Avon Products Reports Q4 EPS $0.39 vs $0.51 Est; Revenues $3.0B vs $3.11B Est

Avon Products, Inc. (NYSE: AVP) today reported fourth-quarter and full-year 2011 results.

Total revenue of $3.0 billion decreased 4% or 1% in constant dollars. Total units declined 2%, while price/mix was a benefit of 1% during the quarter. Active Representatives were down 3%.

Fourth-quarter 2011 gross margin was 61.1%, 70 basis points lower than the prior-year quarter primarily due to an inventory-related charge in Brazil and commodity cost pressures.

Selling, general and administrative expense in the quarter increased as a percent of revenue by 2% versus fourth-quarter 2010, and increased 3% on an adjusted non-GAAP basis due to higher distribution costs, bad debt expense, and investments in Representative Value Proposition ("RVP"). Avon invested an incremental $35 million in RVP in the fourth quarter of 2011 in Sales Leadership and higher incentives. This more than offset a $21 million decline in advertising, which was down 23% to $71 million.

Fourth-quarter 2011 costs associated with the company's 2005 and 2009 restructuring programs were $9 million pre-tax, down from $58 million pre-tax, or $0.01 and $0.09 per diluted share, respectively.

During the quarter, the Company took a non-cash charge of $263 million, or $0.38 per diluted share, to adjust goodwill and an intangible asset related to the acquisition of Silpada Designs, Inc. ("Silpada"). This non-cash impairment charge was largely driven by the rise in silver prices since the acquisition and the negative impact on Silpada's revenues and margins.

Operating profit was $13 million in the quarter and operating margin was 0.4%, significantly impacted by the Silpada impairment charge. Adjusted non-GAAP operating profit was down 31%, and adjusted non-GAAP operating margin was 9.4%, down 360 basis points from a year ago due to higher field and distribution costs in Brazil, higher investments in RVP in the U.S., and lower gross margin.

Fourth-quarter 2011's effective tax rate was 101.7%, compared with 34.0% in the year-ago quarter. Excluding the impact of restructuring costs and the Silpada impairment charge, the fourth-quarter 2011 adjusted non-GAAP tax rate was 32.2% versus 34.0% in fourth-quarter 2010.

Income from continuing operations in the fourth quarter of 2011 was $0.3 million or zero cents per diluted share, significantly impacted by the Silpada impairment charge. Excluding the impact of restructuring costs and the impairment charge, adjusted non-GAAP income from continuing operations was $172 million, or $0.39 per diluted share.