Avon 2006 Annual Report Download - page 19

those countries. In addition, the laws of certain foreign coun-
tries, including many emerging markets, such as China, may not
protect our intellectual property rights to the same extent as the
laws of the United States. The costs required to protect our
patents and trademarks may be substantial.
We are involved, and may become involved
in the future, in legal proceedings that, if
adversely adjudicated or settled, could
adversely affect our financial results.
We are and may, in the future, become party to litigation, includ-
ing, for example, claims relating to our customer service or
advertisings, or alleging violation of the federal securities or
ERISA laws and/or state law. In general, litigation claims can be
expensive and time consuming to bring or defend against and
could result in settlements or damages that could significantly
affect financial results. We are currently vigorously contesting
certain of these litigation claims. However, it is not possible to
predict the final resolution of the litigation to which we currently
are or may in the future become party to, and the impact of
certain of these matters on our business, results of operations
and financial condition could be material.
Significant changes in pension fund
investment performance or assumptions
relating to pension costs may have a
material effect on the valuation of pension
obligations, the funded status of pension
plans and our pension cost.
Our funding policy for pension plans is to accumulate plan assets
that, over the long run, will approximate the present value of
projected benefit obligations. Our pension cost is materially
affected by the discount rate used to measure pension obliga-
tions, the level of plan assets available to fund those obligations
at the measurement date and the expected long-term rate of
return on plan assets. Significant changes in investment
performance or a change in the portfolio mix of invested assets
can result in corresponding increases and decreases in the valu-
ation of plan assets, particularly equity securities, or in a change
of the expected rate of return on plan assets. A change in the
discount rate would result in a significant increase or decrease in
the valuation of pension obligations, affecting the reported
funded status of our pension plans as well as the net periodic
pension cost in the following fiscal years. Similarly, changes in
the expected return on plan assets can result in significant
changes in the net periodic pension cost of the following fiscal
years. During the fiscal year ended December 31, 2006, we con-
tributed approximately $160.0 to the plans.
The market price of our common stock
could be subject to fluctuations as a result
of many factors.
Factors that could affect the trading price of our common stock
include the following:
• variations in operating results;
• economic conditions and volatility in the financial markets;
• announcements or significant developments with respect to
beauty and related products or the beauty industry in general;
• actual or anticipated variations in our quarterly or annual finan-
cial results;
• governmental policies and regulations;
• estimates of our future performance or that of our com-
petitors or our industries;
• general economic, political, and market conditions; and
• factors relating to competitors.
The trading price of our common stock has been, and could in
the future continue to be, subject to significant fluctuations.
ITEM 1B. UNRESOLVED STAFF
COMMENTS
Not applicable.
ITEM 2. PROPERTIES
Our principal properties worldwide consist of manufacturing
facilities for the production of CFT products, distribution centers
where offices are located and where finished merchandise is
packed and shipped to Representatives in fulfillment of their
orders, and one principal research and development facility. The
domestic manufacturing facilities are located in Morton Grove, IL
and Springdale, OH. The domestic distribution centers are
located in Atlanta, GA; Glenview, IL; Newark, DE; and Pasadena,
CA. The research and development facility is located in Suffern,
NY. We also lease office space in two locations in New York City
and own property in Rye, NY, for our executive and admin-
istrative offices.
Other principal properties outside the U.S measuring 50,000
square feet or more include the following:
• three distribution centers for primary use in North America
operations (other than in the United States);
• five manufacturing facilities, ten distribution centers and one
administrative office in Latin America;
• three manufacturing facilities in Europe, primarily servicing
Western Europe, Middle East & Africa and Central and Eastern
Europe;
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