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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the restructuring charges incurred to date, net of adjustments, under our multi-year restructuring plan that
began in the fourth quarter of 2005, along with the charges expected to be incurred for the initiatives approved to date:
Employee-
Related
Costs
Asset
Write-offs
Inventory
Write-offs
Currency
Translation
Adjustment
Write-offs
Contract
Terminations/
Other Total
Charges incurred to date $218.1 $10.6 $7.4 $11.6 $6.1 $253.8
Charges to be incurred on approved initiatives 9.5 – – – .1 9.6
Total expected charges $227.6 $10.6 $7.4 $11.6 $6.2 $263.4
The charges, net of adjustments, of initiatives approved to date by reportable business segment were as follows:
North
America
Latin
America
Western
Europe,
Middle East
& Africa
Central
& Eastern
Europe
Asia
Pacific China Corporate Total
2005 $ 6.9 $ 3.5 $11.7 $1.0 $18.2 $4.2 $ 6.1 $ 51.6
2006 61.8 34.6 45.1 6.9 22.2 2.1 29.5 202.2
Charges recorded to date $68.7 $38.1 $56.8 $7.9 $40.4 $6.3 $35.6 $253.8
Charges to be incurred on approved
initiatives 5.9 1.9 1.1 .1 .4 – .2 9.6
Total expected charges $74.6 $40.0 $57.9 $8.0 $40.8 $6.3 $35.8 $263.4
As noted previously, we expect to incur total costs to implement
in the range of $500.0 before taxes for all restructuring ini-
tiatives, including restructuring charges and other costs to
implement. The amounts shown in the tables above as charges
recorded to date relate to initiatives that have been approved
and recorded in the financial statements as the costs are prob-
able and estimable. The amounts shown in the tables above as
total expected charges represent charges recorded to date plus
charges yet to be recorded for approved initiatives as the rele-
vant accounting criteria for recording have not yet been met. In
addition to the charges included in the tables above, we will
incur other costs to implement such as consulting and other
professional services.
NOTE 14. Contingencies
We are a defendant in an action commenced in 1975 in the
Supreme Court of the State of New York by Sheldon Solow d/b/a
Solow Building Company (“Solow”), the landlord of our former
headquarters in New York City. Solow alleges that we mis-
appropriated the name of our former headquarters building and
seeks damages based on a purported value of one dollar per
square foot of leased space per year over the term of the lease.
A trial of this action took place in May 2005 and, in January
2006, the judge issued a decision in our favor. Solow has
appealed that decision to the Appellate Division of the Supreme
Court of the State of New York. While it is not possible to pre-
dict the outcome of litigation, management believes that there
are meritorious defenses to the claims asserted and that this
action should not have a material adverse effect on our con-
solidated financial position, results of operations or cash flows.
This action is being vigorously contested.
Blakemore, et al. v. Avon Products, Inc., et al. is a purported class
action pending in the Superior Court of the State of California
on behalf of Avon Sales Representatives who “since March 24,
1999, received products from Avon they did not order, there-
after returned the unordered products to Avon, and did not
receive credit for those returned products.” The complaint seeks
unspecified compensatory and punitive damages, restitution and
injunctive relief for alleged unjust enrichment and violation of
the California Business and Professions Code. This action was
commenced in March 2003. In January 2006, we filed a motion
to strike the plaintiffs’ asserted nationwide class. In February
2006, the trial court declined to grant our motion but instead
certified the issue to the Court of Appeal on an interlocutory
basis. In April 2006, the Court of Appeal denied our motion and
instructed the trial court to consider the issue at a subsequent
point in the proceedings. We believe that this action is a dispute
over purported customer service issues and is an inappropriate
subject for consideration as a class action. While it is not possible
to predict the outcome of litigation, management believes that
there are meritorious defenses to the claims asserted and that
this action should not have a material adverse effect on our
consolidated financial position, results of operations or cash
flows. This action is being vigorously contested.