Changes for page Avon Products

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--= Business =
++= Paragraph 1 =
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++==== Business ====
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  Avon Products is a global manufacturer and marketer of beauty and related products. The company commenced operations in 1886 and were incorporated in the State of New York on January 27, 1916. The company conduct its business in the highly competitive beauty industry and compete against other consumer packaged goods ("CPG") and direct-selling companies to create, manufacture and market beauty and non-beauty-related products. The company's 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.
  The company's business is conducted primarily in one channel, direct selling. The company's reportable segments are based on geographic operations in four regions: Europe, Middle East & Africa; South Latin America; North Latin America; and Asia Pacific. Financial information relating to its reportable segments is included in "Segment Review" within Management’s Discussion and Analysis of Financial Condition and Results of Operations, which the company refer to in this report as "MD&A," on pages 27 through 55 of this Annual Report on Form 10-K for the year ended December 31, 2017, which the company refer to in this report as its "2017 Annual Report," and in Note 14, Segment Information, to the Consolidated Financial Statements on pages F-42 through F-44 of its 2017 Annual Report. The company refer to each of the Notes to the Consolidated Financial Statements in this 2017 Annual Report as a "Note." Information about geographic areas is included in Note 14, Segment Information on pages F-42 through F-44 of its 2017 Annual Report. All of its consolidated revenue is derived from operations of subsidiaries outside of the United States ("U.S.").
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  In December 2015, the company entered into definitive agreements with affiliates of Cerberus Capital Management L.P. ("Cerberus"), which included a $435 investment in Avon by an affiliate of Cerberus through the purchase of its convertible preferred stock and the separation of the North America business (including approximately $100 of cash, subject to certain adjustments) from Avon into New Avon LLC ("New Avon"), a privately-held company that is majority-owned and managed by an affiliate of Cerberus. These transactions closed in March 2016 and Avon retained approximately 20% ownership in New Avon. The company's North America business had consisted of the Company's operations in the U.S., Canada and Puerto Rico; this business was previously its own reportable segment, and has been presented as discontinued operations for all periods presented. Refer to Note 3, Discontinued Operations and Divestitures on pages F-19 through F-20 of its 2017 Annual Report and Note 4, Investment in New Avon on page F-20 of its 2017 Annual Report for additional information regarding the investment by an affiliate of Cerberus and the separation of the North America business.
--= Distribution =
++==== Distribution ====
  During 2017, the company had sales operations in 56 countries and territories, and distributed its products in 18 other countries and territories.
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  From time to time, local governments and others question the legal status of Representatives or impose burdens inconsistent with their status as independent contractors, often in regard to possible coverage under social benefit laws that would require it (and, in most instances, the Representatives) to make regular contributions to government social benefit funds. Although Avon Products has generally been able to address these questions in a satisfactory manner, these questions can be raised again following regulatory changes in a jurisdiction or can be raised in other jurisdictions. If there should be a final determination adverse to it in a country, the cost for future, and possibly past, contributions could be so substantial in the context of the volume and profitability of its business in that country that the company would consider discontinuing operations in that country.
--= Promotion and Marketing =
++==== Promotion and Marketing ====
  Sales promotion and sales development activities are directed at assisting Representatives, through sales aids such as brochures, product samples and demonstration products. In order to support the efforts of Representatives to reach new customers, specially designed sales aids, promotional pieces, customer flyers, television advertising and print advertising may be used. In addition, the company seek to motivate the Representatives through the use of special incentive programs that reward superior sales performance. Periodic sales meetings with Representatives are conducted by the district sales or zone managers. The meetings are designed to keep Representatives abreast of product line changes, explain sales techniques and provide recognition for sales performance.
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  From time to time, various regulations or laws have been proposed or adopted that would, in general, restrict the frequency, duration or volume of sales resulting from new product introductions, special promotions or other special price offers. The company expect its broad product lines and pricing flexibility to mitigate the effect of these regulations.
--= Competitive Conditions =
++==== Competitive Conditions ====
  The company face competition from various products and product lines. The beauty and beauty-related products industry is highly competitive and the number of competitors and degree of competition that the company face in this industry varies widely from country to country. The company compete against products sold to consumers in a number of distribution methods, including direct selling, through the Internet, and through the mass market retail and prestige retail channels.
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  The company believe that the personalized customer service offered by the Representatives; the Representatives’ earnings opportunity as well as the amount and type of field incentives the company offer the Representatives on a market-by-market basis; the high quality, attractive designs and prices of its products; the high level of new and innovative products; its easily recognized brand name and its guarantee of product satisfaction are significant factors in helping to establish and maintain its competitive position.
