financeira S.A., representing a 10% holding in the company. This is presented in other assets in our Consolidated Balance Sheets.

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

(7) During the first quarter ~~ended March 31,~~of 2022, the Company entered into foreign exchange forward contracts with Natura &Co Luxembourg, a subsidiary of Natura &Co Holding, to manage a portion of its foreign currency exchange rate exposures. At March 31, 2023, we had outstanding related party foreign exchange forward contracts with notional amounts totaling approximately $523.4 for various currencies for up to 12 months, of which $185.7 were designated as cash flow hedges. In addition we had $8.2 of Accounts Receivable and $8.9 of Accounts Payable recorded in our Consolidated Balance Sheets associated with these transactions, all of which are expected to be reclassified into earnings within the next 12 months. At December 31, 2022, we had outstanding related party foreign exchange forward contracts with notional amounts totaling approximately ~~$175~~$546.3 for various currencies ~~all~~for up to 12 months, of which $289.7 were designated as cash flow hedges. In addition we had ~~$1.1~~$9.5 of Accounts Receivable and ~~$1.0~~$12.9 of Accounts Payable recorded in our Consolidated Balance Sheets associated with these ~~transactions.~~transactions, all of which are expected to be reclassified into earnings within the next 12 months.

(8) On December 20, 2022, the Company entered into a lease arrangement with a subsidiary of Natura &Co Holding. At March 31, 2023, we had a right-of-use asset and lease liability of $6.0. At December 31, 2022, we had a right-of-use asset and lease liability of $6.0.

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

4. REVENUE

Disaggregation of revenue

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


		Three Months Ended March 31, 2022											Three Months Ended March 31, 2023
		Avon International		Avon Latin America		Total reportable segments		Affiliates of Natura&Co		Total			Avon International		Avon Latin America		Total reportable segments		Affiliates of Natura &Co		Total
Beauty:	Beauty:											Beauty:
Skincare	Skincare	$	116.8	$	95.6	$	212.4	$	—	$	212.4	Skincare	$	101.3	$	87.8	$	189.1	$	—	$	189.1
Fragrance	Fragrance	104.1		80.3		184.4		—		184.4		Fragrance	98.4		73.0		171.4		—		171.4
Color	Color	51.7		37.8		89.5		—		89.5		Color	50.3		35.8		86.1		—		86.1
Total Beauty	Total Beauty	272.6		213.7		486.3		—		486.3		Total Beauty	250.0		196.6		446.6		—		446.6
Fashion & Home:	Fashion & Home:											Fashion & Home:
Fashion	Fashion	53.5		23.1		76.6		—		76.6		Fashion	37.8		13.0		50.8		—		50.8
Home	Home	12.6		55.9		68.5		—		68.5		Home	9.1		43.5		52.6		—		52.6
Total Fashion & Home	Total Fashion & Home	66.1		79.0		145.1		—		145.1		Total Fashion & Home	46.9		56.5		103.4		—		103.4

Product sales	Product sales	338.7		292.7		631.4		—		631.4		Product sales	296.9		253.1		550.0		—		550.0
Representative fees	Representative fees	14.6		13.6		28.2		—		28.2		Representative fees	12.2		14.6		26.8		—		26.8
Other	Other	—		—		—		3.7		3.7		Other	—		—		—		13.7		13.7
Other revenue	Other revenue	14.6		13.6		28.2		3.7		31.9		Other revenue	12.2		14.6		26.8		13.7		40.5
Total revenue	Total revenue	$	353.3	$	306.3	$	659.6	$	3.7	$	663.3	Total revenue	$	309.1	$	267.7	$	576.8	$	13.7	$	590.5


	Three Months Ended March 31, 2022
	Avon International		Avon Latin America		Total reportable segments		Affiliates of Natura &Co		Total
Beauty:
Skincare	$	116.8	$	95.6	$	212.4	$	—	$	212.4
Fragrance	104.1		80.3		184.4		—		184.4
Color	51.7		37.8		89.5		—		89.5
Total Beauty	272.6		213.7		486.3		—		486.3
Fashion & Home:							—
Fashion	53.5		23.1		76.6		—		76.6
Home	12.6		55.9		68.5		—		68.5
Total Fashion & Home	66.1		79.0		145.1		—		145.1

Product sales	338.7		292.7		631.4		—		631.4
Representative fees	14.6		13.6		28.2		—		28.2
Other	—		—		—		3.7		3.7
Other revenue	14.6		13.6		28.2		3.7		31.9
Total revenue	$	353.3	$	306.3	$	659.6	$	3.7	$	663.3

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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 $ — $ 272.3
Fragrance 119.9 102.1 222.0 — 222.0
Color 63.4 50.5 113.9 — 113.9
Total Beauty 328.6 279.6 608.2 — 608.2
Fashion & Home: — —
Fashion 67.7 50.8 118.5 — 118.5
Home 16.8 106.9 123.7 — 123.7
Total Fashion & Home 84.5 157.7 242.2 — 242.2
Product sales 413.1 437.3 850.4 — 850.4
Representative fees 17.8 28.3 46.1 — 46.1
Other — .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

Contract balances

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

Generally, we record accounts receivable when we invoice a Representative. In addition, we record an estimate of an allowance for doubtful accounts on receivable balances based on an analysis of historical data and, as applicable, current ~~circumstances,~~conditions and reasonable and supportable forecasts that affect collectability, including seasonality and changing trends, ~~the impact of COVID-19~~economic and ~~the ongoing war between Russia and Ukraine.~~geopolitical environment. 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, ~~2022~~2023 and December 31, ~~2021:~~2022:


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Accounts receivable, net of allowances of $45.1 and $37.2		$	212.1	$	198.7
Accounts receivable, net of allowances of $31.6 and $35.4						Accounts receivable, net of allowances of $31.6 and $35.4	$	168.4	$	183.4
Contract liabilities	Contract liabilities	$	34.2	$	37.1	Contract liabilities	$	25.2	$	31.6

The contract liability balances relate to certain material rights (loyalty points, status program and prospective discounts). During the three months ended March 31, ~~2022,~~2023, we recognized ~~$23.5~~$20.4 of revenue related to the contract liability balance at ~~the beginning of the three month period ended March~~December 31, 2022, as the result of performance obligations satisfied. In addition, we deferred an additional ~~$20.4~~$14.8 related to certain material rights granted during the period, for which the performance obligations are not yet satisfied. Of the amount deferred during the period, substantially all will be recognized within a year, with the significant majority to be captured within a quarter. The remaining movement in the contract liability balance is attributable to foreign exchange differences arising on the translation of the balance as at March 31, ~~2022~~2023 as compared with December 31, ~~2021.~~2022.

~~AVON PRODUCTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

5. INVENTORIES


Components of Inventories	Components of Inventories	March 31, 2022		December 31, 2021		Components of Inventories	March 31, 2023		December 31, 2022
Raw materials	Raw materials	$	117.6	$	103.4	Raw materials	$	89.7	$	91.2
Finished goods	Finished goods	304.2		280.7		Finished goods	262.2		241.0
Total	Total	$	421.8	$	384.1	Total	$	351.9	$	332.2

6. LEASES

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

The table below shows the sublease income recorded in the Consolidated Statement of Operations incurred during the three months ended March 31, ~~2022~~2023 and ~~2021:~~2022:


			Three Months Ended March 31,			Three Months Ended March 31,
Lease Costs	Lease Costs	Classification	2022	2021	Lease Costs	Classification	2023		2022
Sublease income	Sublease income	Selling, general and administrative expenses	3.7	4.3	Sublease income	Selling, general and administrative expenses	$	3.7	$	3.7

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

7. CONTINGENCIES

Brazilian Tax Assessments

Tax on Manufactured Products – minimum pricing rules

In December 2012, ~~and in~~ October 2017 and June 2022, our Brazilian subsidiary, Avon Industrial LTDA (Avon Brazil Manufacturing) received excise tax ("IPI"), assessments notices for the years 2008, 2014 and ~~2014.~~2018.

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

These matters are being contested at the administrative court, where proceedings are currently in progress. As of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the total disputed amount ~~under discussion~~ classified as ~~reasonably possible~~a remote risk of loss was ~~$430~~$505.6 and ~~$360,~~$483.0, respectively, with the increase largely due to higher interest rates and movements in foreign exchange rates.

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

In May 2015, an executive decree established the levy of IPI on the sales of cosmetic products by Avon Brazil. Avon Brazil filed an objection to this levy on the basis that it is not constitutional since this tax is already paid by Avon Brazil Manufacturing. In December 2016, Avon Brazil received a favorable decision from the Federal District Court regarding this objection. This decision has been appealed by the Federal Tax Authority. As of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the total amount under discussion classified as a reasonably possible risk of loss was ~~$292~~$317.0 and ~~$243,~~$301.2, respectively, with the increase being largely a result of higher interest due, toand movements in foreign exchange rates.

Talc-Related Litigation

The Company has been named a defendant in numerous personal injury lawsuits filed in U.S. courts, alleging that certain talc products the Company sold in the past were contaminated with asbestos. Many of these actions involve a number of ~~co-defendants~~codefendants 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, 2023 and December 31, 2022, there were ~~158~~244 and 227 individual active cases pending against the ~~Company.~~Company, respectively, for which associated costs and estimated liabilities have been included in current liabilities of discontinued operations on the Consolidated Balance Sheet. During the three months ended March 31, ~~2022, 13~~2023, 42 new cases were filed and 625 cases were dismissed, settled or otherwise resolved.

In December 2022, one case, captioned Chapman, et al. v. Avon Products, Inc., et al., No. 22STCV05968, resulted in an adverse jury verdict after a trial, with the jury awarding Plaintiffs a total of $36.0 in compensatory damages and $10.3 in punitive damages against Avon. The ~~value~~Company believes it has strong grounds for seeking to overturn the verdict in this case and in January 2023 began the process of appealing the verdict by seeking relief from the trial court. On March 1, 2023, following post-trial arguments, the trial court issued a conditional order reducing the compensatory damages award against Avon to $29.3. Plaintiffs challenged the reduction of the ~~settlements was not material, either individually or~~award as to Avon and asserted that the reduction should only apply to Avon’s co-defendant. The trial court has resolved this issue in Plaintiffs’ favor and, once judgment is entered, the ~~aggregate,~~case will proceed on appeal.

