Avon 2008 Annual Report Download - page 22

PART I
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 in connection
with our business and with respect to beauty and related
products or the beauty industry in general;
• actual or anticipated variations in our quarterly or annual
financial 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.
An internal investigation of our China
operations is being conducted.
We are voluntarily conducting an internal investigation of our
China operations, focusing on compliance with the Foreign
Corrupt Practices Act. The internal investigation, which is being
conducted under the oversight of the Audit Committee, com-
menced in June 2008 after we received an allegation that certain
travel, entertainment and other expenses may have been improp-
erly incurred in connection with our China operations. We have
voluntarily contacted the Securities and Exchange Commission
and the United States Department of Justice to advise both
agencies that an internal investigation is underway. Because the
internal investigation is in its early stage, we cannot predict how
the resulting consequences, if any, may impact our internal con-
trols, business, results of operations or financial position.
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 locat-
ed 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 administrative
offices.
Other principal properties outside the U.S. measuring 50,000
square feet or more include the following:
• two distribution centers for primary use in North America
operations (other than in the U.S.);
• four manufacturing facilities, eleven distribution centers and
two administrative offices in Latin America;
• four manufacturing facilities in Europe, primarily servicing
Western Europe, Middle East & Africa and Central & Eastern
Europe;
• six distribution centers and four administrative offices in West-
ern Europe, Middle East & Africa;
• three distribution centers and two administrative offices in
Central & Eastern Europe;
• three manufacturing facilities, four distribution centers, and
two administrative offices in Asia Pacific; and
• two manufacturing facilities and six distribution centers in
China.
Of all the properties listed above, 32 are owned and the remain-
ing 33 are leased. Many of our properties are used for a com-
bination of manufacturing, distribution and administration.
These properties are included in the above listing based on pri-
mary usage.
We consider all of these properties to be in good repair, to
adequately meet our needs and to operate at reasonable levels
of productive capacity.
In January 2007, we announced plans to realign certain North
America distribution operations. This initiative includes the
building of a new distribution center in Zanesville, OH, that is
expected to open in the first quarter of 2009. We will phase-
out our current distribution branches in Newark, DE, and
Glenview, IL, with the closures expected to be completed by
mid-2009 and mid-2010, respectively.
In January 2008, we announced plans to realign certain Latin
America distribution and manufacturing operations. We are
building a new distribution center in Brazil that is expected to
open in 2010. We will phase-out our current distribution center
in Sao Paulo, Brazil during 2011. During 2008, we transferred
production from our manufacturing facility in Guatemala to our
facility in Mexico.
ITEM 3. LEGAL PROCEEDINGS
Reference is made to Note 15, Contingencies, on pages F-31
through F-33 of this 2008 Annual Report on Form 10-K.
ITEM 4. SUBMISSION OF MATTERS TO
A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during
the quarter ended December 31, 2008.