Avon 2007 Annual Report Download - page 82

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Restructuring Charges – 2007
During 2007 and January 2008, exit and disposal activities that
are a part of our multi-year restructuring plan were approved.
Specific actions for this phase of our multi-year restructuring
plan included:
• the reorganization of certain functions, primarily sales-related
organizations;
• the restructure of certain international direct selling
operations;
• the realignment of certain of our distribution and manufactur-
ing operations, including the realignment of certain of our
Latin America distribution operations;
• automation of certain distribution processes; and
• outsourcing of certain finance, customer service, and
information technology processes.
The actions described above are expected to be completed by
the end of 2009. The outsourcing of certain information
technology processes and the realignment of certain Latin Amer-
ica distribution operations are expected to be completed by the
end of 2011.
In connection with initiatives that have been approved to date,
we recorded total costs to implement in 2007 of $158.3, and
the costs consisted of the following:
• charges of $118.0 for employee-related costs, including sev-
erance, pension and other termination benefits;
• favorable adjustments of $8.0, primarily relating to certain
employees pursuing reassignments to other positions and
higher than expected turnover (employees leaving prior to
termination); and
• other costs to implement of $48.3 for professional service fees
associated with our initiatives to outsource certain human
resource, finance, customer service, and information technol-
ogy processes and accelerated depreciation associated with
our initiatives to realign certain distribution operations and
close certain manufacturing operations.
Of the total costs to implement, $157.3 was recorded in selling,
general and administrative expenses and $1.0 was recorded in
cost of sales in 2007.
Approximately 95% of these charges are expected to result in
future cash expenditures, with a majority of the cash payments
expected to be made during 2008.
The liability balances for the initiatives that have been approved to date are shown below.
Employee-
Related
Costs
Asset
Write-offs
Inventory
Write-offs
Currency
Translation
Adjustment
Write-offs
Contract
Terminations/
Other Total
2005 Charges $ 30.4 $ 1.4 $ 8.4 $ 11.4 $ – $ 51.6
Cash payments (.5) – – – – (.5)
Non-cash write-offs (.7) (1.4) (8.4) (11.4) – (21.9)
Foreign exchange – – – – – –
Balance December 31, 2005 $ 29.2 $ – $ – $ – $ – $ 29.2
2006 Charges 201.2 9.8 .6 .2 6.5 218.3
Adjustments (13.5) (.6) (1.6) – (.4) (16.1)
Cash payments (112.0) – – – (5.1) (117.1)
Non-cash write-offs (23.0) (9.2) 1.0 (.2) – (31.4)
Foreign exchange 3.0 – – – .1 3.1
Balance December 31, 2006 $ 84.9 $ – $ – $ – $ 1.1 $ 86.0
2007 Charges 117.0 .2 – – .8 118.0
Adjustments (8.0) – – – – (8.0)
Cash payments (47.6) – – – (1.1) (48.7)
Non-cash write-offs (4.9) (.2) – – – (5.1)
Foreign exchange 1.8 – – – (.1) 1.7
Balance December 31, 2007 $ 143.2 $ – $ – $ – $ .7 $ 143.9
Non-cash write-offs associated with employee-related costs are the result of settlement, curtailment and special termination benefit charges
for pension plans and postretirement due to the initiatives implemented. Inventory write-offs relate to exited businesses.