~~AVON PRODUCTS, INC.~~

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

~~We believe~~The Company believes that the claims asserted against us in all of these cases are without ~~merit. We are~~merit and is defending vigorously against these claims and will continue to do so. ~~To date, there have been no findings of liability enforceable against the Company.~~ However, ~~nationwide trial results in~~additional similar cases ~~filed against other manufacturers~~arising out of ~~cosmetic~~the use of the Company's talc products ~~have ranged from outright dismissals to very large jury awards of both compensatory and punitive damages.~~are reasonably anticipated. Given the inherent uncertainties of litigation, ~~we cannot~~it is not possible to predict the outcome of all individual cases pending against the Company or potential unasserted claims, and ~~we are only able to make~~therefore a specific estimate and associated provision is made for a small number of individual cases that have advanced to the later stages of legal proceedings. This estimated liability for claims and associated legal costs incurred to date includes an amount for the Chapman case, however taking into consideration the strong grounds for appeal and seeking to overturn the verdict as noted above, should the Company ultimately lose the case, additional amounts representing a significant portion of the original awarded damages could be incurred.

For the remaining filed cases, we ~~provide~~record an estimate of exposure loss on an aggregated and ongoing basis, which takes into account the historical outcomes of all cases we have resolved to date. Any ~~accruals currently recorded on the Company’s balance sheet with respect to these cases are not material. However, any~~ adverse outcomes, either in an individual case or in the aggregate, could be material. Future costs to litigate these cases, which we expense as incurred, are not known but may be significant, though some costs will be covered by insurance.

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Brazilian Labor-Related Litigation

On an ongoing basis, the Company is subject to numerous and diverse labor-related lawsuits filed by employees in Brazil. These cases are assessed on an aggregated and ongoing basis based on historical outcomes of similar cases. The claims made are often for significantly larger sums than have historically been paid out by the Company. Our practice continues to be to recognize a liability based on our assessment of historical payments in similar cases. Our best estimate of the probable loss for such cases at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 was approximately ~~$13~~$10.2 and ~~$11,~~$10.0, respectively. Accordingly, we have recognized a liability for this amount.

Brazilian Financial Indemnities

As of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company has issued a number of guarantees totaling ~~$201~~$189.4 and ~~$157,~~$181.3, respectively, which it could be required to make in the event of adverse judgments in a number of lawsuits in Brazil.

Other Matters

Various other lawsuits and claims, arising in the ordinary course of business or related to businesses previously sold, are pending or threatened against Avon. In management’s opinion, based on its review of the information available at this time, the total cost of resolving such other contingencies at March 31, ~~2022~~2023 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 months ended March 31, ~~2022~~2023 and ~~2021:~~2022:

Three Months Ended March 31, 2022 Foreign Currency Translation Adjustments Net Investment Hedges Cash Flow Hedges Pension and Postretirement Benefits Total
Balance at December 31, 2021 $ (1,062.3) $ (4.3) $ — $ (18.9) $ (1,085.5)
Other comprehensive income other than reclassifications 50.9 — .1 — 51.0
Reclassifications into earnings:
Amortization of net actuarial loss and prior service cost, net of tax of $0.2(1)
— — — 1.3 1.3
Total reclassifications into earnings — — — 1.3 1.3
Balance at March 31, 2022 $ (1,011.4) $ (4.3) $ .1 $ (17.6) $ (1,033.2)


Three Months Ended March 31, 2023	Foreign Currency Translation Adjustments		Net Investment Hedges		Cash Flow Hedges		Pension and Postretirement Benefits		Total
Balance at December 31, 2022	$	(1,018.1)	$	(4.3)	$	0.3	$	(30.1)	$	(1,052.2)
Other comprehensive income other than reclassifications	(7.6)		—		(1.0)		—		(8.6)
Reclassifications into earnings:
Amortization of net actuarial loss and prior service cost, net of tax of $0.1(1)	—		—		—		0.3		0.3
Total reclassifications into earnings	—		—		—		0.3		0.3
Balance at March 31, 2023	$	(1,025.7)	$	(4.3)	$	(0.7)	$	(29.8)	$	(1,060.5)


Three Months Ended March 31, 2022	Foreign Currency Translation Adjustments		Net Investment Hedges		Cash Flow Hedges		Pension and Postretirement Benefits		Total
Balance at December 31, 2021	$	(1,062.2)	$	(4.3)	$	—	$	(19.0)	$	(1,085.5)
Other comprehensive loss other than reclassifications	50.9		—		0.1		—		51.0
Reclassifications into earnings:

Amortization of net actuarial loss and prior service cost, net of tax of $0.2(1)	—		—		—		1.3		1.3
Total reclassifications into earnings	—		—		—		1.3		1.3
Balance at March 31, 2022	$	(1,011.3)	$	(4.3)	$	0.1	$	(17.7)	$	(1,033.2)

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

Foreign exchange net ~~losses~~gain of ~~$2.4~~$1.8 and ~~$2.0~~loss of $2.4 for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, 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).

9. SEGMENT INFORMATION

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

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

Summarized financial information concerning our reportable segments was as follows:

Three Months Ended March 31,
Total Revenue 2022 2021
Avon International $ 353.3 $ 430.9
Avon Latin America 306.3 465.8
Total revenue from reportable segments(1)
659.6 896.7
Revenue from affiliates to Natura &Co 3.7 7.7
Total revenue(1)(4)
663.3 904.4
Three Months Ended March 31,
Operating Loss 2022 2021
Segment Loss
Avon International $ (.9) $ (7.0)
Avon Latin America (44.6) (4.6)
Total loss from reportable segments(2)(4)
$ (45.5) $ (11.6)
Unallocated global expenses(3)
(5.9) (6.0)
CTI restructuring initiatives (10.8) (19.5)
Operating loss(4)
$ (62.2) $ (37.1)

~~AVON PRODUCTS, INC.~~


	Three Months Ended March 31,
Total Revenue	2023		2022
Avon International	$	309.1	$	353.3
Avon Latin America	267.7		306.3
Total revenue from reportable segments(1)	576.8		659.6
Revenue from affiliates to Natura &Co	13.7		3.7
Total revenue	590.5		663.3


	Three Months Ended March 31,
Operating Loss	2023		2022
Segment profit/(loss)
Avon International	$	2.6	$	(.9)
Avon Latin America	(12.1)		(44.6)
Total profit (loss) from reportable segments(2)	$	(9.5)	$	(45.5)
Unallocated global expenses(3)	(8.6)		(5.9)

CTI restructuring initiatives	(16.6)		(10.8)
Impairment of goodwill(4)	(9.1)		—
Operating loss	$	(43.8)	$	(62.2)

(1)Total revenue also includes revenue from other business activities of ~~$.1~~$0.1 and ~~$1.9~~$0.1 for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively, allocated to Avon International and Avon Latin America segments. Other business activities include revenue from the sale of products to New Avon since the separation of the Company’s North America business into New Avon on March 1, 2016 and ongoing royalties from the licensing of our name and products.

(2)Total ~~loss~~profit (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~~$0.1 and ~~$.1~~$0.1 for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, 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 ~~$29.0~~$24.4 and ~~$60.2~~$29.0 for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively, include corporate general and administrative expenses allocated to Avon International and Avon Latin America to the extent they support the operating activity of the segment.

(3)For the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, unallocated global expenses primarily include stewardship and other expenses not directly attributable to reportable segments.

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

(4)On July 1, 2021, the Company sold Avon Luxembourg, including our Mexican business, to a subsidiary of Natura &Co Holding. As a result, from the same date, the results of Avon Luxembourg are no longer included within Avon's consolidated results. The three month period endedAt March 31, ~~2021 includes~~2023 the ~~results of Avon Luxembourg.~~Colombia business goodwill was assessed for impairment. See further details in Note 12, Goodwill.

10. SUPPLEMENTAL BALANCE SHEET INFORMATION

At March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, prepaid expenses and other included the following:


Components of Prepaid Expenses and Other	Components of Prepaid Expenses and Other	March 31, 2022		December 31, 2021		Components of Prepaid Expenses and Other	March 31, 2023		December 31, 2022
Prepaid taxes and tax refunds receivable	Prepaid taxes and tax refunds receivable	$	84.8	$	84.0	Prepaid taxes and tax refunds receivable	$	94.1	$	60.9
Receivables other than trade	Receivables other than trade	28.8		27.8		Receivables other than trade	18.4		18.8
Prepaid brochure costs, paper and other literature	Prepaid brochure costs, paper and other literature	9.9		8.3		Prepaid brochure costs, paper and other literature	9.2		7.4
Other	Other	47.1		45.5		Other	47.5		40.8
Prepaid expenses and other	Prepaid expenses and other	$	170.6	$	165.6	Prepaid expenses and other	$	169.2	$	127.9

At March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, other assets included the following:


Components of Other Assets	Components of Other Assets	March 31, 2022		December 31, 2021		Components of Other Assets	March 31, 2023		December 31, 2022
Net overfunded pension plans	Net overfunded pension plans	$	159.6	$	162.5	Net overfunded pension plans	$	114.4	$	110.7
Capitalized software	Capitalized software	75.9		74.9		Capitalized software	81.1		73.5
Judicial deposits	Judicial deposits	56.7		47.2		Judicial deposits	19.6		23.4
Long-term receivables including Taxes	Long-term receivables including Taxes	210.1		180.2		Long-term receivables including Taxes	174.1		198.3
Trust assets associated with supplemental benefit plans	Trust assets associated with supplemental benefit plans	30.4		30.4		Trust assets associated with supplemental benefit plans	28.5		28.5
Other	Other	13.6		14.2		Other	10.2		11.1
Other assets	Other assets	$	546.3	$	509.4	Other assets	$	427.9	$	445.5

Prepaid taxes and tax refunds receivable and long-term receivables include approximately ~~$144~~$130.6 and ~~$128~~$133.0 related to certain Brazil indirect taxes as of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. During the second quarter of 2021, the Brazilian Supreme Federal Court ruled on a Motion of Clarification which supported the recognition of additional receivable balances related to certain Brazil indirect taxes.

11. RESTRUCTURING INITIATIVES

Natura &Co - Avon Integration

Subsequent to the merger of Natura &Co 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.

~~AVON PRODUCTS, INC.~~

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

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

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

In May 2020, the new leadership of Avon International refreshed our strategy ("Open Up & Grow") which aims to return Avon International to growth ~~over the next three~~for future years. Open Up & Grow replaces and builds on the success of the Open Up Avon strategy, launched in 2018 and continues to strengthen competitiveness through enhancing the representative experience, accelerating digital rep journey and accessing omnichannel, improving brand position and relevance, accelerating digital expansion and improving costs. ~~Over the next three years, savings~~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.

