Avon 2006 Annual Report Download - page 80

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
entitled Nilesh Patel v. Avon Products, Inc. et al. and Michael
Cascio v. Avon Products, Inc. et al., respectively, which sub-
sequently have been consolidated. A consolidated amended
class action complaint for alleged violations of the federal secu-
rities laws was filed in the consolidated action in December 2005
in the United States District Court for the Southern District of
New York (Master File Number 05-CV-06803) under the caption
In re Avon Products, Inc. Securities Litigation naming Avon, an
officer and two officer/directors. The consolidated action,
brought on behalf of purchasers of our common stock between
February 3, 2004 and September 20, 2005, seeks damages for
alleged false and misleading statements “concerning Avon’s
operations and performance in China, the United States ...and
Mexico.” The consolidated amended complaint also asserts that
during the class period certain officers and directors sold shares
of our common stock. In February 2006, we filed a motion to
dismiss the consolidated amended class action complaint, assert-
ing, among other things, that it failed to state a claim upon
which relief may be granted, and the plaintiffs have opposed
that motion.
In August 2005, we reported the filing of a complaint in a share-
holder derivative action purportedly brought on behalf of Avon
entitled Robert L. Garber, derivatively on behalf of Avon Prod-
ucts, Inc. v. Andrea Jung et al. as defendants, and Avon Prod-
ucts, Inc. as nominal defendant. An amended complaint was
filed in this action in December 2005 in the United States District
Court for the Southern District of New York (Master File Number
05-CV-06803) under the caption In re Avon Products, Inc. Secu-
rities Litigation naming certain of our officers and directors. The
amended complaint alleges that defendants’ violations of state
law, including breaches of fiduciary duties, abuse of control,
gross mismanagement, waste of corporate assets and unjust
enrichment, between February 2004 and the present, have
caused losses to Avon. In February 2006, we filed a motion to
dismiss the amended complaint, asserting, among other things,
that it failed to state a claim upon which relief may be granted,
and the plaintiffs have opposed that motion.
In October 2005, we reported the filing of class action com-
plaints for alleged violations of the Employee Retirement Income
Security Act (“ERISA”) in actions entitled John Rogati v. Andrea
Jung, et al. and Carolyn Jane Perry v. Andrea Jung, et al.,
respectively, which subsequently have been consolidated. A
consolidated class action complaint for alleged violations of
ERISA was filed in the consolidated action in December 2005 in
the United States District Court for the Southern District of New
York (Master File Number 05-CV-06803) under the caption In re
Avon Products, Inc. ERISA Litigation naming Avon, certain offi-
cers, Avon’s Retirement Board and others. The consolidated
action purports to be brought on behalf of the Avon Products,
Inc. Personal Savings Account Plan and the Avon Products, Inc.
Personal Retirement Account Plan (collectively the “Plan”) and
on behalf of participants and beneficiaries of the Plan “for
whose individual accounts the Plan purchased or held an interest
in Avon Products, Inc. . . . common stock from February 20,
2004 to the present.” The consolidated complaint asserts
breaches of fiduciary duties and prohibited transactions in viola-
tion of ERISA arising out of, inter alia, alleged false and mislead-
ing public statements regarding Avon’s business made during
the class period and investments in Avon stock by the Plan and
Plan participants. In February 2006, we filed a motion to dismiss
the consolidated complaint, asserting that it failed to state a
claim upon which relief may be granted, and the plaintiffs have
opposed that motion.
It is not possible to predict the outcome of litigation and it is
reasonably possible that there could be unfavorable outcomes in
the In re Avon Products, Inc. Securities Litigation, In re Avon
Products, Inc. Securities Litigation (derivative action) and In re
Avon Products, Inc. ERISA Litigation matters. Management is
unable to make a meaningful estimate of the amount or range
of loss that could result from unfavorable outcomes but, under
some circumstances, adverse awards could be material to our
consolidated financial position, results of operations or cash
flows.
Various other lawsuits and claims, arising in the ordinary course
of business or related to businesses previously sold, are pending
or threatened against Avon. In management’s opinion, based on
its review of the information available at this time, the total cost
of resolving such other contingencies at December 31, 2006,
should not have a material adverse effect on our consolidated
financial position, results of operations or cash flows.
NOTE 15. Supplemental Income
Statement Information
For the years ended December 31, 2006, 2005 and 2004, the
components of other expense, net were as follows:
2006 2005 2004
Foreign exchange losses, net $ 6.2 $ 5.8 $ 9.5
Net (gains) losses on available-for-sale
securities (Note 5) – (2.5) 13.7
Amortization of debt issue costs and
other financing 9.6 8.9 7.0
Gain on de-designated treasury lock
agreement (Note 7) – (2.5) –
Other (2.2) (1.7) (1.9)
Other expense, net $13.6 $ 8.0 $28.3