Avon 2014 Annual Report Download - page 25

research and development facility. Additionally, we use third-party manufacturers to manufacture certain of our products. Therefore, as a
company engaged in manufacturing, distribution and research and development on a global scale, we are subject to the risks inherent in
such activities, including industrial accidents, environmental events, fires, strikes and other labor or industrial disputes, disruptions in logistics
or information systems (such as the ERP system), loss or impairment of key manufacturing or distribution sites, product quality control issues,
safety concerns, licensing requirements and other regulatory or government issues, as well as natural disasters, pandemics, border disputes,
acts of terrorism and other external factors over which we have no control. These risks may be exacerbated by our efforts to increase facility
consolidation covering our manufacturing, distribution and supply footprints, particularly if we are unable to successfully increase our
resiliency to potential operational disruptions or enhance our disaster recovery planning. The loss of, or damage to, any of our facilities or
centers, or those of our third-party manufacturers, could have a material adverse effect on our business, prospects, financial condition,
liquidity, results of operations and cash flows.
Our success depends, in part, on the quality, safety and efficacy of our products.
Our success depends, in part, on the quality, safety and efficacy of our products. If our products are found to be, or perceived to be,
defective or unsafe, or if they otherwise fail to meet our Representatives’ or end customers’ standards, our relationship with our
Representatives or end customers could suffer, we could need to recall some of our products and/or become subject to regulatory action,
our reputation or the appeal of our brand could be diminished, we could lose market share, and we could become subject to liability claims,
any of which could result in a material adverse effect on our business, prospects, financial condition, liquidity, results of operations and cash
flows.
If we are unable to protect our intellectual property rights, specifically patents and
trademarks, our ability to compete could be adversely affected.
The market for our products depends to a significant extent upon the value associated with our product innovations and our 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 foreign countries in which we operate, there can be no assurance with respect to the rights associated with such intellectual
property 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,
especially in those emerging markets, 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, including, for example, claims alleging violation of the federal securities laws or
claims relating to our products or advertising. 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 and the conduct of our business. 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, or to predict the impact of certain of these matters on our business, prospects, financial
condition, liquidity, results of operations and cash flows.
Government reviews, inquiries, investigations, and actions could harm our business or
reputation. In addition, from time to time we may conduct other internal investigations and
compliance reviews, the consequences of which could negatively impact our business or
reputation.
As we operate in various locations around the world, our operations 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 government 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. In addition, from time to time, we may conduct internal
investigations and compliance reviews. The consequences of such government reviews, inquiries, investigations, and actions or such internal
investigations and compliance reviews may adversely impact our business, prospects, reputation, financial condition, liquidity, results of
operations or cash flows.
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