~~CTI Restructuring~~Cost to Implement (CTI )Restructuring Initiatives - Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022

During the three months ended March 31, 2023, we recorded net CTI of $16.6, of which $2.1 related to Avon Integration, and net CTI $14.7 related to Open Up & Grow and a net benefit of $.2 related to other historical programs, in our Consolidated Statements of Operations. During the three months ended March 31, 2022, we recorded ~~net~~ CTI of $10.8 of which $3.5 related to Avon Integration, and a net benefit of $7.5 related to Open Up & Grow, and a net benefit of $.2 related to ~~the Transformation Plan,~~other historical program, in our Consolidated Statements of Operations. During the three months ended March 31, 2021, we recorded CTI of $19.5 of which $6.1 related to Avon Integration, $14.2 related to Open Up & Grow, and a net benefit of $.8 related to the Transformation Plan,

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in ~~our Consolidated Statements of Operations.~~millions, except per share data)

The costs during the three and three months ended March 31, ~~2022~~2023 and ~~2021~~2022 consisted of the following:


		Three Months Ended March 31,				Three Months Ended March 31,
		2022		2021				2023		2022
CTI recorded in operating profit - COGS	CTI recorded in operating profit - COGS						CTI recorded in operating profit - COGS

Inventory write-off	Inventory write-off	—		.2			Inventory write-off	$	0.1	$	—
		—		.2				0.1		—

CTI recorded in operating profit - SG&A	CTI recorded in operating profit - SG&A						CTI recorded in operating profit - SG&A
Net charges for employee-related costs, including severance benefits	Net charges for employee-related costs, including severance benefits	2.4		9.3			Net charges for employee-related costs, including severance benefits	5.7		2.4
Implementation costs, primarily related to professional service fees	Implementation costs, primarily related to professional service fees	6.1		4.1			Implementation costs, primarily related to professional service fees	0.4��		6.1
Dual running costs	Dual running costs	.4		.3			Dual running costs	0.9		0.4
Contract termination and other net benefits	Contract termination and other net benefits	1.9		5.0			Contract termination and other net benefits	5.0		1.9

Impairment of other assets							Impairment of other assets	—		—
Accelerated depreciation							Accelerated depreciation	4.3		—
Variable lease charges	Variable lease charges	—		.6			Variable lease charges	—		—
		10.8		19.3				16.3		10.8

CTI recorded in operating profit							CTI recorded in operating profit	16.4		10.8

CTI recorded in other (expense) income							CTI recorded in other (expense) income
(Gain) loss on sale of business / assets							(Gain) loss on sale of business / assets	0.2		—

Total CTI	Total CTI	$	10.8	$	19.5		Total CTI	$	16.6	$	10.8

Avon Integration	Avon Integration	$	3.5	$	6.1		Avon Integration	$	2.1	$	3.5
Open Up & Grow	Open Up & Grow	$	7.5	$	14.2		Open Up & Grow	$	14.7	$	7.5
Transformation Plan		$	(.2)	$	(.8)
Other historical plans							Other historical plans	$	(.2)	$	(.2)

The ~~following liability balances include~~table below includes restructuring costs such as employee-related costs, inventory and asset write-offs, foreign currency translation write-offs and contract terminations, and do not include other CTI restructuring initiatives such as professional services fees, dual running costs which are clearly identifiable and directly associated with exit activity such as people cost to perform knowledge transfer or rental costs for building being exited once the new building has become fully operational, accelerated depreciation and gain on sale of business.

~~AVON PRODUCTS, INC.~~

The liability balance included in other accrued liabilities in our Consolidated Balance Sheet for the restructuring actions associated with Avon Integration at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 is ~~$0.3~~$1.1 and ~~$1.6,~~$1.5, respectively, related to ~~employee related~~employee-related costs.

The liability balance included in other accrued liabilities in our Consolidated Balance Sheet for the restructuring actions associated with Open Up & Grow at March 31, ~~2022~~2023 is as follows:

Employee-Related Costs Inventory/Assets Write-offs Contract Terminations/Other Total
Balance at December 31, 2021 $ 14.0 $ — $ 1.2 $ 15.2
2022 charges 1.5 — 1.2 2.7
Cash payments (6.8) — (1.3) (8.1)
Foreign exchange (.3) — — (.3)
Balance at March 31, 2022 $ 8.4 $ — $ 1.1 $ 9.5


	Employee-Related Costs		Inventory/Assets Write-offs		Contract Terminations/Other		Total
Balance at December 31, 2022	$	19.6	$	—	$	1.6	$	21.2
2023 charges	5.0		.1		3.8		8.9
Adjustments							—
Cash payments	(4.1)				(1.3)		(5.4)
Non-cash write-offs			(.1)				(.1)
Foreign exchange					.1		.1
Balance at March 31, 2023	$	20.5	$	—	$	4.2	$	24.7

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The liability balance included in other accrued liabilities in our Consolidated Balance Sheet for the restructuring actions associated with our ~~Transformation Plan~~other historical plans at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 is ~~$1.4~~$1.3 and ~~$1.5,~~$1.3, respectively, related to ~~employee related~~employee-related costs.

The majority of cash payments, if applicable, associated with the year-end liability are expected to be made during ~~2022.~~2023.

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

Employee- Related Costs Inventory/ Asset Write-offs Contract
Terminations/Other Foreign Currency Translation Adjustment Write-offs Total
Avon Integration
Charges incurred to date $ 13.3 $ — $ .9 $ — $ 14.2
Estimated charges to be incurred on approved initiatives — — — — —
Total expected charges on approved initiatives $ 13.3 $ — $ .9 $ — $ 14.2
Open Up & Grow
Charges incurred to date $ 117.3 $ 107.4 $ 17.1 $ (10.9) $ 230.9
Estimated charges to be incurred on approved initiatives .2 — — — .2
Total expected charges on approved initiatives $ 117.5 $ 107.4 $ 17.1 $ (10.9) $ 231.1

~~AVON PRODUCTS, INC.~~


	Employee- Related Costs		Inventory/ Asset Write-offs		Contract Terminations/Other		Foreign Currency Translation Adjustment Write-offs		Total
Avon Integration
Charges incurred to date	$	25.2	$	—	$	4.2	$	—	$	29.4
Estimated charges to be incurred on approved initiatives	—		—		—		—		—
Total expected charges on approved initiatives	$	25.2	$	—	$	4.2	$	—	$	29.4

Open Up & Grow
Charges incurred to date	$	147.8	$	108.8	$	22.7	$	(10.9)	$	268.4
Estimated charges to be incurred on approved initiatives	—		—		11.9		—		11.9
Total expected charges on approved initiatives	$	147.8	$	108.8	$	34.6	$	(10.9)	$	280.3

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


		Avon International		Avon Latin America		Total			Avon International		Avon Latin America		Total
Avon Integration	Avon Integration							Avon Integration
2020	2020	$	6.2	$	4.6	$	10.8	2020	$	6.2	$	4.6	$	10.8
2021	2021	(1.2)		3.0		$	1.8	2021	(1.2)		3.0		$	1.8
First quarter 2022		.1		1.5		1.6
2022								2022	.6		14.4		15.0
First quarter 2023								First quarter 2023	—		1.8		1.8

Charges incurred to date	Charges incurred to date	5.1		9.1		14.2		Charges incurred to date	5.6		23.8		29.4
Estimated charges to be incurred on approved initiatives	Estimated charges to be incurred on approved initiatives	—		—		—		Estimated charges to be incurred on approved initiatives	—		—		—
Total expected charges on approved initiatives	Total expected charges on approved initiatives	$	5.1	$	9.1	$	14.2	Total expected charges on approved initiatives	$	5.6	$	23.8	$	29.4

Open Up & Grow	Open Up & Grow							Open Up & Grow
2018	2018	$	52.8	$	64.3	$	117.1	2018	$	52.8	$	64.3	$	117.1
2019	2019	34.7		36.9		71.6		2019	34.7		36.9		71.6
2020	2020	3.2		(.8)		2.4		2020	3.2		(.8)		2.4
2021	2021	36.9		.2		37.1		2021	36.9		.2		37.1
First quarter 2022		2.7		—		2.7
2022								2022	31.3		—		31.3
First quarter 2023								First quarter 2023	8.9		—		8.9

Charges incurred to date	Charges incurred to date	130.3		100.6		230.9		Charges incurred to date	167.8		100.6		268.4
Estimated charges to be incurred on approved initiatives	Estimated charges to be incurred on approved initiatives	.2		—		.2		Estimated charges to be incurred on approved initiatives	11.9		—		11.9
Total expected charges on approved initiatives	Total expected charges on approved initiatives	$	130.5	$	100.6	$	231.1	Total expected charges on approved initiatives	$	179.7	$	100.6	$	280.3

The charges above are not included in segment ~~loss,~~profit (loss), as this excludes CTI restructuring initiatives. The amounts shown in the tables above as charges incurred to date relate to initiatives that have been approved and recorded in the consolidated financial statements, as the costs are probable and estimable. The amounts shown in the tables above as total expected charges

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

on approved initiatives represent charges recorded to-date plus charges yet to be recorded for approved initiatives as the relevant accounting criteria for recording an expense have not yet been met.

12. GOODWILL

Goodwill

During the 2022 year-end close process, our analysis of the Colombia business indicated an impairment as the carrying value of the business exceeded the estimated fair value. At March 31, 2023 further information was analyzed which indicated a further impairment had occurred in the period. Accordingly, a non-cash impairment charge of $9.1 was recorded to reduce the carrying amount of goodwill.

~~12. GOODWILL~~
Avon International Avon Latin America Total
Net balance at December 31, 2021 $ 17.6 $ 54.5 $ 72.1
Changes during the period ended March 31, 2022:
Foreign exchange (.4) 3.2 2.8
Net balance at March 31, 2022 $ 17.2 $ 57.7 $ 74.9


	Avon International		Avon Latin America		Total


Net balance at December 31, 2022	$	16.6	$	9.3	$	25.9

Changes during the period ended March 31, 2023:
Impairment	$	—	$	(9.1)	$	(9.1)

Foreign exchange	.1		1.6		1.7



Net balance at March 31, 2023	$	16.7	$	1.8	$	18.5

13. FAIR VALUE

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis were nil at March 31, 2023.