--= International Operations =
++==== International Operations ====
  During 2017, its international operations, outside of the U.S., were conducted primarily through subsidiaries in 56 countries and territories. Outside of the U.S., its products were also distributed in 17 other countries and territories. In March 2016, the company separated from its North America business, which had consisted of the Company's operations in the U.S., Canada and Puerto Rico; this business has been presented as discontinued operations for all periods presented. As a result, all of its consolidated revenue is derived from operations of subsidiaries outside of the U.S. During 2017, approximately 39% of its consolidated revenue was derived from South Latin America, approximately 38% was derived from Europe, Middle East & Africa, approximately 14% was derived from North Latin America and approximately 9% was derived from Asia Pacific. Further, approximately 22% of its consolidated revenue during 2017 was derived from Brazil, which is its largest market and is included within the South Latin America reportable segment.
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  See the sections "Risk Factors - The company's ability to conduct business in its international markets may be affected by political, legal, tax and regulatory risks" and "Risk Factors - Avon Products is subject to financial risks as a result of its international operations, including exposure to foreign currency fluctuations and the impact of foreign currency restrictions" in Item 1A on pages 7 through 20 of its 2017 Annual Report for more information.
--= Manufacturing and Sourcing =
++==== Manufacturing and Sourcing ====
  The company manufacture and package the majority of its Beauty products, which are formulated and designed by its staff of chemists, designers and artists. Raw materials, consisting chiefly of essential oils, chemicals, containers and packaging components required for its Beauty products are purchased from a range of third-party suppliers. The remainder of its Beauty products and all of its Fashion & Home products are purchased from various third-party manufacturers.
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  The loss of any one supplier would not have a material impact on its ability to source raw materials for the majority of its Beauty products or source products for the remainder of its Beauty products and all of its Fashion & Home products or paper for the brochures.
--= Product Categories =
++==== Product Categories ====
  Both of its product categories individually account for 10% or more of consolidated net sales in 2017. The following is the percentage of net sales by product category for the years ended December 31:
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  |Beauty|75%|74%|74%
  |Fashion & Home|25%|26%|26%
--== Trademarks and Patents ==
++==== Trademarks and Patents ====
  The company's business is not materially dependent on the existence of third-party patent, trademark or other third-party intellectual property rights, and Avon Products is not a party to any ongoing material licenses, franchises or concessions. The company do seek to protect its key proprietary technologies by aggressively pursuing comprehensive patent coverage in major markets. The company protect its Avon name and other major proprietary trademarks through registration of these trademarks in the relevant markets, monitoring the markets for infringement of such trademarks by others, and by taking appropriate steps to stop any infringing activities.
--= Seasonal Nature of Business =
++==== Seasonal Nature of Business ====
  The company's sales and earnings are typically affected by seasonal variations, a characteristic of many companies selling beauty, gift and decorative products, apparel and fashion jewelry. For instance, its sales are generally highest during the fourth quarter due to seasonal and holiday-related patterns. However, the sales volume of holiday gift items is, by its nature, difficult to forecast, and taken as a whole, seasonality does not have a material impact on its financial results.
--= Research and Product Development Activities =
++==== Research and Product Development Activities ====
  New products are essential to growth in the highly competitive cosmetics industry. The company's research and development ("R&D") department’s efforts are important to developing new products, including formulating effective beauty treatments relevant to women’s needs, and redesigning or reformulating existing products. To increase its brand competitiveness, Avon Products has sustained its focus on new technology and product innovation to deliver first-to-market products that provide visible consumer benefits.
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  The amounts incurred on research activities relating to the development of new products and the improvement of existing products were $52.9 in 2017, $52.1 in 2016 and $61.9 in 2015. This research included the activities of product research and development and package design and development. Most of these activities were related to the design and development of Beauty products.
--= Environmental Matters =
++==== Environmental Matters ====
  Compliance with environmental laws and regulations impacting its global operations has not had, and currently is not anticipated to have, a material adverse effect on its financial position, capital expenditures or competitive position.
--= Employees =
++==== Employees ====
  At December 31, 2017, the company employed approximately 25,000 employees. Of these, approximately 500 were employed in the U.S. and approximately 24,500 were employed in other countries.
--= Transformation Plan =
++==== Transformation Plan ====
  In January 2016, the company announced a transformation plan (the "Transformation Plan"). See "Overview" within MD&A on pages 27 through 28 for more information on these items.
--= Acquisitions and Dispositions =
++==== Acquisitions and Dispositions ====
  In December 2015, the company entered into definitive agreements with affiliates of Cerberus, which included the separation of the North America business from Avon into New Avon, a privately-held company that is majority-owned and managed by an affiliate of Cerberus. Avon retained approximately 20% ownership in New Avon. These transactions closed in March 2016. In July 2015, the company completed the sale of Liz Earle. Refer to Note 3, Discontinued Operations and Divestitures on pages F-19 through F-20 of its 2017 Annual Report, for additional information regarding the sales of the North America business and Liz Earle.