Avon 2009 Annual Report Download - page 31

brand equity. We own the material patents and trademarks used
in connection with the marketing and distribution of our major
products both in the U.S. and in other countries where such
products are principally sold. Although most of our material
intellectual property is registered in the U.S. and in certain for-
eign countries in which we operate, there can be no assurance
with respect to the rights associated with such intellectual prop-
erty in those countries. In addition, the laws of certain foreign
countries, including many emerging markets, such as China, may
not protect our intellectual property rights to the same extent as
the laws of the U.S. 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. 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.
Government reviews, inquiries,
investigations, and actions could harm our
business or reputation.
As we operate in various locations around the world, our oper-
ations in certain countries are subject to significant governmental
scrutiny and may be harmed by the results of such scrutiny. The
regulatory environment with regard to direct selling in emerging
and developing markets where we do business is evolving, and
officials in such locations often exercise broad discretion in
deciding how to interpret and apply applicable regulations. From
time to time, we may receive formal and informal inquiries from
various government regulatory authorities about our business
and compliance with local laws and regulations. Any determi-
nation that our operations or activities, or the activities of our
Representatives, are not in compliance with existing laws or
regulations could result in the imposition of substantial fines,
interruptions of business, termination of necessary licenses and
permits, or similar results, all of which could potentially harm our
business and/or reputation. Even if an inquiry does not result in
these types of determinations, it potentially could create neg-
ative publicity which could harm our business and/or reputation.
Significant changes in pension fund
investment performance, assumptions
relating to pension costs or required legal
changes in pension funding rules may have
amaterial 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 perfor-
mance or achange in the portfolio mix of invested assets can
result in corresponding increases and decreases in the valuation
of plan assets, particularly equity securities, or in achange of the
expected rate of return on plan assets. Achange in the discount
rate would result in asignificant 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 theexpected
return on plan assets can result in significant changes in the net
periodic pension cost of the following fiscal years. Finally, recent
pension funding requirements under the Pension Protection Act
of 2006 may result in asignificant increase or decrease in the
valuation of pension obligations affecting the reported funded
status of our pension plans.
The market price of our common stock
could be subject to fluctuations as aresult
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.
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