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

~~AVON PRODUCTS, INC.~~

Level 1 Level 2 Total
Assets:
Foreign exchange forward contracts $ — $ .1 $ .1
Total $ — $ .1 $ .1
Liabilities:
Foreign exchange forward contracts $ — $ .6 $ .6
Total $ — $ .6 $ .6

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


		Level 1		Level 2		Total			Level 1		Level 2		Total
Assets:								Assets:

Foreign exchange forward contracts								Foreign exchange forward contracts	$	—	$	.3	$	.3
Total								Total	$	—	$	.3	$	.3
Liabilities:	Liabilities:							Liabilities:
Foreign exchange forward contracts	Foreign exchange forward contracts	$	—	$	2.7	$	2.7	Foreign exchange forward contracts	$	—	$	—	$	—
Total	Total	$	—	$	2.7	$	2.7	Total	$	—	$	—	$	—

Fair Value of Financial Instruments

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

The net asset (liability) amounts recorded in the balance sheet (carrying amount) and the estimated fair values of our remaining financial instruments at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, consisted of the following:

March 31, 2022 December 31, 2021
Carrying
Amount Fair
Value Carrying
Amount Fair
Value
Loans to affiliates of Natura &Co maturing within one year 45.5 45.5 46.6 46.6
Loans to affiliates of Natura &Co maturing after one year 46.7 46.7 46.7 46.7
Debt maturing within one year (561.4) (567.6) (32.6) (32.6)
Loans from affiliates of Natura &Co maturing within one year (458.3) (458.3) (371.7) (371.7)
Long-term debt(1)
(215.2) (252.0) (676.0) (754.2)
Loans from affiliates of Natura &Co maturing after one year (721.0) (721.0) (736.3) (736.3)
Foreign exchange forward contracts (.5) (.5) (2.7) (2.7)

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


	March 31, 2023				December 31, 2022
	Carrying Amount		Fair Value		Carrying Amount		Fair Value

Loans to affiliates of Natura &Co maturing within one year	$	93.9	$	93.9	$	72.2	$	72.2
Loans to affiliates of Natura &Co maturing after one year	50.3		50.3		54.8		54.8
Debt maturing within one year	(45.4)		(45.4)		(5.7)		(5.7)
Loans from affiliates of Natura &Co maturing within one year	(599.4)		(599.4)		(537.2)		(537.2)
Long-term debt(1)	(214.9)		(220.0)		(214.8)		(206.8)
Loans from affiliates of Natura &Co maturing after one year	(1,437.5)		(1,437.5)		(1,427.2)		(1,427.2)
Foreign exchange forward contracts	—		—		.3		.3

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

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

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

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

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

~~AVON PRODUCTS, INC.~~

14. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

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

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

Derivatives are recognized in the Consolidated Balance Sheets at their fair values. The following table presents the fair value of derivative instruments at March 31, ~~2022:~~2023:


		Asset			Liability				Asset			Liability
		Balance Sheet Classification	Fair Value		Balance Sheet Classification	Fair Value			Balance Sheet Classification	Fair Value		Balance Sheet Classification	Fair Value
Derivatives designated as hedges:	Derivatives designated as hedges:							Derivatives designated as hedges:
Foreign exchange forward contracts	Foreign exchange forward contracts	Prepaid expenses and other	$	1.1	Accounts payable	$	1.0	Foreign exchange forward contracts	Prepaid expenses and other	$	7.9	Accounts payable	$	8.1

Derivatives not designated as hedges:	Derivatives not designated as hedges:							Derivatives not designated as hedges:
Foreign exchange forward contracts	Foreign exchange forward contracts	Prepaid expenses and other	$	.1	Accounts payable	$	.6	Foreign exchange forward contracts	Prepaid expenses and other	$	.4	Accounts payable	$	2.2
Total derivatives	Total derivatives		$	1.2		$	1.6	Total derivatives		$	8.3		$	10.3

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Derivatives are recognized in the Consolidated Balance Sheets at their fair values. The following table presents the fair value of derivative instruments at December 31, ~~2021:~~2022:

~~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~~

—

~~Accounts payable~~

~~2.7~~

~~Total derivatives~~

—

~~2.7~~


	Asset			Liability
	Balance Sheet Classification	Fair Value		Balance Sheet Classification	Fair Value
Derivatives designated as hedges:
Foreign exchange forward contracts	Prepaid expenses and other	$	9.2	Accounts payable	$	9.1

Derivatives not designated as hedges:
Foreign exchange forward contracts	Prepaid expenses and other	$	.6	Accounts payable	$	4.6
Total derivatives		$	9.8		$	13.7

Interest Rate Risk

Approximately ~~13%~~18% and 5%3% of our debt portfolio at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, was exposed to floating interest rates, which relates to our short-term debt portfolio.

Foreign Currency Risk

We may use foreign exchange forward contracts to manage a portion of our foreign currency exchange rate exposures. At March 31, ~~2022,~~2023, we had outstanding third-party foreign exchange forward contracts with notional amounts totaling approximately ~~$237~~$25.0 for various currencies, ~~none~~all of which were designated as cash flow hedges.

During the first quarter ~~ended March 31,~~of 2022, the Company entered into foreign exchange forward contracts with Natura &Co Luxembourg, a subsidiary of Natura &Co Holding, to manage a portion of its foreign currency exchange rate exposures. At March 31, ~~2022,~~2023, we had outstanding related party foreign exchange forward contracts with notional amounts totaling approximately ~~$175~~$523.4 for various currencies for up to 912 months, ~~all~~ of which $185.7 were designated as cash flow hedges. In addition we had ~~$1.1~~$8.2 Accounts Receivable and ~~$1.0~~$8.9 Accounts Payable recorded in our Consolidated Balance Sheets associated with these transactions, all of which are expected to be reclassified into earnings within the next 12 months.

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

~~AVON PRODUCTS, INC.~~

translation impact recognized in earnings relating to the associated balance sheet items. During the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, we recorded a loss of $3.7 and a gain of ~~$3.5~~ and ~~a loss $.7,~~$3.5, respectively, in other (expense) income, net in our Consolidated Statements of Operations related to these undesignated foreign exchange forward contracts.

15. DEBT

Natura Revolving Credit Facility

~~In May 2020,~~On November 7, 2022, the Company’s subsidiary, Avon ~~Luxembourg~~Cosmetics Limited entered into a ~~Revolving Credit Facility Agreement~~two-year committed intercompany multi-currency revolving credit facility with Natura &Co ~~International~~Luxembourg Holdings S.à r.l., a subsidiary of Natura &Co Holding and an affiliate of the Company, in the ~~initial~~ amount of ~~$100, increased to $250 in~~$300.0, of which $230.9 was drawn down at March ~~2021, which may be used for working capital and other general corporate purposes.~~31, 2023. Borrowings under this ~~Facility~~facility will be used to reduce short-term financing from third-party banks and will bear interest at a rate per annum of ~~LIBOR~~3% plus ~~a margin determined on an arm's length basis, and~~ the ~~Facility is to mature on May 31, 2022. On July 1, 2021, the Company sold Avon Luxembourg to a subsidiary of Natura &Co Holding and therefore Company no longer has access to this facility.~~applicable currency benchmark rate.

~~Other~~Related Party Loans ~~from Affiliates of Natura &Co~~

In November 2020, Avon International Operations, Inc. ("AIO") entered into a Promissory Note with a subsidiary of Natura &Co Holding and an affiliate of the Company in the amount of $960. The Promissory Note bears interest at a rate per annum of 3.13% and matures on November 2, 2022 (“the Natura &Co Loan”). On July 1, 2021, as part of the sale of Avon Luxembourg to a subsidiary of Natura &Co Holding the $960 loan was partially repaid with the proceeds from a loan maturing in 2028. As at March 31, ~~2022, $209 was outstanding under the Natura &Co Loan and $721~~2023, $702.5 was outstanding under the loan maturing in 2028, which is between Avon Beauty Limited and Natura &Co Luxembourg Holdings S.à r.l. ("Natura &Co ~~Luxembourg~~Lux Loan"). Avon Beauty Limited is a subsidiary of Avon Cosmetics Limited.

In ~~addition, loans from affiliates~~May 2022, Avon Products, Inc and Avon Cosmetics Limited entered into Promissory Notes with a subsidiary of Natura &Co Holding in the amount of $405.0 and $215.0 respectively. The Promissory Notes bear interest at a rate per annum of 6.71% and mature on May 17, 2029. In addition, in June 2022 Avon Cosmetics Limited entered into an additional Promissory Note with a subsidiary of Natura &Co Holding in the amount of $115.0. This Promissory Note bears interest at a rate per annum of 6.51% and matures on June 28, 2029.

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

At March 31, ~~2022~~2023, our debt and other financing maturing within one year of ~~$249 includes a number~~include $599.4 of intercompany loans between Natura &Co Luxembourg ~~Natura Cosméticos~~Holdings S.à r.l. and Avon Products, Inc. ~~affiliates.~~affiliates, including $230.9 drawn down under a $300.0 committed intercompany multi-currency revolving credit facility from an affiliate of Natura &Co expiring in November 2024.

Other Short-Term Financing

In addition, at March 31, 2023 and December 31, 2022, we utilized approximately ~~$100~~$45.4 and $5.7, respectively, of short-term financing from third-party banks across multiple markets.

Unsecured Notes

In March 2013, we issued a series of unsecured notes (the "2013 Notes"). As of March 31, ~~2022,~~2023, following the ~~following 2013 Notes remain outstanding: $461.9 aggregate principal amount~~repurchase of the 5% Notes due March 15, 2023 ~~and~~(see below), $216.1 aggregate principal amount of 6.95% Notes due March 15, ~~2043.~~ 2043 remained outstanding.

In May 2022, we repurchased $461.9 of our 5% Notes due March 15, 2023, which was financed by long-term related party loans. The aggregate repurchase price was equal to the principal amount of the notes, plus a premium of $15.0 and accrued interest of $5.4. In connection with the repurchase, we incurred a loss on extinguishment of debt of $15.7 before tax in the second quarter of 2022 consisting of the $15.0 premium paid for the repurchase and $0.7 for the write-off of debt issuance costs and discounts related to the initial issuance of the notes that were repurchased.

