Avon 2005 Annual Report Download - page 19

2005฀ANNUAL฀REPORT฀฀39
Our hedges of our foreign currency exposure are not designed
to, and, therefore, cannot entirely eliminate the effect of changes
in foreign exchange rates on our consolidated financial position,
results of operations and cash flows.
Our foreign-currency financial instruments were analyzed at year-
end to determine their sensitivity to foreign exchange rate changes.
Based on our foreign exchange contracts at December 31, 2005,
the impact of a 10% appreciation or 10% depreciation of the U.S.
dollar against our foreign exchange contracts would not represent
a material potential change in fair value, earnings or cash flows.
This potential change does not consider our underlying foreign
currency exposures. The hypothetical impact was calculated on
the combined option and forward positions using forward rates
at December 31, 2005, adjusted for an assumed 10% apprecia-
tion or 10% depreciation of the U.S. dollar against these hedging
contracts. The impact of payments to settle option contracts are
not significant to this calculation.
Credit Risk of Financial Instruments
We attempt to minimize our credit exposure to counterparties by
entering into derivative transactions and similar agreements only
with major international financial institutions with “A” or higher
credit ratings as issued by Standard & Poor’s Corporation. Our
foreign currency and interest rate derivatives are comprised of
over-the-counter forward contracts, swaps or options with major
international financial institutions. Although our theoretical credit
risk is the replacement cost at the then estimated fair value of
these instruments, we believe that the risk of incurring credit risk
losses is remote and that such losses, if any, would not be material.
Non-performance of the counterparties on the balance of all the
foreign exchange and interest rate agreements would result in a
net write-off of $5.2 at December 31, 2005. In addition, in the
event of non-performance by such counterparties, we would be
exposed to market risk on the underlying items being hedged as
a result of changes in foreign exchange and interest rates.
NEW฀ACCOUNTING฀STANDARDS
See Critical Accounting Estimates and Note 2, New Accounting
Standards, for a discussion regarding recent accounting standards,
including FAS 123(R), “Share-Based Payments.”
Over the past three years,
approximately 65% to 75%
of our consolidated revenue
was derived from operations
of subsidiaries outside of
the U.S.
MARKET฀FOR฀AVON’S฀COMMON฀STOCK
Avon’s Common Stock is listed on the New York Stock Exchange and trades under the AVP ticker symbol. At December 31, 2005, there were
approximately 20,000 record holders of Avon’s Common Stock. We believe that there are many additional shareholders who are not “share-
holders of record” but who beneficially own and vote shares through nominee holders such as brokers and benefit plan trustees. High and low
market prices and dividends per share of Avon’s Common Stock, in dollars, for 2005 and 2004 were as follows:
2005 2004
Dividends Dividends
Declared Declared
Quarter High Low and Paid High Low and Paid
First $45.66 $37.30 $.165 $37.95 $30.81 $.14
Second 45.02 35.64 .165 46.31 37.58 .14
Third 38.01 26.30 .165 46.65 41.75 .14
Fourth 29.94 24.22 .165 44.37 36.08 .14