Avon 2010 Annual Report Download - page 41

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Selling, general and administrative expenses increased $75.0 during 2009 as compared to 2008, due to higher CTI from our restructuring
initiatives. On an Adjusted Non-GAAP basis, excluding the impact of CTI restructuring, as a percentage of revenue, selling, general and
administrative expenses during 2009, increased by 1.1 points, due to professional and related fees associated with the FCPA investigation
and compliance reviews, partially offset by lower advertising costs.
See the “Segment Review” section of MD&A for additional information related to changes in operating margin by segment.
Other Expenses
Interest expense during 2010 decreased by 17%, due to lower interest rates. Interest expense increased by 4% in 2009 as compared to
2008 due to increased borrowings, partially offset by lower interest rates. At December 31, 2010, we held interest-rate swap agreements
that effectively converted approximately 74% of our outstanding long-term, fixed-rate borrowings to a variable interest rate based on LIBOR,
as compared to 82% at December 31, 2009.
Interest income decreased in both 2010 and 2009, primarily due to lower interest rates.
Other expense, net for 2010, increased due to a $46.1 negative impact from the devaluation of the Venezuelan currency on monetary assets
and liabilities in conjunction with highly inflationary accounting discussed further within the Latin America segment review. Other expense,
net for 2009 was lower than during 2008 as a result of lower foreign exchange losses.
Effective Tax Rate
The effective tax rate for 2010 was 37.0%, compared to 32.2% for 2009 and 27.8% for 2008.
The effective tax rate for 2010 was unfavorably impacted by 5.6 points due to the devaluation of the Venezuelan currency in conjunction
with highly inflationary accounting discussed further within the Latin America Segment review, partially offset by 2.1 points associated with
benefits from audit settlements and statute expirations. The 2010 rate as compared to the 2009 rate was unfavorably impacted by 2.0
points resulting from the inability to establish deferred taxes on certain inflationary adjustments under highly inflationary accounting in
2010. The comparison was also negatively impacted by unfavorable changes in the earnings mix of international subsidiaries, offset by a
lower tax cost associated with the repatriation of earnings.
The effective tax rate for 2009 was unfavorably impacted by 3.4 points from the establishment of a valuation allowance against certain
deferred tax assets primarily as a result of restructuring activities, partially offset by 2.1 points from a reduction in a foreign tax liability. The
2009 rate as compared to the 2008 rate also included a higher tax cost associated with the repatriation of 2009 earnings, offset by
favorable changes in the earnings mix of international subsidiaries.
The effective tax rate for 2008 was favorably impacted by 3.6 points due to an audit settlement.
A V O N 2010 29