Interest on the 2013 Notes is payable ~~semiannually~~semi-annually on March 15 and September 15 of each year. The indenture governing the 2013 Notes contains interest rate adjustment provisions depending on the ~~long-term~~ credit ratings assigned to the 2013 Notes by S&P and ~~Moody’s.~~Moody's. As described in the indenture, the interest rates on the 2013 Notes increase or decrease by ~~.25%~~0.25% for each one-notch movement below investment grade on each of the credit ratings assigned to the 2013 Notes by S&P or Moody's. These adjustments are limited to a total increase of 2% above the respective interest rates in effect on the date of issuance of the 2013 Notes.

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

For a more detailed description of the Company’s debt agreements, refer to Note 7, Debt and Other Financing of our ~~Annual Report on~~2022 Form ~~10-K for the year ended December 31, 2021.~~10-K.

16. INCOME TAXES

Our quarterly income tax provision is calculated using an estimated annual effective income tax approach. The quarterly effective tax rate can differ from our estimated annual effective tax rate as the Company cannot apply an effective tax rate approach for all of its operations. For those entities that can apply an effective tax rate approach, as of March 31, ~~2022,~~2023, our annual effective tax rate, excluding discrete items, is ~~26.4%~~22.4%, as compared to ~~26.5%~~26.4% as of March 31, ~~2021.~~2022.

The remaining entities, which are operations that generate pre-tax losses which cannot be tax benefited and/or have an effective tax rate which cannot be reliably estimated, have to account for their income taxes on a discrete year-to-date basis as of the end of each quarter and are excluded from the effective tax rate approach. The estimated annual effective tax rate for ~~2022~~2023 and ~~2021~~2022 also excludes the unfavorable impact of withholding taxes associated with certain intercompany payments, including royalties,

~~AVON PRODUCTS, INC.~~

service charges, interest and dividends, which in the aggregate are relatively consistent each year due to the need to repatriate funds to cover costs incurred in the 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, 2023 and 2022 was $12.0 and ~~2021 was~~ $4.8, ~~and $7.1,~~ respectively. Our effective tax rates for the three months ended March 31, 2023 and 2022 ~~and 2021~~ were ~~(5.7)~~(15.0)% and ~~(11.5)~~(5.7)%, respectively.

The effective tax rates for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 were impacted by CTI restructuring charges which could not all be benefited, losses which could not all be benefited, country mix of earnings, limitations on use of tax attribute carryforwards and withholding taxes. The effective tax rate in the ~~first~~ quarter ended March 31, 2023 was also favorably impacted by other miscellaneous tax benefits of $0.5. The effective tax rate in the quarter ended March 31, 2022 was unfavorably impacted by the recording of valuation allowances of $3.1 and other miscellaneous net tax expense of $5.0. ~~The effective tax rate in the first quarter of 2021 was unfavorably impacted by other miscellaneous income tax expense of approximately $2.4.~~

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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. AsThe Company continuously monitors the performance of ~~March 31, 2022,~~entities and assesses the ~~COVID-19 pandemic is an example of negative evidence the Company must consider. As of March 31, 2022, the negative evidence associated with COVID-19 has not required the recording of additional~~need for any further valuation allowances ~~against deferred~~based on market performance and executability of tax ~~assets that are expected to be realized in future periods. The Company will continue to monitor the COVID-19 pandemic~~planning actions and other effects that could impact the conclusions regarding the realizability of its remaining deferred tax assets. Potential negative evidence, including such things as the worsening of the economies in the markets we operate in and reduced profitability of our markets could give rise to a need for a valuation allowance to reduce our deferred tax assets in upcoming quarters.

~~We monitor the realizability of our deferred tax assets on a continuous basis.~~opportunities (including corporate restructuring). Should macroeconomic and ~~socio-political~~sociopolitical conditions change, or our business operations do not improve, or tax planning actions and opportunities not be implemented, up to approximately ~~$75~~$49.3 of the Company's recognized deferred tax assets could potentially need to be offset with the recording of a valuation allowance ~~during~~in the ~~next 12 months.~~future.

17. SUPPLIER FINANCING

We have entered into supplier finance arrangements with a number of banks in the Avon International and LATAM regions. The ~~deferred tax~~key terms of these arrangements are typically that the Company does not pay any subscription fees, confirmation by the Company that each invoice presented by a supplier for payment is valid, the payment of the original invoice on the invoice due dates, and the Company does not provide any guarantees or pledge assets ~~are associated~~for each arrangement. The Company does not determine the terms and conditions of the agreement between the banks and Avon’s suppliers. Each arrangement has a maximum size for the program and the Company may terminate the arrangement with ~~Avon subsidiary operations that suffered a loss in earnings before tax during 2021.~~an established notice period. At March 31, 2023 and December 31, 2022, the Company had outstanding obligations confirmed as valid under supplier finance arrangements of $42.4 and $55.3.

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

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

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

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

OVERVIEW

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

Our business is conducted primarily in the direct-selling channel, with a strategy to expand to omni-channel. During ~~2021,~~2022, we had sales operations in 5451 countries and territories, and distributed products in 2423 more. As at December 31, ~~2021~~2022 we had sales operations in 5249 countries and territories. All of our consolidated revenue is derived from operations of subsidiaries outside of the United States ("U.S."). Our reportable segments are based on geographic operations in two regions, Avon International and Avon Latin America. Our product categories are Beauty and Fashion & Home. Beauty consists of skincare, fragrance and color (cosmetics). Fashion & Home consists of fashion 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 three months ended March 31, ~~2022,~~2023, revenue decreased ~~27%,~~11% compared to the prior-year period, unfavorably impacted by foreign exchange variations, primarily driven by the weakening of the U.S. dollar relative to the ~~Brazilian real, which was partially~~Argentinian peso, Turkish lira, Polish zloty, Columbian peso and Pound sterling offset by the strengthening of the U.S. dollar relative to the ~~Turkish lira,~~ Russian ~~ruble and the Argentinian peso.~~ruble.

On a Constant $ basis, ~~Adjusted~~ revenue decreased ~~22%~~4% driven by declines of ~~10%~~8% in Avon International and ~~33%~~3% in Avon Latin America, mostly as a result of (i) ~~the sale of Avon Luxembourg on July 1, 2021, (ii) decreases~~Average Representative Sales increases being more than offset by a 19% decrease in Active Representatives, ~~in most markets, (iii) the residual impact of changes in COVID-19 restrictions in multiple markets compared to the same period in the prior-year period~~ and ~~(iv)~~(ii) the impact of the ongoing war between Ukraine and Russia. During the three months ended March 31, ~~2022,~~2023, revenues from ~~Russia~~Ukraine and ~~Ukraine~~Russia represented approximately 9%8% of total revenue ~~similar~~compared to ~~the~~approximately 9% for the three months ended March 31, ~~2021.~~

Constant $ Adjusted revenue excluding the impact of the sale of Avon Luxembourg decreased 10% as a 5% increase in Average Representative Sales was more than offset by a 15% decrease in Active Representatives.2022.

Units sold decreased ~~13% (remaining stable excluding the impact of the sale of Avon Luxembourg)~~25%, driven by decreases in both Avon International and Avon Latin America.

See ~~"Segment~~"—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.

~~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 2021 and the first quarter of 2022, the economic disruption caused by the COVID-19 pandemic has resulted in inflationary pressures on the cost of certain raw materials used in the production of essential items due to the increased demand for these inputs worldwide. These inflationary pressures have been compounded by disruptions in global supply chains and climate events that hit electricity generation globally, among others. Moreover, novel strains and variants of COVID-19 emerged in 2021 and the rollout of vaccination programs worldwide have compromised the ability of certain countries to effectively contain the spread and the toll of the virus.

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

~~AVON PRODUCTS, INC.~~

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

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

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

See also “Item 1A. Risk Factors—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 2021 Annual Report.

~~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~~

In May 2020, the new leadership of Avon refreshed our strategy ("Open Up & Grow") which has aims to return Avon to growth over 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 three years, savings are expected to continue to be achieved through restructuring actions (that may continue to result in charges related to severance, contract terminations and asset write-offs), as well as other cost-savings strategies that would not result in restructuring charges.

~~Sale of Avon Luxembourg Holdings S.à r.l~~

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

NEW ACCOUNTING STANDARDS

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

RESULTS OF OPERATIONS—THE THREE MONTHS ENDED MARCH 31, ~~2022~~2023 AS COMPARED TO THE THREE MONTHS ENDED MARCH 31, ~~2021~~2022

Non-GAAP Financial Measures

To supplement our financial results presented in accordance with generally accepted accounting principles ~~generally accepted~~ in the United States ("GAAP"), we disclose operating results that have been adjusted to exclude the impact of changes due to the translation of foreign currencies into U.S. dollars, including changes in: revenue, Adjusted revenue, operating profit, Adjusted operating profit, operating margin and Adjusted operating margin. We ~~also~~ refer to these adjusted financial measures as Constant $ items, 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 revenue, gross margin, SG&A as a percentage of revenue, operating profit, operating margin and income (loss) before taxes on a Non-GAAP basis. We refer to these Non-GAAP financial measures as "Adjusted." We have provided a quantitative reconciliation of the difference between the Non-GAAP financial measures and financial measures calculated and

2726

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

~~reconciliation of the difference between the Non-GAAP financial measures and the financial measures calculated and~~ reported in accordance with GAAP. See "Reconciliation of Non-GAAP Financial Measures" within "Results of ~~Operations"~~Operations - Consolidated" 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 CTIcosts to implement ("CTI") restructuring initiatives ~~which~~ ~~includes~~and the ~~impact on the Consolidated Statements~~impairment of Operations for all periods presented of net charges incurred on approved restructuring initiatives. See Note 11, Restructuring Initiatives, to the Consolidated Financial Statements contained herein for further information.goodwill held in our business in Colombia.


