Avon 2001 Annual Report Download - page 45

Contingencies
Avon is a defendant in a class action suit commenced in
1991 on behalf of certain classes of holders of Avon’s
Preferred Equity-Redemption Cumulative Stock
(“PERCS”). Plaintiffs allege various contract and securities
law claims related to the PERCS (which were fully
redeemed in 1991) and seek aggregate damages of approx-
imately $145.0, plus interest. A trial of this action took
place in the United States District Court for the Southern
District of New York and concluded in November 2001.
At the conclusion of the trial, the judge reserved decision
in the matter. Avon believes it presented meritorious
defenses to the claims asserted. However, it is not possible
to predict the outcome of litigation and it is reasonably
possible that the trial, and any possible appeal, could be
decided unfavorably. Management is unable to make a
meaningful estimate of the amount or range of loss that
could result from an unfavorable outcome but, under some
of the damage theories presented, an adverse award could
be material to the Consolidated Financial Statements.
14
PAGE 70
2002 Charges >
North Latin Corporate
America* U.S. America Europe Pacific and Other Total
Total Accrued Charges $ 4.7 $6.2 $4.1 $17.5 $7.2 $ 3.9 $43.6
Less: Expenses Charged (0.5) (.8) (2.1) (2.8) (2.3) (1.1) (9.6)
Balance at
December 31, 2002 $ 4.2(a) $5.4(b) $2.0(c) $14.7(d) $4.9(e) $ 2.8(f) $34.0
Number of planned
employee terminations 152 179 241 302 119 41 1,034
Remaining employee
terminations at
December 31, 2002 151 178 169 271 90 6 865
* Excludes amounts related to the U.S.
(a) The majority of the remaining liability relates to employee severance costs resulting from the closure of a manufacturing facility in Canada and the transi-
tion of production to existing facilities in the U.S. Employee terminations will begin in March 2003 and continue through September 2003, with the
majority of payments made by December 2003.
(b) The majority of the remaining liability relates to employee severance costs associated with workforce reduction programs within the sales and supply
chain functions. Employee terminations began in December 2002 and will continue through September 2003, with a majority of payments made by
December 2003.
(c) The majority of the remaining liability relates to employee severance costs associated with workforce reduction programs in Argentina, Central America
and Venezuela. Employee terminations began in October 2002 and will continue through September 2003, with all payments made by December 2003.
(d) The majority of the remaining liability relates to employee severance costs. Employee terminations began in November 2002, with all payments made by
December 2003.
(e) The majority of the remaining liability relates to employee severance costs related to supply chain initiatives. Employee terminations began in December
2002 and will continue through January 2003, with a majority of payments made by March 2003. The procurement center in Hong Kong and the sales
branches in Malaysia were closed in 2002.
(f) The remaining liability relates to remaining amounts payable to employees already receiving severance.
Avon is a defendant in an action commenced in the
Supreme Court of the State of New York by Sheldon Solow
d/b/a Solow Building Company, the landlord of the
Company’s former headquarters in New York City. Plaintiff
seeks aggregate damages of approximately $80.0, plus inter-
est, for the Company’s alleged failure to restore the leasehold
premises at the conclusion of the lease term in 1997. A trial
of this matter was scheduled for February 2002, but has been
stayed pending the determination of (i) an interlocutory
appeal by plaintiff of an order that denied the plaintiff’s
motion for summary judgment and granted partial summary
judgment in favor of the Company on one of the plaintiff’s
claims; and (ii) an appeal by plaintiff of a decision in an
action against another former tenant that dismissed plain-
tiff’s claims after trial. In January 2003, both appeals were
decided against the plaintiff. Trial has not yet been sched-
uled. While it is not possible to predict the outcome of liti-
gation, management believes that there are meritorious
defenses to the claims asserted and that this action should not
have a material adverse effect on the Consolidated Financial
Statements. This action is being vigorously contested.