	Three Months Ended March 31,
	2023		2022		%/Basis Point Change
Select Consolidated Financial Information
Total revenue	$	590.5	$	663.3	(11)	%
Cost of sales	(225.0)		(287.4)		(22)	%
Cost of sales from affiliates of Natura &Co	(13.4)		(4.2)		219	%
Selling, general and administrative expenses	(386.8)		(433.9)		(11)	%
Impairment of goodwill	(9.1)		—		*
Operating loss	(43.8)		(62.2)		(30)	%
Interest expense	(7.2)		(13.0)		(45)	%
Interest expense on Loans from affiliates of Natura &Co	(38.0)		(15.3)		148	%

Interest income	5.3		.9		489	%
Interest income on Loans to affiliates of Natura &Co	1.6		.7		129	%
Other income (expense), net	1.6		4.5		(64)	%

Loss from continuing operations, before income taxes	(80.5)		(84.4)		(5)	%
Loss from continuing operations, net of tax	(92.5)		(89.2)		4	%
Net loss attributable to Avon	$	(120.0)	$	(97.2)	23	%

Advertising expenses(1)	$	(14.8)	$	(20.1)	(26)	%

~~Sale of Avon Luxembourg Holdings S.à r.l~~

On July 1, 2021, the Company sold Avon Luxembourg, including our Mexican business, to a subsidiary of Natura &Co Holding for $150. The sale did not qualify for accounting as a discontinued operation in accordance with ASC805 - Business Combinations on the basis that it did not represent a strategic shift having a major effect on the Company's operations and, as a consequence, the results of operations in prior periods include the results of Avon Luxembourg Holdings S.à r.l. and its subsidiaries. While not a non-GAAP measure, in order to better evaluate the ongoing operating performance of the remaining group, the tables below also identify the prior period impacts of the sale of Avon Luxembourg Holdings S.à r.l. and its subsidiaries, including our Mexican business.

2827

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,
2022 2021 %/Basis Point
Change
Select Consolidated Financial Information
Total revenue $ 663.3 $ 904.4 (27) %
Cost of sales (287.4) (398.3) (28) %
Cost of sales from affiliates of Natura &Co (4.2) (7.1) (41) %
Selling, general and administrative expenses (433.9) (536.1) (19) %
Operating loss (62.2) (37.1) 68 %
Interest expense (13.0) (14.9) (13) %
Interest expense on Loans from affiliates of Natura &Co (15.3) (8.7) 76 %
Interest income .9 .2 *
Interest income on Loans to affiliates of Natura &Co .7 — *
Other income (expense), net 4.5 (1.3) *
Loss from continuing operations, before income taxes (84.4) (61.8) 37 %
Loss from continuing operations, net of tax (89.2) (68.9) 29 %
Net loss attributable to Avon $ (97.2) $ (63.6) 53 %
Advertising expenses(1)
$ (20.1) $ (17.6) 14 %
Reconciliation of Non-GAAP Financial Measures
Total revenue $ 663.3 $ 904.4 (27) %
Avon Luxembourg — (121.2) *
Adjusted revenue excluding Avon Luxembourg $ 663.3 $ 783.2 (15) %
Gross margin 56.0 % 55.2 % 80
Avon Luxembourg — .7 % (70)
Adjusted Gross Margin excluding Avon Luxembourg 56.0 % 55.9 % 10
Selling, general and administrative expenses as a % of total revenue 65.4 % 59.3 % 610
CTI restructuring (1.6) (2.2) 60
Adjusted selling, general and administrative expenses as a % of total revenue 63.8 % 57.1 % 670
Avon Luxembourg — 2.4 % (240)
Adjusted selling, general and administrative expenses as a % of total revenue excluding Avon Luxembourg 63.8 % 59.5 % 430
Operating loss $ (62.2) $ (37.1) 68 %
CTI restructuring 10.8 19.5
Adjusted operating income (loss) $ (51.4) $ (17.6) *
Avon Luxembourg — (10.5) *
Adjusted operating loss excluding Avon Luxembourg $ (51.4) $ (28.1) *
Operating margin (9.4) % (4.1) % (530)
CTI restructuring 1.6 2.2 (60)
Adjusted operating margin (7.8) % (1.9) % (590)
Sale of Avon Luxembourg — (1.6) % 160
Adjusted operating margin excluding Avon Luxembourg (7.8) % (3.5) % (430)
Change in Constant $ Adjusted operating margin(2)
(490)
Loss before taxes $ (84.4) $ (61.8) 37 %

~~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,								Three Months Ended March 31,
		2022			2021			%/Basis Point Change				2023			2022			%/Basis Point Change
Reconciliation of Non-GAAP Financial Measures											Reconciliation of Non-GAAP Financial Measures
Total revenue											Total revenue	$	590.5		$	663.3		(11)	%

Gross margin											Gross margin	59.6		%	56.0		%	360

Selling, general and administrative expenses as a % of total revenue											Selling, general and administrative expenses as a % of total revenue	65.5		%	65.4		%	10
CTI restructuring	CTI restructuring	10.8			19.5						CTI restructuring	(2.8)			(1.6)			(120)

Adjusted selling, general and administrative expenses as a % of total revenue											Adjusted selling, general and administrative expenses as a % of total revenue	62.7		%	63.8		%	(110)

Operating loss											Operating loss	$	(43.8)		$	(62.2)		(30)	%
CTI restructuring (3)											CTI restructuring (3)	16.6			10.8			54	%

Impairment of goodwill (4)											Impairment of goodwill (4)	9.1			—			*

Adjusted operating loss											Adjusted operating loss	$	(18.1)		$	(51.4)		(65)	%

Operating margin											Operating margin	(7.4)		%	(9.4)		%	200
CTI restructuring											CTI restructuring	2.8			1.6			120

Impairment of goodwill											Impairment of goodwill	1.5			—			150

Adjusted operating margin											Adjusted operating margin	(3.1)		%	(7.8)		%	470

Change in Constant $ Adjusted operating margin(2)											Change in Constant $ Adjusted operating margin(2)							510

Loss before taxes											Loss before taxes	$	(80.5)		$	(84.4)		(5)	%
CTI restructuring											CTI restructuring	16.6			10.8			54	%

Impairment of goodwill											Impairment of goodwill	9.1			—			*

Adjusted loss before taxes	Adjusted loss before taxes	$	(73.6)		$	(42.3)		74	%		Adjusted loss before taxes	$	(54.8)		$	(73.6)		(26)	%

Income taxes	Income taxes	$	(4.8)		$	(7.1)		(32)	%		Income taxes	$	(12.0)		$	(4.8)		150	%

Effective tax rate	Effective tax rate	(5.7)		%	(11.5)		%	*			Effective tax rate	(15.0)		%	(5.7)		%	*
Adjusted effective tax rate											Adjusted effective tax rate	(19.0)		%	(7.8)		%	*

Performance Metrics	Performance Metrics										Performance Metrics
Change in Active Representatives	Change in Active Representatives							(26)	%		Change in Active Representatives							(19)	%
Change in units sold	Change in units sold							(13)	%		Change in units sold							(25)	%

* Calculation not meaningful

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

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

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

(3)CTI restructuring initiatives include the impact on the Consolidated Statements of Operations for all periods presented of net charges incurred on approved restructuring initiatives. See Note 11, Restructuring Initiatives, to the Consolidated Financial Statements contained herein for further information. The Company has revised its estimated impairment loss related to the Suffern R&D facilities reducing it from a range of $15.0 to $20.0 as previously disclosed to $11.9.

~~Three Months Ended~~(4) During the 2022 year-end close process, our analysis of the Colombia business indicated an impairment as the carrying value of the business exceeded the estimated fair value. At March 31, ~~2022~~

~~Revenue~~

During the three months ended March 31, 2022, revenue decreased 27%, unfavorably impacted by foreign exchange variations, primarily driven by the weakening of the U.S. dollar relative to the Brazilian real,2023 further information was analyzed which ~~was partially offset by the strengthening of the U.S. dollar relative to the Turkish lira, Russian ruble and the Argentinian peso.~~

Onindicated a Constant $ basis, Adjusted revenue decreased 22% driven by declines of 10% in Avon International and 33% in Avon Latin America, mostly as a result of (i) the sale of Avon Luxembourg on July 1, 2021, (ii) decreases in Active Representatives in most markets, (iii) the residual impact of changes in COVID-19 restrictions in multiple markets compared to the same periodfurther impairment had occurred in the ~~prior-year period and (iv)~~period. Accordingly, a non-cash impairment charge of $9.1 was recorded to reduce the ~~impact~~carrying amount of the ongoing war between Ukraine and Russia. During the three months ended March 31, 2022, revenues from Russia and Ukraine represented approximately 9% of total revenue, similar to the 9% for the three months ended March 31, 2021.goodwill.

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

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

~~Operating Margin~~

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

~~Gross Margin~~

~~Adjusted gross margin increased 80 basis points compared to the same period of 2021 largely due to the favorable impact of foreign currency movements.~~

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

SG&A as a percentage of total revenue increased by 610 basis points including the impact of increased restructuring expenses during the three month period ended March 31, 2022. Excluding these items, Adjusted SG&A as a percentage of Adjusted revenue increased 670 basis points, compared to the same period of 2021. The increase in Constant $ Adjusted SG&A as a

3028

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, 2023

Revenue

During the three months ended March 31, 2023, revenue decreased 11% compared to the prior-year period, unfavorably impacted by foreign exchange variations, primarily driven by the weakening of the U.S. dollar relative to the Argentinian peso, Turkish lira, Polish zloty, Columbian peso and Pound sterling offset by the strengthening of the U.S. dollar relative to the Russian ruble.

On a Constant $ basis, revenue decreased 4% driven by declines of 8% in Avon International and 3% in Avon Latin America, mostly as a result of a decrease in Units sold of 25% and the impact of the ongoing war between Ukraine and Russia offset by Average Representative Sales increases being more than offset by a 19% decrease in Active Representatives. During the three months ended March 31, 2023, revenues from Ukraine and Russia represented approximately 8% of total revenue compared to approximately 9% for the three months ended March 31, 2022.

See "—Segment Review" for additional information related to changes in revenue by segment.

Operating Margin

Operating margin increased by 200 basis points including the impact of higher restructuring expenses and the impairment of goodwill held in our business in Colombia in the current period. Excluding these items, Adjusted operating margin increased by 470 basis points compared to the same period of 2022, due to the increase in gross margin and lower Adjusted SG&A as a percentage of total revenue.

The movements in operating margin and Adjusted ~~revenue was~~operating margin are discussed further below in "Gross Margin" and "Selling, General and Administrative Expenses".

Gross Margin

Gross margin increased 360 basis points compared to the same period of 2022 largely due to improvements in the price/mix of products sold offset by the unfavorable impact of foreign currency movements .

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

SG&A as a percentage of total revenue increased by 10 basis points including the impact of ~~our lower~~higher restructuring expenses in the current year period. Excluding these items, Adjusted SG&A as a percentage of revenue ~~which resulted in a deleveraging~~decreased 110 basis points, compared to the same period of ~~our fixed expenses, as well as increases in advertising expenses.~~2022, was largely driven by strategic savings initiatives and sustained controls on expenditure.

Other Expenses

Total interest income increased by approximately $2$5.3 and total interest expense increased by approximately $4$16.9 driven by higher loans from affiliates compared to the prior-year period.

Other income (expense), net, of approximately $5$1.6 represents ~~a favorable~~an unfavorable impact of $6$2.9 compared to the first quarter of ~~2021~~2022 primarily attributable to higher foreign exchange ~~gains~~losses in the current period.

Effective Tax Rate

The effective tax rates and Adjusted effective tax rates in ~~2022~~2023 and ~~2021~~2022 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 ~~2022~~2023 and ~~2021~~2022 continue to be impacted by withholding taxes associated with certain intercompany payments, including royalties, service charges, interest and dividends, which in the aggregate are relatively consistent each year due to the need to repatriate funds to cover U.S. and U.K.-based costs, such as interest on debt and corporate overhead, respectively.

Our effective tax rates for the three months ended March 31, 2023 and 2022 ~~and 2021~~ were ~~(5.7)~~(15.0)% and ~~(11.5)~~(5.7)%, respectively. The effective tax rates for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 were impacted by CTI restructuring charges which could not all be benefited, losses which could not all be benefited, country mix of earnings, limitations on use of tax attribute carryforwards and withholding taxes. The effective tax rate in the quarter ended March 31, 2023 was also favorably impacted by other miscellaneous tax benefits of $0.5. The effective tax rate in the first quarter of 2022 was unfavorably impacted by the recording of valuation allowances of $3.1 and other miscellaneous net tax expense of $5.0. ~~The effective tax rate in the first quarter of 2021 was unfavorably impacted by other miscellaneous income tax expense of approximately $2.4.~~

Our Adjusted effective tax rates for the three months ended March 31, 2023 and 2022 ~~and 2021~~ were ~~(7.8)~~(19.0)% and ~~(21.0)~~(7.8)%, respectively. The Adjusted effective tax rates in ~~2022~~2023 and ~~2021~~2022 were impacted by losses which could not all be benefited, country mix of earnings, limitations on use of tax attribute carryforwards and withholding taxes. The Adjusted effective tax rate for the first quarter of 2023 was also favorably impacted by other miscellaneous tax benefits of $0.5. The Adjusted effective tax rate in the

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

first quarter of 2022 was unfavorably impacted by the recording of valuation allowances of $3.1 and other miscellaneous net tax expense of $5.0. ~~The effective tax rate in the first quarter of 2021 was unfavorably impacted by other miscellaneous income tax expense of approximately $2.4.~~

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

~~We monitor the realizability of our deferred tax assets on a continuous basis.~~opportunities (including corporate restructuring). Should macroeconomic and sociopolitical conditions change, or our business operations do not improve, or tax planning actions and opportunities not be implemented, up to approximately ~~$75~~$49.3 of the Company's recognized deferred tax assets could potentially need to be offset with the recording of a valuation allowance ~~during~~in the ~~next 12 months. The deferred tax assets are associated with Avon subsidiary operations that suffered a loss in earnings before tax during 2021.~~future.

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

~~AVON PRODUCTS, INC.~~

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

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

Impact of Foreign Currency Exchange Rates

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

•foreign currency transaction losses (classified within cost of sales and SG&A in our Consolidated Statements of Operations), which had an unfavorable impact to operating profit and Adjusted operating profit of ~~less than $5,~~approximately $14.0, or ~~less than 50~~approximately 200 basis points to both operating margin and Adjusted operating margin;

•foreign currency translation, which had ~~an unfavorable~~a favorable impact to operating profit and Adjusted operating profit of ~~approximately $5,~~less than $10.0, or ~~approximately~~less than 100 basis points on both operating margin and Adjusted operating margin; and

•foreign exchange net gains, on our working capital (classified within other income (expense), net in our Consolidated Statements of Operations) as compared to gains in the prior year, resulting in a favorable impact of ~~approximately $5~~less than $5.0 before tax on both a reported and Adjusted basis.

Segment Review

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

~~Avon International~~

Three Months Ended March 31,
%/Basis Point Change
2022 2021 US$ Constant $
Total revenue $ 353.3 $ 430.9 (18) % (10) %
Segment loss (.9) (7.0) 87 % 100 %
Segment margin (.3) % (1.6) % 130 200
Change in Active Representatives (18) %
Change in units sold (16) %

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

~~Three Months Ended March 31, 2022~~

Total revenue decreased 18% compared to the prior-year period, including the unfavorable impact of foreign exchange which was primarily driven by the strengthening of the U.S. dollar relative to the Turkish lira and the Russian ruble. On a Constant $ basis, revenue decreased 10% driven by an increase in Average Representative Sales which was more than offset by a 18% decrease in Active Representatives across most markets in Europe, Middle East & Africa and Asia Pacific. The decrease in Revenue and Constant $ revenue was also due, in part, to the ongoing war between Ukraine and Russia which affected revenues in this region.

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

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

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

3230

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

Avon ~~Latin America~~International

Three Months Ended March 31,
%/Basis Point Change
2022 2021 US$ Constant $
Total revenue $ 306.3 $ 465.8 (34) % (33) %
Avon Luxembourg — (121.2) * *
Adjusted revenue excluding Avon Luxembourg 306.3 344.6 (11) % (10) %
Segment loss (44.6) (4.6) * *
Avon Luxembourg — (10.5) * *
Adjusted segment profit (loss) excluding Avon Luxembourg (44.6) (15.1) * *
Segment margin (14.6) % (1.0) % (1,360) (1,330)
Avon Luxembourg — % (3.4) % 340 340
Adjusted segment margin excluding Avon Luxembourg (14.6) % (4.4) % (1,020) (990)
Change in Active Representatives (31) %
Change in units sold (12) %


	Three Months Ended March 31,
							%/Basis Point Change
	2023			2022			US$		Constant $
Total revenue	$	309.1		$	353.3		(13)	%	(8)	%



Segment profit/(loss)	2.6			(.9)			(389)	%	61	%



Segment margin	0.8		%	(0.3)		%	110		(30)



Change in Active Representatives									(18)	%
Change in units sold									(22)	%

*Calculation not meaningful

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

Three Months Ended March 31, ~~2022~~2023

Total revenue ~~and adjusted revenue~~ decreased ~~34%~~13% compared to the prior-year period ~~with~~as a result of exchange rate movements, a decline in Active Representatives and lower volume of units sold offset by an increase in Average Representative Sales. The decrease in Revenue and Constant $ revenue was also due, in part, to the ~~impact of foreign~~ongoing war between Ukraine and Russia which affected revenues in this region. Unfavorable exchange ~~being broadly neutral as~~rate movements were primarily driven by the weakening of the U.S. dollar relative to the ~~Brazilian real~~Turkish lira, Polish zloty and Pound sterling, offset by the strengthening of the U.S. dollar relative to the ~~Argentinian peso.~~ Russian ruble.

On a Constant $ basis, ~~Adjusted~~total revenue decreased 33% which includes the impact from the sale of Avon Luxembourg, including our Mexican business, on July 1, 2021. Constant $ Adjusted revenue excluding the impact of the sale of Avon Luxembourg decreased 10% as increases in Average Representative Sales were more than offset by an 14% decrease in Active Representatives.

~~Revenue decreased in most markets~~8% driven by ~~decreases in Active Representatives and the ongoing impact of COVID-19 restrictions in many countries.~~

~~Revenue in Brazil decreased 14% compared to the prior year period, favorably impacted by foreign exchange. On an Adjusted Constant $ basis, revenue decreased 19% primarily driven by~~ a 18% decrease in Active Representatives ~~continued impact of COVID-19 restrictions~~across most markets in Europe, Middle East & Africa and ~~changes~~Asia Pacific offset by an increase in ~~macro-economic conditions.~~Average Representative Sales.

Segment margin ~~decreased 1,360~~increased 110 basis points, ~~or 1,330~~but declined 30 basis points on a Constant $ ~~Adjusted~~ segment margin basis, which was largely due to the ~~impact~~increase in Constant $ Adjusted gross margin being offset by higher Constant $ Adjusted SG&A as a percentage of ~~revenue decline causing deleverage of our fixed expenses.~~total revenue.

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

Avon Latin America


	Three Months Ended March 31,
							%/Basis Point Change
	2023			2022			US$		Constant $
Total revenue	$	267.7		$	306.3		(13)	%	(3)	%






Segment (loss)/profit	(12.1)			(44.6)			(73)	%	(85)	%






Segment margin	(4.5)		%	(14.6)		%	1,010		1,310








Change in Active Representatives									(20)	%
Change in units sold									(28)	%

Three Months Ended March 31, 2023

Total revenue decreased 13% compared to the prior-year period as a result of unfavorable exchange rate impacts and reductions in Active Representatives and units sold offset by an increase in Average Representative Sales. Foreign exchange variations were primarily driven by the weakening of the U.S. dollar relative to the Argentinian peso and Columbian peso.

Segment margin increased by 1,010 basis points, or 1,310 basis points on a Constant $ segment margin basis, which was largely due the increase in Constant $ Adjusted gross margin and lower Constant $ Adjusted SG&A as a percentage of total revenue. Constant $ Adjusted gross margin increased as the favorable impact of price/mix was partly offset by the unfavorable impact of higher supply chain ~~costs.~~

costs and foreign currency transaction losses. The ~~increase~~decrease in Constant $ Adjusted SG&A as a percentage of Adjusted revenue was largely ~~due to the impact of revenue decline, causing a deleveraging of our fixed expenses, as well as increases in bad debts and advertising expenses, primarily in Brazil.~~driven by tight cost management.

3332

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

LIQUIDITY AND CAPITAL RESOURCES

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

The Company has cash on hand of approximately ~~$209~~$244.5 as of March 31, ~~2022.~~2023.

~~COVID-19, Russia-Ukraine war~~On November 7, 2022, the Company’s subsidiary, Avon Cosmetics Limited entered into a two-year committed intercompany multi-currency revolving credit facility with Natura &Co Luxembourg Holdings S.à r.l, a subsidiary of Natura &Co Holding and ~~going~~an affiliate of the Company, in the amount of $300.0, of which $230.9 was drawn down at March 31, 2023. Borrowings under this facility will be used to reduce short-term financing from third-party banks and will bear interest at a rate per annum of 3% plus applicable currency benchmark rate.

Refinancing and the subsequent repurchase of Unsecured Notes

In May 2022, the Company and Avon Cosmetics Limited entered into Promissory Notes with a subsidiary of Natura &Co Holding in the amount of $405.0 and $215.0 respectively. The Promissory Notes bear interest at a rate per annum of 6.71% and mature on May 17, 2029. In addition, in June 2022 Avon Cosmetics Limited entered into an additional Promissory Note with a subsidiary of Natura &Co Holding in the amount of $115.0. This Promissory Note bears interest at a rate per annum of 6.51% and matures on June 28, 2029.

In May 2022, we redeemed in full and repurchased $461.9 of our 5% Notes due March 15, 2023 (the "2013 Notes"). The aggregate repurchase price was equal to the principal amount of the 2013 Notes, plus a premium of $15.0 and accrued interest of $5.4. In connection with the repurchase, we incurred a loss on extinguishment of debt of $15.7 before tax in the quarter ended June 30, 2022 consisting of the $15.0 premium paid for the repurchase and $.7 for the write-off of debt issuance costs and discounts related to the initial issuance of the 2013 Notes that were repurchased.

In June 2022, the $210.0 outstanding under the Promissory Note with a subsidiary of Natura &Co Holding and an affiliate of the Company, maturing in November 2022, was repaid in full.

Going concern

~~The~~In May 2023, the Company ~~has~~ received ~~an irrevocable~~a commitment from Natura &Co Holding in the form of a letter of support that itwas effective through to May 31, 2024, a period more than 12 months from the date of the issuance of the consolidated financial statements. The letter states that Natura &Co will provide ~~sufficient~~ financial support in the form of loans (which loans shall be secured to the extent legally permissible) if and when needed to enable the Company to meet its obligations as they come due in the ~~normal~~ordinary course of business, which excludes Discontinued Operations obligations as detailed in Note 2 in excess of those reasonably forecasted by management. Management considers that it has reasonably forecasted its exposure to cash outflows for ongoing discontinued operations, which included a ~~period of not less than 12 months~~contingency for expenditures considered possible though unlikely, and that management believes the Company has sufficient liquidity based on the support from the date issuance of the Consolidated Financial Statements. This includes the obligations related to the $462 5.00% Notes, which are due to be repaid in March 2023, and the amount of $209 outstanding under the Natura ~~&Co Loan due to be repaid in November 2022.~~&Co.

Other liquidity matters

We may seek to retire our outstanding debt in open market purchases, through existing call mechanisms, privately negotiated transactions, through derivative instruments, cash tender offers or otherwise. Repurchases of debt may be funded by cash or the incurrence of additional debt and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors, and the amounts involved may be material. We may also elect to incur additional debt to finance ongoing operations or to meet our other liquidity needs. However, our credit ratings remain below investment grade which may impact our ability to access such transactions on favorable terms, if at all. For more information, see "Item 1A. Risk ~~Factors -~~ Factors—Risks Related to Financial ~~Matters -~~ Matters—Our credit ratings are below investment grade, which could limit our access to financing, affect the market price of our financing and increase financing costs. A downgrade in our credit ratings may adversely affect our access to liquidity," and "Risk ~~Factors -~~ Factors—General Risk ~~Factors -~~ 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

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

adversely affect our business, our access to liquidity and capital, and our credit ratings" included in Item 1A of our ~~2021 Annual Report.~~2022 Form 10-K.

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

Off balance sheet arrangements

At March 31, ~~2022,~~2023, the Company has issued a number of guarantees totaling ~~$201~~$189.4 that it could be required to make in the event of adverse judgments in a number of lawsuits in Brazil. See Note 7, Contingencies, to the Consolidated Financial Statements included herein for more information. The company has no other material off balance sheet arrangements at March 31, ~~2022.~~2023.

Cash Flows

Net Cash Used by Operating Activities of Continuing Operations

Net cash used by operating activities of continuing operations during the first three months of ~~2022~~2023 was approximately ~~$168~~$133.8 as compared to net cash used by operating activities of continuing operations of approximately ~~$169~~$168.4 during the first three months of ~~2021,~~2022, a decreased cash outflow of approximately ~~$1.~~$34.6. This was primarily driven by movements in working capital ~~partially offset by increased losses~~ in the first three months of ~~2021.~~

2023.

Net Cash Used by Investing Activities of Continuing Operations

Net cash used by continuing investing activities during the first three months of ~~2022~~2023 was approximately ~~$11,~~$15.4, as compared to net cash used by continuing investing activities of approximately ~~$13~~$10.9 during the first three months of ~~2021.~~2022. The approximate $2

~~AVON PRODUCTS, INC.~~

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

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

~~decrease~~$4.5 increase to net cash used by continuing investing activities was ~~primarily~~ driven by higher capital expenditure and lower proceeds from the disposal of assets in the first three months of ~~2022~~2023 compared to the first three months of ~~2021.~~2022.

Net Cash Provided by Financing Activities of Continuing Operations

Net cash provided by continuing financing activities during the first three months of ~~2022~~2023 was approximately ~~$139,~~$55.8, as compared to cash provided by continuing financing activities of ~~$67~~$138.8 in the first three months of ~~2021.~~2022. The approximate ~~$72 increase~~$83.0 decrease to net cash from financing activities was primarily driven by the decrease in proceeds from debt, partially offset by the increase in repayment of ~~short term~~ debt during the first three months of ~~2022.~~2023.

3534

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

FINANCIAL INSTRUMENTS AND RISK MANAGEMENT STRATEGIES

Interest Rate Risk

Approximately ~~13%~~18% of our debt portfolio, our short-term debt, is exposed to floating interest rates. Our long-term borrowings are all at fixed rates of interest.

Foreign Currency Risk

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

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

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

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

•general economic and business conditions in our markets, including social, economic and political uncertainties, such as the ongoing war between Ukraine and Russia or elsewhere, and any existing and potential sanctions, restrictions or responses to such conditions imposed by other markets in which we operate. See also “Item 1A. Risk Factors—Risks Related to Our International Operations—Our ability to conduct business in our international markets may be affected by economic, political, legal, tax and regulatory risks” and “Item 1A. Risk Factors—Risks Related to Our International Operations—The ongoing war between Ukraine and Russia may have a material adverse effect on our business, financial condition and results of operations” included in Item 1A of our ~~2021 Annual Report;~~2022 Form 10-K;

~~AVON PRODUCTS, INC.~~

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

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

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

•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

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

pressures, economic or political instability (including fluctuations in foreign exchange rates), competitive or other market pressures or conditions;

•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, including as a result of the emergence of new variants, the rollout of vaccination campaigns and uncertainty as to whether existing vaccines and treatments will be effective against these new variants. As a result, we cannot reasonably estimate at this time the continued impact, that COVID-19 may have on our business or operations. The extent to which COVID-19 impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact including on financial markets or otherwise. See also "Item 1A. Risk Factors—General 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 2022 Form 10-K;

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

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

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

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

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

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

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

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

•our ability to attract and retain key personnel;

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

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

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

3736

AVON PRODUCTS, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

•our ability to 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;

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

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

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

•the quality, safety and efficacy of our products;

•the success of our research and development activities;

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

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

•other risks and uncertainties include the possibility that the expected synergies and value creation from the Transaction (as defined in “Item 22. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview”) will not be realized or will not be realized within the expected time period; the risk that the businesses of the Company and Natura &Co Holding will not be integrated successfully; disruption from the Transaction making it more difficult to maintain business and operational relationships; the possibility that the intended accounting and tax treatments of the Transaction are not achieved; the effect of the consummation of the Transaction on customers, employees, representatives, suppliers and partners and operating results; as well as more specific risks and uncertainties.

Additional information identifying such factors is contained in Item 1A of our ~~2021~~2022 Form 10-K ~~for the year ended December 31, 2021,~~ and in Item 1A of this Form 10-Q. We undertake no obligation to update any such forward-looking statements.

3837

AVON PRODUCTS, INC.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in market risk from the information provided in Item 7A, Quantitative and Qualitative Disclosures About Market Risk, of our ~~2021~~2022 Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, our principal executive and principal financial officers carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 of the Exchange Act. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply its judgment in evaluating and implementing possible controls and procedures. Based upon their evaluation, the principal executive and principal financial officers concluded that our disclosure controls and procedures were effective as of March 31, ~~2022,~~2023, at the reasonable assurance level. Disclosure controls and procedures are designed to ensure that information relating to Avon (including our consolidated subsidiaries) required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the United States Securities and Exchange Commission’s rules and forms and to ensure that information required to be disclosed is accumulated and communicated to management to allow timely decisions regarding disclosure.

Changes in Internal Control over Financial Reporting

Our management has evaluated, with the participation of our principal executive and principal financial officers, whether any changes in our internal control over financial reporting that occurred during the quarter ended March 31, ~~2022~~2023 have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on the evaluation we conducted, our management has concluded that no such changes have occurred.

3938

AVON PRODUCTS, INC.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 1A. RISK FACTORS

For a discussion of the risk factors affecting the Company, see "Risk Factors" in Item 1A of our ~~2021 Annual Report.~~2022 Form 10-K. You should carefully consider the risks described in our 2022 Form 10-K in addition to the other information set forth in this Form 10-Q and in our 2022 Form 10-K, including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections and the consolidated financial statements and related notes. These risks, some of which have occurred and any of which may occur in the future, may have a material adverse effect on our business, financial condition and results of operations. The risks described in our 2022 Form 10-K are not the only risks we face. There may be other risks we are not currently aware of or that we currently deem not to be material but that may become material in the future. Therefore, historical operating results, financial and business performance, events and trends are often not a reliable indicator of future operating results, financial and business performance, events or trends.

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

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

4039

AVON PRODUCTS, INC.

ITEM 6. EXHIBITS



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

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

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

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

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

4140

AVON PRODUCTS, INC.

SIGNATURE

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


		AVON PRODUCTS, INC.
		(Registrant)

Date:	May ~~6, 2022~~15, 2023	/s/ Samantha Hutchison
		Samantha Hutchison
		Controller - Principal Accounting Officer

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

4241


	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	$	—	$	272.3
Fragrance	119.9		102.1		222.0		—		222.0
Color	63.4		50.5		113.9		—		113.9
Total Beauty	328.6		279.6		608.2		—		608.2
Fashion & Home:					—		—
Fashion	67.7		50.8		118.5		—		118.5
Home	16.8		106.9		123.7		—		123.7
Total Fashion & Home	84.5		157.7		242.2		—		242.2

Product sales	413.1		437.3		850.4		—		850.4
Representative fees	17.8		28.3		46.1		—		46.1
Other	—		.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